Sul América S.A. Identification. Headquarters. Investor Relations Department. Company s Independent Auditors. Custodian Institution - PDF

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Sul América S.A. Corporate Taxpayer s ID (CNPJ/MF): / Company Registry (NIRE): CVM Registration Publicly Held Company with authorized capital Identification Headquarters

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Sul América S.A. Corporate Taxpayer s ID (CNPJ/MF): / Company Registry (NIRE): CVM Registration Publicly Held Company with authorized capital Identification Headquarters Investor Relations Department Company s Independent Auditors Sul América S.A., publicly held company, CVM Registration No granted on October 3, 2007, corporate taxpayers ID (CNPJ/MF) No / and articles of incorporation filed with JUCERJA under NIRE Rua Beatriz Larragoiti Lucas n 121, Cidade Nova, CEP , in the city and state of Rio de Janeiro. Located in the Company s headquarters. Investor Relations Officer Arthur Farme d Amoed Neto Phone: +55 (21) ; Fax: +55 (21) ; Investor Relations Department Phone: +55 (21) ; Fax: +55 (21) ; Investor Relations Website: KPMG Auditores Independentes responsible for fiscal years ended December 31 st, 2011, December 31 st, 2012 and December 31 st, Custodian Institution Services to Shareholders Bonds and securities issued Itaú Corretora de Valores S.A. Any branch of Itaú Unibanco S.A., headquartered at Praça Alfredo Egydio de Souza Aranha nº 100, Jabaquara, in the city and state of São Paulo, telephone: +55 (11) ; e mail: Common and preferred shares, partially represented by share deposit certificates ( units ), each representing one common share and two preferred shares issued by the Company, listed on the BM&FBOVESPA S.A. Securities, Commodities and Future Exchange under the ticker SULA11 on the Level 2 Corporate Governance Segment. Newspaper used by Company for disclosure Simple, unsecured debentures, not convertible into shares, issued in February 6, 2012, maturing in February 6, 2017, in a single tranche. Newspaper Valor Econômico, Caderno nacional (National Section), and Diário Oficial do Estado do Rio de Janeiro (Official Gazette of the State of Rio de Janeiro). SUMMARY I. Management Proposal to be submitted for approval by the shareholders at the Annual General Meeting of the Company to be held on March 31, 2014 in compliance with CVM Instruction No. 481/09, as amended. II. Information required pursuant to articles 9 (item III and Paragraph 1, item II), 10 and 11, of CVM Instruction 481/2009, as amended 1. Item 10 of the Reference Form (Formulário de Referência) Management Discussion and Analysis 2. Exhibit 9-1-ii of CVM Instruction 481/09 - Additional information regarding the allocation of the net income for the year ended December 31, Article 9, Paragraph 1, item III of CVM Instruction 481/09 Report from the Audit Committee 4. Items to of the Reference Form (Formulário de Referência) - Additional information regarding the proposal to elect the members of the Board of Directors 5. Item 13 of the Reference Form (Formulário de Referência) - Additional information regarding the proposal to establish management compensation Sul América S.A. Corporate taxpayers ID (CNPJ/MF) nº / Company Registry (NIRE) CVM Code Authorized Capital Publicly-held Company Proposal from the Company s management to be submitted for approval by the shareholders at the Annual General Meeting to be held on March 31, 2014, in compliance with CVM Instruction No. 481/09, as amended. Dear Shareholders, The management of Sul América S.A. (the Company ) hereby presents its proposals regarding the matters listed in the Agenda for the Annual General Meeting to be held on March 31, 2014 at 3:00 PM, at the Company's headquarters, Rua Beatriz Larragoiti Lucas, Cidade Nova, Rio de Janeiro RJ, pursuant to the Call Notice disclosed on February 27, 2014: (i) To verify the Company s management accounts, and to examine, discuss and vote on the financial statements of the Company for the fiscal year ended The Company s management proposes that its Shareholders evaluate the Company s management accounts and the financial statements of the Company for the fiscal year ended December 31, 2013 and, after careful consideration, approve the mentioned documents as approved by the Board of Directors at the meeting held on February 25,2014 and published by the Company on , in the newspaper Valor Econômico, national section, and in the Official Gazette of the State of Rio de Janeiro (Diário Oficial do Estado do Rio de Janeiro). The above mentioned documents, along with (a) the opinion from the independent auditors, (b) the summary report from the Audit Committee, (c) the Financial Statements Form (DFP) and (d) the comments from the management on the Company s financial position (MD&A) are all available on the website of the Company (www.sulamerica.com.br/ir), from the CVM (www.cvm.gov.br) and from the BM&FBovespa (www.bovespa.com.br), pursuant to CVM Instruction No. 481/09, as amended. (ii) To approve the allocation of the net income from the fiscal year