Management Report 2011

Transcription

1 1 Management Report 2011

2 1 Evolution of the Private 314 thousand new members The national economy s good performance in 2011 led to significant growth in the volume of new affiliations to the Private (SPP), which totaled 314 thousand new members. This represented an increase of 42.5% compared to

3 1 Evolution of the Private The national economy s good performance in 2011 led to significant growth in the volume of new affiliations to the Private (SPP), which totaled 314 thousand new members. This represented an increase of 42.5% compared to During this period, the number of active affiliates in the SPP increased 6.2% to total 4.9 million. In terms of new affiliations, 98% of the pool is composed of dependent employees from sectors such as agribusiness, public institutions, consultancy, services and construction. Growth in the Peruvian economy of nearly 7.0% and favorable employment indicators (above 5% in companies with 10 or more employees) led to 6.8% growth in the number of contributors in 2011, which totaled 2.2 million at year-end. This level of contributors represented a subscription ratio of close to 45%, which is still low compared to other countries in the region. The volume of affiliates contributions to pension funds totaled U$ 2,094 million in 2011, which constituted a 14.9% increase YoY. The portfolio managed by the SPP totaled US$ 30,360 million at the end of 2011, which represented a 2.3% decrease YoY that was attributable to volatility in the financial markets due to the fiscal crisis in Europe and the evolution of the global economy. Although emerging markets have been affected, and the Peruvian case is no exception, it is important to note that our economic indicators have remained solid, which has allowed us to enjoy comparatively higher levels of confidence among both consumers and businessmen. In terms of SPP s returns on investments, nominal yield over the last year (December 2011/December 2010) was 3.0% for fund 1 whereas funds 2 and 3 reported negative returns of -7.1% y -17.3% respectively. In mid-2011, the government decided to extend until 2014 the exoneration to SPP affiliates from obligatory contributions on extra salary payments, which employers are required to make in July and December under Peruvian Labor Law. It is important to keep in mind that this exoneration was instituted in mid-2009 and was meant to be in effect until December In terms of financial results, SPP s revenues in 2011 totaled US$ million, which represents 18.3% growth YoY. This result is attributable mainly to favorable evolution in the national economy, positive employment indicators and, to a lesser extent, to a revaluation of the Nuevo Sol. Operating expenses increased 13.6% to total US$ million due to an increase in expenses in administrative and sales personnel, the latter of which was associated with new affiliations. SPP s operating income for the period totaled US$ million, which represents a 25.0% increase YoY. It is important to note that these results, expressed in dollars, incorporate the effect of an appreciation in the local currency of approximately 4.0% in Finally, net income was US$ million, which is 34.1% higher than the level reported in

4 1 Evolution of the Private Private : Main Figures End of period Affiliates (thousands) 4,928 4,642 4,458 % variation (1) 6.2% 4.1% 8.7% New affiliations (thousands) % variation (1) 42.5% 11.8% -12.8% Contributors (thousands) (2) 2,067 1,936 1,766 % variation (1) 6.8% 9.6% 11.0% Sales Force 1,142 1,149 1,128 Funds under management (US$ millions) 30,360 31,077 23,967 % variation (1) -2.3% 29.7% 17.7% Voluntary Contributions (US$ millions) % variation (1) -23.8% 34.4% -44.1% Collections (US$ millions) (3) 2,094 1,822 1,597 Income (US$ millions) Operating Expenses (US$ millions) Operating Income (US$ millions) Earnings on legal reserves (US$ millions) (4) Net Income (US$ millions) Source: SMV and information from the Superintendencia de Banca, Seguros y AFP (1) Variation with regard to the previous year. (2) Annual average number of contributors. In 2011, information available as of October. (3) Collections: Corresponds to total deposits in the period for obligatory and voluntary contributions. (4) Since 2010, local Peruvian accounting includes legal reserves earnings in equity, in contrast to previous years that registered as earnings in the income statement. There is no information on results adjusted according to international accounting norms for the SPP, therefore for purposes of comparison with SPP the local accounting norms are used. 4

5 2 Prima AFP 55% tops the previous year s figure Prima AFP s commercial actions in 2011 continued to focus on capturing new affiliates. These efforts allowed us to incorporate 86 thousand new members, which tops the previous year s figure by 55%. 5

