SURA Asset Management S.A. and Subsidiaries Consolidated

Transcription

SURA Asset Management S.A. and Subsidiaries
Consolidated Financial Statements
For year ended December 31, 2013
1
Consolidated Financial Statements for year ended December 31, 2013
INDEX
Consolidated Income Statement ................................................................................................................................................................. 7
Other Comprehensive Income Statement ................................................................................................................................................... 8
Consolidated Statement of Financial Position ............................................................................................................................................. 9
Consolidated Statement of Cash Flows .................................................................................................................................................... 10
Consolidated Statement of Changes to Shareholders´ Equity .................................................................................................................. 11
1.
Corporate information........................................................................................................................................................... 12
2.
Main accounting policies and practices ................................................................................................................................ 21
2.1
Basis for Preparing and Presenting the Financial Statements ............................................................................................. 21
2.2
Basis of consolidation........................................................................................................................................................... 22
2.3
Summary of significant accounting policies ......................................................................................................................... 24
2.4
Changes to accounting policies and the information to be disclosed .................................................................................. 61
2.5
Significant accounting estimates, assumptions and opinions .............................................................................................. 63
3.
Standards issued pending implementation .......................................................................................................................... 67
4.
Business Combinations (Goodwill) ....................................................................................................................................... 69
4.1
Acquisitions in 2013 ............................................................................................................................................................. 69
4.2
Acquisitions in 2012 ............................................................................................................................................................. 73
5.
Gross premiums ................................................................................................................................................................... 84
6.
Fee and commission income................................................................................................................................................ 85
7.
Investment income ............................................................................................................................................................... 86
8.
Net gains and losses on financial assets available for sale ................................................................................................. 87
9.
Gains and losses on assets at fair value .............................................................................................................................. 88
9.1
Other comprehensive income .............................................................................................................................................. 89
10.
Other operating revenue ...................................................................................................................................................... 91
11.
Claims................................................................................................................................................................................... 92
12.
Operating and administrative expenses ............................................................................................................................... 93
13.
Financial income .................................................................................................................................................................. 94
14.
Financial expense ................................................................................................................................................................ 95
15.
Net gains on transactions between related parties .............................................................................................................. 95
16.
Fixed assets ......................................................................................................................................................................... 97
17.
Investment properties .........................................................................................................................................................100
18.
Intangible Assets ................................................................................................................................................................106
19.
Deferred acquisition costs (DAC) .......................................................................................................................................111
20.
Taxes ..................................................................................................................................................................................113
21.
Other assets .......................................................................................................................................................................121
22.
Cash and cash equivalents ................................................................................................................................................122
23.
Financial Assets and Liabilities ..........................................................................................................................................124
23.1
Financial Assets .................................................................................................................................................................124
23.2
Financial Liabilities .............................................................................................................................................................131
2
Current financial liabilities ........................................................................................................................................................................132
24.
Reinsurance assets ............................................................................................................................................................135
25.
Accounts receivable ...........................................................................................................................................................136
26.
Financial obligations ...........................................................................................................................................................139
27
Insurance contracts ............................................................................................................................................................139
28.
Equity Issued capital and reserves .....................................................................................................................................144
29.
Accounts payable ...............................................................................................................................................................154
30.
Other liabilities ....................................................................................................................................................................157
31.
Employee benefits ..............................................................................................................................................................157
32.
Provisions ...........................................................................................................................................................................159
33.
Deferred income liabilities (DIL) .........................................................................................................................................160
34.
Risk Management Objectives and Policies ........................................................................................................................161
35.
Information regarding Related Parties ................................................................................................................................187
36.
Investments in Associates ..................................................................................................................................................192
37.
Information regarding operating segments .........................................................................................................................194
38.
Earnings per share .............................................................................................................................................................199
39.
Commitments and contingencies .......................................................................................................................................199
40.
Additional information .........................................................................................................................................................200
3
SURA Asset Management S.A. presence in Latin America
4
Shareholders
GRUPO SURA
Grupo Bolívar
General Atlantic
IFC
JP Morgan
67.1%
9.7%
7.3%
4.9%
4.3%
Grupo Bancolombia
Grupo Wiese
3.7%
3.0%
5
SURA ASSET MANAGEMENT S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR YEAR ENDED DECEMBER 31, 2013
6
Consolidated Income Statement
At December 31
Note
2013
2012
USD$ 000
USD$ 000
5
5
772,662
(57,093)
715,569
374,095
(54,673)
319,422
Investment income
6
7
704,408
55,089
688,223
89,903
Net realized gains and losses on financial assets available for sale
8
2,820
3,105
Gains and losses at fair value
9
10
87,145
21,836
1,586,867
72,341
9,301
1,182,295
11
12
12
12
314,593
498,924
21,819
568,547
1,403,883
199,393
127,489
75,214
478,204
880,300
182,984
301,995
216,971
57,316
342,639
(104,424)
238,215
61,972
42,032
83,337
405,272
(68,430)
336,842
238,215
336,842
232,965
5,249
202,672
134,170
Gross premiums
Premiums ceded to reinsurers
Net premiums
Fee and commission income
Other operating revenue
Total operating revenue
Claims
Movement in premium reserves
Fee and commission expense
Other operating and administrative expense
Total operating expense
Operating income
Financial income
Financial expense
Earnings on transactions and acquisitions
13
14
15
Net income before income tax from continuing operations
Income tax
Net income for the year from continuing operations
Net income for the year
20
Attributable to:
Controlling interest
Non-controlling interest
7
Other Comprehensive Income Statement
At December 31
Note
Net income for the year
2013
2012
USD$ 000
USD$ 000
238,215
264,031
Other comprehensive income to be reclassified to profit or loss in
subsequent periods:
Gains and losses on financial assets available for sale
9.1
(43,074)
103,857
Effect on deferred income tax
20
32,805
(44,617)
Exchange differences on translation of foreign operations
(37,456)
36,158
Net other comprehensive income to be reclassified to profit or loss in
subsequent periods
(47,725)
95,398
Other comprehensive income not to be reclassified to profit or loss in
subsequent periods:
Revaluation of lands and buildings for own use
9.1
267
3,559
20
521
(1,269)
788
2,290
Other comprehensive income for the year, after tax
(46,937)
97,688
Total comprehensive income for the year, after tax
191,278
361,719
171,832
184,084
19,446
177,635
Net other comprehensive income not to be reclassified to profit
or loss in subsequent periods
Attributable to:
Controlling interest
8
Consolidated Statement of Financial Position
For year ended December 31
In thousands of dollars
Note
2013
USD$ 000
2012
Note
USD$ 000
Assets
Liabilities
Non-current assets
Non-current liabilities
Financial assets
23
2,414,854
3,145,240
Reinsurance assets
24
45,055
Accounts receivable
23, 25
2013
2012
USD$ 000
USD$ 000
Financial obligations
26
552,887
252,104
29,978
Technical reserves
27
1,902,372
1,679,555
2,601
12,947
Deferred tax liabilities
20
532,481
463,935
Accounts payable
29
70,074
54,119
Employee benefits
31
1,430
1,272
Provisions
32
87,479
2,930
33
24,150
25,457
3,170,873
2,479,372
Investments in associates
36
476,829
-
Investment properties
17
238,944
208,531
Fixed assets
16
56,974
54,604
Goodwill
18
1,719,794
1,622,288
Deferred income liabilities (DIL)
Other intangible assets
18
1,336,771
1,246,995
Total non-current liabilities
Deferred acquisition costs (DAC)
19
144,370
65,317
Deferred tax assets
20
79,418
37,666
Current liabilities
Other assets
21
19,223
18,789
26
149,883
7,255
6,534,833
6,442,355
Technical reserves
27
707,904
646,368
Current tax liabilities
20
34,084
36,977
Employee benefits
31
47,144
41,052
Accounts payable
29
109,338
143,442
Provisions
32
96,330
3,624
30
2,649
23,149
Total non-current assets
Current assets
Cash and cash equivalents
22
245,968
88,033
Financial assets
23
1,197,787
490,472
Other liabilities
23, 25
303,904
256,618
Total current liabilities
1,147,332
901,867
Current tax
20
72,120
25,533
Total liabilities
4,318,205
3,381,239
Other assets
21
8,405
13,535
1,828,184
874,191
Accounts receivable
Total current assets
Shareholders’ equity
Subscribed and paid-in capital
28
1,360
646
Share premium
28
3,785,406
1,763,583
Other capital reserves
28
(54,868)
8,690
Profits for the year
28
232,965
202,672
Translation differences
28
2,196
22,719
3,967,059
1,998,310
77,753
1,936,997
Total equity
4,044,812
3,935,307
Total liabilities and shareholders´
equity
8,363,017
7,316,546
Total controlling interest
Total assets
8,363,017
7,316,546
28
9
Consolidated Statement of Cash Flows
At December 31
2013
2012
USD$ 000
USD$ 000
Operating activities
Profit before income tax from continuing operations
Adjustments to reconcile profit before tax with net cash flows:
Depreciation of fixed assets
Amortizations of intangible assets and deferred acquisition costs (DAC)
Profits (losses) at fair value
Impairment losses
Provisions
Adjustments on:
Increase in accounts receivables and other assets
Increase in deferred acquisition costs (DAC)
Increase in reinsurance assets, net
Increase in technical reserves
Increase (decrease) in trade payables and other accounts payable
Changes in minority interest
Paid income tax
Net cash flows (used) from operating activities
342,639
405,272
8,104
81,278
(87,145)
2,768
183,089
13,250
57,256
(72,341)
(24,145)
(74,493)
(94,892)
(15,077)
284,353
32,973
(146,580)
(20,523)
(140,133)
356,361
(104,635)
(67,643)
(29,978)
59,123
(663,210)
798,023
22,683
(29,071)
364,584
Investment activities
Acquisition of subsidiaries, net of acquired cash
Acquired property and equipment
Acquired investment properties
Purchases of financial instruments
Redeemed financial instruments
Additions to intangible assets
Net cash flow used on investing activities
(251,671)
(10,205)
(4,474)
161,202
(252,721)
(357,869)
(142,383)
(25,886)
(60,702)
(436,048)
(5,572)
(670,591)
Financing activities
Capitalizations
Dividend payments
Increase in business combination reserves
Loans received
Loans paid
Interest paid
Net cash flow from financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at January 1
(110,534)
(155,696)
533,422
(90,011)
(17,738)
159,443
157,935
88,033
71,020
48,516
182,432
(8,529)
(5,498)
287,941
(18,066)
106,099
245,968
88,033
Cash and cash equivalents at December 31
10
Consolidated Statement of Changes to Shareholders´ Equity
At December 31
At December 31, 2011
Issued share
capital
Share
premium
(Note 28)
(Note 28)
Statutory
reserve
Other equity
reserves
Net gains
and losses
on financial
assets
available for
sale
Revaluations Income tax on
of land and
other
buildings for comprehensive
own use
income
Net Income
for the year
Translation
differences
(Note 28)
Noncontrolling
interest
Controlling
interest
Total equity
605
1,692,604
50,027
(34,963)
-
-
-
(1,755)
36
1,706,554
1,004,803
2,711,357
-
-
-
-
53,135
1,810
(23,381)
-
-
31,564
-
31,564
41
70,979
-
(1,755)
-
-
-
1,755
-
71,020
-
71,020
Business combinations
-
-
-
(36,183)
-
-
-
-
-
(36,183)
798,024
761,841
(Note 28)
-
-
-
-
-
-
-
-
22,683
22,683
-
-
-
-
-
-
-
202,672
-
202,672
134,170
336,842
646
1,763,583
50,027
(72,901)
53,135
1,810
(23,381)
202,672
22,719
1,998,310
1,936,997
3,935,307
-
-
-
-
(11,747)
2,006
10,860
-
-
1,119
(10,599)
(9,480)
714
2,021,823
-
-
-
-
-
-
-
2,022,537
(1,794,091)
228,446
Legal Reserve
-
-
19,326
-
-
-
-
(19,326)
-
-
(575)
(575)
Dividend payments
-
-
-
-
-
-
-
(110,534)
-
(110,534)
-
(110,534)
Business combinations
-
-
(48,575)
(35,428)
-
-
-
(72,812)
-
(156,815)
-
(156,815)
-
-
-
-
-
-
-
-
-
-
(42,295)
(42,295)
-
-
-
-
-
-
-
-
(20,523)
(20,523)
(16,934)
(37,457)
-
-
-
-
-
-
-
232,965
-
232,965
5,250
238,215
1,360
3,785,406
20,778
(108,329)
41,388
3,816
(12,521)
232,965
2,196
3,967,059
77,753
4,044,812
Other comprehensive
income
Capitalizations (Note
28)
Other comprehensive
income
Capitalizations (Note
28)
Increase in NonControlling interest
(Note 28)
11
22,683
Notes to the Financial Statements
For year ended December 31, 2013 (stated in USD$ thousands)
1.
Corporate information
SURA Asset Management S.A., was incorporated, under the name of Inversiones Internacionales Gruposura S.A.
by means of Public Deed No 1548 drawn up September 15, 2011 before the Notary Public No. 14 of the Circuit of
Medellin. However, by means of Public Deed No. 783, drawn up May 22, 2012 before Notary Public No. 14 of the
Circuit of Medellin, it changed its corporate name to SURA Asset Management S.A..
SURA Asset Management S.A. is a Colombian company with Taxpayer Reg. No. 900.464.054 - 3. It has its
registered place of business in Medellin, but it is entitled to set up branches, agencies, and offices in other parts
of the country as well as abroad, should its Board of Directors so decide. The Company has a term of duration
that expires on September 15, 2111.
Its business purpose is to invest in real estate and personal property. In the case of the latter, it may invest in any
type of personal property such as shares, participations or holdings in companies, entities, organizations, funds or
any other mechanism recognized by law that allows for the investment of funds. Likewise, it may invest in
commercial paper or securities yielding either a fixed or variable income, regardless of whether they are listed on
a public stock exchange. In any case, the corresponding issuers and/or investees may belong to either the public
or private sectors, both at home or abroad.
SURA Asset Management S.A., is the subsidiary of its parent company Grupo de Inversiones Suramericana S.A.
(Grupo SURA), with its registered place of business in Medellin, Colombia.
In 2012 SURA Asset Management S.A. held a 51% stake in SURA Asset Management España S.L., a single-member
limited liability company, parent of a group of subsidiaries dedicated to providing insurance, pension and
retirement savings funds in both Central and Latin America.
In 2012, SURA Asset Management acquired 63.0% of the company Invita Seguros de Vida S.A. (Currently Seguros
SURA S.A.) which in turn held a 99.98% stake in the company INCASA Empresa Administradora
Hipotecaria (Currently Hipotecaria SURA S.A.).
In June 2013, SURA Asset Management S.A. acquired a total of 49,000 shares in the aforementioned company,
equal to a 49% stake in its share capital, with which it increased its overall stake to 100%.
This investment consisted of payments-in-kind made by Grupo de Inversiones Suramericana S.A., General Atlantic
España S.L, International Finance Corporation, Sociedades Bolivar S.A., Compañia de Seguros Bolivar S.A.,
Banagricola S.A., Bluerapids Invest S.L and JP Morgan SIG Holdings in exchange for stakes in SURA Asset
Management S.A.. This was carried out based on the terms of the corresponding offer to each of the
aforementioned shareholders and by means of the following transactions:

On June 6, 2013, the Colombian company SURA Asset Management S.A. acquired 15,194 shares in
the foreign company SURA Asset Management España S.L., through a payment-in-kind made by
Grupo de Inversiones Suramericana S.A., for 357,281 shares in SURA Asset Management S.A..
12

On June 6, 2013, the Colombian company, SURA Asset Management S.A. acquired 8,259 shares in
the foreign Company SURA Asset Management España S.L. through a payment in kind made by
General Atlantic Espana S.L., for 191,168 shares in SURA Asset Management S.A..

the foreign Company SURA Asset Management España S.L. through a payment in kind made by the
International Finance Corporation for 79,660 shares in SURA Asset Management S.A..

Sociedades Bolivar S.A 191,168 shares in SURA Asset Management S.A..

Ccompañia de Seguros Bolivar S.A. for 63,732 shares in SURA Asset Management S.A..

Banagricola S.A. for 95,586 shares in SURA Asset Management S.A..

Bluerapids Invest S.L. for 47,804 shares in SURA Asset Management S.A..

the foreign Company SURA Asset Management España S.L. through a payment in kind made by JP
Morgan SIG Holdings for 113,435 shares in SURA Asset Management S.A..
The consolidated financial statements of SURA Asset Management S.A. and Subsidiaries correspond to the
financial year of 2013, beginning on January 1st and ending on December 31 of this same year. The financial
statements were approved on March 25, 2014 by the Board of Directors.
SURA Asset Management S.A. and Subsidiaries operate in Colombia, Spain, the Netherlands and the Latin
American countries of Mexico, Chile, Peru, and Uruguay.
13
The following is a breakdown of the stakes held in the companies that form part of the consolidated financial
statements of SURA Asset Management S.A. and Subsidiaries:
Company
SURA Asset Management
España S.L. (previously: Grupo
de Inversiones Suramericana
España S.L.)
AFP Integra S.A.
SUAM Corredora de Seguros S.A.
Activos Estratégicos SURA A.M.
Colombia S.A.S.
SURA Asset Management Perú
S.A.
SURA Asset Management México
S.A. de C.V.
Type of Entity
Holding company
Company dedicated to managing pension funds on an
individual account basis.
Company dedicated to all types of activities relating to life
insurance and reinsurance.
Direct stake
(%)
Country
100.00%
Spain
99.99%
Peru
99.98%
El Salvador
Holding company
100.00%
Colombia
Holding company
100.00%
Peru
Holding company
100.00%
Holding company
100.00%
Investment holding vehicle
100.00%
Uruguay
Holland
Grupo de Inversiones
Suramericana Holanda B.V.
100.00%
Holland
Grupo SURA Latin American
Holdings B.V.
100.00%
Holland
Holding company
100.00%
Luxembourg
Holding company
100.00%
Holland
Holding company
100.00%
Holland
Holding company
100.00%
Holland
SURA S.A.
Company investing in financial corporations as well as
insurance and pension fund management firms
100.00%
Chile
Compañía de Inversiones y
Servicios SURA Ltda.
Company dedicated to investing in different financial
instruments and investment vehicles
100.00%
Chile
Corredores de Bolsa SURA S.A.
Company dedicated to purchasing and selling its own or
third party securities, as well as providing its brokerage
services
100.00%
Chile
Administradora General de
Fondos S.A. (previously: SURA
Admora Gral De Fondos S.A.)
Company dedicated to managing mutual and investment
funds.
100.00%
Chile
Seguros de Vida SURA S.A.
Company dedicated to the insurance business, primarily
life insurance and annuities
100.00%
Chile
SURA Data Chile S.A.
Company dedicated to providing data processing services
and leasing computer equipment
100.00%
Chile
Tublyr S.A.
Grupo SURA Holanda B.V.
Mexamlux S.A.
Grupo SURA AE Chile Holdings I
B.V.
Grupo SURA AE Chile Holdings II
B.V.
SURA Asset Management Mexico
B.V.
Mexico
14
Company
Type of Entity
Direct stake
(%)
Country
SURA Chile S.A.
Company dedicated to providing subsidiaries with its
consultancy services
100.00%
Chile
AFP Capital S.A.
Company dedicated to managing retirement funds
99.64%
Chile
Santa Maria Internacional S.A.
funds.
99.63%
Chile
Asesores SURA S.A. de C.V.
Company dedicated to providing its marketing and
advertising services for both products as well as financial
services as well as recruiting and training personal,
managing payrolls and handling labor relations together
with any other administrative service.
100.00%
Mexico
Pensiones SURA S.A. de C.V.
Company dedicated to entering into life insurance
agreements for the exclusive handling of pension
insurance.
100.00%
Mexico
SURA Investment Management
S.A. de C.V. (Mexico)
Company dedicated to managing investments companies.
100.00%
Mexico
Inverconsa S.A. de C.V.
Company dedicated to funding claim settlements, but is
not operating at the present time
100.00%
Mexico
Afore SURA S.A. de C.V.
(previously: Afore Holding B.V.)
Company dedicated to managing investment companies
specialized in retirement funds (Siefores)
100.00%
Mexico
SURA Art Corporation S.A. de C.V.
Company dedicated to collecting Mexican works of art
99.99%
Mexico
Wealth Management SURA S.A.
Company dedicated to making capital investments in other
companies that have either been created or are due to be
incorporated
100.00%
Peru
Fondos SURA SAF S.A.C.
funds
100.00%
Peru
Servicios SURA S.A.C.
Company dedicated to providing business consultancy
services.
100.00%
Peru
100.00%
Peru
100.00%
Peru
International SURA Perú S.A.
Pensiones SURA Perú S.A.
Company dedicated to investing in shares, securities and
other instruments as well as buying and selling personal
and real estate property.
Company dedicated to investing in and providing its
advisory services to Private Pension Fund Management
Funds, general-purpose funds and fund portfolios
Seguros SURA S.A. (formerly
Invita)
Company dedicated to all kinds of activities relating to life
insurance and reinsurance
69.29%
Peru
Hipotecaria SURA Empresa
Administradora Hipotecaria EAH
(formerly Incasa)
Company dedicated to conducting operations inherent to a
financial institution, with a primary focus on granting
mortgage loans.
99.98%
Peru
AFAP SURA S.A.
Company dedicated to managing retirement savings funds.
100.00%
Uruguay
15
Company
Ahorro Inversión SURA
Administradora de Fondos de
Inversión S.A. (previously:
Type of Entity
Direct stake
(%)
Country
100.00%
Uruguay
Company dedicated to managing investments funds
Pactoril S.A)
In 2012 the Company held, directly and indirectly 100.0% of Asset Management SURA S.A.C. in Peru which was
liquidated in 2013.
The consolidated financial statements of the Company include as of 31-12-2013:
(Figures without intercompany eliminations)
686,851
88,064
598,787
Profits for the
year
94,376
AFP Capital S.A.
1,046,515
159,148
887,367
133,682
AFP Integra S.A.
543,655
139,362
404,293
48,183
SURA Asset Management España S.L. (previously: Grupo
de Inversiones Suramericana España, S.L.)
3,659,068
145,680
3,513,388
17,725
Grupo de Inversiones Suramericana Holanda B.V.
2,107,597
25
2,107,572
5,398
Grupo SURA AE Chile Holdings I B.V.
720,593
102
720,491
(76)
Grupo SURA AE Chile Holdings II B.V.
-
93
(93)
(77)
1,360,874
92
1,360,783
(645)
323,755
80
323,675
16,756
30,654
22,380
8,274
(214)
6
2
3
81
2,494
235
2,259
(1,737)
18,302
1,389
16,913
4,942
1,347,706
1,171,192
176,513
10,332
Assets
Afore SURA S.A. de C.V. (previously: Afore Holding B.V.)
Grupo SURA Latin American Holdings B.V.
Hipotecaria SURA Empresa Administradora Hipotecaria
EAH
Inverconsa S.A. de C.V. (previously: Inverconsa)
Ahorro Inversión SURA Administradora de Fondos de Inversión
S.A. (previously: Pactoril S.A)
Seguros SURA S.A.
Liabilities
Equity
16
4,365,893
600,824
3,765,069
Profits for the
year
(69,861)
Administradora General de Fondos S.A. (previously: SURA
Admora Gral De Fondos S.A.)
11,184
6,347
4,837
126
AFAP SURA S.A.
30,633
5,003
25,630
12,856
Corredores de Bolsa SURA S.A. (previously: SURA Agencia
De Valores S.A)
25,105
13,819
11,286
(12,040)
21,406
3
21,403
5
Asesores SURA S.A. de C.V.
1,509
1,484
24
(359)
SURA Chile S.A.
9,013
7,886
1,127
1,284
513,251
573
512,679
63,775
Data SURA Chile S.A.
2,561
1,084
1,477
293
2,749
694
2,055
(1,327)
233
29
204
(54)
24,352
6,855
17,497
(1,016)
503,831
438,402
65,429
5,539
29,178
54
29,124
7,789
34
30
4
-
917,415
8,372
909,042
71,285
1,470,581
1,223,547
247,034
30,541
3
1
2
-
5,210
1,104
4,106
1,791
34
16
17
(37)
7,451
1,015
6,436
343
46
-
46
(4)
20,547
13
20,534
(14)
Assets
SURA Asset Management Perú S.A.
Compañía de Inversiones y Servicios SURA Ltda.
SURA Investment Management S.A. De C.V. (Mexico)
Pensiones SURA Perú S.A.
Promotora SURA AM S.A. de C.V.
SURA S.A.
Mexamlux S.A.
Negocios Financieros S.A.
SURA Asset Management Perú S.A.
Liabilities
Equity
17
13,669
7
13,662
Profits for the
year
(3)
428,314
23
428,291
(159)
1
-
1
-
61
-
61
-
Assets
SURA Asset Management S.A. de C.V. (Mexico)
SURA Asset Management Mexico B.V.
Liabilities
Tublyr S.A.
Activos Estratégicos SURA AM Colombia SAS
Equity
The consolidated financial statements of the Company include as of 31-12-2012:
(Figures without intercompany eliminations)
419,872
38
419,835
Profits for the
year
3,485
AFP Capital S.A.
1,047,831
137,896
909,934
96,882
AFP Integra S.A.
223,385
62,092
161,293
50,663
Grupo De Inversiones Suramericana España, S.L.U.
3,527,990
153,430
3,374,559
(8,513)
Grupo de Inversiones Suramericana Holanda
2,025,034
48
2,024,987
(92)
Grupo SURA AE Chile Holdings I B.V.
868,836
22
868,814
2,523
Grupo SURA AE Chile Holdings II B.V.
-
13
(13)
(13)
1,359,451
47,068
1,312,383
81
354,549
68
354,481
45,276
-
-
-
-
255,498
46,924
208,574
105,862
13
87
(74)
(19)
1,938
198
1,740
(396)
21,092
4
21,089
94
Seguros SURA S.A.
1,422,227
1,312,988
109,239
(755)
SURA Asset Management S.A. Holding
1,813,260
29,027
1,784,234
(17,755)
Assets
Afore Holding B.V.
Hipotecaria SURA Empresa Administradora Hipotecaria
EAH
ING Afore
Inverconsa S.A. de C.V.
Pactoril S.A
Liabilities
Equity
18
-
-
-
Profits for the
year
-
9,251
8,241
1,011
(5,255)
AFAP SURA SA.
23,661
5,825
17,837
11,341
SURA Agencia De Valores S.A
26,040
11,501
14,539
(1,331)
19,761
21
19,740
53
2,378
1,993
385
122
1
-
-
(2)
7,413
7,506
(93)
2,650
552,966
678
552,288
860
1,775
444
1,331
227
3,384
800
2,584
(962)
1,142
860
282
-
25,395
6,381
19,014
(4,696)
574,418
448,885
125,533
3,133
32,148
21
32,127
(11)
23
-
23
(1)
SURA S.A.
1,009,894
101,053
908,840
(35,626)
1,167,265
928,093
239,172
28,136
3
-
3
(1)
2,682
895
1,787
(2,063)
Assets
SURA Administradora De Fondo
SURA Admora Gral De Fondos S.A.
Asesores SURA S.A. De C.V.
SURA Asset Management Sa
SURA Chile S.A.
Compañía de Inversiones y Servicios SURA Ltda.
SURA Investment Management S.A. De C.V.
Pensiones SURA S.A. De C.V.
Pensiones SURA Peru S.A.
Promotora SURA Am S.A. de C.V.
Liabilities
Equity
19
The companies included in these consolidated financial statements operate mainly in the financial sector. The
following table shows the products and services offered in each line of business:
Line of Business
Name of Company
Products or Services
Pension Funds Administration
AFP Capital S.A.
AFP Integra S.A.
AFAP SURA S.A.
AFORE SURA S.A.
Managing mandatory and voluntary pension
funds
Insurance
Seguros SURA S.A.
Life Insurance
Life Annuities
Mutual Funds and Investment
Funds Administration
Administradora General de Fondos
SURA S.A.
Santa María Internacional S.A.
Managing public and private mutual funds
for private individuals (retail) or institutional
investors.
Note 35– Information regarding related parties, shows the amounts recognized in the statements of financial
position corresponding to SURA Asset Management S.A. and Subsidiaries or those where it holds a direct or
indirect stake.
Update on the Streamlining of SURA Asset Management S.A.’s corporate structure.
As previously mentioned, as a result of Grupo SURA's purchase of the pension, savings and investment assets
belonging to the ING Group in Latin America, it was necessary to purchase four Dutch entities that handled the
ING Group´s operations in this part of the world. (See Note 4) This transaction also required that Grupo SURA set
up three investment vehicles domiciled in Spain and the Netherlands. When the ING transaction was finalized at
the end of 2011, the corporate structure included approximately 30 operating companies and investment
vehicles received from ING, all domiciled in Holland, Mexico, Chile, Peru, Uruguay and Colombia.
Subsequently, in order to facilitate the development of SURA Asset Management S.A.'s business and investments
in Latin America, the Company embarked on reorganizing and simplifying its corporate structure, which, once
completed, will provide greater clarity and market transparency with regard to the Company. It shall also allow
for a more efficient running of the Company as well as facilitate the monitoring and oversight functions of the
regulatory authorities in different jurisdictions.
This streamlining required setting up as well as doing away with certain companies in different jurisdictions, some
permanently and others on a more temporary basis.
Furthermore, other mergers, de-mergers and acquisitions had to be carried out, all within SURA Asset
Management S.A.. Further progress and/or the completion of these is scheduled for 2014.
20
In dismantling the Dutch companies and, pursuant to Dutch law, it was necessary to create temporary legal
vehicles in Luxembourg so as not to produce double tax residences, while the final place of domicile is created in
different Latin American countries where SURA Asset Management S.A. is currently present. It is important to
mention that these entities shall not perform any operating activities, since they have been exclusively designed
as temporary legal special purpose vehicles, with a term of duration of less than one year, as reported last August
16, 2013 when Mexamlux S.A. was incorporated.
SURA Asset Management S.A. by means of this streamlining process intends to consolidate all of its pension,
savings and investment business in a single company in each of the countries where it is present. These local
companies shall oversee the SURA Asset Management S.A.’s operating subsidiaries in each jurisdiction, and thus
be able to do away with the aforementioned investment vehicles.
This reorganization process shall be carried out according to the regulatory framework and legal requirements
applicable in each of the corresponding jurisdictions. So far the Company has presented to the authorities and
regulators in the different countries, details of the respective operations to be carried out so as to be able to
receive the corresponding authorizations and thus ensure that the aforementioned corporate streamlining is
carried out in strict compliance with both the law and our own corporate principles.
2.
Main accounting policies and practices
2.1
Basis for Preparing and Presenting the Financial Statements
The consolidated financial statements of SURA Asset Management S.A. and Subsidiaries have been prepared in
accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). These consolidated financial statements included all the Group's entities that form part
of SURA Asset Management S.A.'s scope of consolidation regardless of their activity, form of business
organization and nationality. The financial statements were approved on March 25, 2014 by the Board of
Directors.
In 2013 there were no changes made to the accounting policies, estimates or any significant errors that could
have had an impact on the financial position or results of SURA Asset Management S.A. and Subsidiaries.
The consolidated financial statements have been prepared using the historic cost method, except for investment
properties, land, buildings, and financial instruments at fair value through gains and losses, together with
financial assets available for sale, which have been measured at their fair value or amortized cost. The
consolidated financial statements are presented in U.S. dollars with amounts being rounded up to the nearest
thousand (U.S. $ 000) except when otherwise stated.
Generally speaking, the historic cost method is based on the fair value of the transactions carried out. Their fair
value is equal to the fair market price that would be received or paid should the asset or liability be sold or
otherwise transferred.
In estimating the fair value of an asset or liability, the Company takes into account the same characteristics of the
asset or liability that the market would upon setting the price of the asset or liability in question on the date the
21
value of such is measured. The fair value measured and/or disclosed in the consolidated financial statements is
determined on this basis, excluding leasing transactions that are governed by International Accounting Standards
(IAS) 17 which although are measured in a similar fashion are not posted at their fair value but at their net
realizable value (IAS 2) or their value in use (IAS 36).
Also, for financial reporting purposes, fair value measurements are classified as Level 1, 2 or 3 based on the
degree to which the inputs to fair value measurements are observable and the importance of inputs for
measuring fair value in their entirety, as described below:



Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
entity can access at the measurement date.
Level 2 inputs are inputs other than quoted prices belonging to Level 1 that are observable for the asset
or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability.
Assets and liabilities have been converted to U.S. dollars using the exchange rates applicable at December 31,
2013 and December 31, 2012, respectively; equity was converted using the historic rate and the income accounts
using the average exchange rate for the period in question.
Country
Currency
Year-End
Rate
2013
Average
Rate 2013
Year-End
Rate
2012
Average
Rate 2012
Chile
CLP
525.45
495.36
474.2
486.3
Mexico
MXN
13.10
12.76
12.73
13.16
Peru
PEN
2.80
2.70
2.55
2.64
Peru -Seguros SURA S.A.
PEN
2.80
2.70
2.55
2.57**
Uruguay
UYU
21.50
20.43
19.20
20.26
Colombia
COP
1,926.83
1,869.10
1,768.23
1,788.89
Holland – Spain
EUR
1.38
1.33
1.32
1.29
El Salvador
USD
1
1
1
1
** Exchange rate corresponding to the average rate between December 1 and 31, 2012 since the Company was
acquired in November 2012
2.2
Basis of consolidation
The consolidated financial statements include the financial statements of SURA Asset Management S.A. and
Subsidiaries for the years ended December 31, 2013 and December 31, 2012. Control is gained when the
Company:


exerts power over the investee;
is exposed or entitled to variable returns corresponding to the stake held in the investee;
22

Is able to use its power over the investee to influence the amount of investor returns to be paid.
The Company reevaluates whether it controls an investee if the current facts and circumstances indicate any
change to one or more of the three aforementioned elements of control.
Should the Company hold less than the majority of the voting rights of an investee, it may well exert power over
the investee if its voting rights are sufficient to provide the practical ability to unilaterally direct the investee´s
activities. The Company considers all relevant facts and circumstances in assessing whether or not its voting rights
in an investee are sufficient to constitute power over such, including:




the quantity of the voting rights held in the investee relative to the size and dispersion of those held by
other vote-holders;
potential voting rights held by the Company, other vote holders or other parties;
rights under other contractual arrangements, and
All additional facts and circumstances indicating that the Company has, or has not, the current ability to
direct the investee´s activities, at the time the decisions should be made, including voting patterns at
previous shareholders meetings.
The consolidation of the corresponding accounts begins when the Company obtains control over the subsidiary
and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the Consolidated Income Statement and other
comprehensive income from the date the Company obtains control until the date when the Company gives up
control of the subsidiary.
The corresponding profit or loss and each component of other comprehensive income is attributed to the owners
of the Company and the non- controlling interest. The total comprehensive subsidiary income is attributed to the
owners of the Company and non- controlling interest even if this results in a deficit for the non-controlling
interest.
The financial statements corresponding to the subsidiaries are prepared for the same reporting period as that of
the parent company, using uniform accounting policies. All balances, investments, transactions, profits and losses
arising from transactions between SURA Asset Management S.A., including dividends, are eliminated completely.
Total comprehensive subsidiary income is attributed to minority interests, even if a debit balance is involved.
A change in the ownership stake held in a subsidiary that does not involve a loss of control, is accounted for as an
equity transaction. Any difference between the adjustment made to the non - controlling interest and the
consideration paid or received is directly recognized in the equity accounts and attributed to the owners of the
Company. Should SURA Asset Management S.A. lose control of a subsidiary, it would:





Write off the subsidiary´s assets (including goodwill) and liabilities
Write off the book value of minority interests
Write off the accumulated translation differences as posted under net equity.
Recognize the fair value of the consideration received for the transaction
Recognize the fair value of any retained investment
23


2.3
Recognize the fair value of any retained investment
Reclassify the stake held by the parent company to either the income accounts or reserves, as
applicable, under the items previously recognized in other comprehensive income.
Summary of significant accounting policies
In preparing the consolidated financial statements the following accounting policies have been applied in the case
of SURA Asset Management S.A. and Subsidiaries:
a)
Classification of Products in accordance with IFRS 4
In classifying its insurance portfolios SURA Asset Management S.A. considered the following criteria as stipulated
in IFRS 4:
i.
Insurance Contracts: are all those contracts where the company (the insurer) has accepted significant
insurance risk from the counterparty (the insurance holder) by agreeing to pay compensation in the case
of any uncertain future event adversely affecting the insurance holder. Insurance risk is considered
significant when the benefits paid out in the case of occurrence differ materially from those in the case
of non-occurrence. Insurance contracts include those in which financial risks are transferred providing
the insurance risk component is more significant.
ii.
Investment contracts: are all those contracts where the insurance holder transfers significant financial
risk as opposed to insurance risk. The definition of financial risk includes the risk of any future change in
one or any combination of the following variables: interest rates, prices of financial instruments,
commodity prices, exchange rates, price indexes or rates, credit risk or credit risk index or any other nonfinancial variable, as long as said variable is not specific to a party to the contract.
Under IFRS 4, as relating to insurance contracts, the insurer may continue using non-uniform accounting policies
for subsidiary insurance contracts (as well as for deferred acquisition costs (DAC) and related intangible assets).
Although IFRS 4 does not relieve the Company of some implications of the criteria set out in paragraphs 10 to 12
of IAS 8.
Specifically, the Company shall:
i.
Not recognize provisions for future claims as a liability when these arise as a result of insurance contracts
that were nonexistent at end of the reporting period (such as catastrophe and equalization provisions).
ii.
Perform adequacy tests on liabilities.
iii.
remove an insurance contract liability (or a portion thereof) from its statement of financial position
when, and only when, it is extinguished, that is to say when the obligation specified in the contract is
discharged or canceled or expires.
iv.
not offset (i) reinsurance assets with related insurance liabilities, or (ii) income or expense from
reinsurance contracts along with the respective income or expense from related insurance contracts,
v.
Consider whether any impairment has occurred to its reinsurance assets.
24
Insurance risk is significant only if an insured event could cause an insurer to pay a significant amount in
additional benefits under any scenario. Additional benefits relate to amounts that exceed those that would be
paid if an event did not occur. An analysis is performed on the significant risk existing on a contract-by-contract
basis.
According to the characteristics of our products, the portfolio is classified under the concept of an insurance
contract. Importantly, once a contract is classified as an insurance contract, classification is maintained for the
duration of such, even if the insurance risk reduces significantly during its term of validity.
Not all products are available at all locations and / or subsidiaries. Currently, we have insurance contracts in Chile,
Peru and Mexico.
Permitted practices and policies include performing compulsory liability adequacy and impairment tests on
reinsurance assets. Prohibited practices include setting up catastrophic reserves, maintaining or setting up
contingent or equalization reserves and offsetting reinsurance assets and liabilities.
b)
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as
the sum of the consideration transferred, measured at fair value at the date of its acquisition, as well as the
amount of any non-controlling interest in the acquisition.
Upon allocating the purchase price, tangible net assets and acquired intangible assets (with both a definite and
indefinite useful life) are identified and assessed, so as to reconcile the value paid and the value of the net assets
of the Company (both tangible and intangible).
GW = VP - ANA + I (+/-) T
GW: Goodwill (residual value)
VP: Value Paid. Including the cash price paid and any future disbursements.
ANA: Acquired Net Assets corresponding to their market value
I: Intangible assets (client relations, trademarks, leases over/below their market value, others)
T: Deferred tax
Each business combination was accounted for in books by applying the acquisition method,
In assessing the value of intangible assets acquired in business combinations, the methodologies used are
grouped into the following three approaches:

Income approach: present value of the cash flows attributable to intangible assets.
25

The “Relief from Royalty " method: this method of assessing the value of intangible assets consists of
estimating the market value of the intangible asset in question as the present value of future savings
from expected annual payments of royalties due to the owner of the asset.

The “Multi-period Excess Earnings Method (MEEM): based on contributory or excess earnings during
multiple periods: This valuation method is based on the principle that the value of an intangible asset is
equal to the present after tax value of incremental cash flows attributable to the asset, after deducting
the charges for the cost of capital invested or the charge corresponding to contributory assets (tangible
and intangible).

Incremental Flow Method: this method represents the present value of income or additional cash flows
that the intangible asset enables its possessor to obtain (e.g. price premiums or cost reductions).

Market Approach: this is the process by which the value of an intangible asset is established based on a
comparison with the value resulting from market purchases and sales of comparable intangible assets.
This requires performing an analysis of intangible assets recently bought or sold, and then comparing
their characteristics with those of the asset in question.

