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Sul América's Q2 profit nearly doubles on one-off tax reversal

Sul América SA's second-quarter 2019 profit nearly doubled year over year, driven by a one-off, tax-related item as well as strong results from the company's health and dental segment.

The Brazilian insurance company booked net income after noncontrolling interest of 260.8 million reais for the three-month period, up 92.6% from 135.4 million reais in the year-ago quarter. EPS increased to 67 centavos for the quarter from 35 centavos a year ago.

The company noted that the result included a reduction in its effective tax rate due to a reversal of deferred tax liabilities, equivalent to about 77 million reais. This was partially offset by a reversal of equity income — equivalent to about 14 million reais related to the company's stake in CAIXA Capitalização SA, which it sold to Icatu Seguros SA.

Without the nonrecurring items, Sul América's net income would have increased 46.0% year over year.

The company's operating revenues hit 5.21 billion reais in the quarter, up 6.8% year over year. Operating revenues from the health and dental segment rose 10.9% yearly to 4.21 billion reais, while those from the life and personal accident segment grew 6.1% to 130.9 million reais.

However, operating revenues from the automobile segment contracted 9.3% to 825.7 million reais, while those from the other property and casualty segment fell 10.8% to 43.4 million reais.

Other operating revenues, which include those from private pension, savings bonds and asset management, rose 11.4% annually to 233.8 million reais. Results for the quarter also included 159.4 reais of investment income, down 5.2% from a year earlier.

Earned premiums for the period totaled 5.24 billion reais, up 9.2% year over year. The company's combined ratio came to 98.6% in the second quarter, as opposed to 98.9% in the prior-year period.

The recurring return on annual average equity was 17.6% in the quarter, up from 15.1% a year ago.

Sul América's total health and dental insured members reached grew 10.9% yearly to 3.6 million.

Separately, the company also said it completed its acquisition of Prodent Assistência Odontológica Ltda. for 146 million reais at the end of July.

As of Aug. 6, US$1 was equivalent to 3.98 Brazilian reais.