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Transcript of MANAGEMENT PRESENTATION. Table of Contents 1. Overview 3. Mandatory Pension 4. Voluntary Product...
MANAGEMENT PRESENTATION
Table of ContentsTable of Contents
1. Overview1. Overview 3. Mandatory Pension 3. Mandatory Pension 4. Voluntary Product4. Voluntary Product5. Severance Funds 5. Severance Funds
6. Investment Management (IM)6. Investment Management (IM)
2. Strategy2. Strategy
8. Main Challenges8. Main Challenges
7. Financial Information7. Financial Information
9. Appendix9. Appendix
AFP SHAREHOLDERS
• Grupo de Inversiones Suramericana S.A 48.35%• Bancolombia S.A. 24.64%, • Colsubsidio 18.54%, • Other 112 shareholders 8.46%
• Grupo AVAL (20%)• Banco de Bogotá (35.28%)• Banco de Occidente(23.10%)• Fiduciaria Bogotá y Fiduciaria de Occidente
• Grupo BBVA 99,95%
• In process of acquisition by GRUPOSURA
• Grupo Colpatria PE unit• Palmfund PE• Linzor Capital
• Part of Old Mutual Group
OverviewOverview
More than 1.700 employees working for the Future Economic Security of more than 2.600.000 affiliates in Colombia.
No. 1 in Satisfaction levels for affiliates and employers in 2010
•82,9 %Affiliates•82,6 % Employers
• No. 1 Historical Returns. Real return of 10,63% / year• No. 2 Market Share in AUM, US$ 15,7 BN
• AAA Rating in Funds, M1 as Mangers of Investment Assets• ISO 9001 Version 2000 Certified
Acquisition of AFP CRECER (El Salvador) – Est. process finished by August 2011
•360 Employees•US$ 2,5 BN in AUM•53% Market Share with 1.000.000 + affiliates•No. 1 Historical Returns and Customer Satisfaction
PROTECCION COLOMBIA
OverviewOverview
MANDATORY PENSION FUNDS:
• AUM:• Affiliates:• Historical Returns:• 3 Years:
Ranked # 2Ranked # 2Ranked # 1Ranked # 1
25,5 % Market Share.21 % Market Share.20,62 % Per year.15,75% Per year.
$US 13,353 Million (Sep 11)2,0 Million Affiliates (Feb-11)10,63% Real11,23% Real
SEVERANCE FUNDS:
• AUM:• Affiliates:• Collection 2011:• Historical Returns:
Ranked # 2Ranked # 3Ranked # 2Ranked # 2
26,1 % Market Share.20 % Market Share.28 % Market Share.14,69 % Per year.
$US 822 Million (Sep 11)1,2 Million Affiliates (Feb-11)$US 407 Million (Jan–Feb 11)5,19 % Real
VOLUNTARY FUNDS:
• AUM:• Affiliates:
Ranked # 2Ranked # 1
30,8 % Market Share.31 % Market Share.
$US 1,529 Million (Sep 11)116,054 Affiliates (Feb 11)
Organizational StructureOrganizational StructureBOARD OF DIRECTORS
RISK COMMITTEE AUDIT COMMITTEE
SOCIAL RESPONSIBILITY COMMITTEE
MANAGEMENT AND GOVERNANCE COMMITTEE
EXECUTIVE PRESIDENT
AUDIT DEPARTMENT
CHIEF MARKETING OFFICER
CHIEF ADMINISTRATIVE AND HR OFFICER
CHIEF OPERATIONS OFFICER
CHIEF FINANCIAL OFFICER
CHIEF COMMERCIAL OFFICER
CHIEF PLANNING, AND RISK MANAGEMENT CHIEF IT OFFICER CHIEF LEGAL OFFICER
Antioquia Regional Manager
Bogotá Regional Manager
Bogotá Central Regional Manager
Caribe Regional Manager
Occidente Regional Manager
Employees 1739 100%Administrative and Operational 608 35%Commercial 1063 61%Aprentices and trainees 68 4% DIRECCION GENERAL 398 23%Bogotá Regional 316 18%Bogotá Central Regional 290 17%Antioquia Regional 330 19%Occidente Regional 242 14%Caribe Regional 163 9%
• 5 Regional Offices
• 27 Cities
• 26 Sales Offices
• 17 Customer Service Branches
• 18 Multi Activity Offices
Marketing StrategyMarketing Strategy
PRODUCTS
I. FOR INDIVIDUALS: Mandatory Pensions
Severance Fund
Voluntary Savings
II. FOR COMAPANIES: Mandatory DC Corporate and State
Companies Plans
Mandatory Severance Funds for State Companies
Our Mission:To be allied with our affiliates and employers in the construction of their future financial security through a comprehensive range
of funds, insurance and financial services, adapted to their life cycle needs.