6 2 Prima AFP 2.1 Relevant Facts During 2011, the company s commercial activity focused on obtaining new affiliates and building stronger relations with our client base by providing permanent information and diverse channels of communication. In terms of funds under management, the year 2011 was marked by uncertainty in the financial markets due to the global economic outlook, which was less than encouraging due to the European fiscal crisis. Stock exchanges around the world -and primarily in emerging markets- contracted significantly, which in turn had a negative impact on funds under management. Despite this scenario, the Peruvian economy s indicators have remained solid and the outlook remains favorable based on considerable monetary stability, fiscal discipline, high levels of private investment and encouraging evidence of high levels of confidence among consumers and businessmen. Assets under management by Prima AFP at the end of December 2011 reached US$ 9,486 million, which falls below 2010 s value (US$ 9,765 million) due to impact of market yields. At Prima AFP, we believe that comprehensive risk management is important to identify and manage potential scenarios that may affect the company s ability to achieve its objectives. Prima has implemented strict policies and controls that are applied by both management and personnel on a daily basis. In 2011, we created a Sub-Division for Credit Risk, which means that the Risk Division is currently divided into three sub-divisions: the Sub-Division for Operating Risk, the Sub-Division for Market Risk and Liquidity and the Sub-Division for Credit Risk. During 2011, we directed our efforts at the review and update of operating risks inherent to the company s critical processes. We placed emphasis on familiarizing all of our personnel with our operating risk management approach, which is based on a methodology to decentralize operating risk management. Our efforts to execute system recovery plans; institute an emergency response plan; ensure operating continuity in the investment process; open agencies country-wide; and plan for crisis management among others continued throughout the year. In 2011, Prima AFP s Quality Management System performed satisfactorily in both of the ISO Certification 9001:2008 audits performed. Throughout the period, we focused on measuring, analyzing and improving processes to fine-tune our culture and provide a solid basis to achieve strategic objectives. The progress we have made in terms of our understanding of processes stands as proof of the maturity of our System for Quality Control and shows our success to achieve continuous improvements. 6

7 In 2011, Prima AFP maintained its position as market leader in SPP s main indicators, which include funds under management, collections volumes for new contributions and the total value of our affiliate s RAM. Next, we provide details on the main indicators: The subscription level of Prima AFP s affiliates remained solid with an adjusted average index for January-October 2011 of 60.0%, which topped the system s average of 50.8% as reported by the Superintendencia de Banca, Seguros y AFP (this indicator excludes affiliates that have not made contributions during their permanence in the SPP). In 2011, Prima AFP maintained its leadership in the SPP in terms of obligatory and voluntary contributions with a share of 32.9% of total collections, which exceeds the figure reported last year (32.3%). Collections volume increased 17.0% (measured in US Dollars). Fee income is based on our subscribers remuneration level (RAM). According to estimates based on our revenues and management fees in 2011, Prima AFP s RAM level grew in If we extend analysis to the SPP level, we estimate that our market share for this indicator was near 32.2% at the end of Prima AFP s portfolio under management at the end of 2011 was close to US$ 9,486 million, which represents 31.2% of total funds under management in the SPP and makes us the Peruvian AFP with the largest portfolio under management. The volume of voluntary contributions under management fell in 2011 due to volatility in global financial markets, closing the year at US$ 86 million with a market share of 42.2%. Prima AFP: Main indicators and market share Prima AFP System Share Prima AFP System Share % % 2010 Affiliates (1) 1,203,363 4,928, % 1,124,457 4,641, % New Affliations (2) 86, , % 55, , % Sales Force (1) 275 1, % 270 1, % Funds under Management 9,486 30, % 9,765 31, % US$ millions (1) Collections US$ millions (2) 688 2, % 588 1, % Voluntary Contributions % % US$ millions RAM US$ millions (3) 535 1, % 433 1, % Source: Superintendencia de Banca, Seguros y AFP; SMV (1) At the end of the period. (2) Accumulated to period. (3) Monthly affiliate remuneration, income calculation base. Prima AFP estimates, based on average income over the past 4 months. 7