Cost Approach: a valuation technique based on the reproduction cost less adjustments for depreciation,
amortization and obsolescence. This approach is used preferably when the asset is easily replaceable
and when the replacement cost is reasonably certain. It is used more frequently for assets that do not
constitute a direct source of cash flows for the entity, such as its workforce, internally developed
software, websites.
SURA Asset Management S.A. applied the income approach in assessing the value of intangibles acquired in
business combinations. In the case of client relationships the MEEM method is applied, for trademarks the relief
from royalty method is used.
For each business combination, SURA Asset Management S.A. and Subsidiaries chose whether to assess the value
of the non- controlling interest in the acquiree as the proportionate share of the identifiable net assets acquired
or at their fair value, Acquisition costs incurred are charged to the income accounts under administrative
expense.
When SURA Asset Management S.A. acquires a business, it assesses the identifiable assets acquired and liabilities
assumed for appropriate classification and designation in accordance with the contractual terms, economic
circumstances and other relevant conditions existing at the date of acquisition. This includes separating
embedded derivatives in the acquiree´s main contracts.
Should the business combination be carried out in stages, the stakes previously held in the acquiree´s equity are
valued on the acquisition date and gains or losses are recognized on the income accounts.
Any contingent consideration that must be transferred by the acquirer is recognized at fair value at the
acquisition date. Contingent considerations classified as financial assets or liabilities in accordance with IAS 39
Financial Instruments Recognition and Measurement measured at fair value, and any changes to such are posted
as a profit or loss or as a change to other comprehensive income.
26
In cases where the contingent considerations do not fall under the scope of IAS 39, these are measured in
accordance with the relevant IFRS. Should the contingent consideration be classified as net equity this is not
valued and any subsequent changes are recorded in net equity.
Goodwill is initially measured at cost, as the excess of the sum of the consideration transferred and the amount
recognized for non-controlling interest in respect of net identifiable acquired assets and liabilities. Should the fair
value of the net acquired assets exceed the value of the consideration transferred, the difference is recognized in
the income accounts.
After initial recognition, goodwill is carried at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated, from the
acquisition date, to each cash-generating unit belonging to SURA Asset Management S.A. and Subsidiaries that is
expected to benefit from the combination, irrespective of whether the acquire has other assets or liabilities of
assigned to those units.
When goodwill forms part of a cash-generating unit and a portion of that unit´s operations is written off, the
goodwill associated with these divested operations is included in the book value of the operation in question
when determining the gain or loss obtained on such disposal. The goodwill written off in these circumstances is
measured based on the relative values of the operation disposed of and the portion of the cash -generating unit
retained.
Business combinations carried out during 2013 are listed below and later explained in detail in Note 4:
Country
Peru
c)
Date
April 2013
Company
AFP Integra
Description
Acquisition of 50 % of the portfolio of affiliates and funds
managed by AFP Horizonte, which was subsequently taken
over by AFP Integra.
Intangible Assets
The cost of intangible acquired assets in a business combination corresponds to their fair value at the date of
acquisition. After initial recognition, intangible assets are carried at cost less any accumulated amortization and
any accumulated impairment.
Intangible assets with finite useful lives are amortized over their useful economic life and assessed to determine
any impairment to such whenever there is an indication that the intangible asset may have suffered such
deterioration. The period and the amortization method used for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period.
27
Intangible assets with indefinite useful lives are not amortized, but are tested annually to determine whether
they have suffered any impairment in their value, either individually or at the level of the cash-generating unit to
which they were assigned.
An indefinite useful life is assessed and reviewed annually to determine whether it is still appropriate, if not, the
change in useful life from indefinite to finite is made on a prospective basis.
The useful life and depreciation method are reviewed periodically by Senior Management on the basis of
expected future economic benefits for the components of intangible items.
The useful lives of intangible assets are as follows:
Estimated useful life
Client relations
Between 4 and 31 years
Acquired goodwill
Trademarks
Indefinite
Definite and indefinite
Contracts and licenses
17 years
Software *
3 years
* Not acquired as part of the business combination.
Gains or losses arising from writing off an intangible asset are measured as the difference between the net
income obtained from the sale and the carrying amount of the asset, recognizing these in the income accounts
when the asset is written off.
d)
Impairment of nonfinancial assets
Pursuant to that stipulated in IAS 36 - Impairment of assets, the carrying value of these assets should not exceed
the recoverable value thereof, and any impairment of these shall be recognized as the need arises.
Consequently, SURA Asset Management S.A. and its related parties conduct an annual review of their nonfinancial assets in order to evaluate the possible recognition of any impairment sustained to such.
Non-financial assets are classified according to their expected useful life:
Assets with indefinite useful lives, for example, the goodwill determined in a business combination.
For this type of asset, considering that these are not amortizable, a recoverability test is performed
annually.
- Assets with definite useful lives include long-term fixed assets and intangible assets such as
customer relationships. Considering the fact that these assets are depreciated or amortized,
recoverability tests are performed if there is evidence of impairment.
Indications that impairment has occurred include:
o A significant decrease in the value of the asset as a result of normal use or with the passing of time;
-
28
o
o
o
o
o
o
o
Significant changes having an adverse effect on the Company or the market to which the asset is
allocated, in terms of the corresponding economic, legal, technological and market environment;
Changes in market interest rates or other rates of return that significantly affect the calculation of
the discount rate used to calculate the value in use of the asset in question;
The book value of the entity´s net assets of the entity is greater than the estimated fair value of the
entity as a whole;
Evidence of obsolescence or physical damage sustained by the asset in question;
Changes in the use of the goods, producing a deterioration in these same assets;
Expected operating losses (idle capacity, outage plans, restructuring or the sale of assets);
Economic output lower than expected (e.g. maintenance capex greater than expected, greater
needs in operating issues, operating margin or flows associated with negative asset, etc.).
Recoverability or impairment testing
Once the indications of a potential impairment have been detected a recoverability test must be performed on
the asset to determine whether to recognize an impairment loss. For this purpose, IFRS establishes the following
guidelines:
a.
In order to estimate the recoverable amount of an asset the entity must identify whether it can
assigned a flow of funds directly to the asset in question. If not, the corresponding assets should
be grouped at the lowest level for which there is an identifiable flow of funds regardless of the
amount of flows from other assets (Cash-Generating Unit - CGU).
b.
Estimate the recoverable amount of the asset or CGU in question.
c.
Compare the recoverable amount with the carrying amount of the asset or CGU in question
i. When recoverable value is higher that the corresponding book value:
 No impairment loss is recognized.
 Amortization policies (useful life) are reviewed.
ii. When the recoverable value is higher that the corresponding book value:
 The asset´s book value is not recoverable.
 An impairment loss should be determined.
Recoverable value
a)
Net Realizable Value (NRV): Price in a binding sale agreement in an unforced arm's-length
transaction between independent parties under normal market conditions less the associated costs
(dismantling, transportation, legal, tax).
b) Value in Use (VU): Expected present value of net cash flows that should arise from the continued
use of the asset and from its disposal at the end of its useful life (or its early sale, if applicable).
With respect to the net realizable value, the applicable accounting standards state:
29
i.
Is there a price in a binding sale agreement as part of a transaction conducted at arm's
length?


ii.
Does the business trade in an active market?


iii.
If the answer is yes, the NRV is calculated as the price minus expenses relating to
the transaction.
If the answer is no, the following elements must be evaluated.
the transaction.
If the answer is no, the following elements must be evaluated.
Can a reliable estimate be made of the amount that could be obtained by selling the
business in a separate transaction between knowledgeable, willing parties?


the transaction.
If the answer is no, the asset´s Value in Use (VU) is used as its recoverable value.
Goodwill Recoverability Test
Recoverable value of the CGU vs. Goodwill allocated + the CGU´s Net Book Value


If the Recoverable Value is greater than the corresponding Net Book Value + Goodwill: there is no
need for any further analysis.
If the Net Book Value + Goodwill is greater than the corresponding Recoverable Value = the
corresponding impairment loss must be determined.
The process of determining and calculating impairment
Among the valuation methodologies outlined in the standard, SURA Asset Management S.A. uses the
methodology based on the Present Value of the CGU´s Net Cash Flows, which represents the value in use or the
expected present value of net cash flows that should arise from the continued use of the asset in question as well
as its disposal at the end of its useful life.
Identifying CGUs:


CGU: when the recoverable value of an asset considered separately from the rest cannot be determined.
Define parameters for allocating indirect costs and expense and for corporate common assets, if any.
Estimating cash flows:
30

Macro Analysis: Here the macroeconomic context is considered based on the markets in which the CGU
is active (local / International), analyzing the current and expected behavior of macroeconomic variables
having the greatest impact on the business (GDP, inflation, nominal and real exchange rates, etc.).

Industry Analysis: Understanding the industry in which the CGU and comparable companies operate, as
well as the competitive position of the Company to which it belongs and performing a historic and trend
analysis for the industry in question with regard to certain key variables (sales, margins, capital
investment - CAPEX).

Company Analysis: Understanding the viability of the business compared to its expected macroeconomic
environment and the dynamics of the sector to which it belongs, reviewing the historic and expected
evolution of sales and profitability, determining the evolution of investments linked to the assets,
identifying income taxes and defining the applicable discount rate based on the risks and returns
prevalent on the Company´s respective market.
+ Operating income before interest and taxes (EBIT)
- Capital gains tax payable
+ Depreciation / Amortization
- Maintenance Capex
- (+) Increase (decrease) in Working Capital
= Free Cash Flow for the Company after taxes
It must be noted that upon analyzing impairment tests, the cash flows must not include:
•
•
•
•
•
Future uncommitted restructurings;
Future enhancements to the CGU´s service capacity;
The results of its financial activities;
Payments of liabilities that has already been recognized on the estimation date:
Recovered amounts of income tax
Estimating the discount rate:
The discount rate to be considered in the impairment test of an asset:







Must reflect current market assessments of the effect of the value of money over time and the specific
risks for the asset in question.
Must reflect the returns that investors would require upon deciding on an investment of a similar nature.
Must be totally separate from the entity´s capital structure and the manner in which the entity finances
the asset in question.
As a starting point in making such an estimate, the entity might take into account the weighted average
cost of capital, the incremental rate of interest on loans taken by the entity, and other market interest
rates for loans.
This should be considered as an after tax value.
This must be consistent with the assumptions reflected with the cash flows.
Must not reflect risks that have been considered in adjusting the estimated cash flows.
31
International standards recommend the use of the Weighted Average Cost of Capital or WACC as the rate that
best represents the return that investors would require from investing in a similar asset:
The after-tax WACC rate to be used in estimating the value in use, is based on the following equation:
(
)
(
)
Where:





Ke: Cost of own capital
Kd: Cost of debt
E/(D+E): Portion of financing that corresponds to equity
D/(D+E): Portion of financing that is debt
T: Income tax rate
The cost of equity estimated using the Capital Asset Pricing Model (CAPM):
Where:




Rf: Risk free rate
Β: Leveraged asset beta
Pm: Market risk premium
Rc: Country risk premium
Discounted Cash Flows:



Discount factors are used to consider the value of money over time.
The present value of cash flows is calculated by multiplying the free cash flow for the Company by the
appropriate discount factor
The discount factor is defined as follows:
Discount factor (1 Discount Rate)
Where: i = the period between the FCF and the date of analysis
Recoverable Value
32
The result of discounting cash flows is equal to the recoverable value of the asset or the CGU in question. This
value is then compared with its book value resulting in:


e)
When the recoverable value is higher that the corresponding book value: No impairment loss is
recognized and the amortization policies are reviewed (provided the asset classifies as having a useful
life).
If the recoverable value is lower than book value: The book value of the asset (or CGU) is reduced to its
recoverable amount. An impairment is recognized immediately in the income accounts, unless the asset
is carried at a revalued amount, in which case the impairment loss is recognized as decrease in the
revaluation accounts.
Deferred Acquisition Expense
SURA Asset Management S.A. is entitled to obtain benefits from the investment management services of its
subsidiaries and the insurance contracts entered into during the life of said contracts. For this reason, the
acquisition costs incurred, which are directly related to these new contracts, are deferred for the period in which
the Company shall receive revenues from new contracts and are amortized when said revenues are recognized.
It is important to note that the expenses relating to issuing new policies or pension fund management contracts
are classified separately as an underwriting expense in the income accounts. Those expenses that do not qualify
as underwriting costs are shown as operating expenses. Examples of underwriting costs include commissions,
target bonuses, etc.
However, not all underwriting costs can be deferred on the Statement of financial position (capitalized) and
subsequently amortized on the income accounts. Only costs incurred that directly relate to new contracts are
subject to this treatment, consequently, the acquisition costs subject to deferral include:
-
Variable commissions paid by new members to the Pension Fund Management firms.
Variable commissions paid on transfers from other Pension Fund Management firms or StateOwned Obligatory Pension Systems (in countries where these exist).
Variable commissions on new sales or deposits relating to the voluntary pension products
offered by the Pension Firm Management firms.
Variable commissions on new long-term life insurance products (excluding life annuities and
annual renewable insurance).
Sales-based bonuses and sales force incentives paid for achieving the productivity goals set.
Costs associated with the payment of variable commissions, bonuses and incentives, as
described above, include:
o Taxes
o Social security contributions
SURA Asset Management S.A. recognizes assets as Deferred Acquisition Expense for the following lines of
business:
33
-
Mandatory Pensions: consisting of managing retirement savings that are mandatory, based on the
pension system in each country. Here member (client) funds are managed so as to obtain an amount of
money to finance the member´s pension when reaching retirement age. Depending on the laws of each
country, contributions can be paid into the pension fund either by the private individual or by in
conjunction with his or her employee the minimum contribution is also legislated in each country. These
are recognized by the Pension Fund Management firms.
-
Voluntary Pensions: consist of managing retirement savings that are deposited by clients over and
above the amount of mandatory pension savings required by law. These are paid into a Pension Fund
Management firm.
-
Long-term Life Insurance: consists mainly of providing life insurance policies with effective multi-year
terms of duration (excluding annual renewable policies and those whereby life annuities are granted).
Amortization
Amortization of deferred expenses, depending on the line of business, is performed as follows:
-
Mandatory and Voluntary Pensions: acquisition expense subject to deferral is amortized on a straightline basis according to the average duration of expected revenues from new pensions taken out during
the period. The expected revenues are discounted on a financial basis. The amortization period is
calculated separately for Mandatory and Voluntary Pensions.
-
Long-Term Life Insurance: acquisition expense subject to deferral is amortized over the life of the
contracts based on the following amortization structure:
o
o
Pattern recognition of revenue in accordance with the expected term of the
policy (Unit Linked).
A nonlinear predefined pattern (term insurance).
Recoverability testing when voluntary and mandatory pensions are activated
Acquisition costs to be deferred are subject to a recoverability test performed when the asset is first set up. The
recoverability test will be conducted on the basis of core wholes of mandatory and voluntary pension product
sales for each month at the end of the month. In countries where sales are not recorded on a monthly basis
(according to applicable local rules and regulations), the recoverability test may be performed with the same
frequency as the sale is recorded (subject to authorization from the Company’s Models and Assumptions
Committee) Currently, the only country that does not perform a monthly test is Mexico, since sales there are
recorded on a bimonthly basis by the country´s clearing agency.
This test may be performed on a single or group of products depending on the following non-exhaustive list:
business strategy, the level of integration with the acquisition in question and/or product operating expense. In
any case, the Models and Assumptions Committee must approve the methodology used for each country.
34
The asset shall be considered recoverable if the present value of expected gross revenues is greater than the
amount of the expense to be charged. Expected gross revenues are defined as income net of maintenance costs
that are expected to be reported by new business for said product. Should the recoverability test not be
satisfactory, expense may only be deferred up to the amount of the present value of expected gross revenues
and the remaining balance shall be carried as an expense on the income statement for the period in which the
memberships were acquired.
Expected gross revenues are projected on a monthly basis using models and assumptions approved by the
Models and Assumptions Committee. The most relevant assumptions include: exit rates (transfers, deaths,
retirements and disabilities), contribution rates, management fees, activity rates, salary increases, fund returns,
expenses, etc.
Annual Impairment or Adequacy tests on DAC assets
Annual impairment or adequacy tests are performed on the portfolio of Mandatory and Voluntary Pensions
existing on the date these tests are carried out, except when the business unit provides sufficient grounds for
testing each product separately. These arguments must be submitted to the Models and Assumptions Committee
for due approval.
It is important to note that a separate test is performed on each subsidiary, that is to say one on AFP Capital S.A.
in Chile, another on Corredora de Bolsa SURA S.A. in Chile on sales of voluntary pension funds, another on
Seguros de Vida SURA S.A. in Chile on sales of voluntary pension funds, another on Afore SURA S.A. de C.V. in
Mexico, another on AFP Integra S.A. in Peru and another on AFAP SURA S.A. in Uruguay.
This test consists of comparing the carrying balance of DAC with the present value of expected gross revenues
from the portfolio on the date said test is performed. Should the present value of expected gross revenues be
higher than the corresponding DAC, then the asset is recoverable, otherwise a loss must be recognized upon
amortizing the asset by the amount exceeding the present value of expected gross revenues of the current
portfolio.
Based on the Recoverability Test performed when the pensions are issued, expected gross revenues are defined
as income net of maintenance costs that are expected to be reported for new product sales. Expected gross
revenues are projected on a monthly basis using models and assumptions approved by the SURA Asset
Management S.A.’s Models and Assumptions Committee. Relevant assumptions include among others: exit rates
(transfers, deaths, retirements and disabilities), contribution rates, management fees, activity rates, salary
increases, fund returns and expenses.
In the case of Long-Term Life Insurance, tests are performed implicitly by testing the adequacy of the reserves set
up, since these are considered to be non-amortized net DAC asset reserves.
f)
Property, plant and equipment
Property for own use
35
Corresponding to the amounts invested in domestic and foreign real estate as well as buildings under
construction, which are used solely by SURA Asset Management S.A. and Subsidiaries.
Subsequent to being recognized as an asset, land and buildings for own use are carried at fair value less
accumulated depreciation and any accumulated impairment losses sustained.
If the book value of an asset is increased as a result of a revaluation, this increase is recognized as other
comprehensive income and accumulated in the equity accounts as a revaluation surplus.
When the corresponding book value is decreased as a result of asset revaluation, this decrease is recognized in
the income accounts for the period. However, this decrease shall only be recognized in other comprehensive
income to the extent of any credit balance existing in the revaluation surplus account with regard to the asset in
question. The decrease recognized in other comprehensive income reduces the amount accumulated in the
equity revaluation surplus account.
The fair value of land and buildings is based on periodic appraisals carried out both internally as well as externally
by outside qualified appraisers. Subsequent expenditure is included in the carrying value of the asset when it is
probable that economic benefits will flow to SURA Asset Management S.A. and Subsidiaries, and the cost thereof
can be measured reliably.
Depreciation of buildings is recognized based on their fair values and estimated useful life (usually between 20
and 50 years). Depreciation is calculated using the straight-line method. Eliminations from the revaluation reserve
are transferred to retained earnings.
Other elements of fixed assets
Equipment is posted at cost less accumulated depreciation and impairment losses the cost of assets is
depreciated on a straight-line basis according to their estimated useful life, as shown below:
 Data processing equipment from 2 to 5 years
 Furniture and fixtures from 4 to 10 years
Maintenance expense and repair costs are charged to income accounts, and items corresponding to significant
improvements are capitalized and depreciated thereafter.
The useful life and depreciation method are periodically reviewed at least once a year by Senior Management
based on the expected economic benefits to be obtained from buildings, furniture and equipment.
Disposals
The difference between the proceeds of the sale and the net book value of the asset in question is recognized in
the income statement under other income.
g)
36
Investment properties consist of land and buildings (or portions thereof) which SURA Asset Management S.A. and
Subsidiaries hold for the purpose of earning rentals or for capital appreciation. Similarly properties held for direct
investment or those held under a finance lease are also considered as investment properties.
SURA Asset Management S.A. and Subsidiaries recognize investment property as an asset when, and only when, it
is probable that future economic benefits associated with the investment property will flow to the entity and the
cost of the investment property can be measured reliably.
When a property is used both for investment purposes as well as for the entity´s own use, a portion thereof must
be accounted for as an investment property and another as a property for its own use, based on the use of each
portion.
In this case, if the entire property is treated as an investment property and ten percent or less is used for the
entity´s own purposes, then it must be recorded as an investment property.
Investment properties are recognized at fair value. Any changes to such occurring as a result of revaluations are
recognized in the income accounts. At the time of their disposal, the difference between their selling price and
their book value is recognized in the income accounts.
Fair value is determined based on the assessments of qualified appraisers.
The index is based on the results of the independent appraisals carried out during the period in question. All
properties are appraised separately over a period of three to five years.
Appraisals are performed on the assumption that the properties are leased and sold to third parties based on the
current conditions of the lease agreement. Appraisals performed earlier on in the year are updated if needed to
reflect the situation at year end.
Fair values are based on market prices, estimating the date on which the property is to be transferred between a
buyer and a seller, as part of an arm´s length transaction between knowledgeable market players. Market values
are based on appraisals for which the following methods are used: comparable market transactions, income
capitalization or cash flow methods, whereby lease income and future expense is calculated according to the
terms and conditions set out in existing leases as well as the estimated rental values when the lease agreements
expire.
Any gains or losses arising from changes in fair value are recognized in the income statement. Subsequent costs
are only charged as a higher book value of the asset when it is probable that future economic benefits will flow to
SURA Asset Management S.A. and Subsidiaries and the expense can be measured reliably.
All maintenance expense and repair costs are charged to the income accounts.
Investment properties are de-recognized when sold or when permanently withdrawn from continued use and no
future economic benefits are expected from its disposal. The difference between the net proceeds from the sale
37
of an asset and its corresponding book value is recognized in the income accounts during the period in which it is
written off.
In the case of reclassifying investment property as fixed assets, the estimated cost of the property is the fair value
calculated at the date of the change in its use. If a fixed asset is reclassified as investment property, SURA Asset
Management S.A. and Subsidiaries account for such property in keeping with its established policy for fixed assets
at the date of the change in its use.
h)
Investments in Associates
Using the equity method, investments in Associates are initially recognized at cost. From the date of its
acquisition, the book value of the investment in question is adjusted for changes in the stake held by SURA Asset
Management S.A. in the net assets belonging to the related party. Goodwill corresponding to the related party is
included in the book value of the investment in question. This is not amortized nor individually tested for
impairment.
The income statement reflects the portion of the related party´s operating revenues corresponding to SURA Asset
Management S.A..
When there is any change that the related party directly recognizes in its equity accounts, SURA Asset
Management S.A. recognizes its portion of such change, where applicable, in its statement of changes in net
equity, Unrealized gains and losses resulting from transactions between SURA Asset Management S.A. and the
related party are eliminated based on the portion corresponding to the stake held by SURA Asset Management
S.A.. SURA Asset Management S.A.’s portion of the results obtained by its related parties is shown directly in the
income accounts and represents earnings after tax and any minority interests existing with regard to the related
party´s subsidiaries.
The related party´s financial statements are prepared for the same period as that of SURA Asset Management
S.A. and adjustments are made to standardize any differences that might exist with respect to SURA Asset
Management S.A.’s accounting policies.
After applying the equity method, SURA Asset Management S.A. decides whether it is necessary to recognize
impairment losses with regard to its net investment in the related party. SURA Asset Management S.A.
determines at each reporting date whether there is objective evidence that the investment in the related party
has deteriorated. Should this be the case, SURA Asset Management S.A. calculates the amount of impairment as
the difference between the recoverable amount corresponding to the related party and its book value, and
recognizes this amount in the income accounts as net income from related parties.
In the case of SURA Asset Management S.A. ceasing to have a significant influence over a related party, it
calculates and recognizes the investment held at fair value. Any difference between the book value of the related
party at the moment when significant influence is lost and the fair value of the investment held plus proceeds
from the sale of the investment are recognized in the income accounts.
i)
Financial instruments
38
i. Financial assets
Initial recognition and measurement
Financial assets that fall within the scope of IAS 39 are classified as financial assets at fair value through profit or
loss, loans and receivables, investments held to maturity or financial assets available for sale, as appropriate.
SURA Asset Management S.A. and Subsidiaries determine the classification of such financial assets upon initial
recognition.
All financial assets are initially recognized at their fair value plus; and in the case of financial assets that are not
carried at fair value through profit or loss, the directly attributable transaction costs.
Purchases or sales of financial assets that require assets to be delivered within a time period established by any
rule, regulation or market convention (conventional bills of sale or regular-way trades) are recognized on the date
of the sale, that is to say the date on which SURA Asset Management S.A. and Subsidiaries pledge to purchase or
sell the asset.
The financial assets belonging to SURA Asset Management S.A. and Subsidiaries include cash and short- term
investments, trade receivables, loans and other accounts receivable as well as listed and unlisted financial
instruments.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification, as listed below:
-
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include assets held for trading and financial assets designated
upon initial recognition as at fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in
the near future. This category includes derivative financial instruments if any, set up by SURA Asset Management
S.A. and Subsidiaries that are not considered as hedging instruments in effective hedging relationships as defined
by IAS 39.
Derivatives, including separate embedded derivatives, are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets at fair value through profit or loss are recognized in
the statement of financial position at fair value, and any changes to such are recognized as financial income or
expenses in the income statement.
SURA Asset Management S.A. and Subsidiaries evaluate financial assets held for trading that are not classified as
derivatives, to determine whether they intend to sell them off in the near term, if applicable.
39
When SURA Asset Management S.A. and Subsidiaries cannot trade these financial assets due to the absence of
active markets this would significantly change their intention of selling them off in the near future, thus they
could well decide to reclassify such financial assets, but only in exceptional circumstances.
Derivatives embedded in hybrid contracts are accounted for in books as separate derivatives and are recorded at
fair value if their economic characteristics and risks do not closely relate to those of their corresponding host
contracts and if the host contracts are not held for trading or are designated in the category of fair value through
profit or loss. These embedded derivatives are measured at fair value and changes in said fair value are
recognized in the income statement. These are only re-evaluated if there is a change in the contractual terms and
conditions that could significantly modify the related cash flows.
40
-
Reserve requirements
In the Mandatory Pension business, fund management firms must maintain, pursuant to applicable rules and
regulations, a portion of the value of each of the funds under management in what is called a reserve
requirement. This reserve requirement as a percentage of the assets under management varies by country, as
shown below
–
–
–
–
Chile: 1.00%
Mexico: 0.80%
Peru: 1.00%
Uruguay: 0.50%
This reserve requirement corresponds to a representative amount of the managed funds and serves as a
guarantee should the returns obtained by the funds vary from those normally produced by the industry, this in
order to protect fund members and ensure that their returns do not decrease substantially below the industry
average. The reserve requirement should be used to supplement fund returns if performance goes beyond a set
tolerance margin (generally over a 36-month period compared to the industry average). Assets are valued on a
daily basis and at their fair market value.
Criteria for classifying financial assets or liabilities at fair market value on the income accounts
Financial assets and liabilities valued at market prices in the income accounts consist of those that meet one of
the following criteria:
o
Assets classified as trading instruments in accordance with the following conditions:
– If the asset or liability was acquired for the purpose of selling or repurchasing in the near
term.
– Upon initial recognition they form part of a portfolio of identified financial instruments,
jointly managed and providing evidence that there is a current pattern of profit-taking in
the short term.
– They relate to a derivative (except for derivatives that are associated with a financial
guarantee contract or a designated and effective hedging instrument).
o
Upon initial recognition they have been designated by the entity as assets or liabilities valued at
fair market value through profit or loss.
A company can use this designation only when permitted by paragraph 11 of IAS 39 (effective as of 2013) or when
upon proceeding with this designation further information is obtained as to whether it meets one or more of the
following conditions:
o
The valuation eliminates or substantially reduces the measurement or mismatch arising from having
measured assets or liabilities on a different basis.
41
o
o
A group of financial assets, financial liabilities or both are managed and their returns are assessed
based on their fair market value, in accordance with a documented risk management or investment
strategy, and information about the family of investments is provided on this same basis.
The asset or liability includes one or more embedded derivatives, unless the embedded derivative
does not substantially change the cash flows or when separating the embedded derivative is
prohibited.
In the case of the Reserve Requirement asset the second criterion applies because the fair value of the asset is
known on a daily basis and Senior Management uses "total returns" to measure fund performance. According to
the business model that the Pension Fund Management firms use to manage Reserve Requirement assets and
considering that these investments are portions held by the firms in the different funds and which serve to
ensure the same minimum returns for funds as for their financial assets, they are measured at fair value through
profit or loss. The management firms classify these financial assets to be measured at fair value.
-
Loans and accounts receivable
Loans and accounts receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted on active markets. After initial recognition, these financial assets are measured at their amortized cost
using the effective interest rate method, less any impairment that should have occurred. Amortized cost is
calculated taking into account any discount or premium on the acquisition as well as commissions or costs that
form an integral part of the effective interest rate. Accruals to the effective interest rate are included in the
income statement as financial income. Losses arising from any impairment to their value are recognized in the
income statement as finance costs.
-
Financial assets available for sale
Financial assets available for sale include equity and debt securities. Equity investments classified as available for
sale are those that are not classified as "held for trading" or "at fair value through profit or loss". Debt securities
in this category are those that are expected to be held for an indefinite period, but which could be sold in the
event of requiring liquidity or given changes to market conditions.
After initial recognition, financial assets available for sale are measured at fair value, and gains or losses are
reported as other comprehensive income in the reserve for financial assets available for sale, until the investment
is de-recognized. At that time, the cumulative gain or loss is either recognized as an operating gain or considered
as impairment to the value of the respective investment, in which case, the cumulative loss is reclassified to the
income statement under finance costs and eliminated from other comprehensive income.
SURA Asset Management S.A. and Subsidiaries evaluate financial assets available for sale to determine whether
their ability and intention to sell them in the near term is still applicable. When SURA Asset Management S.A. and
Subsidiaries cannot trade these financial assets due to the absence of active markets this would significantly
change their intention of selling them off in the near future, thus they could well decide to reclassify such
financial assets, but only in exceptional circumstances. Reclassification as loans and receivables is permitted when
the financial assets meet the required definition and the entity intends and is able to hold the asset for the
42
foreseeable future or until maturity. Reclassification as assets held to maturity is only permitted when the entity
intends and is able to hold the asset until maturity.
In the case of financial assets that are reclassified from out of the category of assets available for sale, their fair
value at the date of reclassification becomes its new amortized cost and any prior gain or loss obtained by an
asset that has been recognized under net equity is reclassified to the income accounts over the remaining useful
life of the investment in question, using the effective interest rate method. Any difference between the new
amortized cost and its value at maturity is also amortized over the remaining useful life of the asset using the
effective interest rate.
In the case of financial assets available for sale, at each cut-off date for the period in question, SURA Asset
Management S.A. and Subsidiaries evaluate whether there is objective evidence of an impairment to the value of
an individual asset or group of assets, and the amounts recognized under net equity are reclassified to the income
accounts.
The amount of financial assets held to maturity is not sufficiently significant for a breakdown of the applicable
accounting policies.
Write-offs
A financial asset (or, where applicable, a portion of such or a group of similar financial assets) is written off or derecognized when:
-
The contractual rights to the cash flows from the asset expire.
The contractual rights to the cash flows of the asset are transferred or an obligation to pay to a third
party all of the cash flows without significant delay is assumed through a transfer agreement (pass through arrangement) and (a) all risks and benefits inherent to owning the asset have been substantively
transferred; and (b) all risks and benefits inherent to owning the asset have not been substantively
transferred, but control over the same has.
When SURA Asset Management S.A. and Subsidiaries transfer their contractual rights to receive cash flows from
an asset or enter into a transfer agreement but have neither transferred nor substantially retained all the risks
and benefits inherent to owing the asset, nor transferred control over the asset, the asset continues to be
recognized to the extent of the involvement of SURA Asset Management S.A. and Subsidiaries in said asset. In this
case, the related liability is also recognized. The transferred asset and the associated liability are measured in
such a way as to reflect the rights and obligations that SURA Asset Management S.A. and Subsidiaries have
retained. A continuing involvement that takes the form of a guarantee over the transferred asset is measured as
the lower value of the original carrying amount of the asset and the maximum amount of consideration required
to be repaid. Any continuing involvement that takes the form of a guarantee on the transferred asset is measured
as the lower value of the original carrying amount of the asset and the maximum amount of consideration
required to be repaid.
43
j)
Impairment to financial instruments
At the end of each reporting period, SURA Asset Management S.A. assesses whether there is any objective
evidence that a fixed income asset valued at its amortized or "held-for-sale" cost be impaired in value.
Impairments to financial instruments is defined when there is objective evidence indicating that one or more
events that occurred after initial recognition, has / have had an effect on the estimated cash flow of the asset in
question. So in this case an impairment test is performed consisting of recognizing losses incurred to the value
posted in books.
The methodology used for Impairment Tests on Fixed Income Assets that are held in the portfolio, takes into
account the general criteria set out in IAS 39, which indicate that impairment should be recorded when an issuer
is unable to meet its obligations (incurred default).
Fixed Income Assets measured at amortized cost or classifying as available for sale
In the case of fixed income assets carried at amortized cost first the entity determines whether the instrument is
in sufficient condition to be assessed. An instrument is considered in to be in sufficient condition to be assessed
when two of the following conditions are met:
-
Difference between the Valuation Spread (under current market conditions)and the Purchase Spread
(implicit in the valuation at amortized cost) is equal to or greater than 200 basis points; and
-
Market value is lower than the Value at Amortized Cost.
Spread is defined as the differential between the rate at which the market values the instrument less the Risk
Free Rate (for the sovereign issuer) in the local currency: for example, in the case of a Peruvian corporate entity
issuing dollar-denominated debt this is considered to be the rate implicit for the sovereign debt issued by the
Government of Peru in dollars) for a similar flow structure and in the same currency.
All those instruments that exceed the established threshold (200 basis points of difference between the Valuation
and the Purchase Spreads) and have a Market Value lower than their Book Value, that is to say, those that fall
into a situation of impairment, are subject to an internal assessment.
Reasons for performing internal assessments lie in the fact that there could be situations in which the asset to be
assessed is not necessarily impaired. For example, there are cases in which the spread is increased when market
stress prevails and does not necessarily imply the issuer´s failure to fulfill its obligations. Stress can be produced
given local lending conditions, increased liquidity premiums, changes in the valuation of prepaid options (or other
embedded options, etc.).
Each instrument subject to assessment must be accompanied by a report covering at least the following points:
-
Impairment Evaluation Committee (made up of members of the Finance, Risk and Investment
Departments which meets when required)
44
-
Collecting information related to the issuer
Issuer credit analysis
Proposed impairment value and the basis for said valuation
The value to be impaired must be recorded as a provision, which shall be reviewed periodically while making the
corresponding adjustments (increased or reduced impairment). In the event of any change to this provision, an
analysis containing the information similar to that set forth above must be submitted. Should the provision for
the natural amortization of the debt be modified, this analysis is not required.
In the case of impaired assets, these must be recalculated using a new Amortized Cost rate (taking into account
the effect of the provision). This rate is included in the Liability Adequacy Test in order to represent the
corresponding instrument with regard to the projected accrual rate for the portfolio in question.
Investments in equity securities classified as available for sale
In the case of investments in equity securities classified as available for sale, objective evidence would include a
significant or prolonged decline in the fair value of the investment in question taking it to below its cost. The
concept of "significant" (greater than 40%) is evaluated with regard to the original cost of the investment and the
concept of being "extended " (more than 12 months) relative to the period in which its fair value has remained
below its original cost.
Where there is evidence of impairment, the cumulative loss, measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on the investment in question, as previously recognized
in the income statement, is recognized in the income statement
Losses due to the impairment of investments in equity securities that are classified as available for sale are not
reversed through the income statement. Increases in fair value after impairment are recognized directly in other
comprehensive income.
k)
Fair value of financial instruments
At each cut-off date during the reporting period in question, the fair value of financial instruments traded in
active markets is determined by referring to quoted market prices or prices quoted by market players (purchase
price for long positions and ask price for short positions), without any deduction for transaction costs.
For financial instruments not traded in active markets, their fair value is determined using appropriate valuation
techniques. Such techniques may include the use of recent market transactions between knowledgeable, willing
parties within an arm's length transaction, references to the fair value of other financial instruments that are
substantially similar, analysis of discounted cash flows or other valuation models.
45
l)
Reinsurance
SURA Asset Management S.A.'s insurance companies, who have provided a specific coverage as part of an
insurance contract entered into in exchange for a premium, may transfer some of the risk to another insurer,
sharing the insured risk sharing and also part of the premium. Currently only Chile and Peru have reinsurance
contracts.
SURA Asset Management S.A. determines the assets arising from assigned reinsurance contracts as net
contractual rights of the assignor in a reinsurance contract.
At least once a year, at the end of each reporting period, SURA Asset Management S.A. evaluates and monitors
the changes in the level of exposure to reinsurance credit risk. When recognizing a reinsurance asset (upon
assigning such), an adequacy test is performed on such assets, for every reinsurance contract assigned, and the
assigner reduces its value in books and recognizes an impairment loss in the income accounts.
A reinsurance asset is impaired if, and only if:
-
There is objective evidence, as a result of an event that occurred after the initial recognition of the
reinsurance asset, that the assignor may not receive all amounts owing in accordance with the terms and
conditions of the respective contract.
-
This event has an effect that can be reliably measured based on the amounts that the assignor will
receive from the reinsurer.
The following may not be offset:
-
Reinsurance assets with liabilities corresponding to the insurance contract.
-
The income or expense arising from reinsurance contracts with income or expense, respectively,
generated by the corresponding insurance contracts.
Reinsurance assets are assessed for impairment on a regular basis should any event arise that could cause an
impairment to such. A trigger is considered to be an historic experience with regard to collecting from specific
reinsurers evidencing a delay in honoring their commitments of 6 months or more, this attributable to a credit
event affecting the reinsure.
m)
Cash and cash equivalents correspond to short-term assets, presented in the statement of financial position.
Cash and cash equivalents include:


Cash
Banks
46

Short-term investments that meet the conditions defined for cash equivalents. Such investments are
characterized by a high degree of liquidity and can be readily converted to a known amount of cash
being subject to an insignificant risk of any change in their value
This category includes investments that can be converted into cash within 3 months from the date of their
purchase.
n)
Taxes
Current income tax
Current income tax assets and liabilities are measured on the basis of the amounts expected to be recovered
from or paid to the tax authorities. The tax rates and taxation laws used to compute said amounts are those that
are enacted or are due to be enacted near to the cut-off date for the reporting period in question, in all those
countries where SURA Asset Management S.A. and Subsidiaries operate and produce taxable income.
The current income tax relating to items recognized directly in the equity accounts is recognized here and not on
the income statement. Periodically, Senior Management evaluates the tax return positions taken with regard to
situations in which applicable tax regulations are subject to interpretation and for which provisions are set up
where applicable.
Deferred income tax
Deferred income tax is recognized using the balance sheet method on temporary differences between the tax
bases of assets and liabilities and their respective book values at the close of the reporting period in question.
Deferred tax liabilities are recognized for all temporary taxable differences except:

When the deferred tax liability arises from the initial recognition of goodwill in a business combination
or an asset or liability in a transaction that does not constitute a business combination and that, at the
time of the transaction, affects neither book profits nor taxable profits or losses.

