Grupo de Inversiones Suramericana S.A. (GRUPOSURA) Earnings Call Transcript & Summary

My name is Sylvia, and I'll be your operator for today's call. [Operator Instructions] Please keep in mind that this teleconference is being recorded. As of now, we give the floor to Juan Carlos Gómez, Manager of Investor Relations, to begin this conference.

Good morning. Thank you for joining us in this call of the results of the second quarter of 2020 of Grupo SURA. I'd like to remind you, you can access the recording of this conference at gruposura.com. There, you will also find the slides that we'll be following during this setting. For the attendees in English on the webcast, you will find the slides both in English and in Spanish. And the questions will be received from you through the platform. For those that are connected instead on the webcast, you can choose the language on the top left of the window of audio. Today, we have in this call, from Grupo SURA, our CEO, Gonzalo Perez; Ricardo Jaramillo, our VP of Corporate Finance; Juan Luis Múnera, VP of Legal Affairs; Luis Fernando Soto, Manager of Accounting; and from our affiliates, we have Carlos Oquendo, VP of Corporate Finance of SURA Asset Management; and Juan Fernando Uribe, VP of Finance and Investments of Suramericana. Now I will give the floor to our CEO, Gonzalo Perez.

Thank you so much, Juan Carlos, and again, greetings to everyone. Thank you for joining us in this call to talk about the results of Grupo SURA at June 30. As before, we would like to provide you a context of these results, given the viewpoint of the employees of the company. Obviously, we'll talk about the corporation, clients and business as well as risks and opportunities and the financial results of the company. For us, it's very important to keep these focus. And along with the affiliates, we've been able to cruise through these 5 concepts, which are the main objectives of the company of Grupo SURA and all the businesses of Grupo SURA, especially during this pandemic. When we talk about employees, it's important to underscore several things. First, to keep the 30,000 jobs was our first purpose since March. When we began the pandemic and we began really the lockdown and till today, not only have we kept those 30,000 jobs, but also, and fundamentally in Colombia, when it comes to providing health care in this pandemic, we've hired more than 1,500 people in the health care area, so that we could be more proactive and provide a service to clients above what they were expecting. And really, we consider that we've achieved that. In addition, we have focused the company's employees to move from -- really moving if -- because of the pandemic, they have administrative positions and they don't have such a burden, they can really serve customers directly. And truly, it's not only been something efficient, but it has enabled us to keep with our service promises in terms of employees when it comes to those that have been subject to COVID-19. In total, we were at about 120 employees, which really is not a high figure fundamentally because more than 10,000 of our employees are in the health care area obviously are more exposed. So really with this, our priority was to take care of the health of our employees. Until now, we have done this with good results. In terms of corporation, it's important to underscore that our work goes beyond the contributions from the economic viewpoint that we have made in 10 countries where we operate or where there's presence of our affiliates because we have contributed as well with our knowledge, and we think it's absolutely fundamental. Indeed, we have desktops with local governments that we worked with, especially in Colombia, in Antioquia with [ Baraquiga ] and other local authorities have allowed the government and other factors, including ourselves, could add up our knowledge to serve the pandemic, to look at logistics and exactly everything that could lead us to a better not only service of physical and health -- mental health care, but also financial health care. So I believe that knowledge is what we would like to underscore is a new contribution that we're creating in the societies where we operate. And that is in different countries where Suramericana is as well as SURA Asset Management, the contributions of our knowledge, insisting not only for health care as a priority, of course, but obviously, for economic reactivation. So there, we've made -- we've created teams. We have worked with different authorities to seek how our knowledge can contribute not only for our customers, but to reactivate the countries and society. It's very important with regards to clients and businesses to obviously talk about COVID tests. In Colombia, for instance, as you know well, we have a very significant share in terms of mandatory health care plans or what we call basic health care plans. And 13% of the tests of the country have been made by us. Obviously, we're not scattered throughout the entire country, but instead, we're in the main countries. But that 13% as a total has led us to make more than 200,000 tests. Remember, we were -- we started making the tests and obviously, to acquire all the material and the kits necessary to do so. So there, we'd like to highlight that our capability that began with 1,000 tests a day increased 200% and now we're making 4,000 tests a day in the country, and the idea is to get close to 15,000 a day. And we're working now with oxygen therapy, which is very important to control the expansion and above all, the use of ICUs. That oxygen therapy comes with German technology. EPS SURA brought it to Colombia. Today, we have more than 4,000 patients served, and those patients served are showing great results. It's important here to say that the anticipation that we had of mobility in the sense that one of the coverages that we have is that mobility can be nonmobility. And to have 1,300 health care home services provided through oxygen therapy led us to serve people at their homes with this therapy, which, again, avoids people leaving their homes to be served at hospitals and obviously reaching ICUs. That not only controls the pandemic, but also improved the health. And that has led us to have a death rate for those in SURA and affiliates of SURA is a 0.50%, 0.55%, while in the country and worldwide, it's about 3%. To support economic reactivation, the ARL has advised more than 100,000 companies with all the biosecurity protocols. And that's important because those protocols have allowed those companies to open and obviously to reactivate in that we've delivered more than 14 million protection gears to the different companies. And it's important to highlight that before the pandemic, those -- that gear could not be given by them. But then with the decree in Colombia was enacted, we could give them and fortunately, we had them in our health care provider services, we had that gear in our reserves. And that also allowed us to anticipate the delivery to our affiliates. And Empresas SURA, which is a strategy that Suramericana has had for a couple of years and was already starting off with its beginning last year or at the beginning of this year has provided 44,500 consultancy services to SMEs, such -- in topics in human talent, tax advisement, financial, digital marketing. So at least SMEs have that assistance for their economic reactivation as well. It's a value-added that we provide SMEs to increase the loyalty from Suramericana for them, but also to attract new clients. And as I said before, 44,500 companies have been served. Likewise, we have new solutions. As we said in our past talk, part of returning the adaptation of solutions of provisions and obviously the capabilities according to the pandemic, there are new products such as Plan Elige, Salud Digital, Vida Digital. There's a complementary plan for seniors above 60 that has been successful. That -- we have really new projects in 9 countries where Suramericana operates. And Auto SURA, for instance, in Uruguay has made an acquisition that has also let us add a bit that we not only attract in the presence, but with the due diligence and pertinence, we have continued to invest in the development of the strategy, such as Autos SURA in Uruguay with the acquisition, as we said, of a corporation for automobiles and in SURA Asset Management by launching new real estate funds and financing for SMEs that complement what Suramericana does. The incorporation of SICAV in Luxembourg recently made very important to obviously cover a very specialized market, but recently, also the formalization of Fiduciaria SURA and the closing of this acquisition, the fiduciary in Colombia have shown that we're not only serving today what we have today, but also working the strategy to develop the future of these companies, especially SURA Asset Management and Suramericana. When it comes to risks and opportunities, we've been mentioning -- really, there's been a huge increase in commercial effectiveness. I think here what we'd like to comment here is how we quickly transformed all