Mexico may be next stop in Suramericana's regional expansion plan - Fitch

- Thursday, April 28, 2011

Mexico may be next stop in Suramericana's regional expansion plan - Fitch

Colombian holding Grupo de Inversiones Suramericana may be looking at prospective acquisitions in the Mexican, Central American and Peruvian financial systems that fulfill the characteristics of a strong market position, solid financial profile and growth potential, among others, José Vértiz, director at Fitch Ratings, told BNamericas.

Given its consolidated leading position in Colombia's financial sector, the company has begun looking at other markets in the region. One of the company's most important objectives in the short to medium term is the expansion of the insurance and social security businesses.

"Internationalization has become a very important part in the group's diversification strategy. In this sense, the participation of the operations outside Colombia in the results of the group is expected to grow in the coming years," Vértiz said.

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Suramericana has identified the financial sector as its top strategic business. It controls Colombia's largest bank, Bancolombia (NYSE: CIB); the top P&C and life insurers; and number two private pension fund manager AFP Protección.

In January, the group announced the purchase of 97% of the Asesuisa units, El Salvador's leading P&C and life insurers, for US$98mn.

Only days earlier and as part of the same package that Bancolombia acquired from financial conglomerate Banagrícola in El Salvador in 2007, Suramericana bought pension fund manager AFP Crecer for some US$100mn.

And also in January, Suramericana announced the acquisition of Proseguros in the Dominican Republic for US$22.5mn.

Earlier this year, CEO David Bojanini told BNamericas that the group expects Proseguros and Asesuisa to deliver revenues above US$200mn in 2011, or 10% of Suramericana's insurance income.

Besides the financial services sector, Suramericana also has what it calls portfolio investments, including Colombia's largest cement producer, Cementos Argos, and the country's biggest food company, Grupo Nutresa, formerly known as Grupo Nacional de Chocolates.

"The group's main revenue driver in the coming years is expected to be Colombia's macroeconomic performance and positive future projections given the company's presence in several sectors of the economy. This is expected to have a positive impact on the results of its main companies and on the dividends received by the group," Vértiz said.

After growing 4% in 2010, the Colombian economy is forecast to post growth rates of 4.4% and 4.5% during 2011 and 2012, respectively.

On February 28, Suramericana became the first Colombian company to be listed on Madrid's Latin American stock exchange (Latibex). The group also has a level 1 ADR program in the US.

FUNDING ALTERNATIVES

In a report written with analyst Felipe Vargas, Vértiz said Suramericana may increase its debt to finance its current expansion strategy.

The group has reliable, robust and diversified sources of liquidity that provide additional support to current and future financial obligations and a long track record in the local debt and stock market.

"Given this and the important demand showed for both the group's debt and stocks, it is expected that the company would find no difficulties in raising resources in the local markets, if needed," the report reads.

In addition, the company has approval from the board of directors to issue up to 30.9mn shares (currently worth US$550mn), which is an additional alternative liquidity source that can be used if necessary.

In late March, Fitch assigned a BBB- investment grade rating to Suramericana, the fourth largest Colombian company in terms of market capitalization.

To read the full Fitch report, in English, go to this link