With respect to taxable temporary differences relating to investments in subsidiaries, related parties and
interests in joint ventures, where the timing of the reversal of the temporary differences can be
controlled and it is probable that these temporary differences will not be reversed in the near future.
Deferred tax assets are recognized for all deductible temporary differences and the future offsetting of non-used
tax credits and losses, to the extent that it is probable that there shall be available future taxable income against
which these tax credits or tax losses are to be charged except:

When the deferred tax asset related to the temporary difference arises from the initial recognition of an
asset or liability in a transaction that does not constitute a business combination and, at the time of the
transaction, affects neither book profits nor taxable profits or losses.
47

With respect to deductible temporary differences relating to investments in subsidiaries, related parties
and interests in joint ventures, the deferred tax assets are recognized only to the extent that it is
probable that the temporary differences will be reversed in the near future and it is probable that there
shall be available future taxable profits against which these deductible temporary differences are
charged.
The carrying amount of deferred tax assets is reviewed at each cut-off date for the reporting period in question
and reduced to the extent that it is no longer probable that there is sufficient taxable income to allow all or a
portion of those assets to be used. Unrecognized deferred tax assets are reassessed at each cut-off date for the
respective reporting period and are recognized to the extent that it becomes probable that future taxable income
will allow for those assets to be recovered.
Deferred tax assets and liabilities are measured using the tax rates that are expected to be applied in the period
when the asset is realized or the liability is paid off, based on the tax rates and taxation legislation enacted at the
cut-off date of the corresponding reporting period, or those that are expected to be enacted near to said date.
Tax benefits obtained as part of a business combination that do not qualify to be recognized separately on the
date acquired shall be subsequently recognized upon obtaining any new information regarding any change to the
corresponding facts and circumstances.
Any corresponding adjustments shall be treated as a reduction in goodwill (providing these do not exceed the
value of such) if the change occurred during the measurement period, or on the income results, if it is the same
that happened later.
SURA Asset Management S.A. has identified the following items that generate deferred tax:
-
Deferred Acquisition Costs (DAC): Corresponding to the deferred cost of acquiring new clients. For tax
purposes this cost decreases the income tax base during the fiscal year in question, while according to
international standards an amortizable intangible asset entitling the Company to obtained economic
benefits from managing investments belonging to its fund members can be recognized, and this is
amortized as the Company recognizes income for the period in which the client retains his or her
investment with the Company.
-
Deferred Income Liability (DIL): Corresponding to the deferral of income received from fund members
to cover maintenance expense and a reasonable level of profit, in the periods in which those members
become non-contributors or pensioners who by law cannot be charged for the management of their
funds and/or pension payments, while from the tax standpoint income is recognized in full for the year
in which such income is obtained.
-
Property, Plant And Equipment The temporary difference is mainly caused by the difference in valuation
criteria for the fixed asset in question for the reasons presented below:
o On an accounting basis and for the effects of some jurisdictions no inflation and tax adjustments
are recognized, if applicable.
o Fixed assets recognized in books that for tax purposes relate to expenditure.
48
o
Difference in the useful life between book and fiscal.
-
Tax losses: These correspond to the posting of tax loss assets generated during the year for which the
entity expects to amortize these with taxable income in future years.
-
Investment Valuations: Corresponding to the difference between valuation methods either amortized
cost or market value against taxable value.
Current and deferred taxes are recognized in the income accounts for the period in question, except when they
relate to items recognized in other comprehensive income or directly in the equity accounts, in which case
current and deferred tax is also recognized in other comprehensive income or directly in the equity accounts,
respectively.
o)
Leases
Determining whether a contract is a financial lease is based on the substance of the agreement from its effective
date.
SURA Asset Management S.A. and Subsidiaries as lessees
Total payments for the lease are charged to the income accounts on a straight-line basis over the term of the
agreement. When a lease is terminated before the agreed term, any fines or penalties incurred are recognized as
an expense in the period in which the contract is terminated.
SURA Asset Management S.A. and Subsidiaries as lessors
Leases in which SURA Asset Management S.A. and Subsidiaries retain a substantive portion of the risks and
benefits inherent to the ownership of the leased asset are classified as operating leases. Initial direct costs
incurred in negotiating operating leases are added to the book value of the leased asset and are recognized over
the term of the lease using the same criteria as for rental income.
Embedded leases
SURA Asset Management S.A. and Subsidiaries take into account the following criteria to identify whether an
arrangement is, or contains, a lease:
-
Fulfillment of the agreement is dependent on the use of a specific asset or assets.
-
The agreement provides for the use the asset for an agreed period of time, so that the buyer can exclude
others from using such.
-
The payments stipulated in the agreement are made during the period of time that the asset is made
available for use, and during the term the asset is actually used.
49
p)
Translating foreign currency
The amounts reported in the financial statements of SURA Asset Management S.A. and Subsidiaries are stated in
the currency of the primary economic environment (functional currency), where each entity operates:
Country
Chile
Mexico
Peru
Uruguay
Colombia
Spain
Holland
Functional currency
Chilean pesos
Mexican pesos
Peruvian nuevos
soles
Uruguayan pesos
Colombian pesos
Euros
Euros
The consolidated financial statements are presented in thousands of U.S. dollars which is SURA Asset
Management S.A.’s reporting currency. Therefore, all balances and transactions denominated in currencies other
than the U.S. dollar are considered foreign currency translation.
SURA Asset Management S.A. and Subsidiaries, in accordance with IAS 21. The Effects of Changes in Foreign
Exchange Rates, may present its financial statements in any currency.
SURA Asset Management S.A. and Subsidiaries determined their reporting currency as the U.S. dollar, as opposed
to its functional currency, the euro, and thus converted its statements of income and financial position into U.S.
dollars.
This decision was made in the light of the U.S. dollar providing global investors with a much more accurate
reading of its financial statements.
SURA Asset Management S.A. and Subsidiaries recorded all the currency translation effects on its financial
statements under IFRS, pursuant to IAS 21. The Effects of Changes in Foreign Exchange Rates.
Converting functional currency into the reporting currency:
The information reported in the consolidated financial statements for SURA Asset Management S.A. and
Subsidiaries was converted from the functional currency to the reporting currency using the exchange rate
applicable on the date of the reporting period in question.
Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate
applicable for the functional currency at the cut-off date for the corresponding reporting period. Non-monetary
items that are measured in terms of their historic cost in a foreign currency are translated using the exchange
rates applicable on the date of the original transactions. Non-monetary items that are measured at fair value in a
foreign currency are translated using the exchange rates on the date when these are recognized at fair value. All
exchange differences are recognized as a separate component of net equity.
50
Translating functional currency into the reporting currency:
Year-End Rate:
Country
Chile
Mexico
Peru
Uruguay
Colombia
Holland - Spain
2013
525.45
13.10
2.80
21.50
1,926.83
1.38
2012
474.20
12.73
2.55
19.20
1,768.23
1.32
Average rate:
Country
Chile
Mexico
Peru
Peru -Seguros SURA S.A.
Uruguay
Colombia
Holland - Spain
2013
495.36
12.76
2.70
2.70
20.43
1,869.10
1.33
2012
486.30
13.16
2.64
2.57*
20.26
1,788.89
1.29
* Exchange rate corresponds to the average rate between December 1 and 31, 2012 since Seguros SURA S.A. was
acquired in November 2012
Assets and liabilities corresponding to foreign operations are translated into U.S. dollars at the exchange rate
applicable on the closing date of corresponding reporting period, and the income accounts are translated using
average rates prevailing on the dates the transactions were performed. The equity accounts were translated
based on their respective historic rates.
q)
Provisions for Insurance Contracts
Insurance and life annuity provisions are recognized upon underwriting the corresponding contracts receiving the
corresponding premiums. Provisions for insurance (excluding life annuities) are calculated as the estimated value
of future commitments with policyholders including expenses relating to the payment of claims based on the
valuation assumptions used. In the case of life annuities, the mathematical reserve is calculated as the present
value of commitments to policyholders including the direct costs of handling the policy.
Provisions may be calculated based on the assumptions held at the time of the policy is issued or to applicable
assumptions on the date such provisions are calculated, or that have been updated as a result of periodic
51
reviews. Mortality assumptions, expense and returns are evaluated at regular intervals to ensure that they
remain valid. Also, the assumptions used may be re-evaluated if an adequacy test shows that the reserve is not
sufficient to provide future earnings. Consequently, the principle is to keep valid assumptions at the time policies
are issued while periodic reassessments demonstrate their ongoing validity and / or an adequacy test confirms
the sufficiency of the reserves held.
Provisions for Insurance Contracts include:
-
Reserves for commitments for claims incurred : this category includes both reserves for claims both
incurred and reported as well as incurred but not reported (IBNR).
Reserves for contingent commitments: this category includes mathematical reserves (long-term risks) as
well as reserves for ongoing risks (short-term risks).
Provisions for the savings components corresponding to life insurance: these refer to the values of the
Unit Linked Insurance and / or Universal Life Insurance (including Flex) funds.
Claim reserves
Reserves in the case of claims are calculated on a case- by-case basis or using an experience-based approach and
include both the expected ultimate commitment of the claims that have been reported to the Company, such as
claims incurred but not reported (IBNR) and the handling costs of future claims. These technical reserves are
evaluated each year using standard actuarial techniques. Also, expense for losses that have occurred but have not
yet been notified are recognized in the IBNR reserves.
Mathematical insurance reserves (excluding life annuities)
Insurance reserves are calculated on the basis of a prudent prospective actuarial method, taking into account the
current terms and conditions of insurance contracts. Specific methodologies may be used by business units to
reflect local regulatory requirements and practices for products that are specific to the local markets.
These reserves are calculated based on mortality, morbidity, expense, investment returns and policy duration
assumption. These assumptions are made on the date the policy is issued and are reviewed constantly
throughout the life of the policy. If the assumptions remain valid they are not modified, otherwise the change is
recognized in the event of loss.
The liability is determined as the sum of the present value of expected future profits, claims and policy handling
expense, options and guarantees, and the returns on investment of the assets underlying these liabilities, that
directly relate to the contract, less the discounted value of expected premiums required to meet future payments
based on the valuation assumptions used.
Moreover, insurance contract liabilities consist of the provision for unearned premiums and poor quality, as well
as for claims, including estimated claims that have not yet been reported to SURA Asset Management S.A..
Adjustments to this liability at each reporting date are recognized in the income statement Liabilities are derecognized when the contract expires, is discharged or canceled.
52
Mathematical life annuity reserves
Annuity reserves are calculated based on the present value of future earnings from the contract and direct
operating expenses that the Company incurs in paying its contractual obligations. The present value is discounted
based on the implicit rate applicable when the life annuity is issued which is equal to that used to match the
technical reserve at the time of issuing the annuity with the premium received minus sales commissions.
The implicit rate is maintained throughout the life of the policy, unless a periodic review of the assumptions used
show a change in said rate or reserves become insufficient as shown by a liability adequacy test.
These reserves are calculated using mortality, morbidity and expense assumptions. These assumptions are made
on the date the policy is issued and are reviewed constantly throughout the life of the policy. If the assumptions
remain valid they are not modified, otherwise the change is recognized in the event of loss.
Adjustments to the corresponding liability at each reporting date are recognized in the income accounts.
Liabilities are written off when the contract expires, is discharged or canceled.
Ongoing Risk Reserves
Ongoing Risk or Unearned Premium Reserves are set up for short-term insurance (both collective and individual)
in which the premium payment frequency differs from the effective coverage term and therefore a premium has
been received for a future risk, which must be provisioned. The provision is determined as paid premiums net of
expense and is amortized over the term of coverage.
Provisions for savings components corresponding to life insurance
Insurance and life annuity provisions are recognized upon underwriting the corresponding contracts receiving the
corresponding premiums. These provisions are recognized at fair value (price excluding transaction expense
directly attributable to issuing the policy). Subsequent to initial recognition, both investments and provisions are
recognized through gains and losses.
Deposits and withdrawals are recorded as adjustments to the provision on the statement of financial position and
are not recorded as revenue on the income statement.
Fair value adjustments are recorded at each reporting date and are recognized on the income statement. The fair
value of unit-linked contracts is determined on the amount of units allocated to each fund on the reporting date
and the unit price of each fund units at this same date. In the case of Universal Life (including flexible) insurance
contracts, their fair value is determined as the account´s value including the credited interest based on the terms
and conditions of the policy.
53
Liability Adequacy Tests
At the end of each reporting period, an adequacy test is performed on net DAC reserves. This test is performed in
keeping with SURA Asset Management S.A.’s principles and policy guidelines, which are based on IFRS currently in
force. If the provisions are insufficient to cover obligations with policyholders and expected future expense, they
are adjusted for the impact on the results for the period, first applying an accelerated freeing up of DAC and
should this not be sufficient an additional reserve is set up.
In performing this adequacy test on reserves, best estimates of future contractual cash flows are used. Cash flows
include both assets and liabilities over time and are discounted using the rate of return associated with the
investment portfolio for which the provisions are made as well as the Company´s reinvestment assumptions.
The methodology using in performing adequacy tests on reserves and assumptions includes the following:




Projected contractual cash flows using best estimate assumptions in force at the time these are forecast.
These assumptions on a monthly basis using models and assumptions approved by the Models and
Assumptions Committee.
Scenarios for rates of return (taking into account the performance of each individual investment and
divestiture of each Company subsidiary).
Discounted flows for obligations (in order to obtain their current value).
Calculating the 50th percentile of the present values and compared these with recorded reserves. In the
case of Mexico and Peru, where contracts have no optionality (they are symmetrical), cash flows are
projected symmetrically. However, in the case of Chile, which has non- symmetrical contracts (for
example: flexible with guaranteed rates), stochastic projections are drawn up in order to calculate the
50th percentile.
The assumptions used to test the adequacy of reserves include:

Operating Assumptions:
o
o
o
Terminations, Partial Surrenders, Collection Factors (non-applicable in the case of Life
Annuities): an experience-based analysis is periodically performed so as to be able to
include the most recent behavioral patterns within the corresponding assumption.
Analyses are performed on families of similar products.
Operating Expense: operating expense assumptions are reviewed every year to check
levels of best estimates (based on portfolio volume and levels of expenditure). The
Company's annual strategic planning forms an important tool for gauging said
assumptions.
Mortality tables: the Company draws up its own tables for its life annuity portfolio, while
for the rest of its life insurance portfolio, since it does not have enough experience for
building its own tables, the assumptions used are based on the mortality tables provided
by the reinsurer.
54

Financial assumptions: the reinvestment model provides scenarios for rates of return based on both
updated market and investment assumptions at the end of the reporting period. The assumptions obtained from
the reinvestment model include:
o
o
o
o
o
r)
Scenarios for Government Zero Coupon Rates which together with the spread index are
used to value the assets held for investment / reinvestment.
Projected Spread Index: applicable to zero coupon rates.
Multiplicative Spread Factor.
Depreciation Factor: applicable to real estate and equity securities.
Projected Flows of Assets and Liabilities.
Provisions for Investment Contracts
SURA Asset Management S.A.'s insurance companies do not hold any investment contracts in their portfolios.
s)
Products with discretionary participation features (DPFs)
At the end of the reporting period, SURA Asset Management S.A.'s insurance companies did not have any
products commanding a discretionary participation in profits. These are understood to be any contract that
entitles the policy holder to participate in the profits from investments that go over and above a guaranteed level
of profits that the insurance company provides at will with regard to the date and the amount to be issued.
t)
Financial liabilities
Initial recognition and measurement
All financial liabilities are recognized initially at fair value less, in the case of loans and accounts payable, all those
transaction costs that are directly attributable to such.
Financial liabilities held by SURA Asset Management S.A. and Subsidiaries include trade payables, loans and other
accounts payable, financial guarantees and derivatives.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification, as listed below:
-
Financial assets at fair value through profit or loss include assets held for trading and financial assets designated
upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are obtained for the purpose of being sold off in the
near future. This category includes derivative financial instruments if any, set up by SURA Asset Management S.A.
and Subsidiaries that are not considered as hedging instruments in effective hedging relationships as defined by
55
IAS 39. Derivatives, including separate embedded derivatives, are also classified as held for trading unless they
are designated as effective hedging instruments.
-
Loans and accounts payable
Subsequent to their initial recognition, interest-earning loans and accounts payable are measured at their
amortized cost using the effective interest rate method. Gains and losses are recognized on the income
statement when these liabilities are written off, and are amortized using the effective interest rate method.
Amortized cost is calculated taking into account any discount or premium on the acquisition as well as
commissions or costs that form an integral part of the effective interest rate. The accrual of the effective interest
rate is recognized as a financial expense on the income statement.
Write-offs
A financial liability is written off or de-recognized when the obligation specified in the relevant contract is
discharged, canceled or expired.
When an existing financial liability is replaced by another from the same lender on substantially different terms
and conditions, or the terms of an existing liability are substantially modified, the change or exchange is treated
as a de-recognition of the original liability whereupon the new liability is recognized. The difference in the
respective carrying amounts is recognized on the income statement.
u)
Employee benefits
SURA Asset Management S.A. and Subsidiaries only handle short-term benefits and defined contribution plans.
SURA Asset Management S.A. and Subsidiaries classified all the benefits relating to the agreements in which they
agree to provide benefits during the post-employment period, regardless of whether this requires setting up a
separate entity to receive contributions and to pay the benefits corresponding to defined contribution plans.
The liabilities recognized in the Statement of financial position with regard to these benefits are recognized as the
employee services are rendered, after deducting any amount already paid.
If the amount paid exceeds the non-discounted amount of the benefits, the entity shall recognize the difference
as an asset (prepaid expense) providing that such prepayment shall lead to a reduction in future payments or
cash refunds.
In the case of defined contribution plans, SURA Asset Management S.A. and Subsidiaries pay contributions to
public or private plan management firms on a mandatory, contractual or voluntary basis. No further payment
obligations remain once the contributions have been paid. The contributions are recognized as personnel
expense. Prepaid contributions are recognized as an asset to the extent that these imply cash refunds or
reductions in future payments.
Employee benefits for the subsidiaries of SURA Asset Management S.A. include:
56
-
-
-
Benefits associated with legal obligations: overtime, vacation, seniority, Christmas bonuses or bonus
packages, maternity leave, breastfeeding, family deaths, marriage. All these obey legal requirements in
each country and their terms and conditions are also internally regulated in the subsidiaries´ Labor
Regulations.
Benefits associated with employee well-being and quality of life: such as insurance policies (life,
accident, cancer, dental), employee support program through EAP, recreation and cultural programs for
employees and their families, housing and vehicle loans, educational financial aid and subsidies, birthday
and house-moving excusals, salary advances and loans, voluntary pension contributions (based on
individual employee contributions).
Rank and Performance based benefits: relating to bonuses for performance and achieving targets,
company car, and club membership fees.
A breakdown of the expense shown above can be found in Note 31.
v)
Recognition of revenue on normal business activities
For local accounting purposes, revenue is recognized in accordance with current legislation issued by the
respective oversight authorities in each country. This form of accounting does not always comply with that
stipulated in IFRS as well as the consolidation policies of SURA Asset Management S.A. and Subsidiaries, so
individual countries must make adjustments to that the revenues received from their business activities are duly
recognized in accordance with said policies.
Revenue relating to activities performed in the normal course of business is recognized based on the degree to
which the transaction is completed during the respective reporting period. Revenues from a transaction can be
reliably estimated providing all and every one of the following conditions are met:
-
The value of the revenue from ordinary business activities can be measured reliably;
There exists the probability that the entity shall receive economic benefits associated with said
transaction;
The degree of completion of the transaction at the end of the reporting period in question, can be
measured reliably, and
The costs incurred with the transaction and the remaining costs to be incurred until the transaction is
completed can be measured reliably.
SURA Asset Management S.A. and Subsidiaries estimate the extent to which the service is provided as follows:
-
Portion of services performed compared to total amount agreed upon.
Portion of costs incurred compared with total estimated costs. For this purpose, the costs incurred up to
the present time include the costs incurred with the service provided before said date; and with regard
to the total estimated costs of the transaction itself, only the cost of the services that have been or shall
be provided were included.
Gross premiums
57
A premium is the value paid by the policyholder to the insurance company for assuming a risk covered by an
insurance contract.
Life insurance premiums are recognized as income in the income statement during the period in which the service
is rendered.
Receipts under investment contracts forming part of such policies are not recognized as gross premiums.
Reinsurance income
Gross Premiums ceded to reinsurers on life insurance contracts are recognized as an expense either when these
are paid or whenever the policy comes into full force and effect, whichever date is the earliest.
Issued Premiums ceded to reinsurers include premiums earned for the term of coverage as stipulated by the
contracts entered into during said period and are recorded on the date the policy comes into effect.
Dividend income
This is defined as Business Units distributing the greatest quantity of surplus funds in the form of dividends,
providing adequate business capital is maintained for ongoing operations and such dividends do not exceed the
maximum levels set by the regulatory authorities.
These are determined by each entity, and their distribution is based on the following formula:
(+) Retained Earnings Net of Tax on a Statutory Basis
(-) Adjustments for accounting concepts that do not represent cash flow
(-) Increase in the Business Capital Required
(=) Dividends to be distributed
As mentioned above, in all events the dividends to be distributed may not exceed the maximum level set by local
regulatory restrictions.
Unearned Premiums ceded to reinsurers are a proportion of written premiums issued during a year which relates
to the period of risk after its filing date. Unearned Premiums ceded to reinsurers are deferred during the term of
the direct insurance policies and their contracts’ underlying inherent risks. The deferment is also applied
regarding the term of the reinsurance agreement including its contract’s losses.
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Fees and commissions
Fees and commissions are generally recognized when the corresponding service is rendered. Those corresponding
to negotiating, or participating in the negotiation of transaction with a third party such as purchases of shares or
other securities or the purchase or sale of businesses, are recognized when the transaction is completed.
Portfolio and consultancy fees and other services are recognized based on the applicable service contract when
the service is rendered.
The asset management fees relating to investment funds and contractual investment rates are recognized on a
proportional basis over the period in which the service is provided. The same principle applies in the case of
wealth management, financial planning and custody; these services are usually performed continuously for a
prolonged period of time. The rates charged and paid between banks in payment of services, are classified as fee
income and expense.
Recognition of Deferred income liabilities (DIL)
SURA Asset Management S.A.'s pension fund management companies offer mandatory pension consisting of the
managing the retirement savings of its fund members. The corresponding commission income, depending on the
local regulations applying to each country where the subsidiary is located, is recognized based on the following:



On flows of member contributions paid into the individual capitalization account (commission on wages).
On the balance of the members’ individual capitalization accounts.
On a combination of the above (part on flow part on the balance).
The following table sets forth the manner in which fees are charged by different subsidiaries belonging to SURA
Asset Management S.A.:
AFP/AFORE/AFAP
Basis for Calculating Commissions
Mexico
Balance (Asset Under Management)
Peru
Mixed (*)
Chile
Flow (Salary Base)
Uruguay
Flow (Salary Base)
(*) As a result of a reform of the Peruvian pension system, a mixed commission collection system was set up (on
both flow and the balance), leading to a system of payment on balances held.
Since Mandatory Pension Savings entail certain administrative costs, even when no management commissions
are received, it is important to note the rationale behind income recognition so as to be able to ensure the
financing of these costs over time. For this reason a Provision for Deferred Liabilities Provision (DIL) has been set
up.
59
The purpose of DIL is to defer income received from fund members so as to cover maintenance expense and a
reasonable level of earnings in the periods in which those members become non-contributors or pensioners who
by law cannot be charged for the management of their funds and/or pension payments.
This is because when fund members become non-contributors they do not generate any income to meet the
costs. So, this provision remains in place while the Company collects the corresponding amounts and is freed up
as the future costs are incurred.
This provision covers the members of the mandatory pension funds offered by SURA Asset Management S.A. for
companies that are charged commissions based on flow or a mix of low and balance, as well as all those other
members who cannot be charged for the management of their funds and/or pension payments.
Methodology for calculating DIL
This provision is calculated at least every quarter. This is calculated in the currency in which the Subsidiary’s
collections and obligations are denominated. For those subsidiaries in which the provision is calculated on an
inflation-indexed unit of account, the provision is restated in the country´s legal currency using the applicable
exchange rate between said currency and the inflation-index unit rate at the cut-off date of the Statement of
financial position or at the end of each month.
The formula for calculating the provision is as follows:
t 20
DIL  
 CnoC
t
 CPt x FD t

