U.S. Markets open in 7 hrs 6 mins

Edited Transcript of GRUPOSURA.BG earnings conference call or presentation 15-Nov-19 1:00pm GMT

Q3 2019 Grupo de Inversiones Suramericana SA Earnings Call

Medellin Dec 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Grupo de Inversiones Suramericana SA earnings conference call or presentation Friday, November 15, 2019 at 1:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* David Emilio Bojanini García

Grupo de Inversiones Suramericana S.A. - CEO & President

* Juan Carlos Gómez

Grupo de Inversiones Suramericana S.A. - Manager of IR

* Juan Camilo Parra Osorio

Grupo de Inversiones Suramericana S.A. - Investment & Treasury Manager

* Ricardo Jaramillo Mejía

Grupo de Inversiones Suramericana S.A. - CFO & Chief Corporate Finance Officer

================================================================================

Conference Call Participants

================================================================================

* Andres Soto

Santander Investment Securities Inc., Research Division - Head of Andean Research

* Julian Felipe Amaya Restrepo

Corredores Davivienda S.A., Research Division - Equity Research Analyst

* Steffania Mosquera

CrediCorp Capital, Research Division - Senior Analyst of Transport, Telecom, Media and Technology and Information Technology

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Welcome to the presentation for results for the third quarter 2019 for Grupo SURA. My name is Silvio, and I'll your operator for today's call. (Operator Instructions) Please, this conference is being recorded.

I give the floor to Mr. Juan Carlos Gómez, Manager of Investor Relations, to start the conference.

--------------------------------------------------------------------------------

Juan Carlos Gómez, Grupo de Inversiones Suramericana S.A. - Manager of IR [2]

--------------------------------------------------------------------------------

Good morning. Welcome to the call for results for the third quarter of 2019 for Grupo SURA. Thank you for being connected. The presentation we're going to have here is found in our web page, gruposura.com. Remotely, we have our President, David Bojanini; and here in the room, Ricardo Jaramillo, Financial Vice President; Juan Luis Múnera, Vice President of Legal Affairs; and Luis Fernando Soto, Manager of the accounting area -- and our Financial Vice President of SURA AM; and for Suramericana, Juan Camilo Parra, Manager for Capital Management.

Now I'll give the floor to our President, David Bojanini.

--------------------------------------------------------------------------------

David Emilio Bojanini García, Grupo de Inversiones Suramericana S.A. - CEO & President [3]

--------------------------------------------------------------------------------

Very good morning. Welcome to everyone who has connected to our call for results for the third quarter of 2019 for Grupo SURA. To start with, I'd like to invite you to look at Slide #5 where we have some significant events for Grupo SURA. I'd like to start by talking about the excellent results that the company obtained during this third quarter. In addition, with a positive operating performance, mainly the yield for investment, which has been very good for this year, makes up for some of the operating aspects that we will be commenting on later.

Our operating revenue for Grupo SURA came to 16.2 billion (sic) [COP 16.2 trillion] with an increase of 14.8%. The double-digit growth in the main operations, as I mentioned, the investment revenue has been pretty positive this year. And in addition, the participation method for the associated companies also reflects very good results, very especially for Bancolombia. The operating expenses have grown by 13% coming to COP 13.8 billion (sic) [COP 13.8 trillion].

About the expenses, it's good to remember that companies have been focusing on efficiency and expense control, that the accident claim has been controlled and obviously, the expenses have some investments in projects for growth and for company transformation. And as I said also, there are impacts on some operations like in Argentina, in health and also that for sales for health insurance -- life insurance. The operating profits came to COP 2.4 billion (sic) [COP 2.4 trillion], growing 26.3%. And the net profits came to COP 1.5 billion (sic) [COP 1.5 trillion], up 35%. It should be mentioned that the figure is higher than the profit for the entire 2018, which is highly positive and is a good omen for the results for the end of the year.

These consolidated results reflect several things. First that, as we have said in previous calls, we are focused on organic growth, on efficiency and making profitable -- operations profitable, and all of that has been reflected in these results that we are presenting today. As we already said, there is a positive yield from investments, which definitely, compared to 2018, investments have produced much better results. We are in the process of optimizing our invested capital and to reduce leveraging, which is also seen in the results of the companies and which will -- these good results are part of the benefits from risk diversification from the geographic point of view.

Lastly, significant events, I'd like to mention some issues of an economic and social nature that have occurred in the region over the past months. First, there's the case of protests in Chile. We've had, the past several weeks, a wave of demonstrations in that country which indicate a serious social unrest by the population that have -- has led not only to demonstrations but somewhat violent events which have affected stability in that country. And we are hopeful that through dialogue, the government and the community can find a way to go back to normal because Chile has been one of the countries with the best indicators in the region and we are convinced that this problem is going to be resolved.

