Suramericana de Inversiones S.A.

Carrera 64 B # 49 A 30
Medellín, Antioquia
Colombia
Telephone: (57 4) 260-2100
Fax: (57 4) 260-4306
Web site: http://www.suramericana.com.co

Public Company
Incorporated: 1944 as Compañia Suramericana de Seguros S.A.
Employees: 5,827
Sales: COL 359.85 billion ($152.54 million) (2006)
Stock Exchanges: Bolsa de Valores de Colombia (Bogotá)
Ticker Symbol: SURAMINV
NAIC: 523900 Other Financial Investment Activities (Including Investment Advice); 523999 Miscellaneous Financial Investment Activities; 524113 Direct Life Insurance Carriers; 524126 Direct Property and Casualty Insurance Carriers; 524130 Reinsurance Carriers; 524290 Other Insurance Related Activities; 525910 Open-End Investment Funds; 525990 Other Financial Vehicles; 551112 Offices of Other Holding Companies

Suramericana de Inversiones S.A. is the financial arm of Grupo Empresarial Antioqueño (GEA), the largest business group in Colombia, and it is the largest holding company within GEA and, indeed, in Colombia. Its core holdings relate to insurance, but it also owns large stakes in Colombia’s largest bank and in pension funds. Suramerica also has strategic investments in GEA’s other two holding companies, a portfolio of investments in the service sector, and holdings in hotels, real estate, retailers, textiles, and a number of other economic sectors.

Suramericana’s 71 percent of Inversura en Seguros y Seguridad Social Suramericana S.A. is its chief holding. This is a holding company in itself, covering insurance fund management and social security. Suramericana’s roughly one-third share of Bancolombia is also a leading source of profit. This financial services company’s subsidiaries includes the brokerage house Suramericana de Valores S.A.; Colcorp, an investment bank; Fiducolombia, an asset manager; Leasing Colombia and Subleasing Internacional; Sufinaciamiento, for consumer finance; the offshore banks Bancolombia Panama-Cayman and Banco Corfinsura Internacional; and Bancolombia Miami, an international agency. Also important is Suramericana’s near-majority stake in Protección AFP S.A. This firm consists of a mandatory pension fund and the second largest private pension and severance funds in Colombia.

AT MEDELLÍN’S ENTREPRENEURIAL HEART: 1944–90

Compañia Suramericana de Seguros S.A. was formed in 1944 in Medellín by a group of 32 companies and over 150 shareholders, almost all from Antioquia, the department of which Medellín is the capital. It began operations the following year and soon extended throughout Colombia. Suramericana de Seguros de Vida S.A. was established in 1947 for life and accident insurance, disability, illness, and annuity income. Formed in 1954, Compañia Industrial de Construcciones S.A., which ten years later became Compañia Suramericana de Construcciones S.A., was dedicated to housing for its employees and agents. Compañia Suramericana de Capitalización S.A. was founded in 1958. Corporación Nacional de Ahorro y Vivienda (Conavi), established in 1959, offered both mortgage loans and short-term consumer credit. Also founded in 1959, Corporación Financiera Suramericana S.A. offered a variety of financial services. Administradora Suramericana de Inversiones, created in 1964, played an important part in furthering Colombian industry. By 1960 Suramericana was also engaging in reinsurance activities.

Antioquia is Colombia’s wealthiest department, and Medellín has long been the center of Colombian industry, but Bogotá is the nation’s capital and financial center. During the mid-1970s the Bogotá-based conglomerates run by Julio Mario Santo Domingo and Carlos Ardila Lülle began extending their reach through hostile takeovers of Medellín companies, most of them public with diversified ownership. To protect their interests, leading Medellín capitalists formed an alliance to prevent further takeovers by buying one another’s stock. Soon Sindicato Antiqueño, as journalists called it, had developed a complex web of cross ownerships that resulted in the syndicate being compared to the octopus-like conglomerates of Japan and South Korea. Each company was required to invest a minimum of 30 percent of its profits into the group and to reinvest a significant amount of the dividends it received.

Beginning in 1978, the enterprises in Sindicato Antioqueño came to be grouped under three holding companies: Suramericana de Seguros S.A., Compañia Nacional de Chocolates S.A., and Compañia de Cemento Argos S.A. Although the syndicate had no legal existence and no headquarters, Suramericana became regarded as the first among equals because its assets were larger than the other two and monthly strategy meetings, presided over by Suramericana’s chief, Nicanor Restrepo Santamaría (a former governor of Antioquia) were held in his company’s offices. Suramericana held a controlling interest of both Nacional de Chocolates and Argos, but these two also, directly or indirectly, controlled Suramericana, although outsiders, including thousands of small shareholders, bought stock in these public holding companies. As drug trafficking became a major national problem in the 1980s, Medellín businessmen cited Sindicato Antioqueño’s tight structure as a way to keep Colombia’s corporate assets from falling under illicit control.