0
Where:
CnoC t
Is the cost of non- contributing pension fund members stated in the currency used for calculating the
provision. This information is determined at least at the end of every year based on the number of noncontributing members multiplied by the unit cost, including a profit margin.
CPt
This being cost of pensioners who cannot be charged for the managing of their retirement funds and / or
pension payments, stated in the currency used for calculating the provision. This information is determined at
least at the end of every year based on the number of non- contributing members multiplied by the unit cost,
including a profit margin.
FDt
is the discount factor calculated based on the rates of local "AAA" corporate bond that do not carry
prepayment options, over a term similar to the forecast horizon in nominal or real terms based on the currency
used for calculating the provision. If there is no liquid market for the aforementioned corporate bonds, rates
pertaining to similar local government bonds that do not carry prepayment options can be used over a term
similar to the forecast horizon while adding a spread to cover business risk.
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t: forecast horizon stated in years. The forecast horizon is set at 20 years, since after such a time the size of the
portfolio is significantly reduced and the financial discount makes cost flows from non-contributing pension fund
members immaterial.
w)
Provisions
Provisions are recognized when there is a (legal or implicit) obligation as a result of a past event where it is
probable that the entity shall have to spend funds that would otherwise provide economic benefits in order to
pay off an obligation and when the value of such funds can be reliably estimated. In cases where the provision is
expected to be reimbursed, totally or partially, for example, under an insurance contract, this reimbursement is
recognized as a separate asset but only in cases where such reimbursement is virtually certain.
The expense corresponding to any provision is presented in the income statement, net of any reimbursement.
x)
Accounting policy segment information
The Company reports its operations by business unit, according to the nature of the services provided.
The Company operates in four business segments: Mandatory Pension Funds, Voluntary Wealth Management,
Life Insurance and Annuities, and Other and Corporate. The Chief Operating Decision Maker (the Board of
Directors) evaluates segment performance and allocates resources based on several factors, including fee and
commission, net premiums, Total operating revenue, and total operating expenses.
All segment revenues reported are from external customers. Segment revenue and operating income are
attributed to countries based on the location in which the services are rendered.
The Company does not report a measure of total assets and liabilities for each reportable segment as such
amounts are not regularly provided to the Chief Operating Decision Maker.
2.4
Changes to accounting policies and the information to be disclosed
Standards and new and modified interpretations
2.4.1 IAS 27 - Separate Financial Statements (amended in 2011)
Following the issuance of the new IFRS 10 and IFRS 12, the objective of IAS 27 is limited to accounting for
subsidiaries, or the subsidiaries contained in the financial statements. These modifications have no material
impact on either the financial position or the results of SURA Asset Management S.A. and Subsidiaries.
2.4.2 IAS 28 - Investments in Associates and Joint Ventures (as amended in 2011)
As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates and
Joint Ventures, and provides for the application of the equity method for investments in associates. These
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changes have no material impact on the financial position or results of SURA Asset Management S.A. and
Subsidiaries.
2.4.3 IAS 32 - Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32
These amendments clarify the meaning of "when it has an enforceable legal right to offset". These amendments
also clarify the application of the offsetting criteria for settlement systems (such as central clearing house
systems) which apply gross settlement mechanisms that are not simultaneous. These changes have no material
impact on the financial position or results of SURA Asset Management S.A. and Subsidiaries.
2.4.4 IFRS 7 - Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7
These amendments require an entity to disclose information about rights of set-off and related arrangements
(e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the
effect of netting arrangements on an entity’s financial position. The new disclosures are required for all
recognized financial instruments that are set off in accordance with IAS 32. These changes have no material
impact on the financial position or results of SURA Asset Management S.A. and Subsidiaries.
2.4.5 IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the
accounting for consolidated financial statements. It also addresses the issues raised in Superintendencia de
Industria y Comercio- SIC 12 Consolidation - Special Purpose Entities.
IFRS 10 establishes a single control model that applies to all entities, including special purpose entities. The
changes introduced by IFRS 10 will require that Senior Management make significant judgments to determine
which companies are controlled and, therefore, must be consolidated by the parent company, compared to the
requirements described in IAS 27. IFRS 10 does not have any material impact on the investments currently held
by SURA Asset Management S.A. and Subsidiaries.
2.4.6 IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 includes all disclosures that previously appeared in IAS 27 relating to the consolidated financial
statements and all disclosures previously included in IAS 31 and IAS 28. These disclosures relate to interests in
subsidiaries, joint ventures, associates and structured entities.
It also requires new additional disclosures, but has no material impact on the financial position or results of SURA
Asset Management S.A. and Subsidiaries
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2.4.7 IFRS 13 Fair Value Measurement
IFRS 13 provides a single guideline for all fair value measurements. IFRS 13 does not change when fair value is
used, but rather describes how to measure fair value when fair value is required or permitted by IFRS. These
changes have no material impact on the financial position or results of SURA Asset Management S.A. and
Subsidiaries.
2.5
Significant accounting estimates, assumptions and opinions
The preparation of consolidated financial statements requires the use of estimates and assumptions. Using these
estimates and assumptions affect the amounts of assets, liabilities and contingent liabilities on the date of the
Statement of financial position as well as revenues and expenses for the year. Actual results could differ from
those estimated. The determination of these assumptions is subject to internal control procedures and approvals
and takes into account both internal and external studies, industry statistics, factors and environmental trends
and regulatory requirements.
The more significant accounting estimates and assumptions include DAC, DIL and Deferred Tax (DT), whose
legislative aspects have been mentioned in the notes above.
Accounting estimates and assumptions
The following are the key assumptions used to estimate the future pattern of all those variables existing at the
reporting date which carry a significant risk of causing a material adjustment to the value of assets and liabilities
to be reported on the next financial statement given their uncertainty.
a)
Valuation of insurance contracts
(Refer note 27)
Provisions for life insurance and annuity contracts are recognized on the basis of the best estimate assumptions.
Also, like all insurance contracts, these are subject to an annual liability adequacy test, which reflects Senior
Management´s best estimates of future cash flows. In the event these prove to be insufficient, assumptions are
updated and remain locked -in until the next review or provisions prove insufficient, whichever occurs the
earliest.
As described in the section corresponding to Deferred Acquisition Costs, expenses are deferred and amortized
over the lifetime of the contracts. In the event that the assumptions regarding future contractual profitability
prove erroneous, the amortization of costs is accelerated with the corresponding impact on the income accounts
for the period.
The main assumptions used in the calculation of provisions include: mortality, morbidity, longevity, investment
returns, expenses, fund exit and collection, redemption and discount rates.
The assumptions corresponding to the mortality, morbidity and longevity rates are based on the standards of the
local industry for each subsidiary and are adjusted to reflect the Company’s own risk exposure, where applicable,
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and where there is sufficient historic information to perform an experience-based analysis that would alter
industry estimated. The longevity assumptions are introduced through future improvement factors for mortality
rates.
For assumptions regarding rates of return, the proceeds received from investments (assets underlying the
technical reserves corresponding to insurance contracts) are taken into account these based on market
conditions at the date the contract is entered into, while factoring in future expectations of changes in local
economic and financial conditions in those markets where the companies operate together with the Company’s
own investment strategy.
Expense assumptions are based on expenditure levels prevailing when the contracts are signed which are then
adjusted for expected inflation increases, where applicable.
Exit, collection and redemption rates are based on an analysis of the subsidiary´s own experience with the
product or product family
Discount rates are based on current industry and market rates and adjusted for the subsidiary´s own risk
exposure.
For insurance contracts with savings components based on unit-linked fund units, obligations are determined
based on the value of the assets underlying the provisions, those that arise from the value of each of the funds
holding policy deposits.
b)
Valuation of investment contracts without DPF
(Refer note 27)
The portfolios of SURA Asset Management S.A.'s insurance companies do not contain any contracts that classify
as investment contracts.
c)
Revaluation of property for own use
(Refer note 16)
SURA Asset Management S.A. and Subsidiaries record properties for their own use at fair value and any changes
to such are recognized in other comprehensive equity.
This revaluation increase is recognized in other comprehensive income and is accumulated in the equity accounts
as a revaluation surplus. The revaluation is calculated every year.
When the corresponding book value is decreased as a result of an asset revaluation, this decrease is recognized in
the income accounts for the period. However, this decrease shall only be recognized in other comprehensive
income to the extent of any credit balance existing in the revaluation surplus account with regard to the asset in
question. The decrease recognized in other comprehensive income reduces the amount accumulated as a
revaluation surplus in the equity accounts.
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The fair value of land and buildings is based on periodic appraisals carried out both internally as well as externally
by outside qualified appraisers.
65
d)
Fair value of financial instruments
(Refer note 23)
When the fair value of financial assets and financial liabilities recorded in the statement of financial position is not
obtained from active markets, this is determined using valuation techniques including the discounted cash flow
model cash. The information that appears in these models is taken from observable markets where possible, but
when it is not, some judgment is required for determining the respective fair values. These judgments are made
on the basis of certain data including liquidity and credit risk as well as volatility.
Investment properties are recognized at fair value. Any subsequent revaluation changes are recognized in the
income accounts. At the time of disposal, the difference between the selling price and the carrying amount is
recognized in the income accounts.
Fair value is determined based on the assessments of qualified appraisers. All properties are appraised separately
over a period of three to five years.
e)
Taxes
(Refer note 20)
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and
the amount and timing of future taxable income. Given the wide range of international business relationships
and the long-term nature and complexity of existing contractual agreements, differences arising between the
actual results and the assumptions made, or future changes to such assumptions, could necessitate
future adjustments to tax income and expense already recorded. The Company establishes provisions, based
on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties
in which it operates. The amount of such provisions is based on various factors, such as experience of previous
tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority.
Such differences in interpretation may arise for a wide variety of issues depending on the conditions prevailing in
the respective domicile of the Company companies.
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be
available against which the losses can be utilized. Significant management judgment is required to determine the
amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable
profits together with future tax planning strategies.
Judgments
The preparation of the consolidated financial statements of SURA Asset Management S.A. and Subsidiaries
require Senior Management to make significant judgments, accounting estimates and assumptions that affect the
reported amounts of revenues, expense, assets and liabilities as well as the disclosure of contingent liabilities, at
the end of reporting period in question.
66
Here, any uncertainty regarding these assumptions and estimates could result in levels of income that could
require significant future adjustments to the book values of the asset or liability being assessed.
The following key assumptions concerning the future and other key sources of uncertainty for year-end estimates
pose a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year.
a.
Impairment to Goodwill
Determining whether goodwill is impaired requires estimating the value in use of the cash generating units to
which goodwill has been allocated. This requires Senior Management to estimate the expected future cash flows
from the cash-generating unit and an appropriate discount rate to calculate the present value of the
aforementioned value in use. In the event of future real cash flows being lower than expected, an impairment
loss could occur.
b.
Deferred tax on investment properties
For purposes of measuring deferred tax liabilities or deferred tax assets from investment properties that are
measured using the fair value model, Senior Management has reviewed the real estate portfolios belonging to
SURA Asset Management S.A. and concluded that these were not conducted as part of a business model, the
purpose of which is to substantially use up all the economic benefits inherent to the features of the investment
over time, as opposed to obtaining such through the sale of these investment properties.
Therefore, in determining the Group's deferred tax on investment property, Senior Management has determined
that there are no grounds for rebutting the presumption regarding the book values corresponding to its
investment properties measured using the fair value model and their recovery through sale. As a result, SURA
Asset Management S.A. has not recognized deferred tax on changes in fair value of its real estate investments
since this is not subject to any income tax on changes in the fair value of divested real estate investments.
03.
Standards issued pending implementation
Below is a list of standards that have been issued but not have entered into full force and effect. SURA Asset
Management S.A. and Subsidiaries shall adopt these standards on the date they are due to come into effect.
3.1
IAS 32 - Compensation for Financial Assets and Financial Liabilities - Amendments to IAS 32
These amendments clarify the meaning of "when it has an enforceable legal right to offset". These amendments
also clarify the application of the offsetting criteria for settlement systems (such as central clearing house
systems) which apply gross settlement mechanisms that are not simultaneous. These changes are not expected
to have any material impact on the financial position or results of SURA Asset Management S.A. and Subsidiaries,
and shall be effective for annual periods beginning on or after January 1, 2014.
67
3.2
IFRS 9 - Financial instruments
As published to date, IFRS 9 reflects the first phase of IASB’s work on replacing IAS 39 and applies to classification
and measurement of financial assets and financial liabilities as defined in IAS 39.
The standard was initially planned to enter into full force and effect for the fiscal years beginning on January 1,
2013, but some amendments to IFRS 9 as issued in December 2011 delayed its effective date, and its application
may possibly be delayed to the fiscal year beginning on January 1 2015. In subsequent phases, IASB will address
hedge accounting and the impairment of financial assets. The adoption of the first phase of IFRS 9 will affect the
classification and measurement of financial assets, but will have no impact on the classification and measurement
of financial liabilities. SURA Asset Management S.A. and Subsidiaries shall quantify this effect together with those
of subsequent phases when the final standard is published, including all of its stages.
3.3. Amendments to IAS 39 - Financial Instruments - Renewal of derivatives and a continuation of hedge
accounting
Under these amendments there is no need to discontinue hedge accounting if a hedging derivative was renewed,
provided certain criteria are met. The amendments are effective for annual periods beginning on or after January
1, 2014.
3.4.
assets
IAS 36 (Amendment) - Impairment of Assets - Disclosure of recoverable amounts of non-financial
IASB in the form of an amendment to IFRS 13 Fair Value Measurement, amended some of the disclosure
requirements of IAS 36 - Impairment of Assets with respect to the measurement of the recoverable amount of
the impaired assets.
One of the amendments to IAS 36 potentially resulted in broadening the information requirements to a much
greater degree than originally intended. Instead of requiring the disclosure of the recoverable amounts of
impaired assets, including goodwill, as intended, this amendment is perceived as requiring disclosure of the
recoverable amounts of any cash-generating unit (group of units) for which the carrying amount of goodwill or
intangible assets with indefinite useful lives allocated to that unit (or group of units)is significant in comparison
with the total carrying amount of the entity 's goodwill or intangible assets with indefinite useful lives. The
amendments are effective for annual periods beginning on or after January 1, 2014.
3.5
IFRS 14 - Deferred Regulatory Accounts
IFRS 14 Deferred Regulatory Accounts provides for an entity who is adopting IFRS for the first time, to continue to
account for, albeit with certain limited changes, "balances of deferred regulatory accounts" under previous the
Generally Accepted Accounting Principles - GAAP, both in the initial adoption of IFRS and for subsequent financial
statements. Balances of deferred regulatory accounts and their corresponding movements, are presented
separately on the statements of financial position and income for the period as well as other comprehensive
income, and no specific disclosures were required. IFRS 14 shall enter into full force and effect for annual periods
beginning on or after January 1, 2016.
68
3.6 International Financial Reporting Interpretations Committee - IFRIC 21 - Liens
This standard addresses accounting for outflows imposed by government institutions (including government
agencies and similar bodies) in accordance with the current applicable legislation and / or regulations. However,
this does not include income taxes (IAS 12 Income Taxes), fines and other penalties, liabilities arising from
emission trading schemes and other outflows that come under the scope of other standards. This standard shall
become effective for annual periods beginning on or after January 1, 2014.
4.
Business Combinations (Goodwill)
4.1 Acquisitions in 2013
Acquisition of AFP Horizonte in Peru
On April 23, 2013, the Company acquired through its subsidiary AFP Integra S.A., a 100% stake in the share capital
of AFP Horizonte S.A., a Peruvian pension fund management firm subsidiary of BBVA.
The transaction was performed during four months in which, to comply with regulatory restrictions AFP Integra,
acting as the leading acquirer, started transferring 50% of the assets under management and client list to
Profuturo AFP. The acquisition was carried out after due authorization was granted by the Peruvian
Superintendency of Banking, Insurance and Pension Fund Management to the Group, and was completed at the
end of August when AFP Integra absorbed the remaining assets of the acquired company.
For the acquisition, allowing regulatory approval, the Company paid a total of USD$ 249,153,494, and the same
amount was paid by Profuturo AFP to BBVA. At the same time an agreement was signed between AFP Integra and
Profuturo AFP, to guarantee the transfer of the 50% of assets under management and client list of AFP Horizonte
S.A.
The Peruvian Superintendency of Banking, Insurance and Pension Fund Management by means of Resolution SBS
N ° 4747-2013 dated August 14, 2013, approved the demerger- merger operation for AFP Horizonte in favor of
Profuturo AFP and AFP Integra. Also with SBS Resolution N ° 5071-2013 dated August 21, 2013, the spinoff/merger operation was scheduled to take place, for corporate purposes, on August 31, 2013, while for
operating purposes, the date of separation, transfer and merger of the funds administered by AFP Horizonte, the
scheduled date was for August 29, 2013.
Based on the provisions of IFRS 3 Business Combinations, the purchased goodwill should correspond to the
difference between the price paid and the fair value of the assets, liabilities and contingent assets and liabilities
net of any intangible assets identified in the acquired companies. This purchase involved a purchase price
allocation (PPA) and the valuation of intangible assets obtained from the acquisition of the direct and indirect
interests in the acquired company.
In accordance with IFRS 3, the Company proceeded to recognize and measure the identifiable assets acquired and
liabilities assumed at the acquisition date. The values were determined using various valuation techniques
depending on the type of asset and / or liability in question, as well as the best information available. In addition
to the various considerations made in determining fair values, the Company obtained expert advice in making
these calculations. The methods and assumptions used to determine the fair values were as follows:
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a)
Client relations
Relationships with existing customers on the date of the transaction were identified and recognized in books
based on the following product lines, while meeting the recognition criteria stipulated by all applicable standards.
In assessing the value of the client portfolio the Multi- period Excess Earnings Methods (MEEM) was used, which
consists of applying the Income Approach in estimating the fair value of an intangible asset and the flow of funds
attributable solely and exclusively to the asset in question, less charges for the use of other assets that contribute
to the generation of flows for the asset being valued (contributory asset charges - CAC).
To assess the value of client portfolios using MEEM, projected revenues should include approximate client loss
ratios, whether based on sales revenue or number of clients.
Revenues were projected based on the scheme of fee payments from our client base, these being pure flow or
mix flow regarding the latest pension reform. Projections are based on the premise that 75% of our clients chose
to remain in the pure flow fee payment category, and this ratio is maintained throughout the years projected.
The pension fund members were divided into age groups in order to reflect the average retirement age for each.
All pension fund members are estimated to retire at the age of 65.
Mortality and disability rates also depend on the average age of the pension fund members, since as they grow
older they are more likely to die or become disabled.
Mortality and disability are also available depending on the average age of contributors, as contributors as they
grow older the probability of death or disability increases.
A fair value range was obtained for the client base, this being between S/374.1 and S/409.7 million, with a
midpoint of S/391.2 million, having a term of 47 years and a CAC rate of 1.44 %. Despite the fact that we used a
47-year term for the estimation of the value of client relationships, 95 % of the present value of cash flows
generated by the portfolio, are concentrated during the first 18 years of projections. Thus, we determined that
the portfolio acquired from Horizonte has a useful life of 18 years.
b)
Other Identified Intangible Assets
In accordance with the provisions of IFRS 3 and IAS 38 these should be recognized separately from goodwill when
meeting the following criteria:
-
The asset is able to be separated or arises from contractual or legal rights
The asset is controlled by the Company
The asset generates future benefits
In addition to client relationships, the following intangibles were identified and validated by external consultants
who were responsible for drawing up the PPA:
70
Trademarks: for which the Relief from Royalty approach was used. The Company applied the income
approach approximating the Fair Value of an intangible asset and the expected relief from royalties attributable
to the legal control of the asset being assessed. Royalty relief is projected as a royalty fee that was either selected
or based on licensing agreements for similar assets. A useful life of 3 years was determined at a value of S/.2,451
thousands to be amortized using the straight-line method.
Non-Competition Agreement using the With and Without Method. The value of the intangible represents
the present value of the incremental cash flows attributable to said asset. Then a comparison was performed
between the margin that would be obtained if there were no competition with the margin that the Company
would obtain if the seller could enter the market as a competitor
The difference observed for each year during the term of the contract is considered as cash flow for each fiscal
year.
A useful life of 3 years was determined at a value of S/.2,451 thousands to be amortized using the straight-line
method
c)
Identified Goodwill Acquired assets and assumed liabilities
The goodwill identified with the acquisition of AFP Horizonte came to USD$ $ 101,670 which represents the value
of the expected synergies arising from this acquisition, and also includes a client list that had not been recognized
as a separate asset. The goodwill was entirely attributed to the acquired entity. The client list was separated and
measured individually thus meeting the requirements for recognition as an intangible asset in accordance with
IAS 38 The recognized goodwill is not expected to be tax deductible.
d)
Acquired assets and assumed liabilities
The acquisition of AFP Horizonte was recorded, as required by IFRS 3 " Business Combinations", following the
purchase method of accounting, which reflects the assets and liabilities acquired at their fair estimated market
value (fair values) including unrecognized intangible assets on the part of AFP Horizonte at said date, as well as
the respective goodwill. The book and fair values corresponding to AFP Horizonte´s identifiable assets and
liabilities at the date of purchase are shown below:
71
Balances recognized at December 31, 2013:
(Figures stated in thousands of US dollars)
Book value – acquire
Recognized fair
value
Fair value - acquiree
Assets
2,097
4,779
42,546
1,494
2,520
4,445
-
1,250
912
145,493
317
2,097
4,779
42,546
2,744
2,520
4,445
912
145,493
317
57,881
147,972
205,853
Total Liabilities
3,127
9,373
1,478
13,978
44,392
44,392
3,127
44,392
9,373
1,478
58,370
Net acquired assets
43,903
103,580
147,483
Cash and banks
Negotiable securities
Legal reserve requirement
Furniture, machinery and equipment, net
Deferred income tax, net
Other assets, net
Trademarks
Client relations
Non-Competition Agreements
Total Assets
Liabilities Current Income Tax
Deferred income tax
Other accounts payable
Other liabilities
Goodwill obtained from the acquisition
2013
Transferred consideration
Less: Net acquired assets
Less: Adjustments to fair value of net acquired assets
Goodwill obtained from the acquisition
249,153
(43,903)
(103,580)
101,670
According to the terms of the corresponding purchase agreement, AFP Integra S.A. legally took over AFP
Horizonte, which was dissolved without being wound up. As of the date of this acquisition, AFP Integra is
responsible for any obligation or contingency relating to AFP Horizonte. The number of fund members that were
transferred from AFP Horizonte transferred to the AFP Integra 965,686, representing a portfolio worth
S/.10,989,794,000 (USD$ 3,929,557,693) (S/.1,437,853,000 (USD$ 514,124,861) in the case of Fund # 1,
S/.7,668,688,000 (USD$ 2,742,048,843) for Fund # 2, and S/.1,883,253,000 (USD$ 673,383,988) for Fund # 3).
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From the date of acquisition, August 30, 2013, AFP Horizonte has contributed USD$ 33.8 of revenue and USD$
12.9 to the profit before tax from continuing operations of AFP Integra. If the combination had taken place at the
beginning of the year, revenue from continuing operations would have been USD$ 160.6 million and the profit
before tax from continuing operations for the Company would have been USD$ 79.9 million.
4.2 Acquisitions in 2012
On November 14, 2012, SURA Asset Management España S.L. , acquired 69.3% (in 2013 we acquired an additional
6.3%) of the voting shares in Seguros SURA (formerly Invita Seguros de Vida S.A.), which in turn holds 99.98% of
the voting shares in Hipotecaria SURA (formerly Incasa Empresa Administradora Hipotecaria), for a total value of
US$ 142 million. After allocating a purchase price allocation to the assets acquired and liabilities assumed, USD$
55 million in goodwill was produced. Payment was made in cash at the time of the transaction.
SURA Asset Management España S.L., directly performed the transaction. Based on that stipulated by the
International Financial Reporting Standard No. 3 (IFRS 3) governing Business Combinations, purchased goodwill is
recognized as the difference between the value paid and the corresponding fair value of the assets, liabilities as
well as the contingent assets and liabilities of the companies thus acquired, net of any intangible asset belonging
to the acquired companies.
According to these principles, goodwill is not amortized, but impairment to such is assessed when there are
indications of such. Also applicable rule and regulations stipulate a period of 12 months to make any adjustments
to the purchase accounting associated with the takeover. SURA Asset Management S.A. and Subsidiaries have
chosen to measure the non-controlling interest in the acquiree at its share of the net assets acquired. According
to the aforementioned legislation, this transaction included a purchase price allocation (PPA) as well as the
valuation of intangible assets corresponding to the direct and indirect interests held in the acquired companies.
In accordance with IFRS 3, the Company proceeded to recognize and measure the identifiable assets acquired and
the liabilities assumed on the date of said acquisition. The values were determined using various valuation
techniques depending on the type of asset and / or liability in question, as well as the best information available.
In addition to the various considerations made in determining fair values the Company obtained expert advice in
making these calculations. The methods and assumptions used to determine the fair values were as follows:
a)
Client relations
Relationships with existing customers on the date of the transaction were identified and recognized in books
based on the following product lines, while meeting the recognition criteria stipulated by all applicable standards:
•
Individual Life Insurance: this type of insurance is specially designed for private individuals and provides
coverage in case of natural death. They may have additional clauses covering other risks such as
accidental death, dismemberment, disability, accident or illness, exemption from payment of premiums
or serious illness. The forecast horizon was set at 31 years, according to the portfolios age pyramid and
current mortality tables.
73
•
Life annuities: consisting of income received by the pension fund member once funds or beneficiaries are
withdrawn thus ensuring a monthly pension for the rest of their lives.
There are three types of annuities: legal retirement, early retirement and disability and survivorship. The forecast
horizon was set at 31 years, according to the portfolios age pyramid and current mortality tables.
Customer portfolios were evaluated using the MMSE ("Multi - Period Excess Earnings Method") method, which is
based on a calculation of discount cash flows attributable to future economic benefits to be received from the
client base, once pension holder charges are eliminated. To estimate the remaining useful life of the client base,
an analysis is performed on the average duration of client relationships based on the withdrawal rate method.
This method was used to determine the useful life corresponding to the accumulation of cash flows generated by
the intangible. Under this method the useful life of the intangible is estimated in the year in which 95% of the
cash flows accrue. The straight-line amortization method was used. This analysis resulted in the recognition of
USD$ 60,662 of intangible fixed asset as client relations, refer to note 18.
The acquired companies generated from January 1 to November 30, 2012, approximately USD$ 74 million and
USD$ 13 million in operating income and net income, respectively, for an annual total of approximately USD$
22.2 million and USD$ 11.3 million in operating income and net income, respectively.
In accordance with IFRS 3 Business Combinations, SURA Asset Management S.A. proceeded to update the fair
value measurements of assets acquired during the subsequent measurement period in 2013.
At the time of the purchase in 2012, and following the guidelines used to update the effects of purchase
accounting, acquired net assets were estimated at a total of USD$ 309.8 million, this amount underwent
substantial variation during the measurement period due to adjustments in the balance of reserves, which in
2012 were overestimated. This overestimation occurred because at the time of the Purchase Price Allocation
(PPA) no adequacy tests were performed on liabilities to corroborate the amount of reserves held in the form of
local balances. Said tests were carried out during the first 12 months after the purchase in order to comply with
this methodology.
Consequently adjustments were made to the reserves appearing on the local financial statements and this
resulted in an increase in the net assets acquired of USD$ 309.8 million. Related intangibles along with the
corresponding deferred tax did not undergo any change.
b)
Identified Goodwill
The goodwill identified on the acquisition of Seguros SURA (Formerly Invita) in 2012 came to USD$ 55,106. For
the year 2013 an adjustment was made in the net assets acquired during the measurement period, producing an
increase of USD$ 203,045 in adjustments to the reserves recognized in the local financial statements. The
consequent impact caused the recognition of a gain on the transaction of USD$ 72,820.
c)
Acquired assets and assumed liabilities
74
In accordance with IFRS 3 Business Combinations, SURA Asset Management S.A. proceeded to update the fair
value measurements of assets acquired during the subsequent measurement period in 2013.
At the time of the purchase in 2012, and following the guidelines used to update the effects of purchase
accounting, acquired net assets were estimated at a total of USD$ 167.4 million, this was however a provisional
amount. During the measurement period after 31 December 2012 independent valuation experts completed the
valuation of the reserves. This adjustment to the provisional amount occurred because at the time of the
Purchase Price Allocation (PPA) it was not possible to perform adequacy tests on liabilities to corroborate the
amount of reserves held in the form of local balances. Said tests were carried out during the first 12 months after
the purchase.
Consequently adjustments were made to the provisional amounts recognized for reserves and this resulted in an
increase in the net assets acquired of USD$ 370.5 million. Related intangibles along with the corresponding
deferred tax did not undergo any change.
The fair value of the assets and liabilities belonging to the Purchaser on the date this acquisition was conducted is
as follows:
75
Seguros SURA S.A. (Formerly Invita)
Initial Proposal
Accounts
Accounts receivable
Financial assets
Other assets
Fixed assets
Intangible assets
2012
15,680
124,237
Adjustments to
Initial
Accounting
Final Accounting
Adjustments
-
2012
15,680
124,237
1,208,995
-
1,208,995
1,897
-
1,897
43,016
-
43,016
9,637
-
9,637
430
-
430
-
Total Assets
1,403,892
1,403,892
Technical reserves
1,253,439
(203,046)
1,050,393
Accounts payable
26,714
-
26,714
16,634
-
16,634
Other liabilities
346
346
Total Liabilities
1,297,133
(203,046)
1,094,087
Net Acquired Assets
106,759
203,046
309,805
Identified intangibles
60,662
60,662
370,467
Fair value of Net Acquired Assets
167,421
203,046
(61,945)
(75,120)
(137,072)
Deferred tax assets (liabilities)
(18,199)
(18,199)
Fair value of Net Identified Assets
87,277
127,926
Goodwill
55,106
(55,106)
(72,812)
Value paid
142,383
(72,812)
-
Cash flow at date of acquisition
Net cash included from companies
Cash payment
Net cash disbursement
15,680
142,383
158,063
-
15,680
142,383
158,063
Gains in Company Acquisitions
215,195
142,383
In order to ensure that the measurements appropriately reflect consideration of all available information as of
the acquisition date, the Company reassessed whether it has correctly identified all of the assets acquired and all
of the liabilities assumed. The Company did not identify any additional assets or liabilities that qualify for
recognition. Additionally, the Company reviewed the procedures used to measure the amounts recognized at the
acquisition date for the identifiable assets acquired and liabilities assumed and the consideration transferred. The
Company concluded that no errors were made during said procedures.
76
From the date of acquisition, November 30, 2012, Seguros SURA (formerly Invita Seguros) has contributed USD$
16.7 million of revenue and USD$ 3.9 million to the profit before tax from continuing operations of the group of
Companies in Peru. If the combination had taken place at the beginning of the year, revenue from continuing
operations would have been USD$ 200.4 million and the profit before tax from continuing operations for the
Company would have been USD$ 46.8 million.
Share swap - 2012
On December 29, 2011, SUAM España acquired a 100% stake in the share capital of ING Administradora de
Pensiones y Cesantías Colombia in Colombia (hereinafter ING Colombia).
On December 31, 2012, a share swap was conducted in which the entire shares in ING Colombia were exchanged
for an equity stake in the new company produced from the takeover merger between Protection S.A. and ING
Colombia (henceforth known as Protección S.A.). The terms and conditions of this swap are shown as follows:
Book value of ING Colombia at the date of its acquisition
Investment in ING Colombia
2012
Stake Held 2012
143,169
93%
7,691
5%
SURA Asset Management España S.L.
2,807
2%
153,667
100%
Total Consolidated
Net Assets -ING Colombia at the date of acquisition
129,942
129,942
PPA
ING Colombia
(fair value)
4,447
70,404
74,851
14,692
14,692
23,233
23,233
23,233
14,692
37,925
Capital
28,639
Other reserves
69,043
Profit / Loss for the year
8,085
9,483
Total equity
115,250
Swap terms between ING Colombia and Protección S.A
53,189
(1,571)
51,618
81,828
69,043
6,514
9,483
166,868
ING Colombia
(book value)
Goodwill
Intangibles
Other assets
Total assets
Deferred tax
Other liabilities
Total liabilities
Net assets
delivered
4,447
70,404
129,942
204,793
77
No. Shares in
Protección
Holdings B.V.
Swap Price
(COP)
COP 000
USD$ 000
Equity Stake in Newly
Merged Protección
3,619,505
71,972
260,503,014
147,325
14.25%
Grupo SURA Holanda
194,514
71,972
13,999,562
7,917
0.77%
España S.L.
379,915
71,972
27,343,242
15,464
1.50%
301,845,818
170,706
16.52%
Total consolidated - SURA
Asset Management S.A.
4,193,934
Total shares in Protección S.A. came to 25,407,446.
Amount Invested
(book balance)
Grupo SURA Latin American Holdings
B.V.
Amount received
Protección S.A.
Profits from
transaction
143,169
147,325
4,156
Grupo SURA Holanda
7,691
7,917
226
2,807
15,464
12,657
Total transaction
153,667
170,706
17,039
Significant acquisitions performed prior to 2012
On December 31, 2011, SURA Asset Management España, S.L. acquired 100% of the voting shares belonging to
Grupo SURA Holanda B.V and Grupo de Inversiones Suramericana Holanda B.V, which held majority stakes in the
ING Latin American companies. This included the purchases of insurance companies and pension funds in Mexico,
Chile, Uruguay, Peru and Colombia for a total value of USD$ 3.4 billion. This payment was made in cash at the
moment this transaction was completed.
After allocating a purchase price to the assets acquired and liabilities assumed, USD$ 1.6 million of goodwill was
produced.
78
A payment of USD$ $3.4 billion was made in cash at the time of the transaction, along with a payment of USD$
6.8 million contingent on recovering the tax due to two subsidiaries.
Pursuant to IFRS 3 Business Combinations, SURA Asset Management S.A. proceeded to update the fair value
measurements of the net assets acquired during the measurement period subsequent to 2012.
The acquired companies generated from January 1 to December 31, 2011, approximately USD$ 1,111 million and
USD$ $206 million in operating income and net income for that year, respectively.
The adjustments made to the initial PPA are shown below:
Initial PPA
Final
accounting
Adjustments
82,431
(150)
82,281
1,790,332
(1,600)
1,788,732
171,791
(1,811)
169,980
-
-
-
136,456
-
136,456
41,968
-
41,968
-
-
-
5,335
-
5,335
267,778
(267,778)
-
-
-
-
7,488
(7,801)
(313)
Current tax
23,625
(9,272)
14,353
Other assets
27,212
-
27,212
2,554,416
(288,412)
2,266,004
85,238
-
85,238
Provision for life insurance (technical reserves)
961,070
31,198
992,268
129,095
(70,215)
58,880
Current tax liability
12,703
-
12,703
Employee benefits
43,044
-
43,044
2,546
-
2,546
142,775
(2,741)
140,034
25,092
5,607
30,699
121,761
(101,446)
20,315
Total acquired liabilities
1,523,324
(137,597)
1,385,727
Total Acquired Assets, net
1,031,092
(150,815)
880,277
Other financial assets
Accounts receivable
Investments in controlled companies
Property, plant and equipment
Goodwill
Other intangible assets
Assets available for sale
Deferred tax assets
Total Acquired Assets
Other liabilities
Accounts payable
Provisions
79
Identified Intangible Assets
Deferred Tax liability
Minority interest
Total identified assets, net
Goodwill
Amount paid for the ING Latam companies
-
1,671,896
(432,212)
(115,214)
2,155,562
1,214,610
3,370,172
1,306,106
(341,180)
(75.470)
1,769,733
1,607,200
3,376,933
Adjustments to Net Acquired Assets
Net acquired assets (preliminary)
1,031,092
i. Eliminated initial DAC balance
(197,024)
II. Adjustments to fair value measurement of DIL
84,841
III. Test of adequacy-TOA adjustments to reserves
(22,395)
IV. Other proposed adjustments
(16,237)
Net acquired assets (final)
i.
(365,790)
91,032
39,744
(385,829)
392,590
6,761
880,277
Elimination of initial balance of Deferred Acquisition Costs for the year 2012
Deferred Acquisition Costs are those incurred in acquiring the new insurance or pension fund management
business, which vary according to, or are directly related to the acquisition of new business
These costs are recognized as an asset in the Statement of Financial Position and amortized over the contract.
DAC relating to contracts acquired at the date of acquisition, are implicit in the valuation of contracts
with clients and the corresponding business relationships acquired which were identified as intangibles
and duly recognized in the respective purchase accounting (PPA - Purchase Price Allocation), the DAC
recognized in the acquired companies are part of the intangibles identified with regard to the purchase under
Client Relations.
Transaction
Elimination of initial DAC
balance
Deferred tax effect on DAC
Effect on equity
ii.
Total
Chile
Mexico
Peru
Uruguay
Colombia
(267,778)
(55,927)
(160,337)
(34,697)
(3,895)
(12,922)
70,754
9,626
45,481
10,409
974
4,264
(197,024)
(46,301)
(114,856)
(24,288)
(2,921)
(8,658)
Adjustments in the measurement of Deferred Income Liabilities - DIL
The concept of DIL (Deferred Income Liability) is to defer income from fund members so as to cover maintenance
costs and a reasonable level of earnings in the periods in which members become non-contributors. This is
80
because when fund members become non-contributors they do not generate any income to meet the costs. For
this purpose, SURA Asset Management S.A. and Subsidiaries maintain a provision while the corresponding
amounts are collected which is then reversed when the aforementioned costs are incurred.
The acquired companies recognized DIL, on the basis of a group measurement, i.e. marginal cost. After due
analysis it was determined that the pension fund management firms must measure the adequacy of expected
future cash flows from its fund member base (affected by the probability that a contributing member shall
become non-contributing at some stage).
Based on the above, the recognized DIL was considered to be enough to offset the probability of members going
from a contributing to a non-contributing status as well as expected future costs of existing non-contributing
members.
Transaction
Total
Chile
Peru
Adjustments to fair value
measurement of DIL
101,445
107,787
(4,774)
(1,568)
Deferred tax effect on DIL
(16,604)
(18,404)
1,408
392
84,841
89,383
(3,366)
(1,176)
Effect on equity
iii.
Uruguay
Adjustments to Liability Adequacy Testing (Insurance Companies)
As a result of the valuation of reserves under IFRS, differences were identified that fully reflect an impact of USD$
31.2 million, before tax, as detailed below:

Inadequacy derived from calculating contingency reserves: Based on an analysis of technical reserves
and upon comparing the amount of obligations produced by the adequacy test with the reserve recognized under
IFRS the insurance companies take into account the contingency reserve of basic and additional earnings.
Because the contingency reserve is an obligation to a third party (other than the obligations under insurance
contracts), it was considered that this should not be taken as the base reserve for the TOA. Therefore the
inadequacy calculated by the insurance companies was considered to be underestimated in the amount of USD$
6.9 million.

Updated assumptions and scenarios at the end of 2011: Based on a more accurate valuation model for
projecting flows of liabilities, another methodology was used, other than the MG Alfa technique, which has been
historically used, for projecting reinvestment rates for assets, as designed by independent experts. Thus the
reserve was recalculated based on assumptions that were updated for year-end 2011, taking into account the
conditions at that time for the portfolio of pension fund members a pensioners portfolio, as well as current and
expected factors regarding the portfolio of assets and liabilities based on a best estimate scenario which
generated an impact of USD$ 18.2 million.
81

Effect of including best estimate assumptions on the Company: Under IFRS guidelines different
assumptions can be used with regard to best estimates for the calculation of the reserve, specifically
reinvestment rates and mortality tables based on changes in such assumptions. This implied an adjustment of
USD$ 6.1 million.
Transaction
Total
TOA adjustments to reserves
Deferred tax effect on reserves
Effect on equity
iv.
Mexico
(31,198)
(31,198)
8,803
8,803
(22,395)
(22,395)
Other minor adjustments
Senior Management carefully reviewed each of the acquired assets and liabilities in every individual financial
statement, which produced the following adjustments:
Transaction
Accounts receivable
Current tax asset
Other financial assets
Accounts payable
Provisions
Effect on equity
-
Total
(148)
(1,810)
(9,272)
(1,600)
2,740
(5,608)
(539)
(16,237)
Chile
(148)
(1,810)
(9,214)
2,740
(5,776)
(39)
(14,247)
Mexico
Uruguay
-
(1,600)
(500)
(2,100)
(58)
168
110
Adjustments to the valuation of intangible assets identified in the transaction:
In estimating the adjustments made to the fair value of client relationships, SURA Asset Management S.A. used
the income approach that forms part of the "Multi - Period Excess Earnings Model" (" MEEM").
For the purposes of applying the MEEM method, the EBITDA margin obtained from client relationships was
calculated. The charges attributable to the use of other assets required for generating such were deducted from
said margin (i.e. fixed assets, minimum required capital, labor force, etc.). This methodology allows for identifying
the individual value specifically created by client relations.
In estimating EBITDA, returns on the reserve requirement were considered as part of the total income
attributable to client relations. Returns on the reserve requirement were calculated applying the rate of return on
the average balance held in the reserve requirement except in the case of Mexico where said income is calculated
by applying the rate of return on average assets under management ("AUM").
SURA Asset Management S.A. and Subsidiaries reviewed the estimates made and found that, for the purposes of
improving the accuracy of these same, it was convenient to consider two other effects that the reserve
82
requirement has on cash flow: i) the effect of when the reserve requirement is freed up when a fund member is
discharged ("inflow") and ii) given the cash outflow associated with the new reserve requirement to be set up on
new contributions from fund members made in each period ("outflow").
In order to account for these effects, EBITDA after tax was adjusted by varying the period of the net position. This
produced an adjustment to the initial measurement, as shown below:
Other Identified Intangible Assets
Client relations
Trademarks (Note 18)
Software licenses Profitable contracts (Note 18)
Total
Effect on Deferred Tax
Preliminary
1,618,383
51,439
2,074
1,671,896
Adjustments
(365,790)
432,212
(91,032)
(365,790)
341,180
Total useful
life
Remaining
useful life
AFP Capital (Chile)
27
26
Corredora de Bolsa SURA S.A.
10
9
ING Seguros de Vida (Chile)
14
13
AFP Integra (Peru)
30
29
ING Wealth Management (Peru)
4
3
AFAP SURA S.A.
23
22
ING Afore S.A. (Mexico)
21
20
Total useful
life
Remaining
useful life
AFP Capital (Chile)
Indefinite
Indefinite
AFP Integra (Peru)
Indefinite
Indefinite
1
-
Client relations
Trademarks
AFAP SURA S.A.
-
-
Final
1,252,593
51,439
2,074
1,306,106
Adjustments to non-controlling interest
As a result of adjustments made to both the net acquired assets and the identifiable intangible assets, noncontrolling interest is affected as follows:
83
Non-controlling interest is broken down as follows:
Preliminary
Accounting
115,214
Total
Adjustments *
Final
Accounting
(39,744)
75,470
*The adjustments made are broken down as follows:
Item
Value
Other proposed adjustments
13
Adjustments to fair value measurement of DIL
(341)
Eliminated initial DAC balance
(5,012)
Adjustments to measurement of Intangible Assets
(23,525)
(10,879)
Adjustments on verifications of equity stakes
Total adjustments
-
(39,744)
Adjustments to the value paid for the purchase:
Based on the contractual terms of the acquisition, certain subsidiaries of SURA Asset Management S.A. were
evaluated at the date of the acquisition to ensure that they had recognized refundable taxes in their asset
accounts. It was agreed that these taxes would be reimbursed to ING Group, because these corresponded to
balances due on prior years. Pursuant to IFRS 3 this corresponds to a contingent payment and therefore forms
part of the value paid. It was therefore determined that based on the obligations of the corresponding tax
authorities, the total value of reimbursable tax at the date of acquisition comes to USD$ 6.8 million.
5.
Gross premiums
Gross premiums obtained by SURA Asset Management S.A. and Subsidiaries for the years ended December 31,
2013 and December 31, 2012 is broken down as follows:
2013
Gross
Life insurance contracts
Life insurance contracts - reinsurers
Total net premiums
772,662
(57,093)
715,569
2012
374,095
(54,673)
319,422
84
premiums for each individual country is shown as follows:
Total
2013
Total gross premiums
Total premiums assigned to insurers
Total net premiums
772,662
(57,093)
715,569
Total
2012
Total gross premiums
Total premiums assigned to reinsurers
Total net premiums
6.
374,095
(54,673)
319,422
Chile
Mexico
552,309
(55,589)
496,720
Chile
Peru
20,541
20,541
199,812
(1,504)
198,308
Mexico
356,044
(54,190)
301,854
Peru
790
790
17,261
(483)
16,778
Fee and commission income
Fee and commission income obtained by SURA Asset Management S.A. and Subsidiaries at December 31, 2013
and December 31, 2012 is broken down as follows:
2013
Pension fund commission income
2012
668,608
658,278
35,800
29,945
704,408
688,223
Fee income
Total fee and commission income
85
Fee and commission income obtained from each individual country is shown as follows:
Fee income
Total fee and commission
income
Total
2013
Chile
668,608
35,800
233,190
11,170
260,737
21,229
149,225
3,356
25,456
45
-
704,408
244,360
281,966
152,581
25,501
-
Total
2012
Fee income
Total fee and commission
income
7.
Chile
Mexico
Peru
Mexico
Uruguay
Peru
Uruguay
Colombia
Colombia
658,278
29,945
218,265
9,160
237,653
17,382
111,556
3,403
22,461
-
68,343
-
688,223
227,425
255,035
114,959
22,461
68,343
Investment income
Investment income obtained by SURA Asset Management S.A. and Subsidiaries at December 31, 2013 and
December 31, 2012 is broken down as follows:
2013
2012
Lease income on investment properties
Financial assets available for sale and asset at fair value
through profit and loss
Income from financial instruments (*)
20,886
26,728
18,448
47,627
Investment impairment
(2,271)
-
Dividend income (**)
6,478
2,389
Income from loans and interest receivable
7,450
13,159
Other Income
5,522
Impairment of loan portfolio
(300)
-
Impairment of accounts receivable
(197)
-
Losses from sales of investments
(881)
-
(30)
-
Other Financial assets
Loss from sales of other assets
Losses from sales of property and equipment
Total investment income
(16)
-
55,089
89,903
86
(*) Income from financial instruments 2013: Financial assets available for sale USD$ 8,048, Financial assets at fair
value through profit and loss USD$ 7,307 and others USD$ 3,093.
(**) Dividend Income 2013: Protección USD$ 5,876 and others USD$ 602.
Investment income for each individual country is shown as follows:
Total investment income –
2013
Total investment income –
2012
8.
Total
2013
Chile
55,089
28,577
Total
2012
Chile
Mexico
89,903
52,774
20,922
Mexico
7,081
Peru
Uruguay
Colombia
Spain
Holland
-
-
379
4,350
Peru
Uruguay
Colombia
Spain
Holland
5,465
572
10,170
-
-
14,702
Net gains and losses on financial assets available for sale
The following is a breakdown of net realized gains and losses on financial assets available for sale at December
31:
2013
2012
Realized gains
Debt securities
486
4,628
2,334
-
Variable-income securities
-
(1,523)
Debt securities
-
-
2,820
3,105
Equity securities
Losses sustained
Total net realized gains and losses
87
Net realized gains and losses for each individual country are shown as follows:
Total
2013
2,820
Total
2012
3,105
Chile
1,518
Chile
802
Uruguay
486
Mexico
2,671
Peru
816
Peru
(368)
See additional information (Note 23 - Financial Instruments)
9.
Gains and losses on assets at fair value
The following is a breakdown of gains and losses on assets at fair value at December 31:
2013
2012
Gains and losses on investment properties
26,208
11,373
Gains and losses on non-derivative financial instruments
60,937
60,968
Total gains and losses on assets at fair value
87,145
72,341
Gains and losses on assets at fair value for each individual country are shown as follows:
Total
2013
Total gains and losses on
assets at fair value
87,145
Chile
49,356
Mexico
7,643
Peru
29,490
Uruguay
656
88
Total
2012
Total gains and losses on assets
at fair value
72,341
Chile
34,313
Mexico
25,183
Peru
Uruguay
11,526
1,319
See additional information in Note 17 on investments properties.
See additional information in Note 23 on financial instruments.
9.1 Other comprehensive income
The balance of the equity components including controlling and non-controlling interest contained within other
comprehensive income are as follows:
2013
Gains and losses on financial assets held for sale
2012*
60, 783
103,857
(11,812)
(44,617)
(1,299)
36,158
Revaluation on land and buildings for own use
3,826
3,559
(748)
(1,269)
50,750
97,688
Exchange difference on converting foreign transactions
Total other comprehensive income
89
Effect on non-controlling interest on components of other comprehensive income
2013
2012
Net income for the year attributable to non-controlling interest
(3,573)
(134,230)
(19,395)
(50,721)
-
21,917
3,495
(13,439)
(10)
(1,749)
39
588
Effect of non-controlling interest on components of other comprehensive
income
(15,871)
(43,404)
Total effect non-controlling interest on other comprehensive income
(19,446)
(177,635)
Effect of controlling interest on components of other comprehensive income
2013
2012
41,388
53,135
(11,812)
(22,700)
2,196
22,719
3,816
1,810
(709)
(681)
34,879
54,283
Effect of controlling interest on components of other comprehensive income
* For 2011 there are no listed equity balances within other comprehensive income, it is for this reason that for
2012 the balances of equity are considered as the movement to use for the calculation of Other Comprehensive
Income.
90
10.
Other operating revenue for the years ended December 31, 2013 and December 31, 2012 are broken down as
follows:
2013
Other income
Total other operating revenue
2012
21,836
21,836
9,301
9,301
Other operating revenue for each individual country is shown as follows:
Total other
operating
revenue – 2013
Total other
operating
revenue 2012
Total
Chile
Mexico
Peru
Uruguay
Colombia
Holland
Spain
21,836
15,794
3,108
1,679
64
1,138
52
1
9,302
(28,498)
1,257
33,323
20
793
31
2,375
91
11.
Claims
The following is a breakdown of claim expense at December 31:
2013
2012
a) Gross benefits and claims paid
339,332
224,118
1,426
(1,489)
340,758
222,629
(25,448)
(23,236)
(717)
-
Total claims assigned to insurers
(26,165)
(23,236)
Net benefits and claims
314,593
199,393
Non-life insurance contracts*
Total gross benefits and claims paid
b) Requests assigned to reinsurers
Non-life insurance contracts
* For the year 2012 corresponds to bonuses received from reinsurance companies.
Claim expense for each individual country is shown as follows:
Total 2013
Chile
Mexico
Peru
314,593
163,851
27,035
123,707
Total 2012
Chile
Mexico
Peru
199,393
164,576
24,690
10,127
92
12.
Operating and administrative expenses
Operating and administrative expense for SURA Asset Management S.A. and Subsidiaries for the year ended
December 31, 2013 and December 31, 2012 is broken down as follows:
2013
Movement in premium reserves
2012
498,924
127,489
617
749
Audit Fee
1,841
787
Financial and legal fee
4,651
2,564
Fee and commission expense
14,710
21,819
75,214
Amortization of intangibles:
65,439
54,930
8,104
13,250
15,839
2,326
-
3,558
Personnel expense (Note 31)
214,565
141,335
Other operating expense*
264,600
262,805
Other operating and administrative expense
568,547
478,204
Board of Directors
Other fees
Depreciation of goods / personal property
Deferred acquisition cost amortization (DAC)
Capitalize software
71,114
*Other operating expense in 2013 consists mainly of commissions expenses (USD$ 18,385), tax expense (USD$
18,185), lease rentals (USD$ 18,373), maintenance (USD$ 12,976), advertising (USD$ 24,080), data mining (USD$
8,115) , transportation (USD$ 6,737) , donations (USD$ 1,290) , other legal expenses (USD$ 2,302), Services (USD$
75,661) , contributions and membership fees (USD$ 5,099) and other insurance expenses (USD$ 1,625).
Operating and administrative expense for each individual country is shown as follows:
Total other operating
and administrative
expense -2013
Total other operating
and administrative
expense -2012
Total
Chile
Mexico
Peru
Uruguay
Colombia
1,089,290
580,690
195,264
251,612
12,109
46,885
Total
Chile
Mexico
Peru
Uruguay
Colombia
680,907
301,392
13,883
98,935
168,527
76,528
El
Salvador
4
Spain
3,408
93
Europe
2,725
Holland
18,234
13.
Financial income
Financial income for years ended December 31, 2013 and December 31, 2012 is broken down as follows:
2013
2012
62,437
14,737
Other net income
154,534
47,235
Net financial income
216,971
61,972
Other net income in 2013 includes: interest USD$ 94,981, debt instruments income USD$ 36,811, and other
financial income USD$ 22,742.
Financial income for each individual country is shown as follows:
Total
Chile
Net
financial
income 2013
216,971
84,643
Net
financial
income –
2012
61,972
-
Mexico
Peru
38,791
57,886
14,737
Uruguay
-
Colombia
248
-
Spain
Holland
94
35,308
-
37
71
47,127
94
14.
Financial expense
Financial expense for years ended December 31, 2013 and December 31, 2012 is shown as follows:
2013
2012
Interest expense
Other interest expense
30,927
24,006
Exchange difference expense
26,389
18,026
Total financial expense
57,316
42,032
Financial expense for each individual country is shown as follows:
Total
Total financial
expense – 2013
57,316
Total
Total financial
expense – 2012
15.
42,032
Chile
7,852
Chile
12,449
Mexico
Peru
8,845
Mexico
Colombia
231
22,202
Uruguay
Colombia
-
217
6,844
Peru
6
Uruguay
-
Spain
Holland
11,022
Spain
319
Holland
29,422
Net gains on transactions between related parties
15.1. The following is a breakdown of the gains obtained from acquisitions of companies:
Goodwill identified with the purchase of Seguros SURA (formerly Invita) for 2012 came to USD$ 55,106. During
the measurement period in 2013, an adjustment was made to net acquired assets producing an increase of USD$
203,045 due to having adjusted the reserves posted as part of the local financial statements. This entailed
recognizing a gain on bargain purchase of USD$ 72,812 on the aforementioned transaction.
95
(62)
Seguros SURA S.A. (Formerly Invita)
Accounts
Initial PPA
Adjustments to
initial accounting
Final accounting
2012
Adjustments
2013
Total assets
1,403,892
-
1,403,892
Total liabilities
1,297,133
(203,046)
1,094,088
106,759
203,046
309,804
60,662
-
60,662
Net acquired assets at fair value
167,421
203,046
370,466
(61,945)
(75,127)
(137,072)
Deferred tax asset (liability)
(18,199)
-
(18,199)
Net identified assets at fair value
87,277
127,919
215,195
Goodwill / Gain on bargain purchase
55,106
(127,919)
(72,812)
142,383
-
142,383
Net acquired assets
Identified intangible assets
Value Paid
More detailed information on the acquisition of Seguros SURA (formerly Invita) can be found in Note 4 Business
Combinations - Goodwill Section 4.2.
15.2. Net gains on transactions between related parties for 2012 are broken down as follows:
Investment
delivered (book
value)
143,169
7,691
2,807
Total transaction
153,667
Operating income for ING Colombia for the year
Amortization of PPA for ING Colombia year
Total gains on share swap between ING Colombia and newly merged Protección
Investment
received Protección S.A
Profits
obtained on
transaction
147,325
7,917
15,464
170,706
4,156
226
12,657
17,039
(8,085)
1,571
10,525
December 31, 2012, SURA Asset Management S.A., transferred its entire stake in ING Administradora de
Pensiones y Cesantías (ING Colombia) to Protección S.A. in exchange for a stake in the new company resulting
from the merger between Protección S.A and ING Colombia (See Note 4).
As a result of this share swap, SURA Asset Management S.A. and Subsidiaries lost their control over ING Colombia
in exchange for a non-controlling interest in the newly merged Protection S.A. and therefore has no significant
influence over the latter company. Bearing in mind that this swap was conducted on December 31, 2012, the net
96
income for the year corresponding to ING Colombia is part of the gains obtained from this transaction, and from
the standpoint of the Company’s consolidated financial statements the real effect on income came to USD$ 10.5
million.
16.
Fixed assets
Fixed assets for SURA Asset Management S.A. and Subsidiaries are broken down as follows:
2013
Land and buildings
Equipment
Furniture, fixtures and vehicles
2012
32,115
13,209
11,650
56,974
56,974
Total fixed assets
33,707
7,590
13,307
54,604
54,604
Movements in the fixed asset account for SURA Asset Management S.A. and Subsidiaries are broken down as
follows:
Cost
At January 1, 2012
Additions
Write-offs
Revaluations
Additions
Acquisitions on business combinations
Write-offs
Revaluations
Depreciation
Depreciation for the year
Withdrawals
Depreciation for the year
Withdrawals
Net book value
Land and
Buildings
Equipment
Furniture,
fixtures
and
vehicles
21,929
12,871
(2,573)
3,559
35,786
4,777
2,031
(7,936)
267
34,925
8,479
5,745
(1,796)
12,428
9,810
583
(364)
22,457
15,111
8,313
(7,761)
15,663
4,303
130
(5,438)
14,658
45,519
26,929
(12,130)
3,559
63,877
18,890
2,744
(13,738)
267
72,040
(2,266)
187
(2,079)
(2,431)
1,700
(2,810)
(5,863)
1,025
(4,838)
(4,774)
364
(9,248)
(5,121)
2,765
(2,356)
(899)
247
(3,008)
(13,250)
3,977
(9,273)
(8,104)
2,311
(15,066)
33,707
7,590
13,307
54,604
32,115
13,209
11,650
56,974
Total
97
Changes presented in the fixed assets note do not include the effect of exchange difference. This effect is
presented separately in each revelation required.
Fixed assets for each individual country for 2013 and 2012 are shown as follows:
Total
Chile
Mexico
Peru
Uruguay
Colombia
Land and buildings
32,115
10,457
302
18,664
2,692
-
Equipment
13,209
6,648
3,783
2,464
254
60
Furniture, fixtures and
vehicles
11,650
409
8,247
2,720
177
97
Total fixed assets - 2013
56,974
17,514
12,332
23,848
3,123
157
Total
Chile
Mexico
Peru
Uruguay
Colombia
33,707
10,831
310
20,044
2,522
-
7,590
1,571
4,546
1,236
200
37
Furniture, fixtures and
vehicles
13,307
7,854
3,933
1,229
207
84
Total fixed assets - 2012
54,604
20,256
8,789
22,509
2,929
121
Land and buildings
Equipment
Fixed assets are initially measured at cost, which includes all the expense required in order to ready these for use.
Subsequent to being recognized as an asset, land and buildings for own use are carried at fair value less
accumulated depreciation and any accumulated impairment losses sustained.
The straight-line method was used to calculate depreciation on property, plant and equipment the over their
estimated useful life in years.
Although SURA Asset Management S.A. and Subsidiaries have eligible assets, they do not have any liability
relating to the acquisition and construction of this type of asset, so no lending expense is capitalized.
Useful life
Buildings
Data processing equipment
Equipment, furniture and office fixtures
Vehicles
Between
20 and 50
years
Between 2
and 5 years
Between 4
and 10
years
5
98
The accounting policies used by SURA Asset Management S.A. and Subsidiaries include the revaluation model in
the subsequent measurement of buildings and land, whereas the cost model is applied other fixed assets
The fair value of buildings and land was based on reports from independent appraisal firms.
As stated in Note 9.1, in 2013 land and buildings were reappraised in the amount of USD$ 3,826. This amount
includes the effect of exchange difference.
Their fair values were determined in keeping with market-based evidence. This means that the valuations made
by the appraisal firm were based on prices quoted in active markets, adjusted for differences in the nature,
location or condition of the property in question.
There are no restrictions relating to fixed assets.
An analysis was performed at the end of period to determine where there were indications of any impairment to
the fixed assets belonging to SURA Asset Management S.A. and Subsidiaries.