DISTRIBUTION CHANNELS
I. INTERNAL (FTE)
Specialized Channels for different segments of individuals/employers.
Corporate
State Owned Companies and Government.
Medium Size Companies
Small Size Companies and Independent Individuals.
Big Labor Outsourcers
II. EXTERNALBrokers
Agents
III. VIRTUAL & SERVICE CHANNELSProtección Branches
Contact Center
Web Services
ALLIANCES AND SYNERGIES
I. INSURANCE (w/Suramericana) Complementary D&S Insurance
(Protección Vida)
II. CREDIT (w/ Bancolombia) Loans to employers for Severance
Collection.
Loans to individuals with savings as Collateral
III. OPERATIONAL IT and Operational alliances with
Suramericana, Grupo Bancolombia and Enlace Operativo to improve Operational effectiveness.
SegmentationSegmentation
AFFILIATES EMPLOYERS20
- 35
35 -
4545
- 65
65 +
LIFE CYCLE
VALU
E
CORPORATEMEDIUMMICRO
GOVERNMENTOUTSOURCING
TYPE
Benefits of Segmentation:•Specialized Product Offer•Increased Coverage of Clients•Agents Profiles and compensation adjusted to market segments
VIP
VALUE
ENTREPRENEUR
Customer SegmentationCustomer Segmentation
CORPORATE PUBLIC OUTSNG. MEDIUM MICRO TOTAL
EMPLOYERS (M) No. Companies 3.1 3.0 11.7 36.6 326.8 381.3 Part (%). 0.8% 0.8% 3.1% 9.6% 85.7% 100.0%
AFFILIATES (M) VIP 14.3 3.4 1.1 6.4 7.2 32.3 1.2% Value 14.1 3.1 1.2 5.9 4.7 29.0 1.1% Entrepreneur 465.7 53.2 369.9 407.0 1,255.8 2,552.1 97.7% Total 494.0 59.7 372.2 419.3 1,267.7 2,613.4 100% Part.(%) 18.9% 2.3% 14.2% 16.0% 48.5% 100.0%
REVENUES (US$MM) VIP $16.4 $3.6 $2.2 $7.7 $9.8 $40.6 26.0% Value $7.0 $1.6 $1.0 $3.0 $1.8 $14.5 9.3% Entrepreneur $39.4 $5.1 $17.5 $24.2 $12.8 $100.0 64.1% Total $62.8 $10.2 $20.7 $35.0 $24.4 $156.1 100% Part.(%) 40.2% 6.5% 13.3% 22.4% 15.6% 100.0%
7,268
10,049
12,823 13,354
38.3%
27.6%
4.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-
2000.0
4000.0
6000.0
8000.0
10000.0
12000.0
14000.0
16000.0
Sep_2008 Sep_2009 Sep_2010 Sep_2011
AUM & Var.
Mandatory Pension Mandatory Pension
SYSTEM: AUM
Market Share AUMPROTECCIÓN: AUM
USD Millones
27.4% 26.7% 27.4% 27.8%
24.7% 25.7% 25.6% 25.5%
16.8% 16.4% 16.0% 15.8%14.4% 14.4% 14.3% 14.2%
11.9% 11.8% 11.6% 11.6%
4.8% 5.0% 5.1% 5.2%0%
5%
10%
15%
20%
25%
30%
Sep_2008 Sep_2009 Sep_2010 Sep_2011Porvenir Proteccion HorizonteColfondos ING Skandia
1 USD = 1.915 COP
System: Market Share Affiliates: 2,082,194System: Market Share Mandatory Collection
29.8%31.3% 31.8% 32.4%
23.8% 23.3% 22.9% 23.7%
16.4% 16.0% 15.9% 15.4%14.3% 13.8% 14.2% 13.8%
11.9% 11.6% 11.3% 10.7%
3.8% 4.0% 3.9% 4.1%0%
5%
10%
15%
20%
25%
30%
35%
Sep_2008 Sep_2009 Sep_2010 Sep_2011Porvenir Proteccion HorizonteColfondos ING Skandia
Mandatory Pension:Mandatory Pension: Proteccion + INGProteccion + ING
1 USD = 1.915 COP
10,753
14,675
18,658 19,453
36.5%27.1%
4.3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-
5000.0
10000.0
15000.0
20000.0
25000.0
Sep_2008 Sep_2009 Sep_2010 Sep_2011
AUM & Var.