Medellín was also, however, the home of Colombia’s leading drug cartel, whose members wreaked violence in the city every day and, in one five-week period, killed 60 police officers. Kidnapping was another lucrative source of illicit profits. Seven bodyguards, two in his armored sedan, five behind in a Jeep, followed Restrepo’s every move out of doors. When Sindicato Antioqueño executives met at Suramericana headquarters, they also traveled in armored cars, while shotgun toting guards patrolled the grounds with attack dogs at the ready.

GROWING FINANCIAL REACH: 1990–2000

Protección AFP S.A. was founded in 1991 as an organization with its emphasis on administering a severance fund for dismissed employees. Two years later, it also began administering a mandatory social security fund and a voluntary pension fund, both financed by contributions from employers and employees. In 2006 Protección held about one-quarter of the mandatory fund’s assets, slightly more of the voluntary fund’s assets, and slightly less of the severance fund’s assets. Suramericana de Inversiones held a near-majority stake in the company.

COMPANY PERSPECTIVES

Suramericana de Inversiones is a corporation dedicated to making and managing investments in strategic sectors of both the Colombian and Latin American economies, with the firm commitment of providing value to its shareholders and thereby contributing to Colombia’s social and economic progress.

By 1993 Sindicato Antioqueño consisted of 86 publicly traded firms with combined annual sales of over $2.5 billion. Three years later, there were 116, with annual sales of $5.1 billion. Twenty-nine were in financial services. These included, under the Suramericana banner, Banco Industrial Colombiano, the nation’s largest commercial bank; Suvalor, the leading brokerage house in terms of total commissions; and Corfinsura, created that year from the merger of Corporación Financiera Suramericana with Corporación Financiera Nacional S.A. to become Corporación Financiera Nacional y Suramericana S.A. (Corfinsura), Colombia’s leading investment bank. Suramericana had a 25 percent share of all life insurance in Colombia. It was also the most aggressive of the three great holding companies in crossing national frontiers. It was participating in insurance and reinsurance companies and the administration of pension funds in seven Latin American nations. In Argentina, it established a workers’ compensation and disability company and a medical service for workers. One of its subsidiaries opened a bank in Puerto Rico. A holding company in the British Virgin Islands was organized to manage insurance assets in Central America.

In 1997 Suramericana de Seguros became a subsidiary under a new holding company named Suramericana de Inversiones S.A. Suramericana, with Restrepo remaining in charge. Another unit—later created as Inversura—coordinated the operations of life insurance, capitalization, and retirement funds. Restrepo bought the majority share of the Banco de Colombia that year for $418 million, then merged it with Banco Industrial Columbiano to form Bancolombia, which became Colombia’s biggest financial institution. Suramericana held a large, but not majority, stake in Bancolombia.

Banco de Colombia dated from 1875 and had an important role in the nation’s economic development. Banco Industrial Colombiano, founded in 1944, specialized in corporate banking and serving wealthy individuals. After the merger, Bancolombia cut its operating costs and became profitable. It was chosen Colombia’s bank of the year in 2000 by the magazine LatinFinance and was the only Colombian company whose shares were being traded on the New York Stock Exchange. About 40 percent of the stock was in foreign hands.

Inversura was established in 1999 to take in such financial products as Suramericana’s life insurance, property damage, health, pensions, capitalization, and workers’ compensation. Colombia’s economy was entering a severe recession, and all elements of Grupo Empresarial Antiqueño, or GEA—as Sindicato Antiqueño was coming to be called—felt the pain. The consolidated sales of its 125 firms, which employed 80,000 people, fell from $7.9 billion in 1998 to $5.7 billion in 2000, with a commensurate decline in net profits.

REORGANIZING SURAMERICANA: 2000–07

The demands of globalization required GEA not only to form alliances abroad and increase its international investments—which reached about $500 million in 2001—but also to seek ways to attract foreign investment itself rather than relying on existing shareholders. Suramericana made some progress in 2001, when it sold nearly one-fifth of Inversura to Munich Re, the world’s largest reinsurance company. A year later, the International Finance Corporation acquired nearly another 10 percent. However, the process was complicated by the group’s tightly wound organizational structure. Not only did each of the three GEA holding companies hold large blocs of stock in the other two, but, for example, Argos held significant shares of Bancolombia, Conavi, and Confinsura, and Chocolates held 5 percent of Confinsura.