ended The Company s management proposes the allocation of the results of the fiscal year ended as demonstrated in the table below, as approved by the Board of Directors at the meeting held on February 25, 2013 and reflected in the management report. Net income of the fiscal year ended and proposal for its allocation: 2013 (in R$ thousand) Net profit 480,428 Legal reserve (5%) (24.021) Adjusted net profit (Article Laws 6,404/76 and 10,303/01) 456,407 Mandatory dividends 25% of Adjusted net profit (Article Laws 6,404/76 and 10,303/01) 114,101 (-)Interim Dividends (36,119) (-) Interest on Capital (net of taxes) (73,578) Total Mandatory Dividends 4,404 Complementary dividends 22,820 Total proposed dividends (R$0,0271 per common or preferred share and R$0,0813 per unit as of December 31, ,224 Reserve for business expansion¹ 308,063 ¹ The calculation of the reserve for business expansion considers the deduction of the gross amount of the Interest on Capital paid/declared by the company (R$85 million Reais). This proposal follows the criteria set forth by the Company Dividend Distribution Policy. Additional information on the proposal for the allocation of the net income presented by the management, including comparisons with previous fiscal years, are available on the Company s website (www.sulamerica.com.br/ir), from the CVM (www.cvm.gov.br) and from the BM&FBovespa (www.bovespa.com.br), pursuant to article 9, 1, II of CVM Instruction No. 481/09, as amended. The net income distribution demonstrated in the table above was reflected on the Financial Statements, on the assumption of its approval by the General Meeting. (iii) To establish the number of members in the composition of the Board of Directors The proposal by the management of the Company is that the Board of Directors will be composed of ten (10) members to the term of office that will end on the date of the Annual General Meeting to be held in (iv) To elect the members of the Board of Directors The Company management proposes the individuals listed below be (re)elected to compose the Board of Directors as sitting, as indicated below, for a term of office of one (1) year, until the Annual General Meeting of 2015: Patrick Antonio Claude de Larragoiti Lucas Chairman Carlos Infante Santos de Castro member Christopher John Minter member Appointed by the minority shareholder Swiss Re Direct Investments Company Ltd David Lorne Levy Guilherme Affonso Ferreira member member Appointed by the minority shareholder International Finance Corporation Isabelle Rose Marie de Ségur Lamoignon member Johannes Martinus Maria Boers Jorge Hilário Gouvêa Vieira member member Appointed by the minority shareholder ING Groep N.V. Pierre Claude Perrenoud member Roberto Teixeira da Costa member Messrs. Christopher Minter, David Lorne Levy, Guilherme Affonso Ferreira, Pierre Claude Perrenoud and Roberto Teixeira da Costa, fulfill the requisites of independence established in the Listing Regulations of Level 2 of the BM&FBovespa S.A., and thus, are indicated as independent Board members. The proposed number is equivalent to 50% of the total number of Board members that, therefore, is a percentage higher than that required by the mentioned regulation and by the bylaws of the Company. In attention to the recommendations of Official Letter CVM/SEP/ No. 01/2014 (Ofício CVM/SEP/01/2014), the Management of the Company informs that the election of members of the Board of Directors of the Company will take place following the voting process carried out by simple vote, by ticket, in which the Company designates names, forming a complete list of candidates for the Board of Directors seats, which must be submitted for resolution by the shareholders, unless it is required to adopt the process of a cumulative vote. Cumulative Voting: in the case of adoption of the process of cumulative voting, each common share is attributed as many votes as the number of positions to be filled on the Board of Directors of the Company and the shareholder has the right of accumulating votes on one single candidate or of distributing them among various candidates. The request for adoption of the process of cumulative vote can be made by shareholders that represent at least 5% of the voting capital of the Company, by no later than 48 hours prior to the opening of the Meeting, through a written request to the Company. Separate election: On the terms of applicable legislation, whether in the simple or cumulative vote process, there is assurance of election of a member (and relevant deputy) by a separate vote, excluding the controlling shareholder, by the majority of the holders of common shares that represent at least 15% of the shares with voting rights, as well as by the majority of the holders of preferred shares that represent at least 10% of the capital stock of the Company. The right of electing members of the Board of Directors of the Company separately may only be exercised by shareholders that can evidence uninterrupted ownership of the required equity interest during the three months immediately prior to the