DRS/A

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

As confidentially submitted to the Securities and Exchange Commission on June 17, 2019.

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Pre-Effective Amendment No. 1

to

Form F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Intercorp Financial Services Inc.

(Exact name of Registrant as specified in its charter)

Republic of Panama	6029	Not applicable
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

Intercorp Financial Services Inc.

Torre Interbank, Av. Carlos Villarán 140

La Victoria

Lima 13, Peru

(51) (1) 615-9011

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Corporation Service Company

1180 Avenue of the Americas, Suite 210

New York, NY 10036

(212) 299-5600

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications, including communications sent to agent for service, should be sent to:

Antonia E. Stolper, Esq. Shearman & Sterling LLP 599 Lexington Avenue New York, New York 10022 (212) 848-5009 Juan Francisco Méndez, Esq. Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 (212) 455-2579

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by a check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Proposed Maximum Aggregate Offering Price (2)	Amount of registration fee
Common Shares(1)	U.S.$	U.S.$

(1) Includes common shares that the underwriters have the option to purchase, if any, and common shares that are to be offered outside the United States but that may be resold from time to time in the United States in transactions requiring registration under the Securities Act. Offers and sales of common shares outside the United States are being made pursuant to Regulation S and are not covered by the Registration Statement

(2) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell, nor does it seek an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED                 , 2019

PRELIMINARY    PROSPECTUS

             Shares

Common Stock

This is a public offering of                  shares of Intercorp Financial Services, Inc. (“IFS”) by IFS, one of our subsidiaries identified in this prospectus and Intercorp Peru Ltd. (“Intercorp Peru”). We will not receive any of the proceeds from the sale of the common shares by Intercorp Peru. The sale of our shares by our subsidiary will be treated as a sale by us of treasury shares.

Our common shares are listed on the Lima Stock Exchange (Bolsa de Valores de Lima) under the symbol “IFS”. On                , 2019, the last reported sales price of IFS common shares on the Lima Stock Exchange was U.S.$                per share. We will apply to have the common shares listed on the New York Stock Exchange under the symbol “IFS.”

We and Intercorp Peru have granted the underwriters an option for a period of 30 days to purchase from them up to an aggregate of                  and                 additional common shares, respectively.

Investing in the common shares involves risks. See “Risk Factors” beginning on page 29.

	Price to Public	Underwriting Discount and Commissions	Proceeds to Company(1)	Proceeds to the Selling Shareholders
Per Share	U.S.$	U.S.$	U.S.$	U.S.$
Total	U.S.$	U.S.$	U.S.$	U.S.$

(1) Represents proceeds to us and to our subsidiary from the sale of our shares in the offering.

Delivery of the common shares will be made on or about                 , 2019.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This offering has not and will not be registered in the Republic of Peru and therefore is not and will not be subject to Peruvian laws applicable to public offerings in Peru. Neither this offering nor the common shares have been or will be registered in the Republic of Panama and therefore are not and will not be subject to the Panamanian laws applicable to public offerings in Panama. The information contained in this prospectus has not been and will not be approved or disapproved by the Peruvian Securities Commission (Superintendencia del Mercado de Valores, or “SMV”), the Lima Stock Exchange, or the Panamanian Superintendency of the Securities Market (Superintendencia del Mercado de Valores, or “Panamanian SMV”). The common shares may not be sold in Peru or Panama except in compliance with the securities laws of Peru and Panama, respectively.

Global Coordinators and Joint Bookrunners

BofA Merrill Lynch J.P. Morgan

The date of this prospectus is                 , 2019.

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

We are responsible for the information contained in this prospectus. We have not authorized anyone to give you any other information and we take no responsibility for any other information that others may give you.

TABLE OF CONTENTS

PRESENTATION OF FINANCIAL AND OTHER INFORMATION	ii
SUMMARY	1
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION	20
THE OFFERING	27
RISK FACTORS	29
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	57
EXCHANGE RATES	59
USE OF PROCEEDS	60
CAPITALIZATION	61
SELECTED CONSOLIDATED FINANCIAL INFORMATION	62
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION	69
SELECTED STATISTICAL INFORMATION	138
INDUSTRY	159
BUSINESS	177
RISK MANAGEMENT	231
REGULATION AND SUPERVISION OF THE BANKING AND INSURANCE SECTOR IN PERU AND THE BAHAMIAN FINANCIAL REGULATORY FRAMEWORK	250
MANAGEMENT	267
PRINCIPAL SHAREHOLDERS	280
RELATED PARTY TRANSACTIONS	281
DESCRIPTION OF COMMON SHARES	286
TAXATION	294
UNDERWRITING	303
EXPENSES OF THE GLOBAL OFFERING	313
VALIDITY OF SECURITIES	314
EXPERTS	315
WHERE YOU CAN FIND MORE INFORMATION	316
ENFORCEABILITY OF CIVIL LIABILITIES	317
CONSOLIDATED FINANCIAL STATEMENTS	F-1