Suramericana had been considering going public, not only in Colombia but also in New York, since 1996, but financial analysts had said its large investments in fields other than insurance were confusing to potential shareholders. It was, therefore, considered essential that operating businesses be separated from the holding company. The grouping of insurance companies into Inversura had taken two years to achieve, followed by another 18 months before the Munich Re agreement. For future growth, Suramericana’s managers were looking to trim its companies and concentrate on fewer business areas. The same principle applied to GEA as a whole, and by late 2004 the roster of companies in which it held stakes had fallen to 88.

KEY DATES

1944:

Founding of Suramericana de Seguros S.A., an insurance company.

1960:

Suramericana companies are providing a variety of financial and insurance services.

1978:

Suramericana has become the financial arm of the powerful Antioquia syndicate.

1996:

Twenty-nine financial-service companies are under the Suramericana banner.

1997:

Suramericana de Seguros becomes Inversiones de Suramericana, and the company presides over the creation of Bancolombia, the nation’s leading bank.

1999:

Insurance activities are regrouped under Inversura, a new subsidiary of Suramericana.

2004:

Further streamlining puts two Suramericana financial companies into Bancolombia.

2006:

Suramericana’s assets of over $4 billion top any other Colombian holding company.

Having consolidated its insurance activities into Inversura, Suramericana did the same with its financial holdings in 2004, when it merged Conavi and Corfinsura into Bancolombia. The result was to make Bancolombia one of the largest financial services companies in Latin America. As part of the transaction, Corfinsura yielded some of its operations to Suramericana de Seguros. The worldwide concentration of financial institutions, competing on a global scale, was considered an inevitable result of the free market measures being promoted by the United States in the wake of the collapse of the Soviet empire and world communism. International banks competing for business in Colombia included the Spanish banks Banco Bilbao Viscaya (BBVA) and Banco Santander, plus New York-based Citibank. For its own part, Suramericana had extended its own operations to these Latin markets: Bolivia, Ecuador, Panama, Nicaragua, Guatemala, the Dominican Republic, and Puerto Rico. Its 2003 revenues came to more than half of the GEA total, and its net worth increased 63 percent in 2002–03 alone.

In early 2007 Suramericana and its affiliates still owned 37 percent of Inversiones Nacional de Chocolates and 34 percent of Inversiones Argos. Argos, in turn, owned 36 percent of Suramericana, and Chocolates owned 13 percent. The share of Suramericana and its subsidiaries, in Protección was 44 percent, and that in Bancolombia, 32 percent. Among Suramericana’s holdings outside the financial sector were significant stakes in Textiles Fabricato–Tejicondor S.A.; Confecciones Colombia S.A.–Everfit, an apparel firm; Sodexho Colombia S.A., a facilities management company; and Sodexho Pass de Colombia S.A., a temporary employment agency. Suramericana’s assets of COL 10.2 trillion ($4.3 billion) in 2006 were higher than those of any other Colombian holding company.

Robert Halasz

PRINCIPAL SUBSIDIARIES

Compañia Suramericana de Construcciones S.A. (91.5%); Enlace Operativo S.A. (71%); Inversura en Seguros y Seguridad Social Suramericana S.A. (71%); I.P.S. Punto de Salud S.A. (70%); Portafolio de Inversiones Suramericana S.A. (99%); Suramericana B.V.I. (94%).

PRINCIPAL COMPETITORS

Grupo Aval.

FURTHER READING

Derham, Michael Thomas, “Cleaning House,” LatinFinance, March 2006, pp. 24–26.

Lane, Patti, “The Other Medellin Cartel,” Business Week (International Edition), August 22, 1996, p. 56.

Millman, Joel, “Club Medellin,” Forbes, January 4, 1993, pp. 44–45.

Ordoñez, Catalina, “Gran fusión bancaro en Colombia pretende competer en TLC,” UPI Latin America, September 22, 2004.

“Rebuilt Bancolombia Ready to Do Battle,” LatinFinance, October 2000, p. 42.

Sabogal, Hugo, “Cirugía grupal,” AméricaEconomía, October 8–21, 2004, pp. 37–39.

Wilson, James, “Divide and Capitalize,” LatinFinance, October 2002, pp. 37–40.

_____, “The Doors Open Cautiously,” Financial Times, November 6, 2001, p. 12.