In Argentina, because of the political changes that occurred with the elections where Alberto Fernández was elected, there have been some situations that have created macroeconomic and market instability which has impacted -- well, it has affected the results, the accounting results and the consolidation of the results for Argentina, which although have been good locally, when we consolidate, they are having a significant impact on the Suramericana's results, and we shall see that later.

In previous calls, we also spoke a bit about the problem of the health system in Colombia, in which we've said that we've had not enough payments for -- received from the EPS, a reduction in premium for disability, a massive migration from members from other EPS towards SURA, which comes with delayed pathologies and have increased and highered the cost of health coverage for EPS SURA.

Finally, because of the abolishment of the financing law in Colombia, the government decided to postpone the discussion about pension reform until next year. This reform is still very necessary. We've already heard about many issues of the pensions problem in Colombia. I would summarize that as we have a public system which is unbalanced and unsustainable and a private system that is not enough vis-à-vis the expectations of the community in which the best ways to find a way to unify both systems to look for something that is good in general for the Colombian population. That system must obviously be sustainable and mainly that the country is in a position to pay what pensions cost. We believe that public discussions about pensions must come to a higher level where we have less politics, less ideology and more collective intelligence, and go back to the past is not a solution for this pension system in Colombia.

Okay. This ends the significant events, and I'll give the floor to Ricardo Jaramillo, who will go into more details about the figures for Grupo SURA.

--------------------------------------------------------------------------------

Ricardo Jaramillo Mejía, Grupo de Inversiones Suramericana S.A. - CFO & Chief Corporate Finance Officer [4]

--------------------------------------------------------------------------------

Thank you, David. Let's go now to Slide 6. The financial situation. We've highlighted the growth of equity, COP 28.8 billion (sic) [COP 28.8 trillion] with an increase of 7.2% mostly driven by the increases in consolidated net profits. Also, we have our assets of COP 70 million (sic) [COP 70 trillion], so a decrease of 1.5%, mainly because of 2 effects: the elimination of longer -- life-long revenue and the increase in operating accounts, which makes up most of that effect. And the growth effect there is COP 1 billion (sic) [COP 1 trillion]. Our liabilities, we find the same effect. The elimination of lifetime annuities, we have a decrease of COP 9.4 million (sic) [COP 91.4 billion], and the rest of the operation makes up part of that. And the total decrease is COP 3 billion (sic) [COP 3 trillion] from the liabilities as of September.

On the right-hand side of the graph, we see the financial -- consolidated financial debt, and we see that, that is COP 9.7 billion (sic) [COP 9.7 trillion]. It's important to clarify here that the debt has been amortizing. But as part of that debt is indexed to the dollar, it has higher debt associated with rate of exchange. But it's important to point out that, that impact must be made up or settled by the coverage or the hedges and mitigate the effect. When we looked at that individually, in Grupo SURA, we -- as of September, amortizing approximately [COP 270 million] in debt. And we expect for the end of the year is to have close to COP 330 million (sic) [COP 430 billion] in debt, which was as we expected from the beginning of the year.

Going on to Slide #7. We'll see the consolidated statement of results, and we want to point out the organic growth for investment from -- revenue from investments which drive net and operating revenue. We achieved COP 16.2 billion (sic) [COP 16.2 trillion] in revenue for the 9 -- first 9 months with a growth of 14.8%. And we can see that the various accounts that make up those revenues have good growth. In retained premiums, we have 200 -- 5.8% growth. We're dynamic in revenue from commissions costs and services, 33%. In revenue from investments, a very good year for capital markets and have a growth of 42.7%. The net in participation has been driven by many of the associated companies, especially Bancolombia and Protección, growing 43.8%, what gives us this level of revenue that we're showing.

In expenses, expenses are growing at a lower rate than revenue. We are continuing with the dynamic we've seen in the previous quarters with a focus on making the operations more profitable. They are growing 13%, and this leaves us an operating profit of COP 2.4 billion (sic) [COP 2.4 trillion] for the first 3 quarters of the year, growing at 26.3%. In net profits, we have COP 1.5 billion (sic) [COP 1.5 trillion], which is a growth of 35% and which is higher than the total profit for 2018 and 2017.

To point out in the comments on the right-hand side of the comment, we want to point out that their operating results, not including revenue from the cash deposits, have grown at 13.2% in the operating profits. We also want to clarify that there is an impact according to IFRS 16, which is rentals, which has an impact of close to COP 54,000 million and also to point out that the Argentinian operation, which as David said at the beginning, has had some losses due to the situation in the -- economic and political situation of the country, has losses for close to COP 98,000 million. Compared to the previous year, this means lower profits for COP 131 billion, which if we were to exclude this impact from consolidated profit, the profits would be growing at 48%.