This prospectus has been prepared on the basis that any offer of common shares in any Member State of the European Economic Area will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of common shares. Accordingly, any person making or intending to make an offer in that Member State of the European Economic Area of common shares which are the subject of the offering contemplated in this prospectus, may only do so in circumstances in which no obligation arises for us or the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither we nor the underwriters have authorized, nor do they authorize, the making of any offer of common shares in circumstances in which an obligation arises for us or the underwriters to publish a prospectus for such offer. The expression “Prospectus Directive” means Directive 2003/71/EC (as amended), and includes any relevant implementing measure in each Member State.

The distribution of this prospectus and the offering and sale of common shares in certain jurisdictions may be restricted by law. Persons who receive this prospectus must inform themselves about and observe any such restrictions. This prospectus does not constitute an offer of, or an invitation to purchase, any of the common shares in any jurisdiction in which such offer or invitation would be unlawful.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Certain Definitions

All references to “we”, “us”, “our company”, and “IFS” in this prospectus are to Intercorp Financial Services Inc., a corporation (sociedad anónima) organized under the laws of the Republic of Panama (“Panama”).

In this prospectus, we refer to our principal subsidiaries as follows: (i) in our banking segment: Banco Internacional del Perú, S.A.A.—Interbank, an open-stock corporation (sociedad anónima abierta) organized under the laws of Peru, as “Interbank”; (ii) in our insurance segment: Interseguro Compañía de Seguros, S.A., a corporation (sociedad anónima) organized under the laws of Peru, as “Interseguro”; and (iii) in our wealth management segment: Inteligo Group Corp., a corporation (sociedad anónima) organized under the laws of Panama, as “Inteligo”, Inteligo Bank Ltd., a corporation organized under the laws of The Bahamas, as “Inteligo Bank”, Inteligo Sociedad Agente de Bolsa S.A., a corporation (sociedad anónima) organized under the laws of Peru, as “Inteligo SAB” and Interfondos S.A. Sociedad Administradora de Fondos, a corporation organized under the laws of Peru, as “Interfondos SAFM” or “Interfondos”.

In this prospectus, we also refer to our parent company, Intercorp Perú Ltd. (“Intercorp Peru” or “Intercorp”), a holding company for a group of companies operating mainly in Peru under the name “Intercorp”. Intercorp Peru’s main subsidiaries include our company and Intercorp Retail Inc. (“Intercorp Retail”). Intercorp Retail acts as a holding company for the retail and real estate operations of Intercorp Peru in Peru. Through its subsidiary InRetail Peru Corp whose shares are listed on the Lima Stock Exchange under the symbol “INRETAILC1,” Intercorp Retail has controlling stakes in (i) Supermercados Peruanos S.A. (“Supermercados Peruanos”), a supermarket chain, primarily operating under the: “Plaza Vea,” “Vivanda” and “MASS” brands, (ii) InRetail Pharma S.A., consisting of a chain of pharmacies operating under the “Inkafarma” and “MiFarma” brands with a distribution and marketing business as well as manufacturing some pharmaceutical products and (iii) InRetail Real Estate Corp., an owner, developer and operator of shopping malls under the “Real Plaza” brand. Intercorp Retail also controls directly (a) Tiendas Peruanas S.A., a department store chain operating under the “Oechsle” brand that started operations in 2009, (ii) Financiera Oh! S.A., a consumer finance company that started operations in 2010, and (iii) Homecenters Peruanos S.A. (“Homecenters Peruanos”), a home improvement company operating under the “Promart” brand. Our parent company Intercorp Peru also controls the following companies involved in the private education and healthcare businesses under the following brands: “Innova Schools,” “Zegel IPAE,” “UTP” “IDAT” and “Aviva”.

Financial Statements

Our audited annual consolidated financial statements as of December 31, 2018 and 2017 and as of January 1, 2017 and for each of the three years ended December 31, 2018, 2017 and 2016 included in this prospectus have been prepared in soles and in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and audited by Paredes, Burga & Asociados Sociedad Civil de Responsabilidad Limitada, a member firm of Ernst & Young Global Limited.

Our unaudited interim condensed consolidated financial statements as of March 31 2019 and for the three months ended March 31, 2019 and March 31, 2018 included in this prospectus have been prepared in soles and in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting”.

The accounting principles used in the preparation of our unaudited interim condensed consolidated financial statements are the same as those used in the preparation of our audited annual consolidated financial statements. For new accounting pronouncements effective January 1, 2019, see Note 2(c) to our unaudited interim condensed consolidated financial statements. In addition, our unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in our audited consolidated financial statements and accordingly should be read in conjunction with them.