During the period, the market value of these assets has not decreased more than would be
expected with the passage of time or the normal use of such.

No significant changes are expected to their value due to situations adversely affecting the
Company.

There is no evidence of any obsolescence or physical deterioration affecting the assets.

No changes are expected in the near future with regard to the use of the assets that could
adversely affect the Company.

There is no evidence that the economic performance of the asset is, or will be, worse than
expected going forward.
After analyzing impairment indicators, we determined that there is no evidence of impairment for all items of
property and equipment on the date of this report.
99
17.
Investment properties at December 31 are broken down as follows:
2013
2012
Balance at January 1
Business combination acquisitions 2012*
Additions
Gains and losses at fair value
Write-offs
Translation effect
208,531
16,655
26,208
(12,450)
136,456
43,016
110
11,373
(861)
18,437
Balance at December 31
238,944
208,531
* Corresponding to investment property belonging to Seguros SURA S.A in Peru (formerly Invita) acquired on
November 14, 2012. (See Note 4. Business combinations – Goodwill.
Note 9 presents the net gains from investment property exchange difference.
Investment property for each individual country for 2013 and 2012 is shown as follows:
Total
Chile
Peru
Investment properties - 2013
238,944
176,161
62,783
Investment properties - 2012
208,531
163,360
45,171
SURA Asset Management S.A. and Subsidiaries have no restriction regarding the possible disposal or sale of their
investment properties, or any contractual obligations to purchase, construct or develop investment property or
carry out repairs or maintenance work and / or build property extensions. These investment properties are stated
at fair value based on valuations performed by independent well-recognized appraisal firms.
The fair value of the Group´s investment property as at 31 December 2013 and 31 December 2012 has been
arrived at on the basis of a valuation carried out on the respective dates by independent valuers not related to
the Group. The valuers have appropriate qualifications and recent experience in the valuation of properties in the
relevant locations. The fair value of these properties was determined based on observable market transactions,
given the nature of the property, in compliance with the valuation model contained in the recommendations
made by the International Valuation Standards Council. All these investment properties belong to SURA Asset
Management S.A. and Subsidiaries. Lease contracts are of an operating nature and at the present time SURA
Asset Management S.A. and Subsidiaries do not have any lease agreements that could be classified as a financial
lease. On investment properties will be paying property taxes and property insurance. None of the above
investment properties have been rented out or leased under financial leasing agreements.
Appraisals and valuation assumptions
100
1.
Independent appraiser information.
There are two independent appraisers who have been valuating the Company’s property in recent years. These
are: Gabriel Rodriguez Walker, ICA 3.114, Taxpayer´s Reg. No. 5.082.752-6, architect and independent appraiser
registered with the Chilean Superintendency of Securities and Insurance (SVC in Spanish) and Guillermo Rosselot
Iriarte, Taxpayer´s Reg. No. 6.874.683-3 ,architect and independent appraiser also registered with the Chilean
Superintendency of Securities and Insurance.
2.
The appraisal methods and assumptions used
The fair value is supported by some market evidence and represents the amount at which the assets could be
exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length
transaction at the date of valuation, in accordance with standards issued by the International Valuation Standards
Committee. Valuations are performed on an annual basis and the fair value gains and losses are recorded within
the income statement.
Categorization Level 2 is assigned based on market assumptions but the characteristic of the assets is necessary
to review the consolidated cases to determine the value of these assets
3.
The extent to which fair value is calculated using observable variables in an active market
The parameters used for these appraisals are conservative compared to those observed on the market and this
allows for eventual market fluctuations. Market vacancy rates for properties in similar locations to ours as well
as that we have effectively recorded is lower than that used for appraisals (2% versus 5%).
Real income shows an increase this year and this has not been included in the corresponding appraisals. Finally,
the discount or cap rate is higher than that normally seen on the market for equivalent transactions (7% to 8%).
This means that IFRS-based appraisals include a margin to protect against eventual market fluctuations.
The Company enters into operating leases for all of its investment properties.
The total amount of future minimum payments corresponding to non-cancellable operating lease arrangements
is:
Period
Less than 1 year
Between 1 and 5 years
More than 5 years
Amount
3,997
32,954
15,656
The direct operating expenses (including repairs and maintenance) arising on rental-earning investment
properties amount to 2,260.
101
The investment properties held by SURA Asset Management S.A. and Subsidiaries at December 31, 2013 and
December 31, 2012 are broken down as follows:
Alsacia Building
Maximum
contractual
term (in
years)
6.14
Pionero building
3.39
2.18
November 2013
November 2013
Isidora Foster Building
3.85
2.23
November 2013
Leased to third parties
Isidora Magdalena Building
8.12
4.13
November 2013
Las Bellotas Building
22
11.5
November 2013
Millennium Building
4.36
2.55
November 2013
Nueva Los Leones Building
2.98
2.64
November 2013
Paseo Las Palmas Building
6.64
3.77
November 2013
WTC Building
4.31
2.75
November 2013
Seis Building
8.04
6.71
November 2013
Diez Building
11.0
7.67
November 2013
Torre Apoquindo Building
8.19
5.08
November 2013
Coyancura Building
5.01
3.76
November 2013
Investment properties Chile
2013
Investment properties Chile 2013
Strip Center Small Service
Pedro de Valdivia 3499 Premises
(a)
2
Maximum
term elapsed
(in years)
3.45
Appraisal date
Status
Maximum
contractual
term (in years)
4.11
Maximum
term elapsed
(in years)
2.34
-
-
Appraisal date
Status
November 2013
(a) Property was expropriated for the construction of the metro system
102
Maximum
Investment Properties Peru 2013
contractual
term (in years)
Maximum
term elapsed
(in years)
Appraisal date
Status
República de Panamá - Wacs land
5
0.5
October 2013
Rivera Navarrete land
-
-
October 2013
Unimar Barranca Project – land
30
0.5
October 2013
Rivera Navarrete land - Lutheran
Church
-
-
Metropolitana Arequipa land
-
-
October 2013
Not leased
Unimar Av. land Mexico
30
0
October 2013
Not leased
Las Gardenias building and land
30
11
October 2013
La Molina building and land
30
10
October 2013
Wiese Wacs Headquarters
1
0.5
October 2013
Real 8 Project
5
0
October 2013
Not leased
30
0
-
-
-
-
30
-
Unimar Barranca Construction
Project
Costamar Project under
construction
Lutheran Church project under
construction
Maestro Huancayo
October 2013
October 2013
October 2013
October 2013
October 2013
Not leased
Not leased
Not leased
103
Alsacia Building
Pionero building
Isidora Foster building
Isidora Magdalena building
Las Bellotas building
Millennium building
Nueva Los Leones building
Paseo Las Palmas building
WTC building
Seis building
Diez building
Torre Apoquindo building
Coyancura building
Strip Center Small Service
Pedro de Valdivia 3499 Premises
(a)
2
Maximum
contractual
term (in years)
4
2
3
3
22
5
3
5
3
7
8
5
Maximum
term elapsed
(in years)
2
2
2
3
10
3
2
4
2
5
7
4
Maximum
contractual
term (in years)
4
3
Maximum
term elapsed
(in years)
3
2
-
-
Appraisal date
January 2012
May 2012
January 2012
January 2012
May 2012
May 2012
May 2012
May 2012
May 2012
January 2012
January 2012
January 2012
Appraisal date
Status
Status
January 2012
January 2012
January 2012
Not leased
(a) Property expropriated for the construction of a metro system.
104
Investment properties Peru 2012
República de Panamá - Wacs land
Rivera Navarrete land
Unimar Barranca Project land
Rivera Navarrete Lutheran Church
land
Metropolitana Arequipa land
Las Gardenias building and land
La Molina building and land
Wiese Wacs Headquarters
Real 8 Project
Unimar Barranca Construction
Costamar Project under
construction
Maximum
contractual
term (in years)
1
30
Maximum
term elapsed
Appraisal date
1
-
August 2012
August 2012
August 2012
-
-
August 2012
30
30
1
30
11
10
1
-
August 2012
August 2012
August 2012
August 2012
August 2012
August 2012
Not leased
Not leased
-
-
August 2012
Not leased
Status
Not leased
Not leased
Not leased
As of 31 December 2013 and 31 December 2012 no guarantees exist on the investment property. No investment
property has been pledged as collateral to a third party. The land and buildings are intended for rental and are
free of encumbrances.
The Group's investment properties and information regarding their fair value hierarchy at December 31, 2013 are
shown as follows:
Level 1
Level 2
Level 3
Fair Value - 2013
Land
0
56,477
0
56,477
Buildings
Total
0
0
182,467
238,944
0
0
182,467
238,944
In 2013, no property was transferred between Fair Value Hierarchy Levels 1, 2 and 3.
105
18.
Intangible Assets
The following is a breakdown of the intangible assets held by SURA Asset Management S.A. and Subsidiaries for
the years 2013 and 2012:
2013
Trademarks
Client relations
Profitable contracts
Software licenses
Goodwill
Total Intangible Assets
2012
51,289
51,289
1,271,524
1,190,264
1,762
1,884
12,196
3,558
1,719,794
1,622,288
3,056,565
2,869,283
Intangible assets for SURA Asset Management S.A. and Subsidiaries are broken down as follows:
Trademarks
Client relations
Profitable
contracts
Software
licenses
Goodwill
Total
Cost
51,439
1,252,593
2,074
5,853
1,607,200
2,919,159
Additions
-
-
-
391
19,535
19,926
Business combinations (Note 4)
-
60,662
-
-
-
60,662
Write-offs *
-
(72,681)
(72)
-
(4,447)
(77,200)
Translation effect
-
-
-
(518)
-
(518)
51,439
1,240,574
2,002
5,726
1,622,288
2,922,029
Additions
-
145,960
-
21,307
101,670
268,937
Write-offs
-
-
-
(6,862)
Translation effect
-
(4,904)
-
(1,410)
(4,164)
(10,478)
51,439
1,381,630
2,002
18,761
1,719,794
3,173,626
At January 1, 2012
(6,862)
Amortizations
Amortizations
Amortized write-offs
Amortizations
-
-
-
-
-
-
-
(150)
(52,494)
(118)
(2,168)
-
(54,930)
-
2,184
-
-
2,184
(150)
(50,310)
(118)
(2,168)
-
(52,746)
-
(60,122)
(122)
(5,195)
-
(65,439)
106
Amortized write-offs
-
-
-
16
-
16
Translation effect
-
325
-
783
-
1,108
(240)
6,564)
-
(117,061)
(150) (110,107)
Net book value
51,289
1,190,264
1,884
3,558
1,622,288
2,869,283
51,289
1,271,523
1,762
12,197
1,719,794
3,056,565
*Of the assets acquired in the business combination in 2011, proceeded to write off the proportion of assets from
Colombia (ING assets). This write off was made in 2012 and the entity itself was given as a contribution in kind for
acquisition of shares Proteción (associated company).
Intangible assets for each individual country for the years 2013 and 2012 are shown as follows:
AT DECEMBER 31, 2013
Total
Uruguay
Colombia
-
17,262
-
-
1,271,523
413,677
376,637
402,432
78,777
-
1,762
814
490
372
86
-
12.197
4,341
5,545
1,571
472
268
1,719,794
776,837
436,886
429,434
76,637
-
3,056,565
1,229,696
819,558
851,071
155,972
268
Software licenses
Total at December 31, 2013
Peru
34,027
Goodwill
Mexico
51,289
Trademarks
Client relations
Chile
AT DECEMBER 31, 2012
Total
Trademarks
Chile
Mexico
Peru
Uruguay
Colombia
51,289
34,027
-
17,262
-
-
1,190,264
432,692
396,460
278,584
82,528
-
1,884
870
524
398
92
-
Software licenses
3,558
2,393
-
774
391
-
Goodwill
1,622,288
776,837
436,886
331,928
76,637
-
Total at December 31,
2012
2,869,283
1,246,819
833,870
628,946
159,648
Client relations
-
107
The following are the useful lives corresponding to the more representative intangible assets:
Total useful
Client relations
life
Remaining
useful life
AFP Capital (Chile)
27
25
Corredora de Bolsa SURA S.A. y Administradora General de Fondos S.A. (Chile)
10
8
14
12
AFP Integra (Peru)
30
28
Wealth Management SURA S.A. (Peru)
4
2
AFAP SURA S.A.
23
21
Afore SURA S.A. de C.V. (Mexico)
21
19
Total useful
life
Remaining
useful life
AFP Capital (Chile)
Indefinite
Indefinite
AFP Integra (Peru)
Indefinite
Indefinite
1
-
Seguros de Vida SURA S.A. (Chile)
Trademarks
AFAP SURA S.A. (Uruguay)
In 2012, SURA Asset Management S.A. exchanged the shares held in ING Colombia for a stake in the new
company produced by a merger between Protección S.A – ING Colombia, therefore the goodwill recognized at
the time of the initial acquisition along with the respective identified tangible assets were written off (See Note
4).
Based on IFRS 3 – Business Combinations, the values of net acquired assets were duly analyzed, producing a
reclassification of such along with USD$ 19.1 million in goodwill that had been posted in 2012.
At November 30, 2012, control was gained over Seguros SURA S.A. This produced USD$ 55 million in goodwill
along with USD$ 61 million in identified intangible assets (See Note 4).
Impairment tests
Goodwill acquired through business combinations as well as trademarks with indefinite useful lives have been
assigned to the cash generating units (CGU) for the purpose of performing individual impairment tests:







Corredora de Bolsa SURA S.A.(Chile) and Administradora General de Fondos S.A. (Chile)
AFP Capital S.A. (Chile)
Seguros de Vida SURA S.A. (Chile)
Afore SURA S.A. de C.V. (Mexico)
SURA Investment Management Mexico S.A. de C.V. (Mexico)
SURA Pensiones (Mexico)
AFP Integra S.A. (Peru)
108


Fondos SURA SAF S.A.C. (Peru)
AFAP SURA S.A. (Uruguay)
The above-mentioned entities represent the more significant operating companies, which are responsible for
managing, controlling and projecting the Group´s business in the entire Latin American region.
SURA Asset Management S.A. and Subsidiaries performed annual impairment tests, the results of which showed
no indication of impairment to goodwill or trademarks with indefinite useful lives.
Since AFP Horizonte was acquired in 2013 and is in the measurement period, it is not necessary to perform the
impairment test.
For the purposes of allocating the consolidated goodwill to each of the CGUs, the fair value of equity approach
was applied. This allocation was based on estimated market values for each CGU to December 31, 2013.
Also, certain trademarks have been associated to the business of the two CGUs as shown below. These
correspond to the AFP Capital trademark belonging to AFP Capital S.A. AFP and the Integra trademark belonging
to AFP Integra S.A..
Methodology for Estimating the Value in Use
The value in use for the Group´s CGUs was estimated using the income approach.
General assumptions used in applying the income approach:
The calculation of the value in use for all CGUs is sensitive to the following assumptions:
Time horizon: The time horizon of the projection corresponding to the estimated business CGUs duration
under analysis, see below:
Forecast horizon: Given the current macroeconomic conditions and the general characteristics and
maturity of the different CGU business in question as well as all information currently made available, we have
considered the following specific projection horizons:
–
–
–
–
–
–
–
Corredora de Bolsa SURA S.A. and Administradora General de Fondos SURA S.A.: 11 years
AFP Capital S.A.: 5 years
Afore SURA S.A. de C.V: 5 years
SURA Investment Management Mexico S.A. de C.V: 5 years
AFP Integra S.A.: 12 years
Fondos SURA SAF S.A.C.: 5 years
AFAP SURA S.A: 5 years
109
It is understood that, generally speaking, after these periods the different businesses pertaining to the CGUs in
question shall achieve maturity with cash flows becoming stable.
–
Residual value: Since the CGUs in question are expected to continue operating and generating positive
cash flows beyond the projection horizon, as mentioned above, a perpetuity has been estimated. This
value is known as the residual or terminal value.
In order to estimate the residual value, standardized cash flows were projected into perpetuity, duly
adjusted according to the same growth expectations defined in the guidelines suggested in the
applicable standard.
–
Year-end: The cut-off date corresponding to the fiscal year on which the CGUs financial projections were
estimated on the date the analysis was performed is 31 December, which coincides with the closing date
of the financial statements of the legal entities pertaining to said CGUs.
–
Currency unit: SURA Asset Management S.A. and Subsidiaries have estimated flows in the functional
currency of its business in each market, in keeping with that stated in the applicable standards.
Then flows were converted to dollars using the local dollar exchange rates, so to achieve consistency
with the discount rate applied, this stated in U.S. dollars.
–
Discount rate: Although the functional currency of each business corresponds to the local currencies,
future cash flows have been converted to nominal U.S. dollars for each projected period and discounted
at a nominal rate in U.S. dollars after taxes. A discount rate in U.S. dollars was used because of a certain
lack of data availability, as well as potential distortions from consistency problems in the existing data,
thereby affecting estimated discount rates in these local currencies. The factors relating to this
constraint are: i) the absence of long-term benchmark rates of return in local currency; ii) market
volatility; and iii) a lack of depth, diversification and liquidity in the capital markets, among others.
The discount rates applied to the projections are based on interest rates of the geographic market in
which each CGU operates. These, after taxes, range between 9.10 % and 10.10 %.
–
Income tax rates: Projected cash flows were estimated after tax, for the purpose of preserving
consistency with the estimated discount rates. Here, the tax rates were applied to current earnings in
each market at December 31, 2013. These came to 20% in Chile, 33% in Colombia, 30% in Mexico, 30% in
Peru and 25% in Uruguay.
–
Macroeconomic Assumptions: Financial projections for the CGUs in question, have been prepared based
on macroeconomic variables projected by external sources of information.
The following assumptions were used for the impairment tests performed on trademarks:
–
Projection Horizon: To estimate the value of use corresponding to trademarks their indefinite useful life was
used, based on their positioning and track record, as well as the focus of each market player. Therefore, a
specific projection was drawn up over 5 and 12 years respectively for the for AFP Capital and AFP Integra
trademark, and then the present value of a perpetual flow of net royalties based on a 3% nominal growth in
U.S. dollars was projected over the long term on stabilized cash flows.
110
–
Projected Income: To estimate the value in use of the AFP Capital and AFP Integra trademarks, operating
income from AFP Capital and AFP Integra respectively was used. This corresponds to commission income
returns on its reserve requirement, earned on both their mandatory and voluntary pension business.
–
Market royalties and trademark attributes: For the purposes of applying the Relief from Royalty methodology
the market royalty rate was estimated. Additionally, in order to define the royalties corresponding to these
trademarks, an estimated range of market royalties was taken as a basis, bearing in mind the trademark´s
relative strength and positioning based on the following attributes:





Momentum: the current status and potential for future growth of both trademarks were taken into
account.
Recognition: the degree of brand awareness or "top of the mind" of both trademarks was evaluated
based on market research.
Loyalty: the degree of client loyalty towards the trademarks was evaluated according to market
research.
Market share: the brands´ market shares were evaluated on the Chilean and Peruvian markets, this
based on market research.
Longevity: brand seniority on the Chilean and Peruvian markets were evaluated, based on market
research.
Based on the above procedures, royalties of 1.05% and 1.09 % were estimated for the trademarks AFP Capital
and AFP Integra respectively.
Taxes
For the purpose of calculating after-tax flows of royalties, income tax rates of 20% and 30% were used, as
applicable to companies in Chile and Peru.
19.
Movements of the DAC account for SURA Asset Management S.A. and Subsidiaries are broken down as follows:
2013
2012
144,370
65,317
Total DAC
144,370
65,317
111
Movements of the DAC account
Total
Balance at January 1
-
Additions
67,643
Amortizations
(2,326)
65,317
Additions
94,892
Amortizations
(15,839)
144,370
Deferred Acquisition Costs (DAC) for each individual country for the years 2013 and 2012 are shown as follows:
Total
Life Insurance
Mandatory pensions
Voluntary pensions
Total DAC 2013
Chile
Mexico
Peru
Uruguay
2,514
98,923
42,933
2,514
42,933
81,778
-
14,829
-
2,316
-
144,370
45,447
81,777
14,829
2,316
Total
Chile
Mexico
Peru
Uruguay
Life Insurance
Mandatory pensions
781
42,891
781
-
31,336
10,133
1,422
Voluntary pensions
21,645
21,645
-
-
-
Total DAC 2012
65,317
22,426
31,336
10,133
1,422
112
20.
Taxes
SURA Asset Management S.A. and Subsidiaries offset tax assets and liabilities only if it has a legally enforceable
right to offset current tax assets and liabilities with deferred tax asset and liabilities with regard to income taxes
levied by the respective tax authorities.
Current tax assets and liabilities, as shown below, correspond to the income tax required by the tax authorities in
each country where SURA Asset Management S.A.’s subsidiaries operate.
Deferred tax assets relate to tax losses in the countries of the acquirees, which can be offset against future
taxable income and temporary differences between tax and book income.
Deferred tax liabilities correspond mainly to taxable temporary differences arising between the tax basis and the
book value for each of the subsidiaries.
Deferred tax liabilities also includes the intangibles identified with the purchase of the ING companies during the
period and the temporary differences in measuring and recognizing DAC and DIL, which are not recognized locally
in the countries where the acquirees operate.
The tax rates used to calculate income tax are as follows
Tax rate
Chile
Mexico
Peru
Uruguay
Colombia
20%
30%
30%
25%
34%*
Spain
30%
(Average rate)
* The income tax rate corresponding to 2013 is 25%, whereas for 2012 this was 33%. This reduction came about
after Law 1607 was passed in December 2012 which reformed Colombia´s tax legislation and introduced a new
Income Tax for Equality (CREE in Spanish) at a rate of 9%, which came into effect as of January 1, 2013.
113
The main components on income tax due for the years ended December 31, 2013 and December 31, 2012 on the
part of SURA Asset Management S.A. and Subsidiaries are as follows:
Total
2013
Income Statement
Chile
Mexico
Peru
Uruguay
Spain
Holland
Colombia
Current income tax
Current income tax expense
90,653
19,073
26,641
22,451
3,371
1,785
-
17,332
13,771
22,432
13,869
1,343
125
(1,213)
(7,483)
(15,302)
104,424
41,505
40,510
23,794
3,496
572
(7483)
2,030
-
-
-
-
-
-
-
104,424
41,505
40,510
23,794
3,496
572
(7483)
Peru
Uruguay
Deferred income tax
Corresponding to the
sources and reversals of
temporary differences
Income tax expense
attributable to continued
operations
Income
tax
expense
attributable to discontinued
operations
Income tax expense on the
Consolidated Income
Statement
Total
2012
Chile
Mexico
2,030
Spain
Colombia
Current income tax
Current income tax expense
50,147
3,329
30,727
17,866
2,943
(9,032)
4,314
Corresponding to the sources and
reversals of temporary differences
18,283
20,827
12,136
4,719
502
(13,855)
(6,046)
Income tax expense attributable
to continued operations
68,430
24,156
42,863
22,585
3,445
(22,887)
(1,732)
-
-
-
-
-
-
-
68,430
24,156
42,863
22,585
3,445
(22,887)
(1,732)
Deferred income tax
Income tax expense attributable
to discontinued operations
Income tax expense on the
114
The main components of deferred tax on items debited or credited by SURA Asset Management S.A. and
Subsidiaries directly to equity during the year ended December 31, 2013, are shown as follows:
Total
Chile
Consolidated Statement of Comprehensive Income
Mexico
2013
Deferred income tax corresponding to amounts directly credited or
debited to Shareholders' Equity for the year
Earnings on financial assets available for sale
(11,812)
(1,346)
(10,466)
(710)
(710)
-
(12,522)
(2,056)
(10,466)
(Note: 9.1)
Revaluation of land and buildings for own use (Note: 9.1)
Income tax on other comprehensive income
115
The following is a reconciliation between tax expense and book profits multiplied by the tax rates prevailing in the
different countries for the year ending December 31, 2013:
The tax rates used in these calculations were as follows:
Tax Rate
Chile
Mexico
Peru
Uruguay
Colombia
20%
30%
30%
25%
34%
Total 2013
Book profit
(loss) before tax
on continuing
operations
Book profit
before income
tax
At the tax rate
Adjustments to
current income
tax for prior year
Tax loss
adjustments
Non-deductible
tax expense
Tax-exempt
goodwill
Impairment to
goodwill
Dividends
received
Other nondeductible
expense
At the tax rate
for 2013
Chile
Mexico
Peru
Uruguay
Spain
30%
(Average Rate)
Holland
Spain
Colombia
598,103
332,827
139,100
72,470
14,783
17,725
21,198
(71,891)
598,103
332,827
139,100
72,470
14,783
17,725
21,198
(71,891)
146,744
66,565
41,730
21,741.
3,696
3,162
(7,482)
17,332
6
6
-
-
-
-
-
-
278
-
-
-
278
-
-
-
358
348
-
-
10
-
-
-
(2,590)
-
-
-
-
(2,590)
(210)
-
-
-
(210)
-
(29,069)
(29,069)
-
-
-
-
(11,093)
3,655
(1,220)
2,053
(279)
-
104,424
41,505
40,510
23,794
3,495
572
-
-
(15,302)
(7482)
116
2,030
Total
2012
Chile
Mexico
Peru
Uruguay
Spain
Colombia
Book profit (loss) before tax on
continuing operations
309,482
112,788
147,317
72,274
14,391
(25,885)
(11,403)
Book profit before income tax
3309,482
112,788
147,317
72,274
14,391
(25,885)
(11,403)
At the tax rate
Adjustments to current income
tax for prior year
Utilization of previously
unrecognized tax losses
Non-deductible tax expense
Impairment to goodwill
Other non-deductible expense
87,096
22,558
44,195
21,682
3,598
(9,032)
4,095
861
861
-
-
-
-
-
(146)
-
(146)
-
-
-
-
624
262
-
-
362
-
-
(157)
-
-
-
(157)
-
-
(13,802)
475
(1,186)
903
(358)
(13,855)
219
Other temporary differences
(6,046)
-
-
-
-
-
(6,046)
At the tax rate for 2012:
68,430
24,156
42,863
22,585
3,445
(22,887)
(1,732)
Current tax assets and liabilities for SURA Asset Management S.A. and Subsidiaries are broken down as follows:
2013
2012
Current income tax
Current tax assets
Current tax liabilities
Current tax, net
72,120
25,533
(34,084)
(36,977)
38,036
(11,444)
117
2013
Chile
Mexico
Peru
Uruguay
Colombia
Spain
Holland
Current income
tax
Current tax
assets
72,120
2,996
33,606
26,508
627
-
8,383
-
Current tax
liabilities
(34,084)
(3,424)
-
(21,676)
(127)
(8,832)
(25)
-
38,036
(428)
33,606
4,832
500
(8,832)
8,358
-
Current tax, net
2012
Chile
Mexico
Peru
Uruguay
Colombia
Holland
Spain
Current income
tax
Current tax
assets
25,533
1,171
6,234
17,926
58
-
143
-
Current tax
liabilities
(36,977)
(13,699)
(4,207)
(19,057)
-
(14)
-
--
Current tax, net
(11,444)
(12,528)
2,027
1,131
58
(14)
143
-
Deferred tax for SURA Asset Management S.A. and Subsidiaries is broken down as follows:
2013
2012
Deferred income tax
Deferred tax assets
79,418
37,666
(532,481)
(463,935)
Deferred Tax, net
(453,063)
(426,269)
Total 2013
Chile
Mexico
Peru
Uruguay
Colombia
Spain
Holland
Deferred income tax
Deferred tax assets
79,418
53,258
5,501
5,816
-
14,843
-
Deferred tax
liabilities
(532,481)
(133,352)
(46,879)
(55,314)
(1,137)
-
(40,212)
(255,587)
Deferred Tax, net
(453,063)
(80,094)
(41,378)
(49,498)
(1,137)
14,843
(40,212)
(255,587)
118
Total 2012
Chile
Mexico
Peru
Uruguay
Spain
Colombia
Deferred income tax
Deferred tax assets
37,666
15,836
(463,935)
Deferred tax, net
(426,269)
Total
2013
On changes in measuring financial
assets
3,169
-
9,507
6,116
(81,180)
(48,385) (11,278)
(802)
(322,290)
-
(65,344)
(45,347)
(802)
(312,783)
6,116
Chile
3,038
Mexico
(8,109)
Peru
Uruguay
Colombia
Spain
Holland
(108,608)
(53,294)
-
(55,314)
-
-
-
-
On changes in measuring investments
(14,574)
4,127
(18,701)
-
-
-
-
-
On changes in measuring fixed assets
(15,502)
(13,559)
(1,848)
-
(95)
-
-
-
-
-
-
-
-
-
-
-
(48,665)
(48,665)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30,350)
(9,035)
(21,315)
-
-
-
-
-
On recognizing Deferred Income
Liabilities (DIL)
2,194
2,194
-
-
-
-
-
-
On recognizing provisions under IFRS
5,127
-
-
5,127
-
-
-
-
On tax loss carry forwards
3,737
3,946
200
633
(1,042)
-
-
-
On capitalized tax expense
(1,454)
(1,454)
-
-
-
-
-
-
On provisions for estimated expense
43,047
42,991
-
56
-
-
-
-
On recognizing intangibles identified
for the acquisition
(308,159)
(7,345)
(5,015)
-
-
-
(40,212)
(255,587)
Estimated non-materialization of tax
(a)
20,144
-
5,301
-
-
14,843
-
Total Deferred Tax Assets
79,418
53,258
5,501
5,816
-
14,843
-
-
532,481
133,352
46,879
55,314
1,137
-
40,212
255,587
On changes in measuring employee
benefits
On changes made to actuarial
assumptions in measuring technical
reserves
On eliminating monetary correction on
local GAAP
On recognizing Deferred Acquisition
Costs (DAC)
Total deferred tax liabilities
119
Total
2012
On changes in measuring
financial assets
Chile
Mexico
Peru
Uruguay
Colombia
Spain
(12,030)
-
-
(11.279)
(751)
-
-
(125,979)
(79,335)
(46,644)
-
-
-
-
financial assets
(30)
-
(30)
-
-
-
-
employee benefits
(74)
-
(74)
-
-
-
-
On changes made to
actuarial assumptions for
measuring technical
reserves
639
-
639
-
-
-
-
On eliminating monetary
correction on local GAAP
1.833
-
1.833
-
-
-
-
On recognizing Deferred
Acquisition Costs (DAC)
18.712
15.543
-
3.169
-
-
On recognizing Deferred
Income Liabilities (DIL)
(2.693)
(1.845)
(797)
0
(51)
-
-
On recognizing provisions
under IFRS
0
-
-
-
-
-
-
On tax loss carry forwards
9.507
-
-
-
-
9.507
-
On capitalized tax expense
293
293
-
-
-
-
-
On provisions for estimated
expense
566
-
566
-
-
-
-
On recognizing intangibles
identified for the acquisition
(322.290)
0
-
-
-
(322.290)
-
Estimated nonmaterialization of tax (a)
(839)
-
(839)
-
-
-
-
Other temporary differences
6.116
-
-
-
-
-
6.116
Total Deferred Income Tax
Assets
37.666
15,836
3,038
3,169
-
6,116
9,507
Total Deferred Income Tax
Liabilities
463,935
81,180
48,385
11,279
802
On changes in
measuring investments
-
322,290
(a)
Estimated non-materialization of tax as recognized by the SURA Asset Management S.A.’s Mexican subsidiaries was posted given
the low probability of recovering deferred tax assets, since sufficient profits or cumulative temporary differences are not expected in the short
term which would allow for the materialization of such tax.
There is a temporary difference over an associated of USD$ 229,776,654 and there is not any registry of
any deferred tax according with paragraph 39 of IAS 12.
120
21.
Other assets
Other assets, as recorded by SURA Asset Management S.A. and Subsidiaries for the years 2013 and 2012, are
broken down as follows:
2013
Other assets - non-current
Works of art
Pension assets
Restricted cash
Total Other Assets - Non-Current
Other Assets - Current
Pre-paid Expense
Total Other Assets - Current
Total Other Assets
2012
18,529
174
16,790
776
520
19,223
1,223
18,789
8,405
8,405
13,535
13,535
27,628
32,324
Other assets for each individual country are broken down as follows:
Total
Chile
Mexico
Peru
Uruguay
Spain
Colombia
Total Other Assets
- 2013
27,628
463
22,196
858
519
3,409
183
Total Other Assets
- 2012
32,324
289
28,220
3,815
-
-
Works of art, as recognized by SURA Art Corporation are valued at USD$ 18.529. Works of art are recognized at
historical cost, since their fair value cannot be measured reliably, and consequently SURA Asset Management S.A.
and Subsidiaries prefer to take a conservative approach to their measurement.
Prepaid expense includes interest, leasing, insurance publicity and advertising expense.
121
22.
Cash and cash equivalents for SURA Asset Management S.A. and Subsidiaries are broken down as follows:
2013
Banks
Cash
2012
16,528
229,440
245,968
81,102
6,931
88,033
Bank balances earn variable interest based on daily bank deposit rates. Short-term deposits are made for periods
varying between one day and three months, depending on the immediate cash requirements of SURA Asset
Management S.A. and Subsidiaries, which bear short-term interest rates.
Cash and cash equivalents for the years 2013 and 2012 are broken down as follows:
Cash and cash
equivalents 2013
Cash and cash
equivalents 2012
Total
Chile
245,968
40,682
Total
Chile
88,033
31,624
Mexico
74,870
Mexico
38,027
Peru
29,514
Peru
15,499
Uruguay
Colombia
273
93,633
Uruguay
Colombia
562
1,272
Spain
Holland
4,069
Spain
2,911
16
Holland
El
Salvador
475
-
574
122
El
Salvador
Cash and cash equivalents for SURA Asset Management S.A. and Subsidiaries at December 31, 2013 and
December 31,2012, contain restricted cash that includes amounts going back less than one year along with
amounts bearing undetermined restrictions, as shown below:
Restricted cash
Amounts
subject to
restrictions
31.12.2013
Date on which
Restriction was
Lifted
Country
Injunction charges ordered by the Board of
Conciliation and Arbitration
Undetermined
Mexico
Bail bond deposits made by clients that were
reclassified as ordered by the
Superintendency of Banking and Insurance
Undetermined
Peru
Restriction Description
Bank deposits
Deposit 1
Restricted deposits in bank
accounts
Deposit 2
Scotiabank Checking
Account ME C004332 in
dollars- Scotiabank
Checking Account MN 0000503401 in Peruvian
nuevos soles
Total restricted cash –
2013
Restricted Cash
436
436
84
84
520
Amounts
subject to
restrictions
31.12.2012
Restriction Description
Date on which
Restriction
was Lifted
Country
Bank deposits
Deposit 1
Total sum of restricted cash
in bank deposits
Deposit 2
Scotiabank Checking
Account ME C004332 in
dollars
Deposit 3
Scotiabank Checking
Account MN 000-0503401
in Peruvian nuevos soles
Total restricted cash - 2012
1,020
1,020
Injunction charges ordered by the Board of
Conciliation and Arbitration
Undetermined
Mexico
53
53
reclassified as ordered by the Superintendency
of Banking and Insurance
Undetermined
Peru
150
150
reclassified as ordered by the Superintendency
of Banking and Insurance
Undetermined
1,223
123
Peru
23.
Financial Assets and Liabilities
23.1
Financial Assets
Financial assets for SURA Asset Management S.A. and Subsidiaries are broken down as follows:
Categories of financial assets
2013
Financial assets held to maturity
Financial assets available for sale (1)
Financial assets at fair value through profit or loss (2)
Accounts receivable (Note 25)
Total financial instruments other than derivatives
2012
49
2,757,011
80
2,509,830
855,581
306,505
1,125,802
269,565
3,919,146
3,905,277
2013
2012
Current/ non-current distinction of financial assets
Financial assets
Accounts receivable
Financial assets Non- current
Financial assets
Accounts receivable
Financial assets Current
Total financial assets
2,414,854
3,145,240
2,601
12,947
2,417,455
1,197,787
303,904
1,501,691
3,919,146
3,158,187
490,472
256,618
747,090
3,905,277
1.
Including bonds issued by the Central Banks, financial institutions and listed companies of each individual country,
which were measured at fair value.
2.
In keeping with legal reserve requirements, as provided for by applicable local legal and statutory provisions, the
Pension Fund Management firms must set up and maintain equalization reserves for the returns corresponding to the funds
under management.
These reserves range between 0.8% and 1% of the value of the funds held (each country has its own rules and
regulations). This investment forms part of fund equity, therefore, its availability is restricted and the rate of return obtained is
the same as that provided by each of the funds.
124
a)
Financial assets held to maturity
2013
b)
2012
Amortized cost
Debt securities
49
80
Total assets held to maturity
49
80
2013
Equity securities
Debt securities
Total securities available for sale - financial assets at fair
value
c)
16,268
187,008
2,740,743
2,322,822
2,757,011
2,509,830
2013
Equity securities
d)
2012
2012
Risk investments for policyholders
376,483
479,098
719,377
406,425
Total financial assets at fair value through profit or loss
855,581
1,125,802
Accounts receivable
2013
2012
Accounts receivable (Note 25)
306,505
269,565
Total Accounts Receivable
306,505
269,565
125
Financial assets for each individual country are broken down as follows:
Financial instruments - SURA Asset Management S.A. and Subsidiaries
Total
Financial
assets held
to maturity
Financial
assets
available
for sale
Financial
assets at
fair value
through
profit or
loss
Accounts
receivable
(Note 25)
Total
financial
instruments
other than
derivatives 2013
Chile
Peru
Uruguay
Spain
Holland
Colombia
49
49
-
-
-
-
-
-
2,757,011
1,146,160
490,653
1,090,338
10,857
-
19,009
-
855,581
422,809
210,957
212,207
9,572
30
-
-
306,505
105,466
10,343
183,896
5,368
-
-
1,432
3,919,146
1,674,484
711,953
1,486,441
25,797
30
19,009
1,432
Total
Financial assets
held to maturity
Financial assets
available for sale
Financial assets
at fair value
through profit or
loss
Accounts
receivable (Note
25)
Total financial
instruments
other than
derivatives –
2012
Mexico
Chile
Mexico
Peru
Uruguay
Spain
Holland
Colombia
80
80
-
-
-
-
-
-
2,509,830
504,231
565,565
1,264,222
5,106
15,464
155,242
-
1,125,802
809,769
186,424
120,244
9,365
-
-
-
269,565
105,769
9,687
145,709
5,767
185
2,434
3,905,277
1,419,849
761,676
1,530,175
20,238
15,649
157,676
126
14
14
Fair value of assets not carried at fair value
The methodologies and assumptions used to determine the fair values of financial instruments not recorded at
fair value in the financial statements (i.e. held to maturity as well as loans and receivables) are broken down as
follows:
Assets whose fair value is approximated to their book value
For short-term financial assets (maturing in less than three months), demand deposits and savings accounts
without no specific maturity, the carrying amounts in books are approximated to their fair value. In the case of
other equity instruments, adjustments are also made to reflect the change in the required credit spread, given
the fact that these instruments were initially recognized.
For short-term receivables, which are measured at amortized cost, the carrying amount is a reasonable
approximation of fair value.
Financial instruments at agreed rates
The fair value of fixed-income assets at amortized cost is calculated by comparing market interest rates when
they were initially recognized with current market rates for similar financial instruments The estimated fair value
of term deposits is based on discounted cash flows using current money market interest rates as well as those
applicable to debt securities carrying similar risks and maturities. In the case of listed, issued debt, its fair value is
determined based on quoted market prices
Book value
2013
Fair value
2012
2013
2012
Financial assets
Financial assets at fair value through profit or
loss
Total
2,757,011
2,509,830
2,757,011
2,509,830
855,581
1,125,802
855,581
1,125,802
3,612,592
3,635,632
3,612,592
3,635,632
TOTAL
Non-listed shares
2013
2012
15,751
30,648
517
176,632
2,730,466
2,248,458
10,277
54,092
2,757,011
2,509,830
Listed shares
Listed debt securities
Non-listed debt securities
Total financial assets available for sale
127
128
Fair Value Hierarchy
Financial assets and liabilities carried at fair value are classified based on fair value hierarchy:
Level 1
Financial
assets held to
maturity
Financial
assets
available for
sale
Financial
assets at fair
value
through
profit or loss
Accounts
receivable
Total
financial
assets -2012
Financial
assets held to
maturity
Financial
assets
available for
sale
Financial
assets at fair
value
through
profit or loss
Accounts
receivable
Total
financial
assets -2013
Level 2
Level 3
Amortized
Cost
Subtotal
Total
-
-
-
-
80
80
1,769,308
511,069
229,453
2,509,830
-
2,509,830
818,560
111,454
195,788
1,125,802
-
1,125,802
-
-
-
-
269,565
269,565
2,587,868
622,523
425,241
3,635,632
269,645
3,905,277
-
-
-
-
49
49
2,757,011
-
-
2,757,011
-
2,757,011
662,675
192,906
-
855,581
-
855,581
-
-
-
-
306,505
306,505
3,419,686
192,906
-
3,612,592
306,554
3,919,146
Level 1 - Prices listed on active markets
Inputs for Level 1 consist of unadjusted prices listed on active markets for identical assets and liabilities. An active
market is one in which transactions for the asset or liability occur frequently providing sufficient volume on which
to provide pricing information
129
Level 2 - Modeling with input data from observable markets
Level 2 inputs are those other than quoted prices belonging to Level 1 that are observable for the asset or liability
in question, either directly or indirectly. Inputs for Level 2 include:



Listed prices for similar assets or liabilities on active markets;
Listed prices for identical or similar assets or liabilities on inactive markets; and
Input data other than listed prices, i.e. interest or exchange rates.
Level 3 - Modeling with unobservable inputs
Inputs for Level 3 are unobservable for the asset and liability in question. These can be used to determine fair
value when observable inputs are not available. These valuations reflect assumptions that the business unit
makes based on other market players, i.e. yields for non-listed shares. Most financial assets and liabilities are
measured using observable inputs (Level 1). SURA Asset Management S.A. and Subsidiaries have no assets or
liabilities measured using unobservable input (Level 3) for 2013.
The movement of financial asset for the period ended 31 December 2013, is detailed as follows:
Financial
Financial
assets
assets held to
available for
maturity
sale
Financial
assets at fair
value through
profit or loss
Accounts
receivable
80
2,509,830
1,125,802
Additions
-
2,151,385
575,110
Acquisitions on business
combinations
-
-
47,325
-
47,325
Maturity of financial asset
-
(2,007,390)
(596,147)
-
(2,603,537)
(31)
-
(24,656)
-
-
60,937
-
60,937
-
(43,074)
-
-
(43,074)
-
332,790
(332,790)
Write-offs
Gains and losses on nonderivative financial
instruments
Gains and losses on nonderivative other
comprehensive income
Transfer
Transfer to investment in
associates
49
2,757,011
3,905,277
2,726,495
(24,687)
-
(186,530)
(186,530)
Movement of accounts
receivable
269,565
Total
855,581
36,940
36,940
306,505
3,919,146
130
23.2
Financial Liabilities
The financial liabilities held by SURA Asset Management S.A. and Subsidiaries are broken down as follows:
2013
2012
Total financial liabilities at fair value through profit or loss
-
-
Total financial liabilities at fair value through profit or loss
-
-
702,770
179,412
259,359
197,561
882,182
882,182
456,920
456,920
Other financial liabilities at amortized cost
Financial liabilities (Note 26)
Accounts payable (Note 29)
Total other financial liabilities at amortized cost
Total financial liabilities
2013
2012
552,887
252,104
Accounts payable
70,074
54,119
Total non-current financial liabilities
622,961
306,223
149,883
7,255
Accounts payable
Total current financial liabilities
109,338
259,221
143,442
150,697
Total financial liabilities
882,182
456,920
131
Current financial liabilities
Interest rate
Maturity
2013
2012
Current financial liabilities
Bank loan for COP 30,000,000,000
DTF + 1.73%
2013-2014
15,570
-
DTF + 1.8%
2012-2014
5,190
5,655
DTF + 1.8%
2013-2014
2,076
-
Bank loan for USD$ 25,000,000
6mth Libor +
2,15%
2013-2014
25,000
-
6mth Libor +
2,15%
2013-2014
25,000
-
6mth Libor +
2013-2014
2,15%
Libor +
2,00%
Libor +
2,65%
58,547
-
2013-2014
18,500
-
2013-2014
-
1,600
149,883
7,255
Total current financial liabilities
132
Interest rate
Maturity
2013
2012
Non-current financial liabilities
Bank loan for CLP 43.63 million (2011: CLP 45.23
million)
7.6027%
2014-2018
18,360
92,001
LIBOR +
2.50%
2012-2015
2,800
2,800
LIBOR +
2.50%
2012-2015
140,000
140,000
LIBOR +
2.65%
2012-2015
1,600
-
(USD$ 6,746,833)
DTF + 1.40%
2013-2016
6,747
-
6mth Libor +
2,65%
2013-2016
50,000
-
6mth Libor +
2,65%
2013-2016
50,000
-
6mth Libor +
2,65%
2013-2016
50,000
-
Libor +
2.50%
2013-2016
22,500
-
Libor +
2.50%
2013-2016
62,500
-
Libor +
2.00%
2013-2016
14,000
-
Libor +
2.00%
2013-2016
41,000
-
4.50%
2013-2020
90,382
-
2,998
17,303
552,887
252,104
Issued bonds
Issued debt securities
10%
2018
Total non-current loans and credit
133
Issued bonds consist of Invita Subordinated bonds made out to the bearer - Issue No. 1 Series A which were
issued and placed for a total of USD$ 3,000,000 in 1998, by the former parent companies of Seguros SURA SA
acquired on November 30, 2012 by SURA Asset Management S.A. (See Note 4). These bonds carry a term of 10
years beginning on their date of issue, and bear an annual nominal interest rate of 10 % per annum, payable on a
quarterly basis with payment of principal at the end of the additional 10 year redemption period. Therefore these
bonds are due to mature on December 30, 2018.
Obligation
Long-term debt obligations
Short-term debt
obligations(1)
Lease obligations and other
Less than 1
year
149,883
-
1-3 years
441,387
3-5 years
More than 5
years
-
111,500
-
-
-
-
-
-
financial liabilities
Total
Total
552,887
149,883
-
149,883
441,387
-
111,500
702,770
Financial liabilities whose fair value is approximated to their book value
For short-term payables, which are measured at amortized cost, the carrying amount is a reasonable
approximation of fair value.
The long term accounts payables normally have a maturity between one and two years. This causes the carrying
amount to be a reasonable approximation of fair value.
The long term financial obligations, which are measured and amortized cost, are all borrowing contracts with a
variable interest rate except for two borrowing contracts, which were negotiated with a fixed interest rate at the
end of 2013. Refer to note 26. For the borrowings with a variable interest rate the carrying amount is a
reasonable approximation of their fair value. Concerning the borrowings with a fixed interest rate, as these were
negotiated near the end of 2013, the market interest rate for similar borrowings does not differ significantly,
hence the carrying amount is a reasonable approximation of their fair value.
134
24.
Reinsurance assets
Reinsurance assets for 2013 and 2012 are broken down as follows:
2013
Accounts receivable due from reinsurers
2012
10,858
Reinsured insurance contracts*
Total reinsurance assets
4,510
34,197
25,468
45,055
29,978
Reinsurance assets for each individual country for the period ended 31 December 2013:
Total
Chile
Peru
Accounts receivable due from reinsurers
10,858
Reinsured insurance contracts*
34,197
34,197
10,858
-
Total reinsurance assets – 2013
45,055
34,197
10,858
Total
Total reinsurance assets - 2012
29,978
Chile
Peru
29,560
418
The movement of reinsurance assets for the period ended 31 December 2013, is detailed as follows:
Reinsurance
assets
29,978
Additions
19,664
Gains and losses on reinsurance asset- net
717
Maturity of financial asset
(5,304)
45,055
* SURA Asset Management S.A. determines the assets arising from assigned reinsurance contracts as net
contractual rights of the assignor in a reinsurance contract.
During the period 2012-2013 there are no changes in the reinsurance assets.
135
The insurance subsidiaries of SURA Asset Management S.A. have reinsured a portion of the risks incurred with
insurance contracts, so as to share the risk of potential claims losses.
SURA Asset Management S.A. and Subsidiaries determine the classification of a reinsurance contract, based on its
characteristics, mainly because reinsurance contracts cover major risks. SURA Asset Management S.A. and
Subsidiaries determine claims arising from assigned reinsurance contracts based on the assignor´s net contractual
rights as stipulated in the reinsurance contract.
Impairment to reinsurance assets
When recognizing reinsurance assets, the insurance subsidiaries of SURA Asset Management S.A. perform an
impairment test on all those assets assigned by virtue of a reinsurance contract, reducing their value in books and
recognizing any impairment loss, if applicable, in the income statements
impairment to such. Triggers may include legal disputes with third parties, changes in capital and surplus levels,
changes in counterparty credit ratings and historical experience based on collection statistics with specific
reinsurers. In the case of the insurance subsidiaries of SURA Asset Management S.A. no asset impairment was
recorded against reinsurance contracts
25.
Accounts receivable
Accounts receivable at December 31 are as follows:
2013
2012
Favorable Experience Dividends
Receivable
1,169
12,933
Employee loans
2,070
2,216
-
6,349
62,032
80,899
145,110
21,500
84,012
66,616
12,112
76,463
Accounts receivable due from SURA
Companies
-
666
Accrued interest and income
-
1,923
306,505
269,565
Employee policies
Receivables on Mandatory
operations
Receivables on Insurance
operations
Other receivables
Accounts receivable due from
insurance business
136
Accounts receivable for each individual country is broken down as follows:
Total
Chile
Mexico
Peru
Uruguay
Spain
Colombia
Holland
Total
accounts
receivabl
e – 2013
306,505
105,466
10,343
183,896
5,368
-
1,432
-
Total
accounts
receivabl
e - 2012
269,565
105,769
9,687
145,709
5,767
185
14
2,434
The aging of accounts receivable at December 31, is as follows:
In USD$ 000s
Chile
Total
Less than 1 year
Between 1-5
years
More than 5
years
105,466
105,466
-
-
10,343
7,742
2,601
-
183,896
183,896
-
-
Uruguay
5,368
5,368
-
-
Colombia
1,432
1,432
-
-
306,505
303,904
2,601
-
Mexico
Peru
2013
137
In USD$ 000s
Total
Chile
Mexico
Peru
Uruguay
Spain
Holland
Colombia
2012
Less than 1 year
Between 1-5
years
More than 5
years
105,769
92,822
12,947
-
9,687
9,687
-
-
145,709
145,709
-
-
5,767
5,767
-
-
185
185
-
-
2,434
2,434
-
-
14
14
-
-
269,565
256,618
12,947
-
Trade receivables do not earn interest and generally speaking these are paid within periods of between 30 and 90
days.
The movement of the provision for accounts receivable is shown as follows:
2013
Initial value
12,473
Impairment to receivables
135
Amounts provisioned on
uncollectible debt for the year
469
Amounts recovered for the year
(47)
Reversed impairment losses
Exchange rate gains/losses
Final value for the year
(668)
12,362
138
26.
Financial obligations for the years ended December 31, 2013 and December 31, 2012 are broken down as follows:
2013
2012
Non-current financial obligations
Loans from credit institutions
552,887
252,104
Total financial obligations - non-current
552,887
252,104
Loans from credit institutions
149,883
7,255
Total financial obligations – current
149,883
7,255
Total financial obligations
702,770
259,359
Financial Obligations - Current
Financial obligations for each individual country are broken down as follows:
Total
Total Financial
Obligations - 2012
Total Financial
Obligations - 2013
27
Chile
Peru
Spain
Colombia
702,770
-
21,359
142,800
538,611
259,359
92,001
17,303
142,800
7,255
Insurance contracts
Technical reserves
Items contained in the Technical Reserve Account are divided up into two (2) categories: Those corresponding to
life insurance and those pertaining to insured risk (life insurance). The life insurance technical reserves involves
setting up an obligatory provision in which the insurer deposits a portion of the premiums received or invoiced
corresponding to future risk coverage periods, bearing in mind the date on which this is set up. The insured risk
(life insurance) technical reserve corresponds to Voluntary Retirement Life Insurance in which the policy holders
may bring forward their retirement age or increase the amount of pension to be received.
The technical reserves held by SURA Asset Management S.A. and Subsidiaries for the year 2013 and 2012 are as
follows:
Mathematical Reserve
2013
1,902,372
2012
1,679,555
139
Non-current Reserves
Other Reserves
Unearned Premium Reserve
IBNR Reserve
Contingent Reserves
Current Reserves
Total Reserves
1,902,372
1,679,555
670,042
11,256
16,952
9,654
707,904
599,368
18,337
20,970
7,693
646,368
2,610,276
2,325,923
Life insurance technical reserve
Insured risk (life insurance) technical reserve
Total technical reserves
2013
2,573,111
37,165
2012
1,842,014
483,909
2,610,276
2,325,923
Technical reserves held by each individual country are shown as follows:
Insured risk (life insurance) technical
reserve
Total Technical Reserves - 2013
Total
Chile
2,573,111
1,094,623
425,285
1,053,203
37,165
-
-
37,165
2,610,276
1,094,623
425,285
1,090,368
Total
Insured risk (life insurance) technical
reserve
Total Technical Reserves - 2012
Mexico
Chile
Peru
Mexico
Peru
1,842,014
445,863
412,054
984,097
483,909
396,520
-
87,389
2,325,923
842,383
412,054
1,071,486
140
The breakdown per type of reserve held at December 31, including the retained as well as the reinsured portions,
is shown as follows:
Retained
portion
1,894,849
655,624
4,246
11,706
9,654
2,576,079
Other Reserves
Incurred But Not Reported Reserve
Contingent Reserves
Total 2013
Total
Reinsured
portion
7,523
14,418
7,010
5,246
34,197
Total
1,902,372
670,042
11,256
16,952
9,654
2,610,276
Total
Retained
portion
1,674,826
594,649
5,500
17,787
7,693
2,300,455
Other Reserves
Incurred But Not Reported Reserve
Contingent Reserves
Total 2012
Reinsured
portion
4,729
4,719
12,837
3,183
25,468
Total
1,679,555
599,368
18,337
20,970
7,693
2,325,923
Type of reserve
Universal
life
484,264
-
99,236
-
Other Reserves
102,678
4,024
485,142
3470
9,615
66,639
(1,526)
670,042
540
-
-
463
10,253
-
-
11,256
IBNR Reserve
3,251
-
-
-
8,347
5,354
-
16,952
Contingent Reserves
9,420
-
-
-
234
-
-
9,654
600,153
4,024
584,378
3,933
Total 2013
Unitlinked
Individual
Group
health
Annuities
and
Total
Others*
1,096,774 1,902,372
Traditional
D&S
23,922 198,176
52,371 270,169
1,095,248 2,610,276
141
Type of reserve
Universal
life
1,306,771
2,887
-
-
31,187 252,058
84,891
948
400,124
-
15,307
93,274
4,824
599,368
625
-
-
511
17,201
-
-
18,337
IBNR Reserve
3,211
-
-
-
7,933
9,826
-
20,970
Contingent Reserves
5,987
-
-
-
1,706
-
-
7,693
Other Reserves
Unitlinked
Individual
Group
health
Annuities
and
Total
Others*
86,652 1,679,555
Traditional
D&S
Total 2012
1,401,485
3,835 400,124
511 73,334 355,158
*Includes reserves from Seguros SURA Peru S.A. (formerly Invita) which were consolidated in 2013.
91,476 2,325,923
The breakdown by type of reserve shown as follows:
Gross of Reinsurance
Liabilities insurance
contracts
without DPF
Reinsurance
Total insurance
contract liabilities
Liabilities insurance contracts
without DPF
Total insurance
contract liabilities
Net
At January 1, 2012
992,269
992,269
-
-
992,269
Changes in reserves (premiums, claims,
interest, etc.)
148,127
148,127
992,225,37069
25,370
122,757
Changes in demographic assumptions
(11,556)
(11,556)
-
-
(11,556)
1,071,486
1,071,486
-
-
1,071,486
Adjustments for exposure
55,528
55,528
-
-
55,528
Discount rate adjustments
53,405
53,405
-
-
53,405
Monetary correction adjustments
16,664
16,664
98
98
16,566
2,325,923
2,325,923
25,468
25,468
2,300,455
Changes in reserves (premiums, claims,
interest, etc.)
298,417
298,417
2,512,077
12,077
286,340
Monetary correction adjustments
(14,064)
(14,064)
(3,348)
(3,348)
(10,716)
2,610,276
2,610,276
34,197
34,197
2,576,079
Acquired in business combinations
142
Liability Adequacy Testing
Before the cut-off date of these financial statements, a liability adequacy test was performed in keeping with the
SURA Asset Management S.A.'s policy guidelines and principles, these based on applicable international
standards.
The result showed that the technical reserves maintained by SURA Asset Management S.A. and Subsidiaries are
adequate, therefore there is no need to set up any other additional reserve.
Every year, each of SURA Asset Management S.A.'s subsidiaries perform a liability adequacy test in order to
determine whether the assets underlying the insurance provisions, and also whether these in conjunction with
future premiums are sufficient to meet future commitments to policyholders as well as the administrative
expense incurred with insurance contracts and projected based on best estimate assumptions
Upon conducting this test, the subsidiaries of SURA Asset Management S.A. must perform a valuation using best
estimates of their mathematical reserves for gross reinsurance or fund products with guaranteed rates. This
valuation is called a TAP (Test of Adequacy of Liabilities) reserve. The purpose of this test is to compare the TAP
reserve with reserves posted under IFRS on the financial statements, net of DAC.
The test was performed on the basis of gross reinsurance, since under IFRS 4, the amounts assigned to reinsurers
are accounted for separately and these assets are considered based on the criteria used for evaluating
impairment.
This liability adequacy test included all material commitments contained in insurance contracts (including
additional coverage sold as supplementary main coverage). The assets in excess thereof were not considered.
The TAP Reserve is calculated based on best estimates of streams of liabilities and expense, discounted using the
projected rates of accrual for the portfolio of assets in question.
The best estimates used with regard to demographic (mortality, morbidity, longevity) and business variables (exit
rates, collection, redemption and expense) assumptions were valid at the time of the test. Valid assumptions are
understood to be those approved SURA Asset Management S.A.’s Models and Assumptions Committee.
The result of the test consisted of comparing the valuation of reserves using best estimate assumptions with
reserves recorded based on IFRS on the financial statements of each subsidiary.
In the case of these proving adequate (the valuation reserves using best estimate assumptions lower or equal to
those posted based on IFRS on the financial statements of each subsidiary), no action was required.
In the case of these proving to be inadequate(the valuation reserves using best estimate assumptions lower or equal to
those posted based on IFRS on the financial statements of each subsidiary), the reserve should be reset so that the
reserve posted under IFRS on the financial statements is higher or equal to the valuation performed using best estimate
assumptions
Methodology used for liability adequacy testing
The liability adequacy test is composed of four (4) sequential processes that calculate the adequacy of technical
reserves:
143
-
28.
Preparing assumptions and projections for portfolio flows (assets and liabilities)
Drawing up scenarios for rates of return (based on the investment - divestiture dynamics of SURA Asset
Management S.A. and Subsidiaries)
Discounted flows of commitments (in order to get the current value of these same)
Calculating the 50th percentile of the present values and comparing this with reserves recorded under
IFRS.
Equity Issued capital and reserves
The equity belonging to SURA Asset Management S.A. and Subsidiaries for the years 2013 and 2012 is broken
down as follows:
2013
Authorized shares, issued and integrates
Subscribed and paid-in capital
Share premium
Other capital reserves
Profit / Loss for current year
Total equity - controlling interest
Total Equity
2012
1,360
3,785,406
(54,868)
232,965
2,196
3,967,059
646
1,763,583
8,690
202,672
22,719
1,998,310
77,753
4,044,812
1,936,997
3,935,307
a) Shares Issued
SURA Asset Management S.A.'s authorized capital consists of 3,000,000 of shares with a nominal value per share
of COP$ 1,000. The Company’s subscribed and paid-in capital came to USD$ 1,360, divided up into 2,616,407
shares in 2013. In 2012 the Company’s subscribed and paid-in capital came to USD$ 646 divided up in 1,255,170
shares in 2012. The subscribed and paid-in capital increased because the Company issued shares and received as
a payment in kind 49% of the outstanding shares of SURA Asset Management España S.L. and 32.85% of the
outstanding shares of Protección.

Share issuance of SURA Asset Management S.A. paid with shares of SURA Asset Management España S.L.
In June 2013, SURA Asset Management S.A. issued 1,139,894 shares obtaining as payment 49,000 shares of SURA
Asset Management España S.L., reaching a full 100% ownership stake having acquiring the remaining 49% stake.
In this transaction the Company’s subscribed and paid-in capital increased in USD $304,507 and the share
premium increased in USD$ 1,717,316. On the other hand the Non-controlling interest decreased in USD$
1,836,386.
144
The payment of the share issuance consisted of contributions-in-kind made by Grupo de Inversiones
Suramericana S.A., General Atlantic España S.L, International Finance Corporation, Sociedades Bolívar S.A.,
Compañía de Seguros Bolívar S.A., Banagricola S.A., Blue Rapids Invest S.L and JP Morgan SIG Holdings in
exchange for shares issued by SURA Asset Management S.A. This was carried out in keeping with the terms of the
corresponding offer to each of the aforementioned shareholders.
The 1,139,894 shares issued by SURA Asset Management S.A. were paid via the following contributions-in-kind.