the agents, channels for SURA Asset Management and Suramericana. And that transformation took advantage online and also led to a higher commercial effectiveness, and obviously, a closer assistance to the distribution channels for -- to be more certain about their actions when it comes to different clients at Suramericana. We've seen more demand for Health Care and Life solutions naturally. We're not going to see automobiles fundamentally because of the less use and the policies that the coverage is related to their use. But still, we have a compensation that's the virtue of having multiple products and solutions and being in multiple regions because we can balance the revenue of the company. And in this case, we're talking about solutions of Life and Health that have a very important demand. And when it comes to SURA Asset Management, we would like to underscore that the regulatory changes that we expected, we knew. I think that even fortunately, as an industry, but especially as a company, how to take advantage of the regulatory change. The opportunity given to the affiliates in Chile, for instance, to take 10% out of their pension has really changed the outlook and the expectation as well as the reputation of the mandatory funds of pensions. And it was really an opportunity first to make people aware that, that money was theirs. It was their savings, that they can access it, that the fact that the funds were from private funds facilitated and boosted their access to their savings. Obviously, aware that, that saving was for their retirement. But really that there was a specific need. And they found that the people were quite proactive from [ IFPE Capital ] and the deliveries of those 10% of the funds to the affiliates was great, and that led to a great reputation and to excellence in the service of [ IFPE Capital ]. In addition, giving them -- providing that money even 3 days before what was issued and fortunately, with higher yields also than what people expected. When it comes to Colombia and Mexico, beginning with Mexico, the report that's underway of moving from 6% to 15% of the contribution is a reform that will reach a coverage of 97% of the formal population. That's an improvement for the system of Mexico. And in addition, the increase of the quotation is undoubtedly an opportunity that we have to provide a new service to access assets that will lead us to the responsibility to tell the people their expectation could be when it comes to retirement based on that new savings of 15%, which the 9% and addition is important to underscore given by the employers. So far, the proposal of the reform for us is great. And there, SURA Asset Management in Mexico is doing -- is working closely with all the entities and the people affiliate to obviously disclose the reform and to give transparency to what this reform could imply to the affiliates for the retirement plan. In Colombia, we have the statement of nonviable of the decree that intended what's called the pension commutation. As we said before, it was the proposal of the government, and we simply, as Protección, were attentive to the chance that the commutation could take place. We want to say again that pensional commutations are normal in these business of pensions. So in that sense, the Supreme Court of Justice ruled that it had no grounds and the decree that allowed the lower quotation from 16% to 3% of the pension for employers and employees. And that, of course, led, obviously, to a process, to a recovery for the employers and the employees in those months, which reduced the contribution of the pensions. With regards to Peru, and ahead, Ricardo will show us the -- some very specific decrees and regulations based on COVID-19. But the idea is to clarify that right now, there are some pension reform proposals, which is -- are not only seen in Latin America, but worldwide, seeking, among others, more coverage and better replacement rates, which is something really good if we continue participating constructively and seeking solutions because we are aware of those 2 needs for all of the affiliates, not only in the case of Latin America, but in the rest of the world. When it comes to voluntary savings, which is part of the relevant strategy of SURA Asset Management, it is important to highlight that when it comes to this very first semester of 2020, there is a net flow of savings of COP 1.9 trillion and now, we're reaching COP 57 trillion in voluntary savings. This is a sum that we want to highlight because it's a sum that has been taking again and gaining importance within the exercise of SURA Asset Management, which is part, as I said, of its strategy. And in that sense, really, for a semester like the one that we've been experiencing, talking about COP 1.9 trillion in net flow above is something great. When it comes to financial viewpoint, as you can remember, we had 2 very clear purposes, liquidity and solvency. This quarter was very special in terms of liquidity and solvency because when it comes to Grupo SURA, we paid yields of the debt of 2020 with cash generation of COP 131 billion. And this is important because the figure, which, although it's -- truly it's not a huge figure compared to the figures that Grupo SURA generally manages, it is a reduction of the debt in a quarter in a period that's special to everyone. The dollar-based hedging of the debt is equivalent to 6% of the total of our exposure in dollars, and that has been relevant as well from the viewpoint of the volatility that we can have in the results. It's already a hedging practically absolute over affectation of the exchange rate. And the fact of making a local issuance on August 11 bonds, ensuring resources for the yields of 2021, which an -- with -- was important that Ricardo will be mentioning ahead when it comes to rates and series and how much trust of the mark there -- of the market there was to demand those bonds. We believe that it's very relevant. And it's also very relevant because we add to the rating of Suramericana and SURA Asset Management, the ratification made by Fitch, AAA, the debt of Suramericana and SURA Colombia and in SURA Asset Management with the ratification of its rating of Baa1 by Moody's in June 2020. That undoubtedly allowed us to make a placement, which we believe was successful, of our bonds of COP 1 trillion that we just made in 2020 to cover, as I said before, our yields in '20 -- or maturities in 2021. When it comes to the development in revenue, there is a recovery, and that shows better results than those that we expected. You can see in the graph, clearly, in the segment of casualty or Non-Life business, how we've had a recovery in total segment of Non-Life business or what we call casualty. It's slower in automobile, a bit better in the mandatory, but there is a recovery. And when it comes to Life segment, we see very clearly that the drop was slower, but there is a slight recovery when it comes to Life for all of the companies. Here, we're talking about the companies in 10 countries. I think that for us, it's important to say that even in the casualty segment, operations outside of Colombia participated significantly to create the profits in the second quarter -- in second semester. Argentina, just like last year, had a drop in the revenue of Suramericana. This year, there's a recovery. And obviously, the rest of the companies, in general terms, show great results in Colombia. And that's not only good because we're multiproduct, multi-solution, multi-region, but we can have more sustainability and more solvency for the companies. It helps, as we said before, there are positive variations. It's quite logical because of the time that we're experiencing. There were falls when it comes to diagnostic aids and obviously in HMOs. But there is growth in which the compensation is giving a growth of double-digit of the affiliates of Suramericana by the end of June of this year. And when it comes to revenue from commissions, there's a recovery as well. It's very important that SURA Asset Management has achieved revenues from commissions. In March, we had a worst moment, yes, but there has been a recovery in the mandatory, either higher recovery than the unemployment rates in the case of mandatory. In voluntary, we've also seen a recovery in this last quarter, which I think is important because, again, our expectations were lower than those that we are seeing today. And in terms of reserves, Ricardo, later, will talk about the impact that you know well on the income statements of SURA Asset Management, but really in terms of the reserves, SURA Asset Management had a good quarter and in its profits, we will see a good second quarter. Obviously, in all these cases, SURA Asset Management had lower than those of last year, but they're positive regarding our expectations at the beginning of this pandemic. Overall, this is our introductory remark of this conversation. And now let's move on to Ricardo, who will deepen on the income statements of the company and its cash flow. Thank you so much again for being with us.