8 2 Prima AFP Prima AFP s commercial actions in 2011 continued to focus on capturing new affiliates. These efforts allowed us to incorporate 86 thousand new members, which tops the previous year s figure by 55.1%. Close to 45.0% of these new captures correspond to the provinces, which is in line with the economic development seen nationwide, and the agribusiness, mining and construction sectors in particular. Our subscribers total monthly insurable remuneration level (RAM) in 2011 increased 16.2% YoY (measured in Nuevos Soles). This growth was due to our solid client base, which has continued to consolidate with the incorporation of new affiliates in a framework of sustained economic growth that has led to job creation and improved salary levels. In 2011, we made efforts to provide different service channels and clear information to our affiliates nationwide. We believe that providing transparent information and maintaining permanent communication with our clients is fundamental to ensuring their trust. We have also entered the world of social networks through Facebook and Youtube, which has provided our affiliates with a platform for two-way communication. Soon, we plan to open an account in Twitter and Linkedin. Despite the fact that the SPP has existed for a number of years now, the population continues to lack a clear understanding of how it works. As market leader, we have taken the lead to inform the public by opening a new platform, AFPconversa, which provides affiliates and non-affiliates a new venue to obtain information on how the system works and the benefits it offers. This platform also allows online consultations about SPP related issues. This effort aims to help us develop stronger relations with our clients and the population while increasing knowledge about the SPP. Our agency network includes 17 locations nationwide and our staff is prepared to provide our affiliates with the service and assistance they expect. In 2011, Prima AFP was the preferred choice among executives for the fifth consecutive year in the XI Annual Survey conducted by the Chamber of Commerce of Lima, whose members include the most important companies in the capital city. This distinction has strengthened our commitment to continue offering our clients better service and conditions while striving to exceed their expectations. Additionally, the prestigious British publication World Finance, which specializes in international economics, finance and business, recognized Prima AFP with the World Finance Pension Funds Award 2011 as Peru s best AFP. Prima AFP earned this prize for its outstanding investment and risk management, its focus on client service and efforts to ensure that its affiliates are permanently informed. 8

9 2 Prima AFP As mentioned previously, the year 2011 was marked by uncertainty in the financial markets due to the global economic outlook, mainly by the European fiscal crisis. According to MSCI indicators, the global stock markets fell -7.6% in 2011 but the negative effect was accentuated in emerging markets which contracted -20.4%. The Peruvian stock market was no exception and also fell % (measured in Nuevos Soles), while the rest of Latin America reported a contraction of -21.9%. On the local scene, although a degree of volatility was present during the months from April to June due to the presidential election, the negative returns reported in the markets in 2011 were primarily due to a roll-back in metal prices for commodities such as copper and zinc, which were affected by the context of global uncertainty and a slowdown in China higher than expected. Despite this, it is important to note that Peru s economic indicators have remained solid and post a favorable outlook due to considerable monetary stability, fiscal discipline, high levels of private investment and encouraging confidence levels among both consumers and businessmen. In a context marked by volatility in the financial markets, the portfolio managed by Prima AFP fell 2.9% in 2011 to total US$ 9,486 million at year-end. Our market share was 31.2%, which represents a slight decline with regard to the 31.4% reported at the end of Returns of funds under management were affected over the last twelve months (December 2011 / December 2010), reporting results of 3.3%, -7.1% and -19.8% for funds 1, 2 and 3 respectively. Nevertheless, it is important to mention that pension fund investments are long-term by nature and as such, short-term fluctuations are of less consequence. If we extend the evaluation period to 5 years (December 2011 / December 2006), Prima AFP s fund 2, which represents 66.3% of the total portfolio, achieved a nominal annualized yield of 8.1% while the SPP s average profitability was 7.5%. It is important to mention that during this 5-year period, Prima AFP leads in fund 2 s returns. 9

10 Prima AFP: Annualized nominal return indicators Results from investments dec-11 Prima AFP System Fund 1 Profitability (12 months) 3.3% 3.0% Profitability (24 months) 6.5% 6.5% Fund 2 Profitability (12 months) -7.1% -7.1% Profitability (24 months) 8.1% 7.5% Fund 3 Profitability (12 months) -19.8% -17.3% Profitability (24 months) 8.1% 8.6% Source: Superintendencia de Banca, Seguros y AFP. Due to market volatility in 2011, there were variations in the relative weight of each fund within Prima AFP s total portfolio. In this context, fund 3 fell from 27.5% to 24.2%, causing an increase in funds 1 and 2. dec-11 Part. % Dec-10 Part. % Fund % % Fund 2 6, % 6, % Fund 3 2, % 2, % Total US$ million 9, % 9, % Source: Superintendencia de Banca, Seguros y AFP. 10