o
On June 6, 2013, Grupo de Inversiones Suramericana S.A paid for 357,281 shares issued by SURA Asset
Management S.A. with a contribution-in-kind of 15,194 shares in SURA Asset Management España S.L.
o
On June 6, 2013, General Atlantic España S.L paid for 191,198 shares issued by SURA Asset Management
S.A. with a contribution-in-kind of 8,259 shares in SURA Asset Management España S.L.
o
On June 11, 2013, International Finance Corporation paid for 79,660 shares issued by SURA Asset
Management S.A. with a contribution-in-kind in 3,441 shares of SURA Asset Management España S.L.
o
On June 11, 2013, Sociedades Bolivar S.A. paid for 191,198 shares issued by SURA Asset Management
S.A. with a contribution-in-kind of 8,259 shares in SURA Asset Management España S.L.
o
On June 11, 2013, Compañía de Seguros Bolivar S.A. paid for 63,732 shares issued by SURA Asset
Management S.A. with a contribution-in-kind of 2,753 shares in SURA Asset Management España S.L.
o
On June 13, 2013, Banagricola S.A. paid for 95,586 shares issued by SURA Asset Management S.A. with a
contribution-in-kind of 4,129 shares in SURA Asset Management España S.L.
o
On June 26, 2013, Blue Rapids Invest S.L. paid for 47,804 shares issued by SURA Asset Management S.A.
with a contribution-in-kind of 2,065 shares in SURA Asset Management España S.L.
o
On June 27, 2013, JP Morgan SIG Holdings paid for 113,435 shares issued by SURA Asset Management
S.A. with a contribution-in-kind of 4,900 shares in SURA Asset Management España S.L
Share issuance of SURA Asset Management S.A. paid with shares of Protección S.A.
In December 2013, SURA Asset Management S.A. issued 221,343 shares. The payment of the share issuance
consisted of a contribution-in-kind of 8,347,153 shares in Protección S.A. made by Grupo de Inversiones
Suramericana S.A.
In this transaction the Company’s subscribed and paid-in capital increased in USD $117 and the share premium
increased in USD$ 597.
145
Shares Outstanding
The following is a breakdown of the outstanding voting shares belonging to SURA Asset Management S.A. and
Subsidiaries:
Voting shares in subsidiaries
Shareholder
Outstandin
g Shares –
2013
Outstanding
Shares 2012
% Stake
% Stake
1,568,632
59.9537%
989,986
78.873%
General Atlantic España, S.L.
191,198
7.3077%
-
0.000%
Sociedades Bolivar S.A.
Grupo de Inversiones Suramericana
Panamá S.A.
191,198
7.3077%
-
0.000%
185,992
14.818%
J.P. Morgan Sig Holdings
113,435
4.3355%
-
0.000%
Banagricola S.A.
95,586
3.6533%
-
0.000%
International Finance Corporation
79,660
3.0446%
-
0.000%
International Investments S.A.
79,170
3.0259%
79,170
6.308%
Compañía de Seguros Bolívar S.A.
63,732
2.4359%
-
0.000%
IFC ALAC Spain S.L.
Inversiones y Construcciones Estratégicas
S.A.S.
47,804
1.8270%
-
0.000%
7
0.001%
7
0.001%
4
0.000%
Grupo de Inversiones Suramericana S.A.
185,992
-
7.1087%
-
Suramericana Foundation
Corporación Unidad de Conocimiento
Empresarial
-
Enlace Operativo S.A:
-
-
4
0.000%
2,616,407
100%
1,255,170
100%
-
-
146
The number of voting shares swapped at the beginning and end of the year for SURA Asset Management España
S.L. is broken down as follows:
At December 31,
2012
Shareholder
Grupo de Inversiones Suramericana S.A.
Removed - At December
2013
31, 2012
Added - 2013
989,986
578,646
-
1,568,632
General Atlantic Espana, S.L.
-
191,198
-
191,198
Sociedades Bolívar S.A.
-
191,198
-
191,198
185,992
-
-
185,992
J.P. Morgan Sig Holdings
-
113,435
-
113,435
Banagricola S.A.
-
95,586
-
95,586
International Finance Corporation
-
79,660
-
79,660
79,170
-
-
79,170
Compañia de Seguros Bolivar S.A.
-
63,732
-
63,732
IFC ALAC Spain S.L. (Before Bluerapids Invest S.L.)
-
47,804
-
47,804
Inversiones y Construcciones Estratégicas S.A.S.
7
-
(7)
-
Suramericana Foundation
7
-
(7)
-
Corporación Unidad de Conocimiento Empresarial
4
-
(4)
-
Enlace Operativo S.A.
4
-
(4)
-
1,255,170
1,361,259
(22)
2.616.407
Grupo de Inversiones Suramericana Panamá S.A.
International Investments S.A.
Total shares
The Company’s share capital at December 31, 2013 had been entirely subscribed and paid in. Shares cannot be
set up as negotiable securities.
All stakes carry the same rights and obligations for all holders.
Non-controlling interest corresponds to third-party stakes in
2013
Name of Company
Country
% Non-Controlling
Stake
Equity
Earnings
Seguros SURA S.A.
Peru
30.7077%
73,139
4,721
AFP Capital S.A.
Chile
0.3541%
4,601
527
Hipotecaria SURA
Peru
0.0210%
2
-
AFP Integra S.A.
Peru
0.0016%
11
1
77,753
5,249
Total Non-Controlling Stakes
147
2012
Name of Company
Country
% Non-Controlling
Stake
Equity
Earnings
España
49.0000%
1,794,090
134,158
Seguros SURA S.A.
Peru
36.9980%
137,988
(272)
AFP Capital S.A.
Chile
0.3541%
4,738
290
AFP Integra S.A.
Peru
0.0023%
181
(5)
Total Non-Controlling Stakes
1,936,997
134,171
b) Translation differences
In translating the financial statements from their functional currencies into the reporting currency used by SURA
Asset Management S.A. and Subsidiaries (the US dollar) a translation difference of USD$ 2,196 was produced.
2013
Translation difference
Total equity - controlling interest
2012
2,196
22,719
2,196
22,719
2,196
22,719
View note 2.3 Summary of Significant Accounting Policies, letter p)
148
c)
Dividends declared and paid
The following is breakdown of the dividends declared by SURA Asset Management S.A. and Subsidiaries for 2013
and 2012:
For 2013:
Third Party
Shares
2013
1,347,289
64,305
Grupo de Inversiones Suramericana Panamá
185,992
8,877
General Atlantic
191,198
9,125
IFC
79,660
3,802
IFC ALAC Spain S.L.
47,804
2,282
Sociedades Bolívar
191,198
9,125
Compañía de Seguros Bolívar
63,732
3,042
Banagrícola
95,586
4,562
JP Morgan
113,435
5,414
79,170
-
2,395,064
110,534
International Investment
Total
No dividends were declared for 2012.
d) Capital management
SURA Asset Management S.A. and Subsidiaries uphold an internal capitalization and dividend policy for providing
business units with a rational and objective way of providing the capital required to cover the risks assumed. On
the other hand, the items forming the Group´s Uncommitted Independent Capital Structure were adjusted
pursuant to current rules and regulations. Also all units meet minimum solvency requirements in keeping with
current legislation in all jurisdictions.
With the "Hera" corporate streamlining project, important equity changes have been made to certain
subsidiaries, which have involved extending their capital structure, reserve distributions, premium
returns and setting or winding up companies.
Capitalizations performed in 2013
Capitalizations
Country
Beneficiary
Benefactor
Value in local
currency
Value in EUR or
USD
149
Capitalizations
Country
Value in local
currency
Value in EUR or
USD
Beneficiary
Benefactor
Holland
Afore Holding B.V.
-
EUR 75,000
Uruguay
AFISA
España S.L.
UYU 10,264,910
EUR 403,006.25
PEN 2,086,967
-
UYU
40,382,990.84
EUR
1,631,968.15
Peru
Wealth
Management S.A.
Uruguay
AFISA
Chile
Administradora
General de Fondos
S.A.
Chile
Administradora
General de Fondos
S.A.
S.A.
Grupo SURA Latín
American Holdings
España S.L.
SURA S.A.
Servicios LTDA
CLP 1,000,000,000
SURA S.A.
Servicios LTDA
CLP 1,000,000,000
SURA S.A.
Chile
Peru
Corredores de
Bolsa SURA S.A.
AFP Integra S.A. (*)
Servicios LTDA
S.A.
Chile
SURA S.A.
S.A.
Chile
Corredores de
SURA S.A.
CLP 2,000,000,000
PEN 669,899,262
USD$
258,574,079
CLP
11,373,250,000
USD$ 22,500,000
-
150
Capitalizations
Country
Beneficiary
Benefactor
Bolsa SURA S.A.
Servicios LTDA
Fondos SURA Peru
SAF S.A.C.
Wealth Management
SURA S.A.
Peru
SURA Asset
Management Peru
S.A.
Peru
Value in local
currency
Value in EUR or
USD
CLP 1,000,000
PEN 2,750,000
USD$ 1,060,000
S.A
PEN 38,061,531
USD$ 13,770,453
Peru
SURA Asset
Management Peru
S.A.
S.A.
PEN 19,401,831
USD$ 7,100,000
Peru
Seguros SURA S.A.
Peru S.A.
PEN 1,940,831
-
Mexico
SURA Asset
Management
Mexico S.A. de C.V.
S.A.
MXN 179,000,000
USD$ 13,576,033
Mexico
Primero Seguros
Vida S.A. de C.V.
Mexico S.A. de C.V.
MXN 10,000,000
-
(*) In 2013, AFP Integra was capitalized by SURA Asset Management S.A. in order to perform the
subsequent purchase of a 50% stake in AFP Horizonte. This Colombian company also capitalized the
latter Peruvian company in the amount of USD$ 258 million, for the purpose of purchasing a 50% stake
in AFP Horizonte. With this the Colombian company increased its direct stake in AFP Integra to 44.182%
and in turn, with this capitalization the other Company shareholders decreased their stakes by
increasing the amount of non-controlling interest
Returned premiums - 2013
151
PREMIUMS RETURNED IN CASH
Country
Company
Distributed to
Grupo SURA Latín American
Holland
Holdings B.V.
Holanda B.V.
Holland
Holdings B.V.
Holanda B.V.
Amounts distributed
EUR 16,500.00
EUR 58,500.00
EUR 1,691,499.38
EUR 5,997,134.15
Holland
EUR 9,033,187.59
Holland
EUR 1,691,499.38
Holland
Holdings B.V.
Holanda B.V.
Holland
EUR 88,661.38
Holland
SURA Asset Management España S.L
EUR 314,344.87
Holland
EUR 359,037.14
Holland
EUR 1,272,949.86
Holland
Holdings B.V.
Holanda B.V.
Holland
EUR 88,661.38
EUR 314,344.87
EUR 400,400.00
EUR 1.419.600.00
EUR 250,000.00
152
Premiums returned in kind - 2013
PREMIUMS RETURNED IN KIND
Country
Company
Beneficiar
y
Benefactor
Asset
returned
Holland
Grupo
Holanda
B.V.
Spain
SURA Asset
Shares in
Management Proteccion
España S.L.
COP 12,935,181,000
EUR 5,141,690
Spain
SURA Asset
Manageme
nt España
S.L.
Colombia
SURA Asset
Shares in
Management Proteccion
S.A.
COP 37,337,885,000
Value Delivered
EUR 14,020,986.00
Distribution of reserves for 2013
DISTRIBUTION OF RESERVES
Country
Company
Contractual
Date
Transfer Date
To
Amounts
distributed
Holland
Grupo SURA
Latín American
Holdings B.V.
05/04/2013
08/04/2013
Grupo SURA
Holanda B.V.
EUR
359,037.14
Grupo de
EUR
Inversiones
1,272,949.86
Suramericana
Holanda B.V.
e) Legal Reserve
According to that provided for by law, the Company must set up a statutory or legal reserve, appropriating 10% of
each year’s net income until 50% of the value of the Company's subscribed capital is reached. This reserve may
be reduced to less than 50% of the total value of its subscribed capital, providing it is used to wipe out losses that
exceed the amount of undistributed earnings. This reserve may not be used to either pay dividends or cover
expense or losses incurred during the entire time the Company remains in possession of undistributed earnings
153
Should the Company’s Shareholders so decide at their Annual General Meeting, this reserve may be increased
beyond fifty per cent (50%) of the Company’s subscribed capital, in which case this may be used for any purpose
that the Company’s shareholders should so determine.
29.
Accounts payable
Accounts payable at December 31, 2013 and December 31, 2012 for SURA Asset Management S.A. and
Subsidiaries amount to USD$ 179,412 and USD$ 197,561 respectively, broken down as follows:
2013
2012
Accounts payable - non-current
Accounts payable
Favorable experience dividends payable
Total accounts payable - non-current
1,156
68,918
70,074
238
12,917
40,964
54,119
Accounts payable
Accounts payable (SUAM Companies)
Reinsurance operations
Total accounts payable - current
66,558
18,038
24,742
109,338
31,976
429
18,569
92,468
143,442
Total accounts payable
179,412
197,561
Accounts payable - current
154
Accounts payable for each individual country is shown as follows:
Total
Accounts payable
Chile
66,558
Mexico
22,888
Peru
2,059
40,459
-
-
-
16,292
-
1,156
1,156
-
-
93,660
63,812
4,273
23,031
Total Accounts Payable 2013
179,412
104,148
6,332
65,236
Accounts payable (SURA
Companies)
Favorable experience
dividends payable
-
18,038
Total
Chile
Mexico
Uruguay
Colombia
286
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,486
-
58
286
2,486
825
99
1,746
Peru
Uruguay
Colombia
Spain
Holland
41
825
Spain
Holland
Accounts Payable
Accounts payable
(SURA Companies)
32,355
30,806
807
144
339
117
-
142
429
-
-
15
-
98
-
316
18,428
16,646
-
1,782
-
-
-
-
Favorable experience
dividends payable
12,917
12,917
-
-
-
-
-
-
133,432
66,756
27,266
26,902
1,470
451
10,514
Total Accounts Payable
197,561
127,125
28,073
28,843
1,809
666
10,514
155
73
531
The maturity of accounts payable at December 31, 2013, is as follows:
Less than 1 year
Between 1-5
years
More than 5
years
In USD$ 000s
Total
Account Payable
70,074
70,074
-
2013
70,074
70,074
-
156
30.
Other liabilities
Other liabilities for SURA Asset Management S.A. and Subsidiaries at December 31, 2013 and December 31, 2012
are broken down as follows:
2013
2012
Prepaid interest and leases
2,649
23,149
Total other liabilities
2,649
23,149
Other liabilities for each individual country are shown as follows:
Total
Total Other Liabilities - 2013
Total Other Liabilities - 2012
31.
Colombia
2,649
2,636
13
2,649
2,636
13
Total
Peru
Peru
Colombia
23,149
2,798
20,351
23,149
2,798
20,351
Employee benefits
Employee benefit obligations include:
a)
Mandatory social security and employment benefits: Accruing on a monthly basis according to the rules
and regulations of each country. Payments are made according to the requirements of the oversight authorities.
b)
Short-term Performance Incentives: Accruing on a monthly basis using estimated percentages of
performance compliance. These are paid in March of every year to all those officers who have achieved
predefined targets and to the extent that corporate objectives are met promptly met.
c)
Other benefits: These are minor amounts, which are recognized in expenses, to the extent that the
service or benefit is provide.
157
2013
Employee benefits - non-current
Other benefits (long term)
Total employee benefits - non-current
2012
1,430
1,430
1,272
1,272
Other benefits (short term)
31,816
30,010
Social security and taxes
15,328
11,042
Total employee benefits – current
47,144
41,052
Total employee benefits
48,574
42,324
Employee benefits – current
Employee benefits for each individual country are shown as follows:
Total
Chile
Mexico
Peru
Uruguay
Colombia
Other benefits
38,781
18,510
11,725
6730
436
1,380
Social security and tax
9,793
6,217
2,209
1,195
-
172
Total employee benefits - 2013
48,574
24,727
13,934
7,925
436
1,552
Total
Chile
Mexico
Peru
Uruguay
Colombia
Other benefits
31,282
17,375
4,150
7,748
1,274
735
Social security and tax
11,042
4,805
4,956
1,156
125
-
Total employee benefits - 2012
42,324
22,180
9,106
8,904
1,399
735
The following is a breakdown of employee benefit expense for 2013 and 2012:
2013
Salaries and wages
Social security contributions
Education expense
Other benefits
Total Employee Benefit Expense
119,855
5,563
1,776
87,371
214,565
2012
99,389
8,831
1,971
31,144
141,335
158
SUAM's employee benefit obligations were calculated based on assumptions that were standardized based on
the market and type of product
There is no economic pension liability with retired employees, since both the Company and its subsidiaries were
created after the private pension systems were set up and therefore retirees receive their pensions from pension
funds and not from their employers themselves.
32.
Provisions
Provisions recorded by SURA Asset Management S.A. and Subsidiaries for the periods 2013 - 2012 are shown as
follows:
2013
2012
Provisions - non-current
Other general provisions
87,479
2,608
Provision for litigation expense
-
322
Total provisions - non-current
87,479
2,930
Other general provisions
96,330
3,624
Total provisions - current
96,330
3,624
183,809
6,554
Provisions - current
Total provisions
General provisions corresponding to each individual country at December 31, 2013 are broken down as follows:
Total
General provisions
Closing balance - December 31,
2012
Provisions and additions
Amounts used
Closing balance at December
31, 2013
Chile
Mexico
Peru
Uruguay
Spain
Colombia
6,554
3,029
448
2,930
28
114
5
183,089
49,958
40,056
42,332
1,686
-
49,057
(5,539)
(2,734)
-
(2,658)
(28)
(114)
(5)
(295)
(295)
-
-
-
-
-
183,809
49,958
40,504
42,604
1,686
-
49,057
159
The balance held in Colombia consists of a provision for income tax of USD$ 16,804, a provision for industry and
commerce tax of USD$ 142 as well as USD$ 32,251 corresponding to a provision suggested by Senior
Management backed by a bank guarantee (No. 10090000195) taken out with Bancolombia. The purpose of said
guarantee is to cover any possible liabilities that could be incurred by Protección S.A. as a result of actions taken
by ING Colombia prior to its acquisition. This latter company, acquired in 2011 was surrendered in the form of a
payment-in-kind to Protección S.A. in 2012 who took over said firm. However due to events prior to its
acquisition, a ruling is expected on the part of the Colombian Controller´s Office as to whether ING Colombia is
found to be fiscally or administratively responsible for compensating its fund members.
The balance held in Mexico mainly consists of a provision for income tax of USD$ 2,446, a provision for employee
performance bonuses USD$ 5,120 and another provision for USD$ 2,446 for settling possible lawsuit claims
before the IMSS, CONSAR or CONDUSEF.
33. Deferred income liabilities (DIL)
Balance of deferred income liability at year-end 2013 and 2012, respectively, came to:
2013
2012
24,150
25,457
Total DIL
24,150
25,457
Deferred income liabilities (DIL) for each individual country are shown as follows:
Total
combinations 2011
Chile
Peru
Uruguay
20,315
11,022
7,725
1,568
3,222
261
2,961
-
363
-
-
363
1,557
1,052
452
53
25,457
12,335
11,138
1,984
3,398
-
3,398
-
170
170
-
-
(5,080)
-
(4,864)
(216)
205
(1,534)
1,94010,971
(201)
24,150
10,971
9,672
1,567
Additions
Amortizations
combinations
Additions
Amortizations
160
34.
Risk Management Objectives and Policies
The purpose of this Note is to show the main risks to which SURA Asset Management S.A. is exposed and
managed based on its business in Uruguay, Chile, Peru and Mexico First, we shall describe the Group’s Risk
Management Framework and then proceed to analyze each line of business (in terms of families of units). These
lines of business include: (1) Pension Companies, (2) Insurance Companies, and (3) Fund Management firms. We
shall also provide a brief summary of the exposure relating to the other businesses, such as mortgage loans in
Peru and the stock brokerage services of the Corredora de Bolsa in Chile.
Figures herein included are stated in millions of US-dollars. In 2013, the currencies of the countries in which SURA
Asset Management S.A. operates were adversely affected. In reference to this, we included the following table
showing changes in the exchange rates for each currency:
Foreign Exchange Rate
Currency
2013
2012
Variance %
CLP/ USD$ (Chile)
MXP/USD$ (México)
PEN/USD$ (Perú)
UYU/USD$ (Uruguay)
COP/USD$ (Colombia)
529.1
13.1
2.8
21.5
1,926.8
474.2
12.7
2.5
19.2
1,768.2
11.6%
2.8%
10.0%
12.0%
9.0%
In all those cases where sensitivities have an impact on after tax income or equity, it should be noted that the
measured effects are net of the following tax rates:
Statutory Tax Rates
Country
Pensions %
Insurance %
Mutual Funds %
Chile
México
Perú
Uruguay
20.0%
30.0%
30.0%
25.0%
20.0%
30.0%
0.0%
NA
20.0%
30.0%
30.0%
25.0%
Risk Management Framework
The main objective of SURA Asset Management S.A.'s risk management framework is to protect the Company
from undesired events that may affect the attainment of its organizational objectives and goals. In the event of
their occurrence, these risks could cause financial loss or damage the Company’s reputation. For that reason it is
essential to have an internal control system
161
SURA Asset Management S.A.’s internal controls focus on the importance of risk management so as to ensure the
Company’s ongoing sustainability. In this respect it has defined three lines of defense in the handling of such risk:
1st Line of Defense Including business areas, management activities, and operating controls. The main functions
here are to:
-
Identify risk in the business unit´s daily operations
-
Implement the necessary measures to prevent, mitigate and control such risks
-
Assume the consequences of any economic loss or damage to the Company´s reputation.
2nd Line of Defense This includes the Risk Management and Compliance areas. The main functions here are to:
-
Provide support tools (methodologies) to each process owner so as to be able to identify inherent risks.
Monitor compliance with SURA Asset Management S.A.'s risk management policies and report current
levels of risk for each process
Assist in the interpretation of the policies defined by SURA Asset Management S.A. and establish
guidelines not covered by the policy (in specific cases)
3rd Line of Defense: This includes the Internal Auditing area. The main functions here are to:
Provide an independent and objective assessment of the design and effectiveness of controls over risks
relating to business performance and the attainment of the goals set.
-
Make recommendations to improve the framework and controls, as well as reduce and mitigate risk
Risk management is overseen by the Board of Directors (which serves as a 4th line of defense). The Board
establishes risk management guidelines by issuing the corresponding policies, defining roles and responsibilities
within the Company and determining its degree of risk appetite, among others.
The Board has a Risk Committee which is in charge of monitoring the Company’s risk exposure and reviewing any
policies proposed by Senior Management. The Board is also ultimately responsible for approving policies based
on the Risk Committee´s evaluations and recommendations.
Also, so as to ensure that the types of risk exposure affecting SURA Asset Management S.A. are properly
identified, measured, controlled and monitored, the following risk categories have been established:
Profitability and the Financial Statements This is the risk of potential losses or changes in the expected level of
profits due to demographic, financial and business factors, thereby effecting SURA Asset Management S.A.’s
financial statements.
Handling Third-Party Assets This is the risk of sustaining losses with client funds handled by SURA Asset
Management S.A. as a result of changes to market prices, credit events and counter party and liquidity factors.
Business Context This is the risk of damaging SURA Asset Management S.A.'s corporate image as a result of
changes in market competition (fund, product and strategy management, etc.)
162
Operating Stability This is the risk of potential losses due to human error, faulty systems or fraud, business
continuity, personal safety as well the security of physical assets and information.
Legal and Compliance This is the risk from failing to comply with laws, rules, regulations, principles, policies and
guidelines applicable to SURA Asset Management S.A.'s different businesses that may damage its business
integrity or reputation, with or without sustaining a direct economic loss
Emerging Risk The social and environmental risk that threaten the sustainability of SURA Asset Management
S.A.'s operations (this category is currently being defined)
It is important to note that Reputational and Regulatory Risk is not expressly defined since these are produced
by adverse events or consequences with regard to any one of the above categories
In this Risk Management Note we shall be focusing on Profitability and the Financial Statement.
1.
Risk Management Note - Risk to Pension Business
1.1.
Pension business profile
The following table shows Managed Funds as well as the Wage Base for the Portfolio of Fund Members for SURA
Asset Management S.A.'s pension business, broken down per business unit. For 2013, total Assets under
Management for the Mandatory Pension business for 2013 came to USD$ 71,754 million, with another USD$
1,180 million for its Voluntary Pension business.
Pension Funds - Business Profile 2013 (USDm)
Country
Assets under Assets under
Management Management
Mandatory
Voluntary
Pension Funds Pension Funds
Chile
Mexico
Peru
Uruguay
32,976
21,971
14,907
1,899
992
120
68
0
Total
71,754
1,180
Salary Base
15,476
NA
8,638
1,257
The Chilean Pension company at the end of 2013, had 1.9 million members, of whom 1.1 million are direct
contributors, representing a contribution rate of 56.9 %. The year-end wage base came to USD$ 15,476 million.
Chile´s pension management income is largely linked to the commission charged on said wage base, which is
1.44% additionally, the Chilean Pension company manages USD$ 992 million in Voluntary Pension Funds, which
contribute to a lesser extent to the income earned by the Company.
163
At the end of 2013, the Mexican Pension company, had 6.1 million members, of whom 1.7 million are direct
contributors, representing a contribution rate of 27.4% Mexico´s Mandatory Pension income is largely linked to
the commission charged on Assets under Management which came to USD$ 21.971 million, on which a
commission of 1.21% was charged. The Mexican Pension Fund also manages USD$ 120 million in Voluntary
Pension Funds
At the end of 2013, the Peruvian Pension company, had 2.0 million members, of whom 0.9 million are direct
contributors, representing a contribution rate of 44.5%. The year-end wage base came to USD$ 8,638 million.
Peru´s pension management income is largely linked to the commission charged on said wage base, which was
1.55% at year-end 2013 It is also important to mention the pension fund reform that was recently introduced in
Peru which gave the pension fund members the choice of a commission based either on the wage base or the
amount of Assets Under Management. In the meantime, a framework for transition to this new system, whereby
a mixed commission is presently charged that shall gradually be taken off the wage base and transferred to
AUM). so that pension fund members can choose the second option. It is also worth mentioning the fact that 74%
of all fund members have chosen a wage-based commission
At the end of 2013, the Uruguayan Pension company, had 0.3 million members, of whom 0.2 million are direct
contributors, representing a contribution rate of 56.6%. The year-end wage base came to USD$ 1.257 million.
Uruguay´s pension management income is largely linked to the commission charged on said wage base, which
was 1.99% at year-end 2013
1.2.
Business Risk
Business risk for Pension Companies relate to the changes in variables affecting their financial results. From the
standpoint of volatility risk, the financial effects (Profit after Tax and Equity) have been analyzed over a time
horizon of one-year. Here we took into account possible variations in the following:
-
Commission income: where the effects of a reduction of 10% was analyzed.
-
Client factors: where the effects of a 10% increase of fund members transferring out in one year
The following table shows the effects of Business Volatility on SURA Asset Management S.A.. It is important to
note that, although certain sums are calculated for reporting purposes, these impacts cannot be aggregated
linearly, given the diversification effect between these same, and also there is a diversity effect amongst
countries all within the same cause (type of risk).
164
Business Risk Volatility - 1 year horizon (USDm)
Sensitivity
After tax P&L and Equity
impact
2013
impact
2012
-10% in Fee
(44.7)
(43.3)
Chile
Mexico
Peru
Uruguay
(16.7)
(17.9)
(10.1)
(1.8)
(17.2)
(18.1)
(8.0)
(1.8)
+10% in Lapses
(1.4)
(1.2)
Chile
Mexico
Peru
Uruguay
(0.8)
(0.6)
0.0
0.0
(0.6)
(0.5)
0.0
0.0
The greatest effect comes from risk to commission income. This sensitivity is generic and could be largely
explained by: (1) a reduction in commission rates (low due to market competitiveness, etc.), (2) a decrease in the
number of fund members (unemployment, etc.), (3) a decline in the wage base for reasons not mentioned above
(falling real wages, deflation, etc.). In the case of Mexico (collection on assets), cause (3) relates to declining
funds.
Regarding the risk of an increase in the number of fund members transferring out, the magnitude of such relates
to the business activities of each market in which SURA Asset Management S.A. operates, noting increased
commercial activity in the case of Chile and Mexico, to a lesser extent in Peru, and almost zero in the case of
Uruguay
1.3.
Financial Risk
Financial Risk affecting the pension business relates to changes in variables affecting the Companies´ financial
results. (1) changes in reserve requirements (the capital the Company must preserve in the form of a defined
percentage of the funds managed) in a particular year, (2) changes in fund returns compared to the rest of the
industry that could trigger a Minimum Return Guarantee, or (3) changes in interest rates affecting the Provision
for Deferred Income.
1.3.1.
Volatility risk affecting reserve requirements
Rules and regulations governing the pension business require that companies maintain a portion of its own
capital invested in a reserve (Legal or Statutory Reserve, etc.) This reserve represents a percentage of assets
under management. It is important to note that the underlying invested assets must maintain the same ratio as
165
the underlying assets in the Managed Funds (i.e. the Company should buy portions of its managed funds). The
following table shows the different reserve requirement percentages per business unit:
Mandatory reserves contributions as percentage of Asset under
Management
Country
%
Chile
Mexico
Peru
Uruguay
1.0%
0.8%
1.0%
0.5%
From the standpoint of financial volatility risk, the financial effects (Income after Tax and Equity) have been
analyzed over a time horizon of one-year. Here we took into account possible variations in the following:
-
variable income securities: where a 10% drop in equity prices were analyzed
interest rates: where an increase of 100 basis points to interest rates were analyzed in terms of the
value of fixed-income assets
Foreign currency Here we analyzed the effect of a 10% drop in currency rates affecting prices of assets
abroad (net of any coverage).
The following table shows the effects of Volatility Risk to SURA Asset Management S.A.'s reserve requirement. It
is important to note that, although certain amounts are calculated for reporting purposes, these impacts cannot
be aggregated linearly, given the diversification effect between these same, and also there is a diversity effect
amongst countries all within the same cause (type of risk).
166
Finance Risk Volatility (USDm)
Sensitivity
impact
2013
impact
2012
-10% Equity
(22.1)
(19.8)
Chile
Mexico
Peru
Uruguay
(11.9)
(5.4)
(4.7)
(0.1)
(12.0)
(4.6)
(3.2)
0.0)
+100bps Interest Rates
(27.7)
(30.3)
Chile
Mexico
Peru
Uruguay
(10.7)
(13.8)
(3.2)
(0.3)
(10.8)
(15.7)
(3.8)
(0.4)
-10% Foreign Currency depreciation
(18.6)
(14.3)
Chile
Mexico
Peru
Uruguay
(12.2)
(0.9)
(5.5)
(0.1)
(11.0)
0.2
(3.5)
(0.1)
The greatest effect comes from sensitivity to hikes in interest rates. This is particularly applicable in the case of
Mexico where risk exposure is largely concentrated with Fixed-Income Assets Secondly, we positioned the effect
of price sensitivity with regard to variable-income securities. Here, risk sensitivity was largely concentrated in
Chile. Finally, Chile shows the highest exposure sensitivity to foreign currency declines. This is because the
country´s pension system allows for investments to be made abroad.
1.3.2.
Risk Regarding Guaranteed Minimum Returns
Rules and regulations governing the pension business (excluding Mexico) requires each company to maintain
minimum returns with respect to the funds managed by the rest of the industry. Here, the gap existing between
fund returns provided by SURA Asset Management S.A.'s Business Units and those provided by the rest of the
industry was examined. Should the difference in returns exceed the regulatory thresholds, the Pension Fund
Management firm must reimburse each fund in order to maintain the stipulated limits
The following table shows the effects of any 1 basis point change in the Guaranteed Minimum Return gap. It is
important to note that since average returns compared to the rest of the industry only go back over the last 36
months, as well as the fact that these are very similar to the Companies’ own strategic assets, it is highly unlikely
that the Guaranteed Minimum Returns would ever be transgressed in the short to mid-term It is important to
note that, although certain sums are calculated for reporting purposes, these impacts cannot be aggregated
linearly, given the diversification effect existing between countries and funds.
167
Minimum Return Guarantee Position - December 2013 (USDm)
Sensitivity
GAP (against
minimum)
1bps GAP Impact
Sample
Chile
Fund A
Fund B
Fund C
Fund D
Fund E
3.7%
3.7%
1.7%
1.6%
1.9%
1.9
1.8
3.8
1.7
1.1
36 months
36 months
36 months
36 months
36 months
Mexico
Siefore 1
Siefore 2
Siefore 3
Siefore 4
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Peru
Fund 1
Fund 2
Fund 3
2.1%
3.3%
5.3%
0.6
3.1
0.9
36 months
36 months
36 months
Uruguay
Fund
2.3%
0.6
36 months
168
1.3.3.
Risk of Increases to Provision for Deferred Income
The purpose behind the Provision for Deferred Income is to opportunely recognize said amounts. Here,
commission collections for the period constitute a strong component of financing activities for this same period
as well as financing future expense relating to fund members who cease to pay into their funds. This provision
consists of measuring the expected future expense of non-contributing members (whether these are currently
paying into the funds or not) Here, the present value of the expected expense is exposed to changes in market
interest rates that are used for valuation purposes.
The following table shows the effect of an increase of 100 basis point in the Provision for Deferred Income:
Deferred Income Liability - Interest rate risk volatility (USDm)
Sensitivity
impact
2013
impact
2012
-100bps Interest Rates (DIL Impact)
(1.4)
(1.3)
Chile
Mexico
Peru
Uruguay
(0.7)
0.0
(0.7)
(0.1)
(0.7)
0.0
(0.5)
(0.1)
Importantly, this provision does not apply in the case of Mexico since commissions are charged on managed
assets, and this is collected even when the fund member fails to pay into the fund
1.4.
Investment and Financial Risk Management on the part of Pension Funds
One of the most important processes on the part of the Pension Fund Management firms is handling third-party
funds. The following describes certain general aspects of the investment and risk management processes used as
well as certain governing bodies responsible for such.
1.4.1.
Investment process
The investment portfolios of the funds managed by SURA Asset Management S.A. are built up based on
methodologies for assigning investment assets over the long-term with controlled levels of risk.
Strategic asset allocation lies at the core of this investment process which begins with evaluating key
macroeconomic variables with the support of expert professionals and well-recognized economists who
periodically meet to analyze the performance of different capital markets. This information also includes
numerical estimates of the performance of different classes of assets. Based on market expectations and historic
169
asset performance, asset allocation models are run so as to estimate the relative importance of each type of
investment held in the portfolio so as to maximize expected returns based on their level of risk. This process is
carried out once a year where the overall investment strategy is re-gauged. It is important to note that in
countries with guaranteed minimum returns, certain variables are added to the model, as established by the
corresponding rules and regulations for calculating such returns, so that the allocation model does not deflect
portfolio returns from those legally required.
During the year, tactical asset allocation models are run in order to incorporate the pension management fund´s
short and mid-term vision into their portfolio strategy, this based on macro analyses, the corresponding economic
cycle and the expected level of returns.
Since asset allocation constitutes the main guideline for investments, the corresponding areas run daily security
selections in search of the best market conditions that allow for greater returns on investment.
1.4.2.
Risk Management
Independent risk teams are responsible for controlling and monitoring investment operations, on both a
functional as well as organizational level within the investment departments. These teams are in charge of
conducting permanent follow-ups on the different investment portfolios, monitoring the levels of market, credit,
liquidity and other risks that may have a negative impact on portfolio rates of return. It is the responsibility of the
risk team to sound an alert with regard to any possible failure to comply with both internal and external rules and
regulations as well as to remit such alerts to the Risk Committee so that the respective corrective measures can
be taken.
1.4.3.
Governing Bodies - Investment Management
The Boards of Directors of the different companies constitute the highest decision-making body in the investment
process. It is their responsibility to approve the asset allocation policies, limits, methods, and operating manuals
For this purpose the Board has an Investment Committee, comprised of board members as well as executive
officers from the Investment and Risk Departments This committee is responsible for defining the strategic
allocation of assets, any permitted deviations for such as well as the framework for tactical operations, among
others. The Investment Committee analyzes new investment opportunities which are presented first to the risk
team and then for the approval of the Risk Committee. The functions of the Risk Committee include approving
quotas, new types of operations, markets and assets, evaluating investment overruns and resolving any conflicts
of interest
170
2.
Risk Management Note - Risk to Insurance Business
2.1.
Insurance business profile
The Chilean Insurance company has the highest concentration with regard to the Individual Insurance business,
which can be divided up between the Unit Linked and Universal Life branches The largest volume relates to the
Unit-Linked portfolio, which is an important source of growth for the company, while Universal Life has been
closed (runoff) for over ten years Furthermore, the Life Annuities business was reopened in 2012 (after selling
off its portfolio in 2009). This business is another important source of growth for the company. Traditional
Individual insurance is heavily concentrated in a portfolio of endowment insurance, which was also closed (runoff) more than ten years ago. The Traditional Individual insurance business also consists to a lesser extent of
Temporary Insurance and Individual Health Insurance (covering higher expenses). The Collective Insurance
business is concentrated in Credit Collective Insurance, and to a lesser extent (since it is short term insurance) in
Collective Health (reimbursed expense) and Life Insurance. Finally, Disability and Survivorship insurance declined
significantly during the year, since it has been closed due to the fact that the company has not been awarded
coverage as a result the last three tenders (change in legal provisions that took place five years ago)
The Peruvian Insurance company shows a marked concentration in Life Annuities, which is the most important
source of growth for the company Additionally, there has been a growth in the Traditional Insurance business as
well as with Insurance and Savings Plans Collective insurance shows the highest degree of stability, while that of
Disability and Survivorship insurance has begun to decline due to the fact that the company has not been
awarded coverage as a result of joint tenders (recent changes to legal provisions)
The Mexican insurance company only sells Life Annuity insurance (exclusive business purpose). This business was
reopened during the year (after being closed for more than five years), whereupon it produced a moderate
growth.
Reinsurance is only conducted in Chile and Peru Particularly in Chile, where Collective Insurance business shows a
significant premium assigned as part of the credit insurance portfolio and subsequently the traditional individual
insurance portfolio.
2.2.
Business Risk
Risk to the insurance business relates to changes in variables that could: (1) affect the financial results of the
Company in a particular year (volatility risk), or (2) affect long-term commitments to clients (Risk of Structural
Changes).
2.2.1.
Volatility Risk
From the standpoint of volatility risk, the financial effects (Income after Tax and Equity) over a one-year time
horizon are analyzed here, possible changes to the following items are taken into account:
171
demographics: the effects of a 10 % increase with the longevity, mortality and morbidity rates are
analyzed over a one year period
client factors: the effects of a 10 % increase with the exit rate over a one year period i the case of clients
with savings policies
Changes in fund returns: the effects of a 10 % decline in savings policy funds (Unit-linked policies),
particularly lower management commission income.
The following table shows the effects of Volatility Risk on SURA Asset Management S.A.'s business. It is important
to note that these effects cannot be aggregated given a diversification effect existing between these, and within
the same cause (type of risk type); there is also diversification across countries.
Insurance Volatility Risk - 1 year horizon (USDm)
Variance
impact
2013
impact
2012
+10% Mortality
(2.3)
(3.1)
Chile
Peru
Mexico
(1.0)
(1.2)
0.0
(1.2)
(2.0)
0.0
+10% Morbidity
(3.0)
(5.8)
Chile
Peru
Mexico
(1.9)
(1.2)
0.0
(3.9)
(2.0)
0.0
+ 10% Longevity
(0.7)
(0.6)
Chile
Peru
Mexico
(0.1)
(0.5)
(0.1)
0.0
(0.5)
(0.1)
+10% Lapses
0.3
0.3
Chile
Peru
Mexico
0.3
0.0
0.0
0.3
0.0
0.0
+10% fee (Unit Linked)
(0.5)
(0.4)
Chile
Peru
Mexico
(0.5)
0.0
0.0
(0.4)
0.0
0.0
172
The greatest effects come from demographic risks relating to the coverage provided by various insurance
companies. The most significant of these is the Morbidity Risk. This mainly related to Collective Healthcare
Insurance in Chile, which showed a decline for the year given the fact that a major account with state-owned
companies (covering their employees) was not renewed, as well as Disability and Survivorship insurance in Peru,
which declined due to failing to be awarded coverage during the year (runoff) Additionally, there is a material
mortality risk exposure relating to Disability and Survivorship insurance in Peru (runoff), as well as Life Insurance
in Chile, both businesses showing decline for the aforementioned adjudication reasons. Impacts regarding
Longevity Risk have to do with the volume of each Company’s portfolio.
Regarding the risk of the exit rate increasing with savings policies, this shows a positive effect in the first year
because of the surrender charges associated with these policies in the first years of operation. This positive effect
in the short term would be offset by the negative effect of decreasing the value of the portfolio due to higher
policy exit rates.
Regarding the effect of a decline in savings policy funds, Chile would be impacted, due to its high volume of unitlinked policy portfolio thereby affecting its commission income in the form of a lower policy value.
2.2.2.
Risk of Structural Changes
From the perspective of structural change, the financial effects (Profit after Tax and Equity) as a result of a change
to the most important parameters used in assessing the value of long-term commitments to policyholders, were
analyzed. It is important to note that such a structural effect has implications for volatility risk expectations for
future years (not just the first year), thus affecting the value of long-term reserves for policy portfolios, with the
corresponding impact on the financial statements over one year. In this regard, possible structural changes to
demographics were taken into account, analyzing the effects of a structural 10% increase in longevity, mortality
and morbidity rates.
The following table shows the effects Risk of Structural Changes on SURA Asset Management S.A.. It is important
to mention that these effects cannot be aggregated because of the prevailing diversification effect. On the other
hand, it is important to note that structural changes to demographic parameters respond to phenomena that do
not occur frequently, but nevertheless have a greater impact.
173
Insurance Risk - long term impact (USDm)
Variance
impact
2013
impact
2012
+10% Mortality
(4.9)
(8.0)
Chile
Peru
Mexico
(4.3)
(0.5)
0.0
(4.9)
(3.2)
0.0
+10% Morbidity
(1.5)
(3.7)
Chile
Peru
Mexico
(1.5)
0.0
0.0
(1.5)
(2.2)
0.0
+ 10% Longevity
(29.2)
(24.7)
Chile
Peru
Mexico
(4.0)
(19.1)
(6.1)
(1.3)
(17.7)
(5.7)
The greatest effect comes from Longevity Risk, which is concentrated in each business line in keeping with the
volume of the Life Annuities reserves. This risk increases during the year due to the growth of this business in
Chile and Peru Regarding the Mortality and Morbidity Risks, these are diminished significantly by the run -off with
the Disability and Survivorship insurance portfolio in Peru. As for Chile, both risks remain relatively stable during
the year; both relating to the portfolio of Individual Insurance (Mortality Risk associated mostly with main
coverage, and the Morbidity Risk associated with additional coverage).
2.2.3.
Mitigating Factors in Business Risk
Underwriting policies and reinsurance contracts mitigate the risks that could affect SURA Asset Management
S.A.'s income and equity in Chile and Peru, Here it is worthwhile noting that Life Annuity portfolios are not subject
to reinsurance and depending on the jurisdiction, local rules and regulations allow for risk to be selected by
abstaining from offering the products in certain cases.
The underwriting strategy is designed to avoid the risk of anti - selection and ensure that rates cover the real risk.
Here we have health statements and medical checkups as well regular reviews of claims experience and product
pricing. There are also underwriting limits to ensure proper selection.
The Company's reinsurance strategy includes automatic contracts that protect against the loss frequency and
severity. Negotiated reinsurance includes proportional coverage, excess loss and catastrophic loss
174
2.3.
Financial Risk
Financial Risk for the insurance business relate to changes in financial variables that could directly affect the
Company's results. These include Credit, Market and Liquidity Risk. The following table shows the structuring of
the Companies’ asset portfolios.
Investment Assets - 2013 (USDm)
2.3.1.
Country
Fix Income
Mortgages
Real
Estate
Unit Linked
Funds
TOTAL
%
Chile
% including Unit Linked
% excluding Unit Linked
669.4
50.4%
79.3%
0.0
0.0%
0.0%
175.0
13.2%
20.7%
0.0
484.7
1,329.1
43.0%
0.0%
0.0%
36.5%
Peru
1,066.5
83.9%
83.9%
123.1
9.7%
9.7%
62.7
19.3
0.0
4.9%
4.9%
1.5%
1.5%
0.0%
1,271.5
41.1%
Mexico
490.9
100.0%
100.0%
0.0
0.0%
0.0%
0.0
0.0
0.0
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
490.9
15.9%
TOTAL
2,226.8
72.0%
85.4%
123.1
4.0%
4.7%
237.7
7.7%
9.1%
19.3
0.6%
0.7%
484.7
15.7%
Equity
2013
3,091.6
Credit Risk
Credit risk for the insurance business is analyzed from the following perspectives:
-
Credit risk on portfolio of financial assets
Counter party credit risk on existing accounts receivable
Reinsurance credit risk
2.3.1.1. Credit Risk with Financial Assets
The portfolio of financial assets supporting reserves (with the exception of Unit-Linked policies) and Additional
Funds (Regulatory Capital, Business Capital, etc.) is mostly invested in fixed income instruments, and to a lesser
extent in Derivatives and Structured Notes. The following table shows a breakdown of this portfolio. Total assets
falling in this category for 2013 came to USD$ 2,349.9 million, remaining relatively constant during the year. This
was due to currency depreciation in different countries, the increase in interest rates in Peru and Mexico, which
was partially offset by the increase in the volume mainly with the line of Life Annuities.
175
Credit Risk - Exposure (USDm)
Asset
Class
Derivatives
Fix
Income
TOTAL
0.6
2,297.2
Chile
0.0
0.6
0.0
669.4
1,156.6
471.1
Peru
Mexico