Thank you so much, Gonzalo, and good morning to you all. I'd like for you to please look at Slide 8, and there, we can tell you what Gonzalo mentioned about the recent issuance of bonds of Grupo SURA made on August 18. First, let me tell you a bit, which are the purposes and benefits of this issue and then some of the figures. The main purpose clearly to anticipate to handle the cash flow of 2021. However, there are other benefits of this issue. One that's very important is to look at the profile of maturities of the cash flow of Grupo SURA. And we can see on the graph that bar of 2021, which is at COP 1,022 billion, moves from being high, and we've distributed it into 4 series, 1 to 3 years, 1 to 7, 1 to 12 and the other one, on a longer term, for the 20 years. And all 3 series are quite balanced to amounts, and as you can see, much more connected to the generation of cash flow of the company. Another benefit is the natural coverage that's generated in Grupo SURA. Since we have all of our revenues of dividends of the company's in pesos, to have the debt in pesos is also good because it decreases the exchange exposure. And clearly, with the market conditions of today, we could improve the cost of the liability by 50 basis points. So now let's look at some of the figures of the issue. Let's begin by saying that the placement initially was about COP 800 billion, with the option of COP 200 million (sic) [ COP 200 billion ] more. Given the good conditions we saw in terms and rates, we decided to have those COP 200 billion more, so we placed out the trillion. Total demands were close to COP 1.8 trillion, which reiterates the trust that the market has in the company. On the other hand, when we look at average cost, look at the rate of 4.89% for the issuance, it's quite low, and it keeps in mind that current conditions of the reference rates of IBR and inflation. Now let's look at Slide 9. I and we'll see the numbers of the income statement of Grupo SURA. We'd like to highlight several points. First, the resilient growth of the main business lines; second, the strength of the diversification of the portfolio of Grupo SURA. And clearly, we can see for revenue, these reached COP 10 trillion, dropping 4% solely, which we think is positive given the current conditions and the effects which are seen in the market. Let's look at the first 3 lines of our revenue, retained premiums, revenue from commissions and services provided, which are entirely connected to our business units. All these lines have a growth still positive. Even in services provided, we're growing 20% and the same percentages that we've seen in recent years. Also when it comes to revenues from investments, although we're dropping 33% with the differential versus last year, COP 367 billion, we'd like to highlight here is that in the second quarter the result was quite positive because we could recover about COP 750 billion. If you look at the presentation of the first quarter in that item, we had a negative of COP 25 billion. So it's quite important that recovery that we've observed. On the other hand, the equity method, we have an effect, the biggest one, compared to last year, a lower amount of COP 519 billion, dropping 77%, mainly explained because of the provisions that Bancolombia has had to anticipate in its acknowledgment of the special time. I'd like to highlight here especially the Nutresa. And you saw the numbers of Nutresa has contributed great resources for this equity method and ratifies what was said initially, the importance of the diversification of the portfolio of Grupo SURA. Operating expenses, we're making huge efforts here. We see a growth of 2%. That growth includes expenses that have been necessary to handle the pandemic. Where we look particularly at operating expenses, we see that they've grown 7.6%. If we exclude the expenses related to the pandemic, that growth would be close to 4.2%. It's also to mention here that the claims ratio plus reserves shows a decrease because we have a lower claims ratio that we'll see ahead and because of the decrease that we've been looking at. When we look at the cost of services provided, it's important to highlight that the growth of these costs is lower than the growth that we've seen with revenues, meaning the operation of Health is creating a positive margin, all this to reach an operating profit of COP 922 billion, which we consider as a good figure with a dropping -- with a drop of 39%. After the financial result, we reached a net earning of COP 245 billion, which shows a drop compared to last year, but really shows a big recovery in the second quarter, which gives us a sign of significant recovery, as Gonzalo mentioned in his introduction. Moving on to Slide #10. We can see how we build the net profit of Grupo SURA and how we see the recovery in the second quarter was quite important. We still see an impact on the reserve and in the equity method, as we mentioned, but we want to highlight the good dynamics of the companies of Suramericana and SURA Asset Management. Beginning with Suramericana, we see that the profit in the semester reached COP 293 billion, up 68%. With SURA Asset Management, it's divided into 2. On the one hand, SURA AM without the reserve with a profit reaching COP 130 billion. And with the reserve, it still gives us a negative close to COP 10 billion. On the other hand, the equity method is mainly impacted by Bancolombia. However, there, we have the positive result of Nutresa compensating the effect of Bancolombia. When we look at the items related to Grupo SURA, particularly, we have the growth of the exchange rate in the first quarter as well as the expenses and interest of Grupo SURA to reach then that profit of COP 245 billion that I mentioned before. I'd like to highlight on the lower part of the slide, the results of the second quarter. And as we see, it reached a net total profit of COP 321 billion, which compared with the result of the second quarter of 2019, a year that was quite positive for Grupo SURA as a whole, with a profit of COP 390 