PROTECCIÓN + ING: AUM
USD Millones
27.4% 26.7% 27.4% 27.8%36.6% 37.5% 37.2% 37.1%
16.8% 16.4% 16.0% 15.8%14.4% 14.4% 14.3% 14.2%
4.8% 5.0% 5.1% 5.2%0%
5%
10%
15%
20%
25%
30%
35%
40%
Sep_2008 Sep_2009 Sep_2010 Sep_2011Porvenir Proteccion+ING HorizonteColfondos Skandia
Market Share AUM
System: Market Share Mandatory Collection System: Market Share Affiliates: 3,140,550
29.8% 31.3% 31.8% 32.4%
35.7% 34.9% 34.2% 34.3%
16.4% 16.0% 15.9% 15.4%14.3% 13.8% 14.2% 13.8%
3.8% 4.0% 3.9% 4.1%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Sep_2008 Sep_2009 Sep_2010 Sep_2011Porvenir Proteccion+ING HorizonteColfondos Skandia
15.7% 15.9% 16.1% 16.3%
19.0% 18.4% 18.2% 17.7%
29.1%30.1% 30.7% 31.8%
35.4% 34.7% 34.2% 33.4%
0.9% 0.9% 0.8% 0.8%0%
5%
10%
15%
20%
25%
30%
35%
40%
Feb_2008 Feb_2009 Feb_2010 Feb_2011Colfondos Horizonte PorvenirProteccion+ING Skandia
PROTECCIÓN: AUM Market Share AUM
USD Millones
Voluntary Product Voluntary Product
955.51,166.5
1,418.61,529.7
22.1% 21.6%
7.8%
0%5%10%15%20%25%30%35%40%45%50%
- 200.0 400.0 600.0 800.0
1000.0 1200.0 1400.0 1600.0 1800.0
Sep_2008 Sep_2009 Sep_2010 Sep_2011
AUM % Var.
36.9% 36.6% 36.5% 36.7%
29.1% 29.9% 30.0% 30.8%
19.7% 18.9% 19.1% 18.7%
3.2% 4.1%
5.1% 5.0%5.6%4.9%
4.5%4.5%5.5%
5.6%4.7%
4.3%0%
5%
10%
15%
20%
25%
30%
35%
40%
Sep_2008 Sep_2009 Sep_2010 Sep_2011Skandia Proteccion PorvenirING Colfondos Horizonte
1 USD = 1.915 COP
Market Share AffiliatesPROTECCIÓN: Affiliates
99,423 104,956112,491
122,107
5.6%7.2%
8.5%
0%
2%
4%
6%
8%
10%
12%
14%
-
20000.0
40000.0
60000.0
80000.0
100000.0
120000.0
140000.0
Sep_2008 Sep_2009 Sep_2010 Sep_2011
Affiliates % Var.
PROTECCIÓN: AUM Market Share AUM
USD Millones
Voluntary Product: Voluntary Product: Proteccion + ING Proteccion + ING
1 USD = 1.915 COP
Market Share Affiliates
1,060.5
1,325.6
1,661.71,780.1
25.0% 25.4%
7.1%
0%5%10%15%20%25%30%35%40%45%50%
- 200.0 400.0 600.0 800.0
1000.0 1200.0 1400.0 1600.0 1800.0 2000.0
Sep_2008 Sep_2009 Sep_2010 Sep_2011
AUM % Var.
36.9% 36.6% 36.5% 36.7%
32.3% 34.0% 35.1% 35.9%
19.7% 18.9% 19.1% 18.7%
5.6%
4.9% 4.5%
4.5%
5.5%
5.6% 4.7%
4.3%0%
5%
10%
15%
20%
25%
30%
35%
40%
Sep_2008 Sep_2009 Sep_2010 Sep_2011Skandia Proteccion+ING PorvenirColfondos Horizonte
16.4% 17.2%
10.7% 10.6%12.9% 12.4%
13.4%12.2%
23.2%20.6% 22.3% 22.9%
32.3%34.5% 35.9% 36.3%
15.1%15.2%
17.7% 18.0%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Feb_2008 Feb_2009 Feb_2010 Feb_2011Colfondos Horizonte PorvenirProteccion+ING Skandia
PROTECCIÓN + ING: Affiliates
112,885 119,771 126,196136,611
6.1%5.4%
8.3%
0%
2%
4%
6%
8%
10%
12%
14%
-
20000.0
40000.0
60000.0
80000.0
100000.0
120000.0
140000.0
160000.0
Feb_2008 Feb_2009 Feb_2010 Feb_2011
Affiliates % Var.