Let's go to Slide #8. Slide #8 shows us graphically what the net profits -- consolidated net profits for Grupo SURA make up. This is growing at 35%. This is driven mainly by SURA AM and associated companies, which you see in the participation method, mostly Bancolombia. This reflects the benefits that are obtained from the diversification of Grupo SURA's portfolio. We start at the beginning, COP 1.1 billion (sic) [COP 1.1 trillion]. And then the contribution of Suramericana during that sort of profits, Suramericana is decreasing COP 95,000 million, 24%, mainly due to the VAT for the commissions for life insurance due to the situation in the health sector, which we will detail later, and the impact caused by the Argentinian economic issue.

In SURA AM, the company has been growing at 42.5% mostly due to the cash and the good operating results. The participation method has an increase of 35.9% -- 39.5% driven by the good results from Bancolombia. And when we look at in the gray the various accounts that are affecting the performance of the Grupo SURA, we see that the positive is COP 34,000 million that contribute to the profits. Mainly, I would say that there's a good performance, COP 37,800 million associated to difference in rate of exchange and evaluation of the coverage because of the mitigation of risk that we've been implementing throughout the year. To complete, we have COP 1.5 million -- COP 1.5 billion (sic) COP 1.5 trillion in profits, as we mentioned earlier, and a growth of 35%. When we look at the net profits for the controlling company, the figure is COP 1.3 trillion, and the growth is 39.1%.

Let's go to Slide #9. And here, we see an estimated value for our portfolio. And we see how the sum of the various investments is close to COP 35 billion (sic) [COP 35 trillion]. We have pointed out that in this exercise, SURA Asset Management has been valued as of the latest transaction when we -- the CDPQ came into the company, Suramericana's valued at 1.8x equity. And the associated Grupo Nutresa in Colombia and Grupo Argos are valued at market value by the companies as listed. We come to the portfolio value of COP 35 billion (sic) COP 35 trillion . We decrease the individual net SURA for debt for that, and we come to a net value for the portfolio of close to COP 28.9 billion (sic) [COP 28.9 trillion]. We want to compare this period to the value of the stock capitalization, which is close to COP 19 billion (sic) [COP 19 trillion].

I give the floor to David so he can tell us about some significant events for the Suramericana affiliate.

--------------------------------------------------------------------------------

David Emilio Bojanini García, Grupo de Inversiones Suramericana S.A. - CEO & President [5]

--------------------------------------------------------------------------------

Thank you, Ricardo.

Let's go now to Slide #11 where we find the significant events for Suramericana management of risk [intent trends]. We have positive growth in revenue with significant -- specific impacts that we mentioned in Argentina and in the health sector in Colombia which have affected our company's net profit. The premiums -- issued premiums for the third quarter totaled COP 9.5 billion (sic) [COP 9.5 trillion] with an increase of 15.1%. If we exclude the impact from Argentina, those premiums would be growing at 18.3%. The revenue for services provided, which is basically mandatory health, reached COP 2.8 billion (sic) [COP 2.8 trillion] with a growth of 23.7%. Obviously, in the mandatory health sector, we see very major dynamics mostly due to the migration of members from other companies. And the company's net profit reached COP 300,000 million with a decrease of 24%, which if we were to exclude the accounting effect from the Argentinian consolidation, those profits would be growing at 10.1%.

There is definitely a good operating dynamics but which in the case of Suramericana does not completely offset the specific impacts from what we have mentioned. For example, the event for our commissions on life insurance is having an impact of COP 36,000 million, which in the previous year, we didn't have that impact. In general insurance, the loss from the consolidation of the Argentinian operations was COP 98,000 million, which is one of the biggest impacts on the company profits. In addition, we also, in general insurance, we've seen a higher cost of reinsurance in Chile.

Then what we already mentioned about the Health segment, which although we accumulated the entire health section -- sector by the third quarter, we have positive results of COP 2,000 million. And specifically, because during the third quarter we were able to do some internal corrections that enabled us to achieve net profit of COP 18,000 million for the quarter with -- whereupon -- beyond the breakeven point in Health, and we expect that the government will take some corrective measures so that Health can continue to show positive results.

During this quarter, we also announced as part of the optimization of the equity the sale of our participation in a company in the Dominican Republic, Palic Salud. That sale was COP 68,500 million (sic) [COP 62,500 million] and gave us a profit of COP 31,800 million for that sale.

On the right-hand side of the slide, we complete all the revenue for the company. We see a distribution by country and a distribution by type of solution showing that there's good diversification according to solutions in Suramericana for all these premiums.

So with this, I'll give the floor to Ricardo Jaramillo, who will give you more details about the results for Suramericana.