billion. It's a decrease of 18%. But given all the conditions that we've had with the crisis, we consider it's a good result for the quarter. Moving on to Slide 11. We can see the variation of the profit of Grupo SURA and its different components versus those of 2019. And this is the bridge in which in other times, we have shown you looking at the net profit in '19 -- 2019 of COP 951 billion in the first semester, we see how Suramericana has contributed positively COP 119 billion versus the profit it brought in that same period the year before. We see how SURA Asset Management mainly has a negative effect related to reserve. And there, we see the [ border ] of COP 228 billion that we saw before and how this company has had a recovery, but still does not come to say that what we brought last year. However, in the year 2018, it was not that great for capital markets, but 2019 was great. So I think it's totally logic that this year, we're not going to have such great year like that of 2019. And that's why we have to look at that COP 228 billion compared to 2019. Although the equity method is having an important impact on our figures, we're decreasing COP 400 billion, which is mainly because, as you saw in the Bancolombia call, it's the anticipation to the provisions to acknowledge the possible impact related to economic variables, the growth of GDP, et cetera. In the other items of Grupo SURA, the total is an affectation of COP 116 billion, mainly related to the exchange impact and some interests which are particularly collecting most of the debt hedging strategy that we have now to end at COP 245 billion Moving to Slide 13. We'd like to begin showing the results of Suramericana. We'd like to highlight that the results were driven by a lower claims ratio, while strong controller expenses even compensating the expenses related to the pandemic and by the growth of revenue, which, as you can see, continues being positive. Operating revenue in the first semester of the company reached COP 8.8 trillion, up 10.5%. We consider it's quite important. When we look at the premiums, particularly look at dynamics of those issued, which grew 7.1%, retained grew 1.4%, reaching retained premiums with a positive growth of 2.7%. The next part that we want to highlight are the retained claims ratio, which, as we said before, the company has been showing very good levels of claims ratio, which have dropped about 6%. And we'd like to highlight also the cost of services provided and how this has more growth than the cost. So we reached a technical result of COP 1.4 trillion with an 18% variation, which we deem as very important. And if we look at the graph on the right-hand side -- bottom right-hand side, we can see how it's a technical result and as a percentage of the operating revenues has been displaying growth in the last quarters. Also highlighting that, especially in the second quarter, that technical result compared to the quarters of 2019 and the first quarter of 2020 is particularly higher. Operating expenses show an 8.3% growth. However, when we exclude the specific expenses related to managing the pandemic, we see that 8.3% really is growth of 0.4%. And when we particularly look at the growth of expenses in the quarter, we have a drop of 7.2%, which shows the effort that the company is making to control the expenses, understanding the situation that we're living. All these numbers, also adding that the interest with which Gonzalo told us about the amortization of the debt made by the company, that number of interest can drop to close to 15% because what we amortized was [ 50% ] of the company's debt. That number of interest of the company will reduce from here on. So with all this and also understanding that particularly the item of taxes has been significantly growing because of taxes related to the spin-off of the portfolio that Life has had. Remember, we made a merger of Life and ARL, and then we had a spin-off of portfolio to optimize capital. There, we generated some taxes, and that's why we have that 127% increase, to then arrive to a net earning of COP 293 billion, which is very positive. Some of the topics already mentioned can be seen on the trend of the graphs. I already talked about the technical results. But I want to look at the graphs of the development of the retained earning premiums, a growth or a level very similar to the different quarters. On the other hand, the retained claims ratio shows a significant improvement in that second semester, as mentioned. Revenue from services provided and costs from services provided, seen as percentage, show a growth in revenue that's related to that good dynamic that our Health segment has had in recent years, already reaching 3.8, a bit more of affiliates. And cost ratio has kept at a proper level, which, given the current situation, we consider is quite positive. On the lower right-hand side, you can see the operating expenses as a percentage of revenues and these are at 18.6%. But if we exclude the expenses related to the pandemic, we're talking about 16%. Now let's move on to Slide #14 to show you how we have built the profits of Suramericana in the first semester. So now let's see how Life contributes COP 231 billion, practically flat versus last year. Casualty presents very good dynamics. Particularly here, as Gonzalo mentioned, we'd like to highlight the good operation in the different countries other than Colombia in the first semester, especially Argentina, Mexico, Dominican Republic, and Panama are contributing significantly to that 288% growth of casualty, and additional approval of the importance of the diversification and all the expansion we've had in recent years. The Health segment is positive, and I think we should underscore that it's good. It's at a balanced point. Keeping in mind all of the current situation, it's very positive. And the other related items to the corporate operation, operation expenses, interest, taxes that I mentioned -- that I told you why they increased to reach that profit of COP 293 billion. On the lower part of the