Market Share AUMPROTECCIÓN: AUM
USD Millones
Severance FundsSeverance Funds
537.1
670.4
798.5 822.4
24.8%19.1%
3.0%
0%
10%
20%
30%
40%
50%
60%
70%
- 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0
Sep_2008 Sep_2009 Sep_2010 Sep_2011
AUM % Var.
31.4% 32.0% 32.8% 33.4%
24.4% 25.4% 25.7% 26.1%
18.8% 17.8% 17.1% 16.6%12.4% 12.4% 12.3% 11.8%
10.7% 10.1% 10.0% 9.9%2.2% 2.2% 2.2% 2.2%0%
5%
10%
15%
20%
25%
30%
35%
40%
Sep_2008 Sep_2009 Sep_2010 Sep_2011Porvenir Proteccion HorizonteING Colfondos Skandia
1 USD = 1.915 COP
Market Share AffiliatesPROTECCIÓN: Affiliates
970,0751,053,267 1,034,433
1,114,222
8.6%
-1.8%
7.7%
-10%
0%
10%
20%
-
250000.0
500000.0
750000.0
1000000.0
1250000.0
Sep_2008 Sep_2009 Sep_2010 Sep_2011
Affiliates % Var.
810.0
998.3
1,179.9 1,193.0
23.2%18.2%
1.1%0%
10%
20%
30%
40%
50%
60%
70%
-
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
Sep_2008 Sep_2009 Sep_2010 Sep_2011
AUM % Var.
Market Share AUMPROTECCIÓN: AUM
USD Millones
Severance Funds: Severance Funds: Proteccion + ING Proteccion + ING
1 USD = 1.915 COP
31.4% 32.0% 32.8% 33.4%
36.9% 37.9% 38.0% 37.9%
18.8% 17.8% 17.1% 16.6%
10.7% 10.1% 10.0% 9.9%
2.2% 2.2% 2.2% 2.2%0%5%
10%
15%
20%25%
30%35%
40%
Sep_2008 Sep_2009 Sep_2010 Sep_2011Porvenir Proteccion+ING HorizonteColfondos Skandia
1,749,319 1,859,290 1,938,490 1,886,157
6.3%4.3%
-2.7%
-10%
0%
10%
20%
- 250000.0 500000.0 750000.0
1000000.0 1250000.0 1500000.0 1750000.0 2000000.0 2250000.0
Feb_2008 Feb_2009 Feb_2010 Feb_2011
Affiliates % Var.
Market Share AffiliatesPROTECCIÓN: Affiliates
12.4% 12.7% 13.4%16.2%
21.1% 21.8% 22.9% 23.0%
30.8% 30.8% 29.6% 30.0%
34.9% 34.0% 33.4%30.2%
0.7% 0.7% 0.7% 0.6%00%
05%
10%
15%
20%
25%
30%
35%
40%
Feb_2008 Feb_2009 Feb_2010 Feb_2011Colfondos Horizonte PorvenirProteccion+ING Skandia
13.3%15.5%
12.1% 13.8% 14.2%
2.1%
4.1% 5.4%
19.6%
12.8%
-4.2%-10%
-5%
0%
5%
10%
15%
20%
25%
100120140160180200220240260280
Rentabilidad Anual Rentabilidad Indiciada
13.3%15.5%
12.1%13.8% 14.2%
2.1%4.1% 5.4%
19.6%
12.8%
-1.7% -5%
0%
5%
10%
15%
20%
25%
100120140160180200220240260280300
CES
Rentabilidad Anual Rentabilidad IndiciadaAnual Return Unit Price
18.54%22.36%
17.70%20.87%
27.92%
8.33% 6.50% 5.52%
30.27%
18.90%
-2.11% -5%0%5%10%15%20%25%30%35%
100150200250300350400450500
Rentabilidad Anual Rentabilidad Indiciada
Investment Performance
Mandatory Severance Fund - LT
Industry Returns – Mandatory Pensions Industry Returns – Severance Fund - LT
13.3%15.5%
12.1%13.8% 14.2%
2.1%4.1% 5.4%
19.6%
12.8%
-1.7% -5%
0%
5%
10%
15%
20%
25%
100120140160180200220240260280300
CES
Rentabilidad Anual Rentabilidad IndiciadaAnual Return Unit Price
Sumary Incomen Statemet 2008 2009 2010 Sep_2011 2011E 2012E 2013E 2014E 2015E CAGR '11 - 15'
Fee on Contributable Salary Base (3%) 141.2 173.7 197.7 164.4 229.4 241.1 259.5 277.9 296.2 8.49%Disability and Survivorship (D&S) 59.5 71.9 94.2 101.2 145.3 152.7 151.4 162.1 172.8 14.42%