--------------------------------------------------------------------------------

Ricardo Jaramillo Mejía, Grupo de Inversiones Suramericana S.A. - CFO & Chief Corporate Finance Officer [6]

--------------------------------------------------------------------------------

Thank you, David. Let's now go to Slide #12 where we'll point out some indicators and some accounts from the statement of results. First of all, as we saw in the previous slide, the good growth of retained premiums and revenue from services provided, which is almost COP 10.5 billion (sic) [COP 10.5 trillion] with a growth of 16%. The accident rate and expenses have been controlled, but we have had some impacts on health costs mostly due to VAT and mainly also due to the Argentinian situation. When we look at the claims plus reserves, we see that the indicator is at 54.5%. When we show the cost of services provided, [went up a rate] of 280 basis points. We've been improving that, and we'll see more details later. The trend that we saw from the previous -- from the second quarter, which was negative, these claims were improved in health service provision. Their technical results have been down about 210 basis points. The results of the impact from Argentina, growing at 2.8%.

Operating expenses are controlled and reduced by 40 basis points, as a percentage of operating revenue, growing at 13.2% (sic) [13.6%] less than revenue. Taxes, we have had a significant decrease. Right now, we're using close to 86%. And part of that impact is associated to Argentina and mostly to the next point, which are the revenue from investments. Those grew by 2.7% and impacted by the Argentinian portfolio, which has been one of the highest in the company.

Let's go to Slide #13. Slide 13 shows the evolution in the first 9 months of the year for net profits [south] for the Suramericana affiliate. We see that the various segments have been affected by the reasons we explained earlier, which started with the profit for 2018, COP 395 billion. Then we see the Life segment which contributes COP 20,816 million, positive with a 5.5% increase, even including the associated COP 36,000 million higher IVA that in the commissions.

We go to general. The difference is COP 116,000 million compared to the previous year. Of those [COP 116,000 million] COP 30 million is explained by the Argentina operation, which we'll see in more detail when we look at that segment. And then we see the Health segment mostly affected by the EPS business, which, as we mentioned earlier, has different dynamics this year from what it had in the previous years.

In the Corporate segment, the different accounts that we have in the gray area, we see a positive COP 65,000 million. And mostly, this is due to an impact of close to COP 31,800 million contributed by the divestment of the Palic business, which is a health business that we had in the Dominican Republic and which we announced that -- the divestment several days ago. Then we come to a profit of COP 700 billion (sic) [COP 300 billion] with a decrease of 24%. If we analyze net profits for the company without Argentina to look at the rest of the business, we see that the profit would have been COP 398,400 million with the growth of that 10.3% (sic) [10.1%]. This gives us a return on equity of 13.3% (sic) [10.3%] and return on tangible equity of 13% for the company.

Let's go to Slide #14. This will show some more detail about the life sector. We highlight the positive growth, 22% in premiums and less number of claims in that segment. Net profits were COP 399,000 million with a growth of 5.5%, even offsetting the impact of the VAT that we mentioned, and the various solutions have been growing positively. We see that the premiums are COP 3.6 billion (sic) [COP 3.6 trillion]. Claims has been improved at close to 300 basis points. The technical results, we see increases 11.3%, COP 539 million (sic) [COP 539 billion]. And operating expenses in the next graph is COP 700,000 million with a growth of 24.4%. If we were to exclude the impact of Life to see how much those weigh, the expansion will be growing by 18%, which is less than the growth of revenue, which is growing at 22%. The investment revenue has good dynamics mainly due to the good results from fixed income with a growth of 15%.

Let's go to Slide #15, where we'll show the general segment. In this segment, we must understand the impact of the Argentinian operation in this segment. Without the Argentinian operation, the segment would be achieving COP 93,000 million with an increase of 19.8%, which shows the good health of the other operations. When we specifically look at the net profit, considering the Argentinian operation, a decrease of 77% make a profit of COP 35,718 million.

I want to point out in the middle the retained premiums by country: and we see the different countries first; the relevance of each company in terms of what is the premium level according to the variation in Colombian currency, growing at close to 6.3%; and third, the variation in local currencies, with growth in some countries which are very positive, such as Brazil or Dominican Republic or the case of Colombia itself, which grew at 12.1%. In the case of Argentina, we want to point out, as mentioned earlier, that the company has been growing well in local currency, 57%. This is associated to the levels of inflation and devaluation of the country. But the main impact that we have when we consolidate the operations have to do with the impact due to the valuation in the various accounts into the lower value of the revenue from investment associated with the devaluation of the portfolio. This has not been materialized, but we value it at market prices because it has an impact on our numbers, especially in revenue from investments.

Let's look at the lower part and look at the retained premiums. These have been growing at 6.3% at -- to COP 4 billion (sic) [COP 4 trillion]. The claims decreased close to 100 basis points. Technical results are practically flat. Operation expenses are growing at 9%, close to the growth of premiums. And revenue from investments have decreased at 11% -- 17% due to the Argentinian devaluation.