table, we'd like to highlight that the second quarter was very positive, showing a growth of 235% versus the second quarter of Suramericana in 2019. Now let's move to Slide 15. You can see the variation versus what we had in 2019. What -- you can see that the trend is repeated. Here, we'd like to highlight a positive claims ratio of the Life segment that has grown with issued premium 7%, from 60.1% to 54.2%. When it comes to casualty that I said before, some of the reasons why it's still quite positive besides some multi-annual contracts for buyers. We see lower claims ratio from 51.5% to 47.7%. And we also see a recovery, a major recovery in the profit of Argentina, which with the recent renegotiation of the Argentinian government of the debt will give us more stability as to revenue from investments of this company, again, adding to this bridge of profits, COP 123 billion. When it comes to Health, in the very first semester of 2019, we had a loss. So we're adding even 20 -- COP 17 billion this first semester. Remember that the prior semester, we had a strong migration of affiliates to our EPS, and we had a peak of claims ratio in that first semester, particularly. On the other hand, corporate accounts are subtracting COP 20 billion, mainly, as I said, because of the increase of taxes related to the spin-off to reach that COP 293 billion that I mentioned. So I invite you to look at Slide 17, to look in detail the financial results of SURA Asset Management. Firstly, I'd like to highlight revenue from commissions, resilient commissions and growth of positive AUM. We still have the impact of the reserve, however, there is an important recovery versus the first quarter. So we see revenue from commissions of the company are practically showing a 0% variation, which in local currency dropped 2%. Here, I'd like to highlight especially there's a case in Peru. In the company of Peru, you saw the decree, which gave the chance to the employers and to the affiliates to not contribute during the month. That had an impact, of course, on our figures, close to $8 billion. We see that the difference of the reserve. We see the affectation and the equity method that you know that this company, its participation in Protección, mainly explained also because of the revenue of investments to reach operating revenue of COP 1,158 billion, dropping 23.5%. When it comes to insurance margin, we see a drop of 16%. And here, mainly, I'd say there's some impact related to the final delivery of the company, the annuities, Mexico, which, as you know, we seeded the assets and liabilities in recent months. In operating expenses, we also see a huge effort to keep them controlled, growing 4.5%. In this company, we've had COP 10 billion additional because of expenses of the pandemic, especially in Peru and Chile, where we've had a lot of operations related to retirements withdrawals. So with this, we have an operating earning of COP 320 billion, dropping 55%, mainly again because of the investment revenue. So at the end, we reached a net earning in the semester of COP 120 billion, dropping 65.2%. Looking at the graphs on the right-hand side of the slide, we see that revenue from commissions show a fall that I told you about Peru, but it's really a revenue that we consider versus the other quarters that's resilient. If we compare for instance with the first quarter of 2019, practically, it's at the same level. We had a growth of COP 10 billion per quarter. And we see that from a peak in the fourth quarter of 2019 of COP 597 billion, we dropped to COP 539 billion because of the pandemic. Moving to the graph of revenue from reserves, we see the recovery. In the second quarter of '20, we saw a recovery of COP 284 billion, which compensate significantly that fall of the first quarter and leads us to have a positive COP 23 billion. Now on the lower section of the slide, we see operating expenses and the indicator as a percentage of the net operating revenue. And here, we'd like to highlight several things. First, in the second quarter of 2020, you can see expenses of COP 435 billion, which compared with the second quarter of 2019 is solely a 2.5% increase, reiterating the expense control. Also, as of the fourth quarter of 2019, we see a decrease. And we also would like to highlight that though the indicator of expenses as a percentage of revenue is increasing, this is more related to lower revenue not to more expenses. Moving on to the other graph at the very bottom right. We see that the company's operating earnings, they are really 2. One is the total operating earnings with and without the reserves. We see that the second quarter of '20, how the operating earning was quite positive, which obviously has the revenue from reserves, and we see how the profit without reserve reached COP 123 billion for the second quarter. Now let's move to Slide #18. And there, you can see the bridge of the profit and -- to understand the variation of the profit of SURA Asset Management versus that held in 2019. And we begin in 2019 with a profit of COP 424 billion. We're seeing that the major impact is related to the mandatory segment, and as we explained, because of Peru of $8 million in the reserve. The growth of revenue from commissions in this segment have dropped 1.1 -- 1.8% and the AUMs reached COP 437 billion, up 7.7%. In the voluntary segment, we see a very positive growth in the revenue from commissions of 14.2%. And here, we -- as we said before, we can see that the net flow of the first semester of COP 1.9 trillion is very positive. And we'd like to highlight that we're reaching that figure of COP 57 trillion of AUMs, growing 9.3%. The financial result of this company for exchange topics and the exposure we have in dollars in Chile after these investments made in annuities has been positive. To that end with the Corporate segment that gathers the different items, positive in COP 7 billion. And then reach a net profit final of SURA Asset Management for the first semester of COP 133 billion. Thank you. Now let's move on to the Q&A session.

