Fitch Rates Grupo Sura Sr Unsecured Notes 'BBB'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned a 'BBB' rating to the new proposed senior unsecured notes to be issued by Gruposura Finance for an expected amount of about USD540 million. The new notes will be unconditionally guaranteed by Grupo de Inversiones Suramericana S.A. (Grupo Sura ('BBB'/Stable Outlook). Proceeds are expected to be used to refinance existing debt.

A complete list of Fitch's ratings on Grupo Sura follows at the end of this release.

Key Rating Drivers

Investment Portfolio Credit Quality:

Sura Asset Management S.A. (SUAM) and Bancolombia S.A. are the two largest sources of cash flow to Grupo Sura. Both issuers are rated 'BBB+'. SUAM has a sound business profile and generates stable cash flow. It is the largest pension fund manager in Latin America, operating in six countries. Bancolombia has operations in seven Latin American countries and is the leading bank in Colombia.

Stability of Dividends:

Grupo Sura received USD291 million in dividends during 2015, an increase of about 33% over the prior year. The financial and insurance segments are expected to be the main sources of cash dividends in the medium term.

Growth Strategy:

In September 2015, Grupo Sura increased its controlling position in SUAM to 71.38% from 67.05% and also announced the acquisition of RSA Insurance Group plc in Latin America. In addition, the company exercised its call option to acquire an additional 7.3% stake in SUAM in February 2016. Fitch views these acquisitions as positive from a strategic point of view for Grupo Sura, as it expands its insurance operations to other Latin American countries where it already has a presence.

Business Deleverage Expected:

The company's capacity to maintain strong loan-to-value (LTV) metrics is incorporated as a key rating factor that Fitch estimates will be at about 15.9% post-transaction on a total debt of about USD1.4 billion. Fitch believes Grupo Sura has the flexibility to reduce leverage in the medium term to levels consistent with its rating category. We expect Grupo Sura's net leverage to be in the 4x to 5x range during 2016-2017, with a trend toward reducing leverage in the following years.

Adequate Interest Coverage and Liquidity:

Grupo Sura's dividend stream has had low volatility in recent years, which, along with a manageable debt structure profile, allows the company to adequately cover its debt service and dividend payments with its dividend inflows. Fitch expects dividends-to-gross interest to be in the 3x to 4x range in 2016-2017. The company has maintained historically low levels of cash relative to its short-term debt. This is compensated for by the stable dividend income and Grupo Sura's ability to access alternative sources of liquidity.

KEY ASSUMPTIONS:

Fitch's key assumptions within the rating case for Grupo Sura include:

--Total dividends received will reach COP955 billion in 2016, led by an increase in Grupo Sura's stake in SUAM;

--Dividends will record a compound annual growth rate (CAGR) between 3%-6% in 2017-2019 in COP terms;

--Dividends from Bancolombia and SUAM will represent around 70% of total dividends received by Grupo Sura;

--Net leverage levels around 4x to 5x during 2016-2017;

--Interest coverage around 3x to 4x during 2016-2017.

Rating Sensitivities

Positive Rating Actions: Developments that may, individually or collectively, lead to an upgrade include the completion of the announced investments and interest coverage around 3.5x on a sustained basis. A positive review by Fitch of Bancolombia or SUAM's credit quality could also lead to a positive rating action.

Negative Rating Actions:

Developments that may lead to a negative rating action include a downgrade of Bancolombia or SUAM's Issuer Default Ratings. Weakening liquidity and consistent deterioration in net leverage metrics, reaching levels consistently above 5x and LTV consistently at levels above 20%, could also result in a negative rating action.

Fitch currently rates Grupo Sura as follows:

Grupo Sura

--Long-term foreign currency IDR 'BBB';

--Long-term local currency IDR 'BBB';

--COP250 billion local unsecured bonds due 2019-2049 'AAA(Col)';

--Local bond and commercial paper program, for a total combined amount of COP1.3 trillion 'AAA(col)'/'F1+(col)'.

Gruposura Finance

--USD300 million senior unsecured bonds due 2021 'BBB'.

Date of Relevant Committee: Feb. 19, 2016

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002529

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160414006620/en/

Fitch Ratings
Primary Analyst
Johnny Da Silva
Director
+1-212-908-0367
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Jorge Yanes
Director
+571-326-9999 Ext. 1170
or
Committee Chairperson
Joseph Bormann, CFA
Managing Director
+1-312-368-3349
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: [email protected]

Source: Fitch Ratings

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