Net Fee Income Mandatory Pension 81.7 101.8 103.5 63.2 84.1 88.4 108.1 115.8 123.4 4.47%Fee Income Severance Funds 21.2 27.8 22.7 18.5 27.1 29.8 32.8 36.1 39.8 11.99%Fee Income Voluntary Funds 17.7 22.2 29.1 23.9 33.7 37.8 42.8 48.5 54.5 13.38%
Total Revenues 125.0 162.5 165.4 110.0 155.2 167.0 195.0 211.8 229.3 7.01%
Opeating Expenses 87.6 116.9 123.2 86.2 133.1 142.2 145.4 145.7 151.8 4.30%
Operating Results 37.4 45.6 42.2 23.8 22.1 24.8 49.5 66.1 77.5 22.97%
Encaje Income 7.0 29.0 25.0 7.5 18.0 23.0 26.0 30.0 34.0 7.84%
Net Income 29.0 48.7 44.8 20.6 27.0 32.1 50.5 63.9 74.0 15.80%
29.0%25.3% 27.1%
35.7%40.7%
0.00%5.00%
10.00%15.00%20.00%25.00%30.00%35.00%40.00%45.00%
2010 2011E 2012E 2013E 2014E
27.1%
17.4% 19.2%
25.9%30.2%
00%
05%
10%
15%
20%
25%
30%
35%
2010 2011E 2012E 2013E 2014E
Financial ResultsFinancial Results
Million USD
NET MARGIN EBITDA MARGIN
- Sep 2011 1 USD = 1,915 COP- 2011E-2015E 1 USD = 1.817 COP
Balance SheetBalance Sheet
ROE ROA
Million USDSep 2011 1 USD = 1,915 COP
Balance Sheet 2008 2009 2010 Sep_2011
AssetsCash 12.5 16.8 29.4 127.6Investmet 110.9 161.4 193.3 201.9Property and Equipment 20.1 23.3 23.1 21.7Others Assets 10.5 13.2 20.3 46.2Total Assets 154.0 214.7 266.1 397.3
LiabilitiesTax Retentions 4.9 13.8 10.6 13.7Othes Liabilities 27.1 28.3 25.6 33.5Total Liabilities 32.0 42.1 36.2 47.2
EquityShareholders Equity and Reserves 88.7 118.8 173.0 317.2Surplus 4.3 5.2 11.8 12.3Current Year Profits 29.0 48.7 44.8 20.6Total Equity 122.0 172.7 229.6 350.1
24.3%
11.2% 9.8%
14.3%16.1%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
2010 2011E 2012E 2013E 2014E
16.8%
9.7%8.7%
12.7%14.3%
0.00%2.00%4.00%6.00%8.00%
10.00%12.00%14.00%16.00%18.00%
2010 2011E 2012E 2013E 2014E
Main ChallengesMain Challenges
D&S INSURANCE
Increased loss ratio in the last 3 years, due to:
•Social and demographic changes•Rulings from Courts that extended benefits and eligibility criteria•Change in Mortality Tables
Severe adverse impact in AFP income and profits. More than 60% of Total Fees dedicated to pay for D&S insurance
PENSION REFORM
The Colombian Pension System needs a structural reform to improve its overall performance .
•Competition within mandatory system between DC-AFPs (Private) and DB- ISS (Public) creates asymmetries and inefficiencies.•Public Pensions and ISS are becoming an unsustainable fiscal burden •A Social Pillar for the poorest group of the population is necessary to create a more equitable system (as Solidarity Pillar in Chile)
Operation of AFPs could be improved in areas like Administration Fees (from AUM instead of from collection), D&S insurance, minimum pension guarantees, where other countries have undertaken successful reforms.
CAPITAL REQUIREMENTS & SOLVENCY MARGIN
Capital requirements very high compared with other countries.
•Encaje – 1% of AUM in Mandatory Funds•Solvency Margin of 1/48 of AUM (Excluding Public Debt) and inducing conflicts of interest.•Need to introduce requirements based on Operational Risk