[Operator Instructions] Right now, we have a question from Katherine Ortiz from Davivienda Corredores.

I have 2 questions or better yet, could you please tell us more about the development of the claims ratio, the most recent one, especially those July and August, to have an idea of how these indicators can evolve since the results of the second quarter are impacted because of the lockdowns? And I'd like to know also if you could give us a guidance of what we can expect with this new -- with these new claims ratio. That's first. Second, could you talk about the nonconstitutional statements of the decree that had to do with the contributions? Do you have any more information of how that retroactive payment can be made regarding the contributions that were not perceived during this time?

Katherine, thank you so much for your questions. And allow me to answer the first and Juan Fernando Uribe, who's the VP of Financial Affairs of Suramericana, can answer the second question. With regards to Health, there are 2 highlights. Our original budgets were impacted because of mortality -- because of the COVID-19, the mortality curves we're making led us to make bigger reserves. When it comes to death rates, we're below those that we calculated, which were the biggest impacts because health care services, because of the COVID-19, is not very expensive. And as we've mentioned, the oxygen therapy that we've been providing is not only great to serve people, but also reduces cost because there's no hospital bill. So we know when it comes to Health, we have 2 big impacts. One was death and not going back to work. However, when it comes to deaths, we are way below the curve expected. And really, our data is quite exceptional of 0.57, 0.55 death rate, while the country is at 3, 3.5 and the world as well. So we were talking -- we've heard even the worldwide it's at 4. So when it comes to the COVID-19, we have better death rates. That has, of course, an impact on the ARL. We know that these are very difficult months. July has been very difficult, August and part of September, of course. July -- in July, really, Suramericana reached 75% of its profit levels, we insist 75% and it was a peak month. We have some August that -- really, we don't have the sensibility for August and September, but that's what we can say. I don't know if Mr. Uribe could complement or correct me.