date of the Meeting. Detailed information on the candidates mentioned above, including their professional experience, are available on the Company s website (www.sulamerica.com.br/ri), from the CVM (www.cvm.gov.br) and from the BM&FBovespa (www.bovespa.com.br), in accordance with Article 10 of CVM Instruction 481/09, as amended. (v) To establish management compensation (Board of Directors and Executive Officers) The Management of the Company proposes an overall and annual amount up to R$3,000, (three million reais) for the compensation of its administrative officers (Board of Directors and Executive Board) for the period between the annual general meeting to be held in March 31, 2014 and the holding of the Annual General Meeting of Additional information on the compensation of the management of Sul América S.A. can be obtained in the following annex and is also available on the Company s website (www.sulamerica.com.br/ri), of CVM (www.cvm.gov.br) and of BM&FBovespa (www.bovespa.com.br), pursuant to Article 12 of CVM Instruction No. 481/09. In attention to the recommendations of Official Letter CVM/SEP/ number 01/2014 (Ofício CVM/SEP/01/2014), the Management of the Company informs that in Annual General Meeting of the Company held on April 4, 2013, an amount of up to R$ 9,052, (nine million fifty-two thousand five hundred Reais) has been approved for the compensation of its administrative officers (Board of Directors and Executive Board), out of which R$ 2,605, (two million six hundred and five thousand nine hundred and thirty Reais and thirty-two centavos) were effectively spent. The difference between the approved amount and the total spent in 2013 is due to expectations and assumptions not realized. The effectively spent amount was taken into consideration for the formulation of the management proposal for the 2014 AGM. Additional information on compensation of the management of Sul América S.A, are available in the document attached to this proposal and on the company's website (www.sulamerica.com.br/ri), from the CVM (www.cvm.gov.br) and from the BM&FBOVESPA (www.bovespa.com.br), in accordance with art. 12 of CVM Instruction nº 481/09. Rio de Janeiro, February 26, 2014, Board of Directors Table of Contents 10.1 MANAGEMENT DISCUSSION AND ANALYSIS OPERATING AND FINANCIAL RESULT EVENTS WITH RELEVANT EFFECTS ON THE FINANCIAL STATEMENTS SIGNIFICANT CHANGES IN ACCOUNTING PRACTICES - QUALIFICATIONS AND EMPHASES ON THE OPINION OF THE AUDITOR SIGNIFICANT ACCOUNTING PRACTICES OF THE COMPANY INTERNAL CONTROLS FOR THE PREPARATION OF FINANCIAL STATEMENTS - LEVEL OF EFFICIENCY AND WEAKNESS AND RECOMMENDATIONS FROM THE AUDITORS REPORT PUBLIC OFFERS FOR DISTRIBUTION OF SECURITIES AND ANY DEVIATIONS MATERIAL ITEMS NOT EVIDENCED IN THE ISSUER S FINANCIAL STATEMENTS COMMENTS ON ITEMS NOT INCLUDED IN THE FINANCIAL STATEMENTS BUSINESS PLAN OTHER RELEVANT INFLUENTIAL FACTORS... 98 10.1 MANAGEMENT DISCUSSION AND ANALYSIS 2 A. General financial and equity conditions Sul América S.A. is a is a holding company that directly and indirectly controls companies that constitute Brazil s largest independent insurance group in amount of insurance premiums, according to data from SUSEP and ANS as of December 2012, operating in the following segments: property and casualty, life insurance, private pension, health insurance, medical services management, asset management and capitalization. The group s main revenues come from insurance premiums, Administrative Service Only (ASO) installments, pension contributions, asset management fees and capitalization contributions. The 2013 results consolidated a year of advancements for SulAmérica. The Company recorded growth in its operations, cost management and conducted solid management of its portfolio of investments. Among the highlights, there is the performance of the auto insurance segment, which recorded a strong growth in its premiums revenues, with an increase of 22.6% for the year, and the insured fleet, which grew 9.2% for the same period of comparison. The PME and group portfolios of the health and dental insurance segment demonstrated an expressive evolution, both in volume of premiums as well as in the number of policyholders. As of December 31, 2013, SulAmérica Group had total revenue of R$12.2 billion, total assets in the amount of R$17.0 billion and a portfolio of approximately 7.0 million clients. Regarding the insurance business, SulAmérica held, according to SUSEP data from November 2013, the fourth largest market share of the auto insurance segment, with 9.7% of premiums and the third largest market share of the health segment, with 8.8% of premiums, according to ANS data disclosed on September, In the asset management segment, the amount of funds managed by Sul América Investimentos DTVM S.A. was R$18.2 billion as of December 31, 2013, which corresponded to the second largest market share held by independent institutions, as disclosed by the Brazilian Financial and Capital Markets Association (ANBIMA). As of December 31, 2013, the gross debt (comprised by principal of debentures