11 Prima AFP: Managed portfolio to December 2011 and 2010 Prima AFP s actively invests its funds under management in national development. The company invests in the country s main companies and important development projects in the energy (electricity, hydro-energetic and hydrocarbon distribution), transportation (road networks), telecommunications and the agricultural sector. At the end of December 2011, more than US$ 1,150 million were invested in companies and infrastructure projects across the country. The chart below depicts the structure of each fund at the end of 2011 according to asset class: Prima AFP Fund 1 structure by asset class, as of December % 2.7% 13.2% Long term fixed income Local equity revenues Short term fixed income Foreign equity income Operations in transit + current account 4.1% 73.8% Prima AFP Fund 2 structure by asset class, as of December % 4.6% Long term fixed income Local equity revenues Short term fixed income Foreign equity income Operations in transit + current account 25.3% 52.7% 0.9 % Prima AFP Fund 3 structure by asset class, as of December % 1.5% Long term fixed income Local equity revenues Short term fixed income Foreign equity income Operations in transit + current account 2.4% 25.0% 51.8% Source: Superintendencia de Banca, Seguros y AFP. 11

12 2 Prima AFP In 2011, Prima AFP reported fee income of US$ million and earnings of US$ 32.4 million (IFRS results), both result of growth in our income base and prudent expense controls. Income Fee income totaled US$ million, which represents a 22.6% increase YoY that was attributable to our solid income base, which is composed of our subscribers total remuneration. This base is in turn used to calculate Prima AFP s management fee. New incorporations of affiliates also contributed to higher income this year. The appreciation of nearly 4.0% in the local currency had an impact on income in US Dollars. In mid-2011, the government decided to continue, until 2014, exoneration to SPP affiliates from contributions on extra salary payments which employers are required to make in July and December under Peruvian Labor Law. It is important to keep in mind that this exoneration was instituted in mid and was meant to be in effect until December Administration and Sales Expenses Personnel expenses totaled US$ 28.0 million, which represented a 20.0% increase YoY that was primarily attributable to commercial management s efforts to capture new affiliates. Administrative expenses, excluding personnel, totaled US$ 27.3 million. This represents a 9.8% increase YoY and includes the US$ 9.1 million figure reported for depreciation and amortization. This increase in expenses is due to charges for technological support, new projects to improve operations and additional spending due to an increase in premiums for disability insurance, survivor and burial costs. Other income and Expenses At year-end, other income and expenses fell US$ 1.5 million, which represents a decrease of 38.9% with regard to This was due primarily to an increase in financial income on temporary cash surpluses and a decrease in the impact of the exchange rate difference. 12

13 Balance Sheet Prima AFP s cash level at year-end was US$ 15.7 million. The temporary cash surpluses reported throughout the year were held in bank deposits. The amortization effect on intangible assets related to the acquisition of AFP Unión Vida totaled US$ 5.2 million. Legal reserves corresponding to fund securities used as a guarantee against potential fluctuations in profitability with regard to the competition fell in 2011 due to lower returns on funds under management given the crisis affecting the global markets. At the end of December, assets totaled US$ 88.3 million whereas shareholders equity reported accumulated unrealized earnings of US$ 25.9 million. Prima AFP s financial debt expires in The company maintains a debt payment schedule that is consistent with its goal to optimize the company s debt/capital structure. In December 2011, Prima AFP took on a US$2.4 MM debt to finance mid-term investments made throughout the year. At the end of December 2011, Prima AFP s bank debt totaled US$ 28.3 million, which is similar to the balance reported at the same time last year. Finally, Prima AFP closed the year with assets for US$ million, liabilities totaling US$ 92.3 million and shareholders equity of US$ million. Prima AFP: Main Financial Indicators (US$ thousands) 1/ Revenues 104,380 85,158 General expenses (71,984) (59,652) Net earnings 32,396 25,506 Total Assets 270, ,139 Total Liabilities 92,311 92,437 Net Equity 177, ,702 1/ IFRS 13