Gonzalo, yes, simply, I'd like to complement by saying that in health, we have COVID and non-COVID claims. Non-COVID, the -- we have the normal procedures, and we've had nonpriority proceedings that have been moved back. But still, as a company, we're making the due reserves because most of those procedures will take place later on in the second semester. And these have not taken place, of course, because people don't want to be close to a hospital or a health care center. So in that sense, the company has make -- been making the reserves. So after -- when the claims come, we will have the resources needed. And I'd like to underscore, as Gonzalo and Ricardo said before, we have been preparing to serve the people online. We have been providing the oxygen therapy. We have been sending people medications to their home to help everybody decrease their claims. Also we have a great service of providing health care to people at home, if required. So that's something I'd like to complement.

Thank you so much, Juan. I'd like to also highlight, you know this, but it's important to remember this. We have claims. We have some claims that are COVID and non-COVID. And remember, every day, we are looking at curves in the risks area of Suramericana, so we have to see the impacts of the claims ratio based on those curves. And what we've been doing is that once we get to see the reality, we can look at the reserves again and make positive variations because the reserves that we had for the claims ratio could be always positive. So really, we have to take care that we have calculated properly our IBNR reserves. And there we can highlight again other topics. One, their death rate is much lower and that the curves of those infected do go hand-in-hand with what we had foreseen in March. And the second question, I think Juan Luis can answer on how we can recover the quotes of the months when we only contribute -- we only saw the 3% of the contributions to pensions.

Basically, what's been -- we -- when it comes to the hedging is that the national government has ruled a mechanism and a reasonable term to establish the return -- or better to make the contributions that were not made in a reasonable term and in installments.

Okay. But what about the other segments? Could you give us more...

In terms of Health Care, are you asking? In claims ratio?

Yes. What about the claims ratio of the other segments?

There are 2 topics that are fundamental. With regards to Health Care, as Juan Fernando Uribe said, the reserves are made. In these times, yes, they are lower, of course, taking care of the ICUs. So the reserves are made, but there is no doubt when it comes to electives, there is a decrease because they are services that are more of opportunity, and we see that a lot in the HMOs. To give you an exact data, that's curious, in a weekend, which in Colombia was a long weekend, and there were very, very few people that went to emergency and hospitals in -- so that's an elective type of health care system in which people are avoiding going to ICUs or better to emergencies. However, there are other services that can -- like operations, surgeries that people are just postponing so that the ICUs won't be full. With automobiles, we have obviously been seeing a lower claims ratio, especially because for the policies in different countries, we have we have -- for higher loyalty, we've been lowering the premium. So there is a lower income and lower claims ratio. And so really, claims ratio is quite lower. When it comes to mandatory insurance, it's the same thing, when it comes to automobile claims ratio. And also, literally, if there's less industrial activity, there's a less -- you're less prone to risks. So -- however, you have to look at maintenance of companies. But so far, the claims ratio has been lower, as Ricardo said. The retained claims ratio of the company has dropped generally throughout the company, especially with automobile. Juan, do you have something else to say?

