Fitch Ratings has affirmed
Fitch also affirmed the senior unsecured notes at 'BB+' with a Recovery Rating of 'RR4'. The rating Outlook for the IDRs is revised to Stable from Negative.
The Stable Outlook of Grupo Sura's IDRs reflects significant reliance on dividends from
Fitch has affirmed
Key Rating Drivers
Grupo Sura
Multijurisdictional SROE: Grupo Sura's sector risk operating environment (SROE) score of 'bb+' with High Importance reflects the weighted average of the implied OEs of the jurisdictions where it operates. Grupo Sura is an international group based in
Fitch's assessment also takes into account the entity's other assets in additional jurisdictions with stronger OEs, which partially preserves the issuer's capacity to service its obligations in the relevant currency in the event of sovereign default.
Diversified Business Profile: Grupo Sura's IDRs are based upon its standalone credit profile (SCP) and reflect its diversified business profile with dominant local franchises and revenue diversification in strongly regulated financial industries, including pension funds, banking and insurance services, in several Latin American countries. The SCP is below the implied SCP as it is aligned with, and limited by, the assigned SROE score of 'bb+' and
Sura AM
SROE Stable: Fitch employs a blended approach to assess the sector risk operating environment (SROE) score, considering the countries where Sura AM operates. This assessment is weighted by each country's EBITDA generation and the volume of assets under management (AUM). Additionally, the SROE has minimal exposure to deterioration in investor confidence due to its stable and highly regulated business.
Standalone Credit Profile Drives IDRs: Sura AM's Long-Term IDRs are based on its SCP, which is one notch above the assigned SROE score of 'bbb-' and three notches above
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Grupo Sura
A weaker assessment of Grupo Sura's multijurisdictional SROE due to a sovereign downgrade in
A material reduction in dividends flows from key subsidiaries due to regulatory restrictions on the banking business or deterioration in financial profiles-that negatively impacts debt service, mainly at Bancolombia;
Assumption of new debt to significant levels, resulting in a substantial weakening of financial leverage, interest coverage, and liquidity.
Sura AM
Adverse regulatory changes in the pension fund system in the jurisdictions where the company operates;
Sovereign downgrades in key jurisdictions of operations, particularly
A downgrade of the company's SROE due to EBITDA re-composition or reduced cash flows across operating jurisdictions;
----Sura AM's credit metrics deteriorating such that its debt-to-adjusted FEBITDA remains consistently above 3.0x, or adjusted FEBITDA-to-financial-expense remains well below 6.0x.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Grupo Sura
Grupo Sura's IDRs could be upgraded with a combination of (i) improved multijurisdictional SROE, (ii) an upgrade of the Colombian sovereign rating, and (iii) strengthened credit quality at key subsidiaries.
Sura AM
While upside is limited, an upgrade could occur if Sura AM's SROE score improves to 'bbb' and its financial profile strengthens consistently, with gross debt to FEBITDA below 1.5x and FEBITDA to interest expense above 12.0x, on a sustained basis.
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
Grupo Sura's global senior unsecured long-term debt is rated at the same level as its Long-Term IDR, as the likelihood of default on the notes is the same.
Sura AM's senior unsecured bond rating corresponds with the company's Long-Term IDR, given the probability of default is the same as that of the issuer.
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
The ratings on Grupo Sura's senior unsecured debt would move in line with its global IDRs, respectively.
Sura AM's senior unsecured debt would generally move in line with its Long-Term IDR.
ADJUSTMENTS
Grupo Sura
The Standalone Credit Profile has been assigned below the implied Standalone Credit Profile due to the following adjustment reason(s): Sector Risk Operating Environment / Sovereign Rating Constraint (negative).
The Business Profile score has been assigned below the implied score due to the following adjustment reason(s): Business Model (negative).
Sura AM
The Sector Risk Operating Environment score has been assigned above the implied score due to the following adjustment reason: International operations, divergence between domicile and business activity (positive).
The Earnings & Profitability score has been assigned below the implied score due to the following adjustment reason: Revenue Diversification (negative).
The Funding, Liquidity & Coverage score has been assigned above the implied score due to the following adjustment reason: Historical and future metrics (positive).
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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