14 2 Prima AFP At the General Shareholders Meeting held on March 24, 2011, the following individuals were appointed to serve on the new board of directors: 1. Walter Bayly Llona, elected to act as President in the board session held on May 12, Javier Maggiolo Dibos 3. Alvaro Correa Malachowski 4. Gianfranco Ferrari de las Casas 5. Fernando Dasso Montero 6. Pedro Rubio Feijoo At the Universal Shareholders meeting held on April 26, 2011, an agreement was reached to increase the number of directors from (6) to seven (7) and name Mr. Rodolfo Javier Otero Nosiglia as an Independent Director. At the General Shareholders Meeting held on August 24, 2011, an agreement was reached to partially modify Prima AFP s statutes to reduce capital stock by S/.28 million (equivalent to US$ 10.2 million) by reimbursing contributions made by the shareholder Grupo Crédito S.A. Accordingly, in October 2011, 28,000 shares with a nominal value of S/.1,000 were redeemed. The company s capital stock fell from US$ million to US$ 97.7 million. On January 01, 2012, José Antonio Roca Voto-Bernales took charge of the Investment Division, replacing Alejandro Pérez-Reyes Zarak, who was appointed to new projects at Credicorp. 14

15 3 Financial s US$ million In 2011, Prima AFP reported fee income of US$ million and earnings of US$ 32.4 million (IFRS results), both result of growth in our income base and prudent expense controls. 15

16 3 Financial s (US$ 000) (US$ 000) Assets Cash 15,708 11,295 Legal reserves 88,319 95,929 Fixed Assets 13,893 13,904 Intangibles 70,265 76,493 Goodwill 44,594 44,594 Other assets 34,386 31,049 Income tax and employee profit sharing, differed 3,076 2,875 Total assets 270, ,139 Liabilities Deposits and obligations Bank debt 28,295 28,644 Income tax and employee profit sharing, differed 27,690 36,523 Other liabilities 35,511 26,550 Total liabilities 92,311 92,437 Net equity Capital 97, ,956 Legal reserves and others 5,017 2,703 Unrealized earnings 25,970 33,055 Cummulative results 16,842 14,482 Annual results 32,396 25,505 Total net equity 177, ,702 Total liabilities and net equity 270, ,139 16

17 3 Financial s (US$ 000) (US$ 000) Financial revenues Interests on bank deposits Financial expenses (1,548) (1,542) Interests on bank and correspondents' loans (1,548) (1,542) Net interest income (998) (1,378) Other income 105,494 86,456 Fees 104,380 85,158 Other income 1,114 1,298 Operative expenses (56,799) (50,284) Personnel expenses (28,008) (23,334) Administrative expenses (18,152) (15,173) Depreciation and Amortization (9,147) (9,689) Other expenses (1,492) (2,088) Exchange rate translation result (176) (375) Income before income tax and employee profit sharing 47,521 34,418 Employee profit sharing (*) - 1,228 Income Tax (15,125) (10,140) Net income 32,396 25,506 (*) According to changes in accounting standards, as of 2011 Employee profits sharing is included as Personnel expenses. 17

18 4 Board of Directors 18

19 4 Board of Directors Board of Directors Walter Bayly Llona Javier Maggiolo Dibos Alvaro Correa Malachowski Fernando Dasso Montero President Vice President Director Director Gianfranco Ferrari De Las Casas Pedro Rubio Feijoo Javier Otero Nosiglia Management Director Director Director Ruben Loaiza Negreiros Renzo Ricci Cocchella General Manager Commercial Manager Alejandro Pérez-Reyes Zarak (*) Investment Manager Jaime Vargas Galdós Central Processes Manager Gonzalo Podestá Haustein Risk Manager Sandra Holme Bowdin Finance and Administration Manager Julio Bravo Torrontegui Operations Manager Guillermo Beingolea Vingerhoets IT Manager Claudia Subauste Uribe Legal Manager Carla Barrionuevo Gomez-Morón Human Resources Manager (*) As of January 01, 2012, José Antonio Roca Voto-Bernales was appointed to replace Alejandro Pérez-Reyes Zarak as the head of the Investment Division. 19