Yes, let me provide a data related to the claims ratio of the automobiles, which is so important in the Non-Life segment. Indeed, the claims ratio in the first month of the quarantine had a 45% drop. But by the end of last month, we're starting to see increase, and that drop of 45%, it has -- is now at 20%. So as we start to see normalcy again, the claims ratio has been dropped, but still, it's below the normal levels that -- because of the COVID.

Next question, Nicolas Riva from Bank of America.

I'd like to ask 2 questions. One, on the recent issuance of bonds that you made of $260 million, I understand that the use of that money is to pay off liabilities. Could you confirm that you're going to be using that money to pay off the bond of $300 million? And second, how are you going to be reducing the exposure and the size of your debted dollars through the whole thing? Another question is related to SURA Asset Management. Could you tell us briefly what's your opinion, your analysis of the project you have in Mexico to decrease the money that's given by employers for these pension funds, especially with AUMs? And do you expect any drop in Mexico, which could be a negative offset? Could you give us an analysis? And also when it comes to SURA Asset Management in Chile, as you said, people could take out 10% of their pension. I understand it doesn't have a direct impact on your business, but in Chile, it's -- people can have a pension. It's based on their salary. So could you tell us more about SURA Asset Management and the changes seen in Mexico and Chile?

Nicolas, thank you so much for your questions. My name is Ricardo Jaramillo, and let me answer your question about the bonds to give you more context about what we discussed already. First, even before COVID-19, we anticipated on how we could refinance this $300 million that we had to pay off in January 2021. The rate at which we had covered those resources, which of that COP 1 billion (sic) [ COP 1 trillion ] , we had COP 850 billion are required to pay that $300 million bond that you're mentioning. Right now, we're making different analysis to see what's best purely financially to buy the bond with a premium or to have a resources invested. As of today, what we could say that it's much more efficient to have those resources invested, even because that the rate that we have is very positive. So probably, we will have those resources until their maturity, but we want to monitor this still step by step. We're also talking about COP 150 billion that we took, which, as we said before, the setting was good. The Colombian market had liquidity and appetite for AAA investors and really the setting was good for that. And with those COP 150 billion in addition, we will pay bank debts that's more expensive. And at the end of the day, we'll have an optimization of the cost of financing. Likewise, this company receives its revenues in pesos. So as we have our debt, one, related to pesos; and second, distributed in different areas, it's something that is much more -- much better for the cash flow of the company. So in our viewpoint for the financial performance of the company, this has been great for the company. And even before the pandemic, we would look at different options with hedges and everything, and this was the best alternative. Even our analysis, we never expected a weighted average like that. So again, it has been quite positive. For your second question, Gonzalo can give us his opinion, and Carlos Oquendo can complement.

Thank you, Ricardo. Thank you for your question. When it comes to Mexico, as we said originally, that amount from 6% to 15% was positive for everybody, the affiliates, because really the replacement rate is higher and the idea is that the coverage for formal employment is 97%, as we said. We're talking about 150% increase in the quote. And that's positive as well, as we said, because it increases the AUMs for the pension funds. Again, for the affiliates, this is very important because that increase comes from the employers. So today really what we're seeking very -- especially after making an analysis in Mexico of how we can regulate and what we can do from here on with regards to the pension system. The idea is that we really want to be very transparent and exact in maximum and critical exposures to see what the replacement rates will be because I think that the problem has been, when it comes to reputation worldwide, is that pension funds after 20 or 30 years with private funds had -- were difficult to access. But there are other topics like the number of quotes and in Latin America, especially because of the informality rate. So first, we had to be very clear on what are the expectations with these 15% quotes of the possibility of the replacement rate and how many weeks should be quoted. So the customers and affiliates have a very clear vision of what will happen, and that in 5 or 10 years, we won't have a negative impact on them. So that's where responsibility lies. With regards to the reduction of the commissions or fees, yes, there is one below the 150% increase of the AUM. And with that, we can compensate. But it leads to something that SURA Asset Management and Suramericana have to work on. And it's to have absolute efficiency of their operations so that with low margins, they can operate. It's like the EPS in Colombia that works with claims ratio of 24% with expenses of 4.5%. And so the idea is to reduce the operating cost to the point that with lower fees, we can still be profitable with returns above the capital cost that we have in the company. So although it is true that the fees will drop, I think that, that increase of 120% of AUMs is important. And the idea is to anticipate in these operations so that the return can be the one expected. However, let's listen to Carlos Oquendo, who knows more about this topic to complement and add his ideas on this matter. And if I'm wrong, just let me know, Carlos.

Thank you, Gonzalo. Firstly, I'd like to note, can you hear me okay?