issued in 2012, plus interest) amounted to R$520.4 million, 0.8% higher than in the previous year. This level of debt represents 14.4% of shareholders equity for the end of the year, 1.1 p.p. 2 Sul América S.A. is referred to as Company and the term SulAmérica is used to address the group of companies formed by Sul América S.A. and its subsidiaries and affiliates. lower than in The current ratio 3 was 1.64x, 11.4% lower than The general liquidity ratio 4 amounted to 1.24x, 3.9% lower than in the previous year. The Company s Management believes that SulAmérica s liquidity requirements are mainly covered by the revenues of its operations, profits from its own investments and profits from other investments. Funds originated from those sources are mainly used to pay claims, pension plan redemptions, investment funds redemptions, capitalization redemptions and premiums, marketing and management expenditures, taxes and shareholders revenues was a troubled year for the world economy. Uncertainties as to the U.S. public debt ceiling and, subsequently, the aggravation of the fiscal condition of Euro zone countries was reflected in investor confidence and consumption, production and investment expectations of world economy. While growth of developed countries was restricted by public debt burdens and the high indebtedness of families, emerging economies had to deal with high inflation rates and a potential bubble in assets price. During the first six-month period of 2011, Brazilian economy maintained the high growth rates seen in 2010 and, in order to control inflation, the Brazilian Central Bank (BACEN) was forced to raise the SELIC rate for five consecutive meetings, from 10.75% in January 2011 to 12.5% in July From the second half of 2011, international crisis effects became present in Brazilian economy, forcing the BACEN to reduce the SELIC by 0.5%, for three consecutive meetings, which was established at 11.0% at the end of Gross Domestic Product (GDP), after a strong recovery in 2010 (7.5% growth), lost its strength throughout the year, and 2011 ended with growth of approximately 2.8%. Even with weaker growth, economic sluggishness was reduced, especially in the labor market, with the lowest unemployment rates in recent history (2011 average unemployment rate was 6.0%). In order to promote production and consumption, the Brazilian government used other economic incentive measures such as the IOF reduction on credit operations for consumers and the reduction of the IPI, which represents taxes on industrialized products. Inflation measured by the National Consumer Price Index (IPCA) ended 2011 with a 6.5%, increase within the government s target, generating doubts about inflationary pressures for According to data from the Superintendence of Private Insurance and Pensions (SUSEP), the insurance industry exhibited growth rates of 16.4% until June 2011, when compared to the same period in 2010, with a total of R$29.7 billion of Premiums issued by insurance 3 Current assets divided by Current liabilities. This indicator shows the quantity of short-term assets that would be available for the settlement of short-term liabilities. 4 Current assets plus Long-term assets divided by Current liabilities plus Noncurrent liabilities. This indicator shows the quantity of nonpermanent assets that would be available for the settlement of the Company s liabilities (third-party capital). companies, taking into account only insurance premiums, not including capitalization and VGBL. In 2012, Brazilian economic performance was reflected in the industrial activity, with a decrease in investment driven by the uncertainties present in international and domestic scenarios. Consumption expenditures, the engine of the economic growth over the last years, also lost their strength in Families indebtedness and increasing default, especially in automotive segment, explain the consumption growth slowdown in In the face of the slowdown in economic activity, government authorities promoted a substantial decrease of the basic interest rate (Selic) to 7.25% at the end of the year, the smallest nominal level of recent history. At the same time, government authorities presented incentive packages, especially tax, for durable goods production industries (especially autos) and capital goods. Within this context, the insurance industry performed well, with a total of R$140.3 billion of premium issued, increasing by 21.7% in relation to 2011, taking into account market data regulated by SUSEP, not including capitalization. SulAmérica ended 2012 with a net income of R$483.2 million, an increase of 8.4% in relation to the net income of the previous year. The return on average net equity in 2012 was of 15.1%, an increase of 0.1% in relation to the previous year. Insurance total premiums amounted to R$10.6 billion, with an increase of 12.5% in As of December 31, 2012, the consolidated shareholders equity of the Company and its operating subsidiaries was of R$3.3 billion, with an increase of 8.7% in relation
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