Slide 16 shows our Health segment. We want to point out the results of the quarter. These results is stabilization of the claims and the effects of initiatives for cost expenses to make the operations more efficient. Net accumulated profits was close to COP 2,000 million. It's positive. And in the quarter, we have profits for COP 18,000 million with a growth of 21%. We see that revenue have deteriorated due to the results from the second quarter. In the claims, that has decreased in the percentage cost over revenue by 240 basis points, but it's lower than we had seen in the previous quarter. And operating expenses are more controlled, 18.1%, and grew less than the revenue. The technical results is practically the same, growing at [COP 58,000 million]. And revenue for investments in this relatively has grown 5.7%.

I want to point out, in the right-hand side of the slide, the total number of members, 3.5 million, 17% will -- end of the year, approximately 500,000 million (sic) [500,000] more members, and the number of members in the complementary plan is growing significantly.

And to point out what we said earlier, look at the goal graph where we see the evolution of the cost indicator and net profits. The gray line is the evolution of net profits. The second quarter was specifically bad. But right now, we are at a profit level which is similar to previous quarters that -- even in the previous year. And the percentage is totally related to the cost of -- and revenue went up in the second quarter, and it is now at close to 82 -- close to 88.2%, more aligned with what we've seen in the past.

I'll give the floor now to David to tell us about the highlights of SURA Asset Management.

--------------------------------------------------------------------------------

David Emilio Bojanini García, Grupo de Inversiones Suramericana S.A. - CEO & President [7]

--------------------------------------------------------------------------------

Thank you, Ricardo. Let's now look to Slide #18 where we have our significant events for SURA Asset Management. And the main news is a growth of 52% in net profits, explained mostly due to a better yield of the -- in cash in 2019, together with the growth of operating businesses.

Total clients were more than 20 million people, an increase of 2.3%. And this includes 141,000 new members who result from the bid in Peru for new members. And this is very positive for our portfolio in that country because these new members improve our average age of the customers. The company had net profits for the third quarter of COP 677,000 million with a growth of 52.4%.

And the mandatory business, we should mention that the revenue from commissions that have been resilient has grown at 8.9% in spite of what -- in some countries, we've had lowered the commission rates. The portfolios which are not mandatory have had positive results in Chile and Mexico and Uruguay. Especially in Mexico, we had a recognition as the best AFORE by Morningstar. And another important aspect in the mandatory is the transformation. Because in countries like Chile, today, the digital channel represents 25% of new sales in the case of Chile and 8.5% of new sales for Peru. This means a very significant reduction in membership expenses.

The Savings & Investments business continues growing very well. The assets under management increased by 30% as of September -- at the end of September this year, which is very positive. And in Investment Management, we've continued to consolidate that regional platform, which adds to the announcement of a new acquisition of a fiduciary company in Colombia, which is going to be another channel for Investment Management. And the other good news is that 77% of the managed portfolio has had positive alphas.

In right-hand side, we see that total assets under management in the case of SURA Asset Management have reached COP 491 billion (sic) [COP 491 trillion] with a growth of 19.5%, and we see the distribution by country and by type of investment. With this, I will give the floor to Ricardo Jaramillo, who will go into details about SURA Asset Management.

--------------------------------------------------------------------------------

Ricardo Jaramillo Mejía, Grupo de Inversiones Suramericana S.A. - CFO & Chief Corporate Finance Officer [8]

--------------------------------------------------------------------------------

Thank you, David. Now let's go to Slide #19 which will show the details of some cash from the statement of results of SURA Asset Management. I'll start by pointing out the good growth of operating profits driven by the profitability of the mandatory cash and the commissions. We -- revenue are COP 2.4 billion (sic) [COP 2.4 trillion], additional growth of COP 598,000 million growing at 33%. And we see in the graph how they are -- revenue from commissions, which are significant and increasing 9.9% in Colombian currency. The participation method, reflecting the evolution of protection with a growth of 87.5%. The performance of the cash is 378% in local currencies and 40 -- 407% in local currency for that [204 million] that we mentioned in the graph.

When we see operating expenses, they've grown at 15.3%, less than half of the growth for revenue. In operating expenses, I'd like to say that sales expenses are growing at 5 -- 15.3% (sic) [15.7%] due to an increase in commercial activity in Chile and in Mexico. In administrative expenses, we see an increase of 17.7%, and this is an impact associated to the projects that we have been implementing in transforming -- in the transformation of the business and for improving the management and savings and investment. And our operating profits are COP 1.1 billion (sic) [COP 1.1 trillion], improved margins from 38% to 42.6% (sic) [46.4%]. The performance of the [deposited cash], we had some previous [irregular yield, approximate yield] of 2.8%. Now we have a yield of approximately 12% (sic) [11.2%].