Structure
Notes
2013
TOTAL
Derivatives
Fix
Income
52.1
2,349.9
0.7
2,290.8
53.6
2,345.1
0.0
32.4
19.7
669.4
1,189.6
490.9
0.0
0.7
0.0
494.1
1,257.7
539.0
0.0
27.5
26.1
494.1
1,285.9
565.1
Structure Notes
2012
TOTAL
The following table shows the financial asset portfolio subject to credit risk broken down by industry. Here we can
see that concentrations per industry remain relatively stable from one year to the next. Much of the portfolio is
invested in government bonds, followed by investments in bonds issued by the financial sector. With regard to
the real sector, we have investments in bonds issued by the Manufacturing, Oil and Energy sectors, followed by
bonds issued by the Construction and Materials sector.
Financial Assets subject to Credit Risk, Industry Exposure (USDm)
Manufacturing,
Petroleum &
Energy
Natural
Resources
Other
Financial
Services
Government
Retail &
Wholesale
Construction y
Materials
2012
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.7
0.0
0.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
67.5
36.7
28.8
2.1
217.6
40.0
177.7
0.0
322.1
63.5
249.1
9.5
57.8
30.7
27.1
0.0
345.8
126.4
208.5
10.9
310.9
108.2
202.8
0.0
1,075.5
231.2
330.9
513.3
6.0
0.0
0.0
0.0
0.0
0.0
53.6
0.0
6.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
27.5
26.1
949.0
195.6
304.8
448.7
67.5
36.7
28.8
2.1
217.6
40.0
177.7
0.0
322.1
63.5
249.1
9.5
57.8
30.7
27.1
0.0
345.8
126.4
208.5
10.9
365.2
108.2
231.0
26.1
Asset Class
Financial
Services
Government
Retail &
Wholesale
Construction
y Materials
2013
Derivatives
Chile
Peru
M exico
0.6
0.0
0.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Fix Income
Chile
Peru
M exico
343.4
176.7
166.7
0.0
943.0
195.6
298.8
448.7
Estructurate Notes
46.1
Chile
Peru
M exico
0.0
26.4
19.7
TOTAL
Chile
390.1
176.7
193.7
19.7
Peru
M exico
Manufacturing,
Petroleum &
Energy
Natural
Resources
Other
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
22.4
9.0
11.1
2.4
241.4
39.0
202.5
0.0
318.0
27.8
279.4
10.8
49.1
18.1
31.0
0.0
273.5
61.0
200.0
12.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1,075.5
231.2
330.9
513.3
22.4
9.0
11.1
2.4
241.4
39.0
202.5
0.0
318.0
27.8
279.4
10.8
49.1
18.1
31.0
0.0
273.5
61.0
200.0
12.5
The following table shows the Financial Asset Portfolio subject to credit rating risk (International Scale regardless
of notches). Every country is seen to be relatively concentrated in the Sovereign Risk category: Chile has an AA
sovereign rating, with Peru and Mexico both holding a BBB. It is also worth noting that less than 5% of the
portfolio is invested in bonds with credit ratings lower than BBB. The Unrated Asset Portfolio corresponds to
Mortgage Loans underwritten in Peru which were purchased by the Insurance company in this same country.
176
Financial Assets subject to Credit Risk by Issuers Credit Rating (USDm)
Asset Class
AAA
AA
A
BBB
BB
B
Unrated
AAA
AA
A
2013
BBB
2012
BB
B
Unrated
Derivatives
Chile
Peru
M exico
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.6
0.0
0.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.7
0.0
0.7
0.0
Fix Income
Chile
Peru
M exico
9.5
0.0
9.5
0.0
280.7
267.0
13.8
0.0
325.1
281.9
43.2
0.0
1,480.5
120.6
889.7
470.3
78.2
0.0
77.3
0.9
0.0
0.0
0.0
0.0
123.1
0.0
123.1
0.0
10.8
0.0
10.8
0.0
277.2
263.9
13.3
0.0
218.0
162.3
55.7
0.0
1,621.9
67.9
1,015.9
538.1
65.2
0.0
64.2
1.0
0.0
0.0
0.0
0.0
97.8
0.0
97.8
0.0
Estructurate Notes
0.0
25.7
1.8
24.6
0.0
0.0
0.0
0.0
26.1
12.0
15.5
0.0
0.0
0.0
Chile
Peru
M exico
0.0
0.0
0.0
0.0
6.0
19.7
0.0
1.8
0.0
0.0
24.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
26.1
0.0
12.0
0.0
0.0
15.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
TOTAL
Chile
9.5
0.0
9.5
0.0
306.5
267.0
19.8
19.7
327.0
281.9
45.1
0.0
1,505.1
120.6
914.2
470.3
78.2
0.0
77.3
0.9
0.0
0.0
0.0
0.0
123.8
0.0
123.8
0.0
10.8
0.0
10.8
0.0
303.3
263.9
13.3
26.1
230.0
162.3
67.7
0.0
1,637.4
67.9
1,031.4
538.1
65.2
0.0
64.2
1.0
0.0
0.0
0.0
0.0
98.5
0.0
98.5
0.0
Peru
M exico
2.3.1.2. Credit Risk - Breakdown of Mortgage Loan Portfolio in Peru
The following table shows the Mortgage Loan portfolio of the Peruvian Insurance company, in terms of default
periods and balances. Furthermore, default rates are based on the portfolio´s historic performance. Additionally,
losses given default are calculated depending on mortgage collateral and historic standardization regarding
outstanding debt. Finally, the expected loss for each section is shown.
Mortgages Portfolio - Insurance - 2013 (USDm)
Portfolio
Oustanding Amount
Default probability
Loss given default
Expected Loss
Expected Loss %
No installments in arrears
1 or 2 months in arrears
109.6
1.2%
8.8%
0.1
0.1%
8.7
28.8%
8.8%
0.2
2.5%
3 to 23 months in arrears
4.6
100.0%
10.5%
0.5
10.5%
0.3
100.0%
26.0%
0.1
26.0%
More than 36 months in arrears
0.0
100.0%
100.0%
0.0
0.0%
Total
123.1
0.9
0.7%
2.3.1.3. Impairment of Financial Assets
At the end of each quarter an impairment test is performed on financial assets. Here, variables such as the
difference between book values (amortized cost) and market values are monitored as well as the increase in the
spread as of the time of purchase. In the event that certain pre-defined thresholds are exceeded, an Asset
Impairment Evaluation is performed, in which a credit analysis is carried out on the position held. This can be
done even when the aforementioned thresholds have not been exceeded but rather an alert has been given as a
result of monitoring the credit risk of each company. This credit analysis defines whether an impairment is
applicable No impaired assets were detected for the year.
177
2.3.1.4. Credit Risk to Other Assets
The following table shows Other Assets subject to credit risk such as: Loans and Accounts Receivable, Accounts
Receivable due to Reinsurers, Accounts Receivable due on Insurance Premiums and Cash or Cash Equivalents.
Total Assets in this category for 2013 came to USD$ 88.0 million, remaining relatively constant during the year.
In terms of the impairment to these assets, the only impaired portion found was to accounts receivable due on
insurance premiums in Chile. For 2013, the amount corresponding to the impaired portion came to USD$ 0.06
million, while for 2012 this came to USD$ 0.08 million.
Credit Risk - Other Assets Exposure (USDm)
Loans and Reinsurance Insurance
receivables
Assets
receivables
2013
Asset
Class
TOTAL
Chile
Peru
M exico
24.0
19.3
4.7
0.0
13.6
9.9
3.7
0.0
20.9
10.1
10.8
0.0
Cash and
equivalents
TOTAL
39.3
12.7
16.8
9.8
97.8
52.0
36.0
9.8
Loans and Reinsurance Insurance
receivables
Assets
receivables
2012
27.7
21.8
5.9
0.0
15.2
10.7
4.5
0.0
30.4
9.8
20.6
0.0
Cash and
equivalents
TOTAL
17.5
6.4
11.1
0.0
90.8
48.7
42.1
0.0
2.3.1.5. Credit Risk - Breakdown of Reinsurance Assets
The following table shows a breakdown of Reinsurance Accounts Receivable and Assets (Assigned Reserve);
showing the counter party creditworthiness as well as geographic diversification.
Reinsurance Asset Portfolio 2013 (USDm)
Chile
Reinsurer
Ceded
Receivables Premiums
Peru
Total
Ceded
Mexico
Total
Ceded
Total
Total
Ceded
Total
Rating
Home
Office
A
A+
A+
A
AAA
AA
AAAA
A
A
A+
A+
A+
A+
AABBB+
A
AAAAABBB+
BBB+
USA
France
Barbados
Italy
Germany
Switzerland
Germany
Germany
Ireland
Spain
American Bankers Life Assurance Co.
AXA Corporate Solutions Life Reinsurance Co
Scotia Insurance (Barbados) Ltd**
Assicurazioni Generali SPA
General Reinsurance AG
Swiss Re Life & Health America Inc
M uenchener Rueckversicherungs-Gesellschaft AG
Hannover Ruckversicherung AG
XL RE Latin America LTDA.
M apfre Re Compania de Reaseguros SA
CONVERIUM LTD
Everest Reinsurance Company
QBE Reinsurance Corporation
SCOR Global Life US Reinsurance Co Inc
FOLKSAM ERICA Reinsurance Company
Reaseguradora PATRIA
AON Group Limited
ODYSSEY America Reinsurance corporation
M UTUELLE Centrale de Reassurance
R V VERSICHERUNG AG
LLOYD’'S Syndicate 1400
Sagicor Life Insurance Company *
BF&M Insurance Company Ltd *
0.9
5.4
0.2
2.0
0.8
0.1
0.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
13.7
0.6
4.9
1.0
2.1
1.1
0.2
0.0
0.0
0.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
14.6
5.9
5.1
3.0
2.9
1.2
0.8
0.0
0.0
0.4
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.4
1.1
0.5
0.0
0.4
0.3
0.2
0.1
0.2
0.2
0.1
0.1
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.4
1.1
0.5
0.0
0.4
0.3
0.2
0.1
0.2
0.2
0.1
0.1
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.9
5.4
0.2
2.0
0.8
0.1
0.9
1.1
0.5
0.0
0.4
0.3
0.2
0.1
0.2
0.2
0.1
0.1
0.1
0.1
0.0
0.0
0.0
13.7
0.6
4.9
1.0
2.1
1.1
0.2
0.0
0.0
0.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
14.6
5.9
5.1
3.0
2.9
1.2
1.2
1.1
0.5
0.4
0.4
0.3
0.2
0.2
0.2
0.2
0.1
0.1
0.1
0.1
0.0
0.0
0.0
Total
9.9
24.1
34.0
3.7
0.2
3.7
0.0
0.0
0.0
13.6
24.1
37.7
Colateral
Run-off
Colateral
France
Bermuda
USA
France
USA
M exico
England
USA
France
Germany
England
Caribean
England
Run-off
Run-off
Run-off
impairment to such. Triggers can include legal disputes with third parties, changes in counter party credit ratings
and historic collection experience with specific reinsurers. In the case of SURA Asset Management S.A.'s insurance
companies no impairment was detected on reinsurance assets.
178
2.3.2. Market Risk
The Market Risk for SURA Asset Management S.A.'s Insurance Companies is analyzed from the following
perspectives:
-
Interest rate risk
Currency risk: open position and inflation (deflation)
Exchange rate risk on equity and real estate assets
2.3.2.1. Interest Rate Risk
The risk to the interest rate is analyzed from the following perspectives: (1) accounting records (accounting
mismatches in the equity accounts), and (2) the reinvestment or adequacy of Assets / Liabilities.
2.3.2.1.1.
Interest Rate Risk from the accounting standpoint
Fixed Income Assets for the Insurance Companies are recorded as Available for Sale. Thus interest accruals pass
through the income accounts at their amortized cost with inflation adjustments also passing through the income
accounts. However changes in market interest rates are recorded in the equity accounts (without affecting
income) as unrealized gains or losses, which are reflected in the income accounts when the asset is sold.
Long Term Technical Reserves are recorded at the rate for which the policy is issued (this is an implicit rate
calculated on the ratio between the premium and expected cash flows) and remain fixed throughout the term of
the policy. Thus interest accruals on policies pass through the income accounts based on the level of these rates;
together with inflation adjustments
Consequently, financial results are symmetrical: since the rate of each asset (at amortized cost) and each policy is
fixed. The spread between assets and liabilities is recorded on the income accounts. However, equity is exposed
to fluctuations in market interest rates on assets (even when these are not recognized in the income accounts) as
there are no such market fluctuations in the case of liabilities.
Given the aforementioned accounting mismatch, the following table shows the effects of 100 basis point
increases in interest rates on the equity accounts:
Interest Rate Risk, accounting perspective +100bps (USDm)
Country
Exposure
Duration
TOTAL
Chile
Peru
Mexico
2,349.3
669.4
1,189.0
490.9
9.3
6.9
11.9
After tax P&L
impact
Equity impact
2013
0.0
0.0
0.0
0.0
(172.9)
(49.6)
(82.3)
(41.0)
Exposure
Duration
2,345.1
494.1
1,285.9
565.1
7.9
8.3
12.1
After tax P&L
impact
Equity impact
2012
0.0
0.0
0.0
0.0
(186.5)
(31.5)
(107.0)
(48.0)
179
2.3.2.1.2.
Interest Rate Risk - from the Reinvestment perspective
From the standpoint of matching of rates between assets and liabilities, the following table shows interest
credited to the reserve and accrual rates on the book value of assets. Consequently, the investment margin can
be obtained from the various businesses in terms of currency.
Assets and Liabilities - 2013 (USDm)
Country
Assets (Fair Value)
Assets (Book
Value)
Asset Interest Rate
(Book Value)
Liabilities
Interest
Credited
Chile
Local nominal currency
Local real currency**
USD
844.5
0.0
844.5
0.0
745.1
0.0
745.1
0.0
0.0%
5.3%
0.0%
602.4
0.0
602.4
0.0
0.0%
3.8%
0.0%
Peru
Local nominal currency*
Local real currency
USD*
1,271.5
198.4
449.8
623.3
1,203.7
212.2
406.1
585.5
7.3%
4.3%
6.7%
1,118.0
194.1
348.3
575.7
6.0%
2.9%
5.1%
Mexico
Local nominal currency
Local real currency
USD
490.9
0.0
490.9
0.0
453.1
0.0
453.1
0.0
0.0%
4.5%
0.0%
415.9
0.0
425.8
0.0
0.0%
4.2%
0.0%
* When applicable, includes policy predifine adjustment
** Excludes Unit Linked (Assets and Liabilities at Fair Value through P&L)
To estimate the sustainability of the investment margin (asset interest accrual on the recognition of interest
corresponding to liabilities) a Liability Adequacy Test is performed. This test verifies that flows of assets (including
the proposed reinvestment) in conjunction with premiums payable on existing commitments is sufficient to meet
the commitment set out in the reserve. Should any inadequacy be detected, the reserve must be increased along
with the volume of assets. The following table shows the levels of adequacy.
Test of Adequacy - Insurance Liabilities - 2013 (USDm)
Country
Insurance Liability
Adequacy
Chile
602.4
9.7%
Peru
1,118.0
25.7%
Mexico
415.9
2.1%
2.3.2.2. Currency Risk
Currency Risk for the insurance business is related to potential currency mismatches between assets and
liabilities and changes in currency appreciation / depreciation. Thus, two types of currency risks can be seen: (1)
risks with open positions, and (2) the risk of inflation (deflation). For reference purposes, the following table
shows the position of assets (investment) and liabilities (reserves) divided up between the different currencies.
180
Currency exposure - 2013 (USDm)
Country and currency
Investment
Assets
Exposure
Insurance
Liabilities
Exposure
2013
2.3.2.2.1.
Chile - UF (local real currency)
Chile - Pesos (local nominal currency)
Chile - USD
Chile - Other foreing currencies
Total Chile
844.5
0.0
0.0
484.7
1,329.1
578.3
0.0
0.0
484.7
1,063.0
Peru - Local real currency
Peru - Nuevos Soles (local nominal currency)
Peru - USD
Peru - Other foreing currencies
Total Peru
449.8
198.4
623.3
0.0
1,271.5
348.3
194.1
575.7
0.0
1,118.0
Mexico - UDI (local real currency)
Mexico - Pesos (local nominal currency)
Mexico - USD
Mexico - Other foreing currencies
Total Mexico
490.9
415.9
0.0
0.0
0.0
0.0
0.0
0.0
490.9
415.9
Total - Local real currency
Total - Local nominal currency
Total USD
Total Other foreing currencies
1,785.2
198.4
623.3
484.7
1,342.5
194.1
575.7
484.7
TOTAL
3,091.6
2,596.9
Exchange Rate Risk - Open Position
The following table shows the impact that a 10% drop in the value of the USD$ would have on income after tax as
well the impact on equity. The results of this sensitivity are explained by a greater position of assets over
liabilities in USD.
Sensitivity -10% USD Depreciation - 2013 (USDm)
Country
After tax P&L
impact
Equity impact
2013
Chile
Peru
Mexico
0.0
(4.8)
0.0
0.0
(4.8)
0.0
TOTAL
(4.8)
(4.8)
181
2.3.2.2.2.
Risk of Inflation (Deflation)
The following table shows the impact of a 1% negative change in inflation would have on income after tax and
equity. The results of this sensitivity are explained by a greater position of assets over liabilities in real currency
Sensitivity 1% Deflation - 2013 (USDm)
After tax P&L
impact
Equity impact
2013
Country
Chile
Perú
México
(2.1)
(0.8)
(0.5)
(2.1)
(0.8)
(0.5)
TOTAL
(3.5)
(3.5)
2.3.2.3. Pricing Risks to Equity and Real Estate
Risks relating to pricing for the insurance business relate to maintaining positions in assets that are subject to
changes in market prices. Here positions taken with equity securities are distinguished from those taken with real
estate assets. The following table shows the impact of a 10% drop in the price of the aforementioned assets on
income after tax and equity.
Sensitivity - 10% Asset Value (USDm)
Country - Asset Class
After tax P&L
impact
Equity impact
2013
After tax P&L
impact
Equity impact
2012
Chile Real Estate
Chile Equity
(14.0)
0.0
(14.0)
0.0
(13.1)
0.0
(13.1)
0.0
Peru Real Estate
Peru Equity
(6.3)
(1.9)
(6.3)
(1.9)
(4.5)
(0.8)
(4.5)
(0.8)
Mexico Real Estate
Mexico Equity
0.0
0.0
0.0
0.0
(0.0)
0.0
(0.0)
0.0
Total Real Estate
Total Equity
(20.3)
(1.9)
(20.3)
(1.9)
(17.6)
(0.8)
(17.6)
(0.8)
182
2.3.3. Liquidity Risk
The following table shows the flows of assets and liabilities for periods of 0-12 months and 13-36 months. This
includes liquidity held for immediate use if necessary Total liquidity shows the net interaction between incoming
and outgoing flows, including liquid funds.
Liquidity Risk - Short Term Exposure (USDm)
Country
0 - 12
months
13 - 36
months
0 - 12
months
2013
13 - 36
months
2012
Chile Liquidity
39.8
36.3
39.8
88.6
Assets cashflows
Cash and equivalents
74.3
12.7
144.2
65.6
6.4
133.1
Liabilities and expenses cashflows
47.2
107.8
32.2
44.5
Peru Liquidity
6.7
80.3
14.3
34.2
Assets cashflows
116.2
16.8
214.1
113.0
11.1
166.1
126.3
133.8
109.9
131.9
Mexico Liquidity
2.9
-12.1
-16.9
-8.6
Assets cashflows
21.7
9.8
43.7
10.8
0.0
45.5
28.6
55.8
27.7
54.1
Total Liquidity
39.8
36.3
39.8
88.6
Assets cashflows
74.3
12.7
144.2
0.0
65.6
6.4
133.1
0.0
47.2
107.8
32.2
44.5
183
2.3.4.
Mitigating Factors - Financial Risk
2.3.4.1. Market Risk
Market risk management forms part of ALM (Assets and Liabilities Management) which is a dynamic and
continuous process. This begins with analyzing the liability profile of SURA Asset Management S.A., and
depending on the corresponding risk appetite / return, a strategic asset allocation plan is drawn up, taking into
account the feasibility of implementing such given market conditions (liquidity and depth) and the weight of
existing portfolio of investments (especially in relation to terms and accrual rates) This strategic asset allocation is
reflected in the Company´s investment mandate (or policy), which sets targets, limits, etc.
This investment policy is reviewed annually, and whenever a new type of asset is proposed (which triggers a
special analysis) or whenever there is a material change to business profile.
Additionally, in the case of a material transaction (purchase or sale) that could affect the risk / return profile of
SURA Asset Management S.A. and Subsidiaries, the corresponding analyses are performed to ensure that the
transaction in question is appropriate and the impacts of such are anticipated.
Mitigating market interest rate risk includes taking into account the current position of interest accruing on
liabilities and the adequacy of the accrual structure with regard to the asset portfolio. This aimed at taking
measures to mitigate the reinvestment risk relating to the asset portfolio
Market risk is controlled by monitoring duration mismatches as well accrual rates relating to the asset portfolio.
Likewise, SURA Asset Management S.A.'s business units perform different sensitivity analyses on their
investments with regard to market risk, mainly from changes in interest rates.
Mitigating market risk in the form of price changes mainly focuses on real estate asset management, since SURA
Asset Management S.A.'s business units do not have any material variable-income investments (in addition to
those assigned to the client as part of individual account funds) Here, the concentration of this real estate
portfolio is monitored. Furthermore, lessee creditworthiness and the concentration in each industrial sector are
monitored to mitigate any material impact due to breaches of lease contracts.
2.3.4.2. Credit Risk
Credit risk is managed from two standpoints. The first relates to individual analyses of the creditworthiness of
potential issuers when the corresponding securities are included in the investment portfolio.
This determines whether the issuer is accepted or rejected. The second relates to the analyzing the portfolio on
an aggregate level and takes into account concentration limits per type of fixed-income assets (e.g. limits on bank
/ corporate bonds etc.) as well as issuer constraints depending on their credit risk ratings
This also includes a weighted rating of the corresponding portfolio as well as minimum thresholds both facets of
credit risk management are monitored periodically, so as to take corrective measures in the case of market
movements or equity securities triggering an alert with regard to the limits or targets set.
184
2.3.4.3. Liquidity Risk
Liquidity risk is mitigated by reconciling assets with liabilities from the standpoint of short-term flows In the case
of run-off portfolios, the relationship between liquid assets and commitments on the part of SURA Asset
Management S.A.'s business units is monitored, identifying assets that have become a priority in terms of their
early sales, so as to ensure least impact on accrual rate and block portfolio.
3.
Risk Management Notes - Risks to Fund Management Companies
3.1.
Fund Management Business Profile
The table below contains information regarding SURA Asset Management S.A.'s fund management business
showing individual and institutional funds per business unit. Total Assets under Management for 2013 came to
USD$ 3,828.3 million, 78.5 % of which corresponds to institutional funds and the remaining 21.5 % individual
funds.
Mutual Funds - Business Profile 2013 (USDm)
3.2.
Country
Retail Assets
Under
Management
Institutional
Assets Under
Management
Chile
Mexico
Peru
Uruguay
534.8
174.2
112.1
3.5
35.6
2,813.0
155.1
0.0
Total
824.6
3,003.7
Business Risk
Business Risk for the Fund Management firms relate to changes in variables affecting the Company’s financial
results. Here possible changes are taken into account regarding the following items:
-
Commission income: the effects of a 10% drop in commission income are analyzed.
-
client factors: the effects of a 10% increase in clients transferring out are analyzed
The following table shows the effects of Volatility Risk to SURA Asset Management S.A. It is important to note
that although certain sums are calculated for reporting purposes, the impact of these cannot be aggregated
linearly, given the prevailing diversification effect. There is also a diversification between countries in terms of a
same cause (type of risk).
185
Business Risk Volatility - 1 year horizon (USDm)
Sensitivity
impact
2013
impact
2012
-10% in Fee
(1.5)
(1.3)
Chile
M exico
Peru
Uruguay
(0.2)
(1.1)
(0.2)
(0.0)
(0.1)
(0.9)
(0.2)
0.0
+10% in Lapses
(0.4)
(0.3)
Chile
M exico
Peru
Uruguay
(0.0)
(0.3)
(0.0)
(0.0)
0.1
(0.4)
(0.0)
0.0
The greatest effects correspond to risks with commission income. This sensitivity is generic and could be largely
explained by: (1) a reduction in commission rates (which are low given market competition, etc.); and (2) a drop
in the number of funds existing.
Regarding the risk of the exit rate increasing, its magnitude is related to the surrender rate in each of the markets
where SURA Asset Management S.A. operates, with the greatest risk in Mexico
4.
Risk Management Notes - Risks With Other Companies
The purpose of this section is to supplement the previous risk notes referring to other subsidiaries of SURA Asset
Management S.A. that do not classify in the Pension, Insurance and Funds Management categories. Here, the
Peruvian Mortgage Loan Company and the Chilean Brokerage firm were analyzed
4.1.
Peruvian Mortgage Loan Company
The main business purpose of this company is to place mortgage loans that are then transferred to the insurance
company of said Business Unit, so these securities can be used in support of its Technical Reserves. Consequently
this Mortgage Loan company manages a small residual loan portfolio.
The following table shows the company’s Mortgage Loan portfolio, in terms of default terms and debt.
Additionally, based on the portfolio´s historic performance, the corresponding default rate is calculated. Also,
losses given default are calculated depending on mortgage collateral and standardization history regarding
outstanding debt. Finally, the expected loss for each segment is shown.
186
Mortgages Portfolio - Mortgage Company - 2013 (USDm)
Portfolio
Oustanding Amount
Default probability
Loss given default
Expected Loss
Expected Loss %
No installments in arrears
1 or 2 months in arrears
23.1
1.2%
8.8%
0.0
0.1%
0.4
28.8%
8.8%
0.0
2.5%
0.3
100.0%
10.5%
0.0
10.5%
0.0
100.0%
26.0%
0.0
0.0%
More than 36 months in arrears
0.0
100.0%
100.0%
0.0
0.0%
Total
23.8
0.1
0.3%
4.2.
Chilean Brokerage Firm
The Chilean Brokerage Firm has the following three main business purposes: (1) serve as a vehicle for maintaining
client relationships in certain segments; (2) distribute Open Architecture Funds, and (3) provide brokerage
services for the Chilean Stock Market.
With regard to that stipulated in (2), the company manages open architecture funds amounting to USD$ 136.0
million. The management firms with which it operates are: Black Rock, ING Luxemburg, BTG Pactual Chile and
Principal Chile. With regard to that stipulated in (3) it is worth noting that this firm has only recently been set up
and therefore, based on the Company´s policy, it does not manage a portfolio that could be affected by financial
risks and conflicts of interest.
35.
Information regarding Related Parties
Transactions between related parties include:
-
Loans between related companies: with contractually stipulated terms and conditions for which
interest accruals are based on market rates. All are paid back in the short-term
Financial, management, IT and payroll services
Leases and subleases of office and retail space, as well as re-invoiced public utility bills
corresponding to such.
Cash reimbursements
It is worthwhile noting that all these are considered to be short-term transactions.
Balances are reconciled at the end of each year, in order to eliminate all applicable intercompany transactions.
The exchange difference with recorded rates are charged to the income accounts on the Consolidated Financial
Statements.
The Company performed the following transactions with related parties:
Transaction
Investments
Dividends received
Accounts payable
Reported By:
B.V.
B.V.
SURA Asset Management S.A.
For:
Protección S.A.
Protección S.A.
Value
135,198
4,185
30
187
Suramericana S.A.
Account payable
Expense
Expense
SURA Chile S.A.
Seguros Generales
Suramericana S.A
Suramericana S.A
283
12
7
The following is a breakdown of SURA Asset Management S.A.'s related parties at December 31, 2013:
a)
Companies under the direct control of Grupo de Inversiones Suramericana S.A., the parent company of SURA
Asset Management:
Seguros Generales Suramericana S.A.
Seguros de Vida Suramericana S.A.
Inversiones y Construcciones Estratégicas S.A.S.
Operaciones Generales Suramericana S.A.S. EPS y Medicina Prepagada Suramericana S.A – EPS Sura
Consultoria en Gestion de Riesgos Suramericana S.A.S.
Dinamica IPS S.A.
Servicios de Salud IPS Suramericana S.A.
Seguros de Riesgos Laborales Suramericana S.A. – ARL SURA
Inversura Panama Internacional S.A.
Seguros Suramericana S.A.(Panama)
Suramericana S.A.
Compuredes S.A.
Servicios Generales Suramericana S.A.S.
Integradora de Servicios Tercerizados S.A.S.
b) Companies in which SURA Asset Management S.A. holds a direct stake:
Suam Corredora de Seguros S.A.
AFP Integra
Wealth Management SURA S.A.C.
Tublyr S.A.
Administradora de Fondos de Pensiones Protección
Activos Estratégicos SURA AM Colombia S.A.S.
SURA Asset Management España S.L
SUAM Mexico
SUAM Peru
SURA S.A.
c)
99.98%
44.18%
20%
100%
35.11%
100%
100%
100%
100%
2.78%
Members of the Board of Directors:
Main
David Bojanini García
Gonzalo Pérez Rojas
Miguel Cortés Kotal
Martín Escobari Lifchitz
Ana Capella Gómez-Acebo
Sergio Restrepo Isaza
188
Carlos Jaime Muriel Gaxiola
Marianne Loner
Jaime Humberto López Mesa
Substitute
Ignacio Calle
Fernando Ojalvo
Javier Suárez Esparragoza
Eduardo de Mesquita Samara
Javier Olivares
Carolina Gómez
Carlos Ernesto Santa Bedoya
Eileen Fargis
Luis Fernando Pérez Cardona
The information corresponding to SURA Asset Management S.A. and Subsidiaries´ key personnel is as follows:
Salaries and other
short-term
employee benefits
Colombia
Executive level
Total remuneration
for key personnel
Amount
accruing
-2013
Amount
accruing
- 2012
1,530
1,530
Executive Level
Total
remuneration for
key personnel
Retirement
pensions and
benefits
Employment
Termination
Benefits
Amount
paid 2013
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
-
360,915
-
-
-
-
-
-
360,915
-
-
-
-
-
Salaries and other
short-term
employee benefits
Chile
Other long-term
employee
benefits
Amount
accruing
- 2013
Amount
accruing
- 2012
6,947
6,947
Other long-term
employee
benefits
Retirement
pensions and
benefits
Employment
Termination
Benefits
Amount
paid 2013
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
9,954
1,689
9,487
-
-
-
-
9,954
1,689
9,487
-
-
-
-
Salaries and other
short-term
employee benefits
Other long-term
employee
benefits
Retirement
pensions and
benefits
Employment
Termination
Benefits
189
Mexico
Executive Level
Total
remuneration for
key personnel
Amount
accruing
- 2013
Amount
accruing
- 2012
6,212
6,212
Amount
paid 2013
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
8,876
1,042
-
-
-
-
-
8,876
1,042
-
-
-
-
-
Salaries and other
short-term
employee benefits
Peru
Executive Level
Total
remuneration for
key personnel
Amount
accruing
- 2013
Amount
accruing
- 2012
3,276
3,637
3,276
3,637
Amount
paid 2013
Salaries and other
short-term
employee benefits
Uruguay
Executive Level
Total
remuneration for
key personnel
Amount
accruing
- 2013
Amount
accruing
- 2012
1,114
1,114
Other long-term
employee
benefits
Retirement
pensions and
benefits
Employment
Termination
Benefits
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
694
-
-
-
-
-
694
-
-
-
-
-
Other long-term
employee
benefits
Retirement
pensions and
benefits
Employment
Termination
Benefits
Amount
paid 2013
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
Amount
paid 2013
Amount
paid 2012
1,372
149
83
-
-
-
-
1,372
149
83
-
-
-
-
All those accounts receivable and payable between SURA Asset Management S.A. and Subsidiaries that were
eliminated upon consolidating their financial statements are broken down as follows:
Company
Country
Administradora De Fondos De
Inversión S.A. AFISA Sura
Uruguay
Administradora General De Fondos
Chile
Receivable
Payable
Expenses
Revenues
-
-
-
(64)
52
(762)
4,154
2,493
190
Company
Country
Receivable
Payable
Expenses
Revenues
SURA S.A.
AFAP SURA S.A.
Uruguay
-
(65)
282
-
Afore SURA S.A. De C.V.
Mexico
333
(1,216)
6,719
(2,912)
AFP Capital S.A.
Chile
0
(22)
14,513
(245)
AFP Integra S.A.
Peru
16,252
(204)
750
(559)
Asesores SURA S.A. De C.V.
Mexico
389
-
-
(4,239)
Corredores de Bolsa SURA S.A.
Chile
-
(126)
2,545
(4,498)
Chile
-
-
1
(4,756)
Peru
97
(9)
169
(1)
Holanda B.V
Holland
71
-
-
-
Grupo SURA A.E Chile Holding 1. B.V.
Holland
-
(98)
-
-
Grupo SURA A.E Chile Holding 2. B.V.
Holland
-
(87)
-
-
Holland
15
(63)
-
-
Grupo SURA Latin America Holdings
B.V.
Holland
2,202
(69)
-
-
Hipotecaria SURA E.A.H.
Peru
3,012
(385)
202
(5)
Inverconsa S.A. De C.V.
Mexico
-
-
9
-
Mexamlux S.A.
Luxemburg
-
(1)
-
-
Pensiones SURA Peru S.A.
Peru
-
(36)
-
-
Pensiones SURA S.A. De C.V.
Mexico
-
(143)
1,707
-
Chile
820
(52)
2,676
(5,537)
Seguros SURA S.A.
Peru
388
(18,315)
732
(561)
Peru
-
(0)
-
-
SURA Art Corporation S.A. De C.V.
Mexico
119
-
-
(122)
191
Company
Country
Spain
SURA Asset Management Mexico B.V.
Holland
Colombia
SURA Chile S.A.
Chile
SURA Investment Management S.A. De
Mexico
C.V.
Receivable
Payable
Expenses
Revenues
-
(2,034)
-
-
63
1
-
-
-
(283)
-
-
1,665
-
46
(15,762)
125
(529)
5,380
(3,663)
SURA S.A
Chile
-
-
-
(13)
Peru
-
(1,104)
24
-
25,604
(25,601)
39,908
(40,445)
Total general
Transaction
36.
Total Valor
Reciprocal accounts receivable
25,605
Reciprocal accounts payable
25,599
Investments in Associates
The following is a breakdown of investments held in associates at December 31:
2013
457,820
1,230
3,759
4,674
133
9,213
Fondo de Pensiones y Cesantías Protección S.A.
Inversiones DCV S.A.
Fondos de Cesantías Chile I S.A.
Servicios de Administración Previsional S.A.
DCV Vida. S.A.
Fondos de Cesantías Chile II
Total investments in Associates
476,829
2012
-
Related parties as appearing at year-end for the years in question are listed below:
Name
Main Business
Activity
Registered
Place of
Business
% Stake and
Voting Power
192
Fondo de Pensiones y
Cesantías Protección S.A.
Inversiones DCV S.A.
Fondos de Cesantías Chile
I S.A.
Servicios de
Administración
Previsional S.A.
DCV Vida. S.A.
Fondos de Cesantías Chile
II
Severance and
pension fund
management
Managing
shareholder
register
Severance and
pension fund
management
Voluntary pension
funds
Life Insurance
Severance and
pension fund
management
Colombia
49.36%
Chile
34.82%
Chile
22.6%
Chile
22.64%
Chile
9.95%
Chile
19.74%
SURA Asset Management holds a 49.36% stake in AFP Protección, a fund management firm handling severance as
well as voluntary and mandatory pension funds.
In 2011, Protección S.A. purchased the assets belonging to pension fund management firms in El Salvador, AFP
Crecer, from the Colombian bank, Bancolombia. AFP Protección is headquartered in Medellin, Colombia.
Its shares command a market price of COP 65,000 (USD$ 33.73) and are classified as low liquidity stock on the
Colombian Stock Exchange.
193
The following financial information concerning our associate Fondo de Pensiones y Cesantías Protección S.A.
under local GAAP is summarized as follows:
2013
Total assets
2012
626.756
113.888 -
552.109
75.108
Net assets
512.868
477.001
Operating Revenue
308.795
302.512
Operating Expenses
178.516
204.540
Operating Income
130.279
97.972
Non-Operating Expenses
47.860
47.173
Non-Operating Revenue
5.329
6.212
Net income before tax from continuing operations
87.748
57.011
Income Tax
29.357
21.933
Net Income
58.391
35.078
Total liabilities
37.
Information regarding operating segments
37.1
Segments to be reported
-
For management purposes, SURA Asset Management S.A. is organized into business units based on the services
they provide. These are divided up into the following four reporting segments:
Mandatory Pension Funds: including the companies AFORE SURA S.A. de C.V. (Mexico), AFP Integra S.A. (Peru),
AFP Capital S.A. (Chile) and AFAP SURA S.A. (Uruguay). Their main business activity is collecting and managing the
amounts employees pay into their individual mandatory retirement savings accounts as well as managing and
paying all those benefits required by the local pension systems.
Voluntary Wealth Management: including Administradora General de Fondos S.A. (Chile), SURA Investment
Management S.A. de C.V. (Mexico), Fondos SURA SAF S.A.C. (Peru), and Ahorro Inversión SURA Administradora de
Fondos de Inversión S.A. (Uruguay). Their main business activity is collecting and managing amounts private
individuals pay into their voluntary retirement savings accounts. Also Includes Mutual funds, including Fondos
SURA SAF S.A.C. (Peru), Administradora General de Fondos S.A. (Chile), SURA Investment Management S.A. de
C.V. (Mexico) and Administradora de Fondos de Inversión S.A. (Uruguay). Their main business activity is handling
savings accounts and actively participating on the capital markets.
Life Insurance and annuities: including Seguros de Vida SURA S.A. (Chile), Seguros SURA S.A. (Peru) and Pensiones
SURA S.A. de C.V. (Mexico). Their main business activity is to sell and handle life insurance and life annuities in all
those markets where they are present.
194
Other and Corporate: including Holding SURA S.A. (Chile), Grupo SURA Latin America Holdings B.V. (Holland),
Grupo SURA Holanda B.V. (Holland), Grupo Inversiones Suramericana Holanda B.V. (Holland), SURA Asset
Management España S.L. (Spain) amongst others. Their main business activity is to manage investments.
Senior Management monitors the operating results of the different business units separately for the purpose of
making decisions regarding resource allocation and financial performance. The financial performance of each
business segment is evaluated based on operating profit or loss and is measured consistently with operating
profit or loss disclosed in the consolidated financial statements. The Group's financing (including financial income
and expense) along with income taxes are managed on a centralized basis, since operating segments are not
allocated.
37.2
Income Statement per Segment
2013
CHILE
2013
Pensions
COLOMBIA
Insurance &
Annuities
Voluntary
WM
Other &
Corporate
Pensions
URUGUAY
Insuranc
e&
Annuities
Voluntar
y WM
Other &
Corporate
Insurance &
Annuities
Pensions
EUROPE
Voluntary
WM
Other &
Corporate
Insurance
&
Annuities
Pensions
Voluntary
WM
Other &
Corporate
Gross premiums
-
552,309
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Premiums ceded
to reinsurers
-
(55,589)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net premiums
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Fee and
commission
income
Investment
income
496,720
233,190
-
8,845
2,325
-
-
-
-
25,456
-
45
-
-
-
-
-
7,733
20,131
-
713
-
-
-
-
-
-
-
-
-
-
-
4,729
-
1,519
-
(1)
-
-
-
-
-
-
-
-
-
-
-
-
Gains and losses
at fair value
23,771
25,585
-
-
-
-
-
-
656
-
-
-
-
-
-
-
Other operating
revenue
(999)
(649)
(6,648)
24,090
-
-
-
1,138
-
-
64
-
-
-
-
53
Total operating
revenue
263,695
543,306
2,197
27,127
-
-
-
1,138
26,112
-
109
-
-
-
-
4,782
-
163,851
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,379
358,752
-
-
-
-
-
-
-
-
-
-
-
-
-
-
780
907
161
585
-
-
-
5,325
520
-
133
-
-
-
-
1,867
7,885
16,082
11
2,593
-
-
-
-
1,386
-
892
-
-
-
-
-
92,012
33,829
4,013
61,701
-
-
-
41,561
7,930
-
1,248
-
-
-
-
862
102,056
573,421
4,185
64,879
-
-
-
46,886
9,836
-
2,273
-
-
-
-
2,729
161,639
(30,115)
(1,988)
(37,752)
-
-
-
(45,748)
16,276
-
(2,164)
-
-
-
-
2,053
274
84,471
1
(103)
-
-
-
95
173
-
75
-
-
-
-
35,308
5,471
1,757
489
135
-
-
-
22,202
206
-
25
-
-
-
-
11,341
156,442
52,599
(2,476)
(37,990)
-
-
-
(67,855)
16,243
-
(2,114)
-
-
-
-
26,020
Net realized gains
and losses on
financial assets
available for sale
Claims
Movementspremium reserves
Fee and
commission
expense
Operating
expense
Other operating
and administrative
expense
Total operating
expense
Operating income
Financial income
Financial expense
Profit (loss)
before income tax
on continuing
operations
195
Income tax
29,630
7,543
(2,601)
6,933
-
-
-
2,030
3,814
-
(318)
-
2,944
-
-
(9,855)
Profit (loss)
126,812
45,056
125
(44,923)
-
-
-
(69,885)
12,429
-
(1,796)
-
(2,944)
-
-
35,875
MEXICO
PERU
Pensions
Insurance &
Annuities
Voluntary
WM
Gross premiums
Premiums ceded to
reinsurers
-
20,541
-
-
-
Net premiums
-
20,541
260,737
2013
Fee and commission
income
Investment income
Net realized gains and
losses on financial assets
available for sale
Gains and losses at fair
value
Other &
Corporate
TOTAL
Pensions
Insurance &
Annuities
Voluntary
WM
Other &
Corporate
-
-
199,812
-
-
-
772,662
-
-
772,662
-
-
-
(1,504)
-
-
-
(57,093)
-
-
(57,093)
-
-
-
198,308
-
-
-
715,569
-
-
715,569
-
21,229
-
149,225
3,356
-
-
668,608
3,356
30,119
2,325
704,408
2,240
4,617
224
-
449
3,749
3,326
7,178
10,422
28,497
3,550
12,620
55,089
426
-
60
-
816
-
-
-
1,242
1,519
60
(1)
2,820
87,145
Pensions
Insurance &
Annuities
Voluntary
WM
Other &
Corporate
Total
7,155
-
488
-
-
29,457
-
33
31,582
55,042
488
33
735
(1,658)
(935)
4,966
(716)
1,254
22
1,119
(980)
(1,053
(7,497)
31,366
21,836
271,293
23,500
21,066
4,966
149,774
236,124
3,348
8,330
710,874
802,930
26,720
46,343
1,586,867
-
27,035
-
-
-
123,707
-
-
-
314,593
-
-
314,593
-
24,992
-
-
-
113,801
-
-
1,379
497,545
-
-
498,924
4,852
15
1,016
131
2,970
1,444
-
1,113
9,122
2,366
1,310
9,021
21,819
Operating expense
38,270
235
4,286
1,283
2,341
15,964
1,010
-
49,882
32,281
6,199
3,876
92,238
Other operating and
administrative expense
90,946
726
13,432
15,080
73,865
22,447
3,896
12,761
264,753
57,002
22,589
131,965
476,309
Total operating expense
134,068
53,003
18,734
16,494
79,176
277,363
4,906
13,874
325,136
903,787
30,098
144,862
1,403,883
Operating income
137,225
(29,503)
2,332
(11,528)
70,598
(41,239)
(1,558)
(5,544)
385,738
(100,857)
(3,378)
(98,519)
182,984
Financial income
1,220
37,494
70
7
4,300
53,257
74
255
5,967
175,222
220
35,562
216,971
Financial expense
2,932
-
5,914
-
2,748
1,401
51
2,644
11,357
3,158
6,479
36,322
57,316
135,513
7,991
(3,512)
(11,521)
72,150
10,617
(1,535)
(7,933)
380,348
71,207
(9,637)
(99,279)
342,639
40,574
2,452
(2,678)
162
23,997
-
(208)
5
100,959
9,995
(5,805)
(725)
104,424
94,939
5,539
(834)
(11,683)
48,153
10,617
(1,327)
(7,938)
279,389
61,212
(3,832)
(98,554)
238,215
Total operating revenue
Claims
Movements- premium
reserves
Fee and commission
expense
Profit (loss) before
income tax on
continuing operations
Income tax
Profit (loss)
196
2012
CHILE
2012
Gross premiums
Pensions
COLOMBIA
URUGUAY
Insurance
&
Annuities
Voluntary
WM
Other &
Corporate
Pensions
Insurance
&
Annuities
Voluntary
WM
Other &
Corporate
EUROPE
Pensions
Insurance
&
Annuities
Voluntary
WM
Other &
Corporate
Pensions
Insurance
&
Annuities
Voluntary
WM
Other &
Corporate
0
356,044
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Premiums ceded to
reinsurers
0
(54,190)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Net premiums
0
301,854
0
0
0
0
0
0
0
0
0
0
0
0
0
0
218,079
0
7,175
2,172
68,343
0
0
0
22,461
0
0
0
0
0
0
0
1,817
49,689
0
1,268
0
0
0
10,170
572
0
0
0
0
0
0
0
0
802
0
0
0
0
0
0
0
0
0
0
0
0
0
0
22,861
11,452
0
0
0
0
0
0
1,319
0
0
0
0
0
0
0
(17,264)
(17,479)
(8,915)
15,160
0
0
0
793
0
0
20
0
0
0
0
2,406
225,493
346,318
(1,741)
18,599
68,343
0
0
10,963
24,352
0
20
0
0
0
0
2,406
0
164,576
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(3,221)
122,561
0
0
0
0
0
0
0
0
0
0
0
0
0
0
613
607
93
354
0
0
0
831
353
0
40
0
0
0
0
927
2,220
10,685
4
5,135
0
0
0
0
881
0
3
0
0
0
0
0
Fee and commission
income
Investment income
Net realized gains
and losses on
financial assets
available for sale
Gains and losses at
fair value
Other operating
revenue
Total operating
revenue
Claims
Movementspremium reserves
Fee and commission
expense
Operating expense
Other operating
and administrative
expense
Total operating
expense
Operating income
Financial income
Financial expense
Earnings on
transactions and
acquisitions
Profit (loss) before
income tax on
continuing
operations
Income tax
Profit (loss)
90,735
35,088
3,787
32,732
0
0
0
92,874
12,282
0
322
0
0
0
0
25,945
90,346
333,517
3,884
38,221
0
0
0
93,705
13,517
0
366
0
0
0
0
26,872
135,147
12,801
(5,624)
(9,622)
68,343
0
0
(82,742)
10,835
0
-346
0
0
0
0
(24,466)
0
0
0
0
0
0
0
37
0
0
0
0
0
0
0
47,198
9,274
766
334
2,075
0
0
0
217
0
0
0
0
0
0
0
29,360
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
83,337
144,421
13,567
(5,291)
(17,547)
68,343
0
0
(82,525)
10,835
0
(346)
0
0
0
0
4,894
27,390
7,673
(669)
(10,238)
0
0
0
(1,732)
3,433
0
12
0
0
0
0
(22,887)
117,031
5,895
(4,622)
(7,309)
68,343
0
0
(80,793)
7,402
0
-358
0
0
0
0
27,781
197
MEXICO
2012
Gross
premiums
Premiums
ceded to
reinsurers
Net
premiums
Fee and
commission
income
Investment
income
Net realized
gains and
losses on
financial
assets
available for
sale
Gains and
losses at fair
value
Other
operating
revenue
Total
operating
revenue
Claims
Movementspremium
reserves
Fee and
commission
expense
Operating
expense
Other
operating and
administrative
expense
Total
operating
expense
Operating
income
Financial
income
Financial
expense
Earnings on
transactions
and
acquisitions
Profit (loss)
before
income tax
on continuing
operations
Income tax
Profit (loss)
PERU
TOTAL
Pensions
Insurance
&
Annuities
Voluntary
WM
Other &
Corporate
Pensions
Insurance
&
Annuities
Voluntary
WM
Other &
Corporate
Pensions
Insurance
&
Annuities
Voluntary
WM
Other &
Corporate
0
790
0
0
0
17,261
0
0
0
374,095
0
0
374,095
0
0
0
0
0
(483)
0
0
0
(54,673)
0
0
(54,673)
0
790
0
0
0
16,778
0
0
0
319,422
0
0
319,422
242,614
0
12,421
0
114,959
0
0
0
666,455
0
19,596
2,172
688,223
0
20,473
449
0
2,558
(528)
3,435
0
4,948
69,634
3,883
11,438
89,903
0
2,671
0
0
0
(368)
0
0
0
3,105
0
0
3,105
24,767
0
416
0
(9)
11,535
0
0
48,939
22,986
416
0
72,341
1,402
(5,771)
(2,034)
7,660
976
32,277
56
14
(14,886)
9,027
(10,872)
26,034
9,302
268,783
18,163
11,252
7,660
118,484
59,693
3,491
14
705,456
424,174
13,023
39,643
1,182,296
0
24,690
0
0
0
10,127
0
0
0
199,393
0
0
199,393
0
8,149
0
0
0
0
0
0
(3,221)
130,710
0
0
127,489
65,979
0
1,485
53
3,799
26
0
51
70,745
633
1,619
2,218
75,214
15,356
85
10,949
1,874
(4,520)
4,530
984
0
13,936
15,300
11,939
7,009
48,184
55,901
443
2,825
5,428
57,446
8,761
3,459
1,992
216,364
44,292
10,393
158,971
430,020
137,236
33,366
15,259
7,355
56,725
23,444
4,442
2,044
297,824
390,328
23,951
168,197
880,300
131,547
(15,204)
(4,007)
304
61,760
36,249
(951)
(2,029)
407,632
33,846
(10,929)
(128,554)
301,996
0
14,691
46
0
0
0
0
0
0
14,691
47
47,235
61,972
0
0
6
0
0
0
0
0
9,274
766
340
31,652
42,032
0
0
0
0
0
0
0
0
0
0
0
83,337
83,337
131,547
(15,204)
(4,001)
304
61,760
36,249
(951)
(2,029)
398,358
47,771
(11,222)
(29,634)
405,272
Total
41,793
624
298
149
22,456
0
112
17
95,071
8,297
(247)
(34,691)
68,430
89,754
(15,827)
(4,298)
156
39,304
36,248
(1,063)
(2,046)
303,286
39,474
(10,975)
5,057
336,842
198
38.
Earnings per share
Basic earnings per share
2013
2012
From continuing operations
0.12
0.29
From continuing operations
-
-
0.12
0.29
Total basic earnings per share
38.1 Basic earnings per share
Earnings and weighted average number of ordinary shares used in calculating basic earnings per share are as
follows:
2013
Results for the period
Weighted average number of ordinary shares for the purposes of
basic earnings per share are shown as follows:
2012
238,215
336,842
1,912,912
1,179,873
The Company has no commitments that could result in dilution earnings per share.
39.
Commitments and contingencies
Contingency for legal claims
At December 31, 2013, the Company has several pending lawsuits related to its business activities which, in the
opinion of management and its legal counsel, will not result in additional liabilities to those already recorded by
the Company. And hence, an additional provision is not considered to be necessary.
Guarantees
The Company granted the following guarantees at December 31, 2013:
The Company guaranteed Administradora de Fondos de Cesantía de Chile S.A. for an amount of UF 400,000, to
ensure compliance with the Servicing Agreement Unemployment Insurance. At December 31, 2013 remains a
guarantee for this item for USD$ 521.
The Company shall provide a guarantee in favor of the Superintendencia de Bancos, Seguros y AFP in Peru, by
means of an unconditional and irrevocable bank guarantee letter, issued by a local bank or foreign bank of
recognized solvency at the beginning of each quarter calendar, in an amount not less than 0.5 percent of the
value of each Fund, less the value of the reserve calculated at the last day of the previous quarter, with a validity
of no less than 95 calendar days. At December 31, 2013 letters of guarantee are kept for this item for USD$
79,642.
199
40.
Additional information
Personnel Structure
The following is a breakdown of the staff employed by SURA Asset Management S.A. and Subsidiaries
Number of persons employed at year-end
Men
Women
Total
149
54
203
Administrative personnel
1,009
1,276
2,285
Sales personnel
2,002
3,100
5,122
Total
3,180
4,430
7,610
Senior Management
Number of persons employed at year-end
Men
Women
Total
Senior Management
119
47
166
Administrative personnel
749
959
1,708
1,766
2,654
4,420
Other
4
5
9
Total
2,638
3,665
6,303
Sales personnel
Information regarding the Parent company’s governing bodies
For the year ended December 31, 2013, the members of the Parent company's Board of Directors had not been
paid any compensation nor provided with advanced payments, loans, pension plans, and life insurance from the
Company.
The Board of Directors of SURA Asset Management S.A. and Subsidiaries are responsible for formulating the
Company´s main business guidelines and making key decisions, which in some cases correspond to guidelines
received from its Parent company Headquarter in Colombia.
41.
Events occurring subsequent to the reporting period
No significant events have occurred subsequent to the reporting period that could affect the financial statements
herein reported.
200

SURA Asset Management S.A. and Subsidiaries Consolidated

Transcription

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