Let's go to this next slide where we see graphically how the various segments have contributed to the profits. Most impact is the mandatory growth which contributes COP 275,000 million to that profit. We also must point out that in the annuities, we have made some changes in the portfolio, specifically for the Mexican operation, and that has led to profit which is COP 46,000 million.

And in the Corporate business, we see that the impact of this segment is close to COP 86,000 million negative mostly due to higher taxes that are aligned with the higher revenues and, second, to higher financial expenses which are associated to the IFRS 16 and the difference of coverage that we have to mitigate foreign exchange impacts of the company. These are not additional expenses, just -- these are reclassifications that we have from this year, specifically in financial expenses. And for the total, we have profits that we show, which is COP 677,000 million, which -- so the Asset Management contributes to Grupo SURA. The company has an adjusted ROE of 8.5% and an adjusted ROTE of 30.5%.

Going now to Slide 21, we see the details for the mandatory business. The good performance of the good management -- commercial management and has decreased the impact of the commissions, especially in Mexico and Uruguay. In the case of Peru, which in the new bid that we won last year, we had some impacts. Operating revenue for the segment are close to 1.9 -- or close to COP 2 billion with growth of 30%. And we see in the middle how both the AULs (sic) [AUMs] and the salary bases in both countries have been very positive to AUL (sic) [AUM] at COP 434 billion, 24 point -- 20.4%, driven by Mexico and Peru. Those 2 operations, our revenue is associated to the commission associated to the AUMs. And in the case of Chile and Colombia and Uruguay, where we are associated with the -- maybe salary bases, we had a very good growth, 8.1% in Chile, 5.7% in Colombia and 2.8% in Uruguay.

Commissions revenue have been growing by 8.9%, on the lower part of this slide. The revenue from mandatory cash is very good. Sales expenses have the impact that I mentioned, higher from -- higher commercial activities both in Mexico and in Chile. And administrative expenses reflect the following business transformation projects: the increase in the various profitability of the main funds that we manage in the region; the recognition from Morningstar SURA AM to AFORE in Mexico; the drive given to Protección to these results; and the importance in the recognition of the rejuvenation of the age of the customers in the case of the Peru, where we have 149,000 (sic) [141,000] new members.

Now here's some figures and details for the voluntary business. We maintained the growth dynamics for the quarter. Operating -- net operating results come to COP 275,000 million with a growth of 16.7%. In this segment, we are including the business units of Savings & Investments, which are now COP 35 billion (sic) COP 35 trillion with a growth of 30% driven by net flow and yield. We'll see what each of those 2 contributes to the growth of the AUMs. And the other unit, which is the Investment Management unit, which has a COP 35 billion (sic) COP 35 trillion also at a growth of 5.9%. Let me remind you that approximately 33% of those AUMs are shared by both units, that is, Investment Management managed approximately [33%] of the AUMs. Then for Savings & Investments, this has been growing very well with double-digit growth in the various countries. And in Investment Management, we are advancing in our objective of duplicating or doubling those AUMs in (inaudible) in 5 years to have other alternatives.

The revenue from commissions, we see that grow at 14.3%, and sales expenses are growing less than the revenue, 13.7%. The administrative expenses reflect the various projects that we're implementing in these business units and, mostly, the creation of the Investment Management structure, which already has the complete team for what we expect in terms of growth for the next several months and years. To highlight the increase in the AUL, we have half of the competitors and we see at the end how we are itemized in various countries and in the Investment Management unit, all these AUMs that we have in this voluntary segment.

Let's now go to the Q&A session. Thank you very much.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Right now, we have Julian Felipe Amaya from Davivienda Corredores.

--------------------------------------------------------------------------------

Julian Felipe Amaya Restrepo, Corredores Davivienda S.A., Research Division - Equity Research Analyst [2]

--------------------------------------------------------------------------------

Congratulations on the results. I have several questions about Suramericana. The first is I'd like to know what effects have you been from the protests we've had in Chile? And what is your outlook with respect to all the changes that can take place in that country?

Also very much related to Chile, you were saying about some higher reinsurance costs in that country. Let me -- tell me a little bit more if that is an effect that we will all be seeing currently, or can we see that also in the future?

And my last question is I see that in the general segment, we see a decrease in retained premiums in Uruguay. I'd like to see a little bit more about that trend.

--------------------------------------------------------------------------------

David Emilio Bojanini García, Grupo de Inversiones Suramericana S.A. - CEO & President [3]

--------------------------------------------------------------------------------

Before I give you the answers for the reinsurance in Chile and Uruguay to Juan Camilo Parra, I'd like to tell you that we have been -- in Chile, we've played the role of investors and actors in the financial industry, and we've followed this situation very closely. This morning, we had an important news from -- with the idea of starting to work on a new constitutional assembly which will perhaps reach -- or lead to an agreement between the government and the other actors to find some social peace. This makes us optimistic that things will be going back to normal. Obviously, we will start a process of negotiation with this constitutional assembly. But public order will be more stable, and that's the most important.

I'd like to give the floor to Juan Camilo or [Mauricio] so that they can tell you about the things that you asked with respect to the cost of the protest, which is pretty limited because of -- they have reinsurance in those caps and the cost of reinsurance in Chile and the decrease in premiums in Uruguay.

--------------------------------------------------------------------------------

Juan Camilo Parra Osorio, Grupo de Inversiones Suramericana S.A. - Investment & Treasury Manager [4]

--------------------------------------------------------------------------------

Thank you, Julian. About the first question, reinsurance in Chile, we have been doing our negotiation with all our reinsurers. And as part of this negotiation and as a result of significant growth in our mortgage area, we have an increase in reinsurance costs, which are nonproportional. As a result of these protests, we hope that after the new negotiation of our reinsurance, it [will] be an impact. But right now, we will see.

With respect to Uruguay, that is a natural part of the business. There is a calling of the receivables. And we hope that over the past -- over the next year, we will be recovering those premiums or that decrease that you mentioned.

--------------------------------------------------------------------------------

Operator [5]

--------------------------------------------------------------------------------

Andres Soto from Santander.

--------------------------------------------------------------------------------

Andres Soto, Santander Investment Securities Inc., Research Division - Head of Andean Research [6]

--------------------------------------------------------------------------------

My question has to do with the evolution of expenses. There are several nonrecurring items during this year. When you look at the results to date on the operating leverage that you've had so far, the profits that are growing significantly, this is due to factors that will probably not be repeated, such as the revenue from investments. And how do you feel about any positive operating leverage for the next year when recurring revenue from this year -- when you consider reaching premiums and commissions have grown around 7% and expenses are growing at 13%?

--------------------------------------------------------------------------------

David Emilio Bojanini García, Grupo de Inversiones Suramericana S.A. - CEO & President [7]

--------------------------------------------------------------------------------

I'll give the floor to Ricardo Jaramillo for your answer.

--------------------------------------------------------------------------------

Ricardo Jaramillo Mejía, Grupo de Inversiones Suramericana S.A. - CFO & Chief Corporate Finance Officer [8]

--------------------------------------------------------------------------------

Thank you, Andres. There are several items about your question. First, I have a position that revenues, there are several clarifications. First, premiums have been growing at 5.8%, but we include the fact that SURA Asset Management is paying for the annuities business. When you look at the growth of premiums in Suramericana, we're growing around 15%.

Second, the participation method, our expectations is to maintain good growth. The figures for the bank and the guidance shows that is also with investments and also from the other affiliates. You are right that expenses is usually have had a number of impacts that we don't want to explain right now, but they are relevant, and that's why we clarified it. And when you list Health, that, and all that investment in business, these are significant expenses that have led to that growth of 13%.

In our company strategy, we have -- we're improving expenses. The investments in business transformation, we will be controlling those expenses. We have to be able to move those leverages so that we can have -- for the making more profitable, we have more growth in revenue than expenses. That is practically included in the budget and expenses. We're going to have a good trend in revenue growth, and we're going to invest in our businesses. We have to transform them, but we have to have -- try to make some controls for the expenses.

When we look at these investments, it's difficult to materialize everything overnight because you cannot shut down the business we have to develop new channels, new solutions. We have to invest in that. So on one hand, we have the investment. We also have the reduction in expenses.

So I am positive that we have to look at the thing in its entirety, and we're trying to maintain this operating leverage that you mentioned.

--------------------------------------------------------------------------------

Andres Soto, Santander Investment Securities Inc., Research Division - Head of Andean Research [9]

--------------------------------------------------------------------------------

Specifically, in the investments we've made in growth, in Investment Management, the investments have been completed, and the compression would be easier for next year. And that could be a positive leverage for the voluntary business, right?

--------------------------------------------------------------------------------

Ricardo Jaramillo Mejía, Grupo de Inversiones Suramericana S.A. - CFO & Chief Corporate Finance Officer [10]

--------------------------------------------------------------------------------

Yes, the structure has been strengthened very much for Investment Management. That structure has been part of all the conversations we had with asset managers in the world and make our capacity world-class. But we now believe that we're at an adequate level, and that we'll be comparable in terms of expenses for the following years.

--------------------------------------------------------------------------------

Unidentified Company Representative, [11]

--------------------------------------------------------------------------------

I would also add that in insurance, Suramericana has made a significant investment in diversifying channels, and this will yield our fruit. That's as explained by regard to the growth in premiums only from Suramericana is higher than 15%. And this, we will continue to see that significantly in the future.

--------------------------------------------------------------------------------

Steffania Mosquera, CrediCorp Capital, Research Division - Senior Analyst of Transport, Telecom, Media and Technology and Information Technology [12]

--------------------------------------------------------------------------------

I have 2 questions both for Suramericana. I'd like to understand better in general terms what happened in the Health segment during the second quarter compared to the third to have losses in the second and recovery during the third quarter.

And in the general area, specifically in Argentina, due to the decrease in the revenue from investments, and I'd like to have an idea of the order of magnitude. What in percentage is the investment in Argentina that could have been affected to leave that result?

--------------------------------------------------------------------------------

David Emilio Bojanini García, Grupo de Inversiones Suramericana S.A. - CEO & President [13]

--------------------------------------------------------------------------------

Steffania, I'd like to explain the health issue first. When we -- from the beginning of the year, we began to see some issues in mandatory health such as the fact that the payment for collections was not enough, that disability premiums were decreased. And another high impact was the transfer of odd members from other HMOs that came with some delayed procedures from other companies. Like Ricardo explained, we have received 500,000 new members, and some of them come immediately to go to -- for surgery or different procedures, medical procedures.

So when we started to see that, we started to talk directly to the Ministry of Health, in general, with the government to consider that, which is not normal. And the weakness of other HMOs have been affecting us. Although still with the government, we haven't been able to make any adjustments, we are not standing still, and we began to try to make some adjustments internally, together with many of the health service providers, IPS and the pharma companies to try to get some more efficiencies. And those efficiencies have begun to give positive results during the third quarter. We couldn't wait for the adjustments to be made. Anyway, the fact that we've made some adjustments in agreement with our supply, we were able to get this health activity back on a positive track, and we are still waiting for the government to make the necessary adjustments so that everything can continue in a more sustainable manner.

About investments in general, I give the floor to Juan Camilo Parra for that.

--------------------------------------------------------------------------------

Juan Camilo Parra Osorio, Grupo de Inversiones Suramericana S.A. - Investment & Treasury Manager [14]

--------------------------------------------------------------------------------

Steffania, look, the portfolio of [Centene] is close to [$90 million]. And the fall in prices as a result of the -- that, we've had some decrease in prices of up to 70% devaluation in some of the papers. So we tried to do some defensive actions. And making use of the devaluation, we increase our investments in dollars.

And as we mentioned earlier, this is a loss which is not -- still a book loss. We need to reprofile our debt according to the new government proposal. Everything is still speculative. And let's wait and see what comes out of these measures.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

We have no further questions right now.

We have a question through the platform. So [Felipe] was asking that for some time now, we were saying that there is a significant discount vis-à-vis the intrinsic value and the stock value of the company. The question is, what is the company's position vis-à-vis repurchasing shares as a mechanism to produce value for the shareholders?

--------------------------------------------------------------------------------

David Emilio Bojanini García, Grupo de Inversiones Suramericana S.A. - CEO & President [16]

--------------------------------------------------------------------------------

Thank you, Felipe. Ricardo? I'll give you my first opinion. We -- what we would like to do is not to affect the liquidity of the shares in the market. If we started to repurchase shares, we'll decrease even for more the float, and that could lead to a loss of liquidity, which is not desirable. This is why, in my opinion, we haven't wanted to take this step.

I give the floor to Ricardo in case he wants to add something else.

--------------------------------------------------------------------------------

Ricardo Jaramillo Mejía, Grupo de Inversiones Suramericana S.A. - CFO & Chief Corporate Finance Officer [17]

--------------------------------------------------------------------------------

I think that is the key issue. Repurchasing will have a very short-term response but will be drawing out the float. So that has to be very much in line with the company's financing, right? We're trying to deleverage that. We have some short-term priorities. I would add that we are working on a number of initiatives to reduce the discount because we are aware that it's pretty significant. We have to give clarity to the market with these good results why the company valuation should be much different from what we see right now. There's an impact that has to do with liquidity, and we have several initiatives to work in that area.

The other thing is that repurchasing shares in Colombia is not as clear as in the U.S., for example, where through the operation of the process that we have to follow doesn't make that to be very flexible and practical at the end of the day. But the message is that it's something that we will all be reviewing and we'll have as one of the options.

--------------------------------------------------------------------------------

David Emilio Bojanini García, Grupo de Inversiones Suramericana S.A. - CEO & President [18]

--------------------------------------------------------------------------------

I think that is the last question. Thank you, everyone, for participating in our call and for your interest. The channel of Investor Relations remains open for any questions that you might have.

Have a good day, and thank you very much.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

Thank you. This concludes today's call. You can all disconnect now.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]