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For regulatory purposes, including regulations of the Banco Central de Reserva del Perú (the “Central Reserve Bank of Peru”) and regulations and the reporting requirements of the SMV, our Peruvian subsidiaries, Interbank and Interseguro, also prepare in Spanish and make available to shareholders statutory financial statements as prescribed by the Peruvian Superintendency of Banks, Insurance and Private Pension Fund Administrators (Superintendencia de Banca, Seguros y AFPs, or “SBS”), hereinafter “SBS GAAP”.

We have included in this prospectus certain information reported by the SBS for the Peruvian banking and insurance sectors as a whole as well as for individual financial institutions in Peru, including Interbank and Interseguro, which report to the SBS in SBS GAAP. The information under SBS GAAP has been presented for comparative market purposes. All statements in this prospectus regarding our relative market position and financial performance vis-à-vis the financial services and insurance sectors in Peru are based, out of necessity, on information obtained from the SBS and the SMV. With respect to comparative banking information we typically compare ourselves against certain peer banks or against the system as a whole. With respect to comparative insurance information we typically compare ourselves against the industry as a whole. Statements in this prospectus regarding our relative market position and financial performance, however, do not include information relating to Inteligo as Inteligo is not regulated by and does not report to the SBS or the SMV.

Certain comparative financial information related to our compound annual growth rate (“CAGR”) included in this prospectus has been prepared based on information reported pursuant to SBS GAAP, except for Inteligo. Compound Annual Growth Rate (“CAGR”) is calculated by (i) dividing the value of a variable on year X (ending value) by the value of this same variable on year Y (beginning value), then (ii) raising this to an exponent of one divided by (X-Y) and (iii) subtracting one from the result. In addition, our Peruvian subsidiaries pay dividends to us on the basis of the SBS GAAP financial statements as further described in this prospectus. See “Dividends and Dividend Policy” and “Risk Factors—We are a holding company and all of our operations are conducted through our subsidiaries. Our ability to pay dividends to you will depend on the ability of our subsidiaries to pay dividends and make other distributions to us.”

IFRS differs in certain significant respects from SBS GAAP. Consequently, information presented in this prospectus in accordance with SBS GAAP or based on information from the SBS or SMV may not be comparable with our financial information prepared in accordance with IFRS. Unless otherwise indicated, all financial information provided in this prospectus has been prepared in accordance with IFRS.

Comparability of 2018 audited consolidated financial statements to prior years and financial statements restatement

As a result of the adoption of IFRS 9 beginning January 1, 2018, our audited consolidated financial statements for 2018 and related ratios are not comparable to prior years. See Note 4.7 to our audited annual consolidated financial statements.

In 2018, the SBS published new Peruvian mortality and morbidity tables to be used in mathematical reserve calculations of pensions. These tables gather updated information and show the recent changes in the life expectancy in Peru. We decided to use these new tables for our pension reserve calculation, as they show the recent changes in mortality rates and life expectancy. According to IAS 8, this change in mortality and morbidity tables represents a change in our accounting estimate regarding pension reserve calculation whose effects have been recognized prospectively, affecting the results of the year and not prior periods. See Note 4.6 to our audited annual consolidated financial statements.

Until December 31, 2017, our subsidiary Interseguro recognized in its income statements the effect of the change in the value of liabilities coming from retirement, disability and survivor’s pensions, caused by the variation in the market interest rates used to discount these liabilities. During 2018, Interseguro voluntarily modified its accounting policy in order to show the effect of the change in market interest rates in the statements of other comprehensive income, providing more accurate and relevant information. The resulting impact was

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retrospectively recorded, restating unrealized results, net and retained earnings of our consolidated statements of financial position as of December 31, 2017, 2016, 2015 and 2014 and for the years then ended included in this prospectus. Restated line items due to the voluntary change in accounting policy for 2015 and 2014 have not been audited. See Note 4.2.1(i) to our audited annual consolidated financial statements and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” for a discussion of the impact of this change. In addition, minor reclassifications for comparative purposes were made for the periods presented. See Note 4.4(a.i) to our audited annual consolidated financial statements.

Additionally, our acquisition of Seguros Sura in November 2017 affected the comparability of the financial information for our subsidiary Interseguro for 2018 to prior years.

Currency Translation

The term “sol” and the symbol “S/” refer to the legal currency of Peru, and the term “U.S. dollar” and the symbol “U.S.$” refer to the legal currency of the United States.

We have translated some of the soles amounts contained in this prospectus into U.S. dollars for convenience purposes only. Unless otherwise indicated or the context otherwise requires, the rate used to translate soles amounts to U.S. dollars as of March 31, 2019 and as of December 31, 2018 was S/3.318 = U.S.$1.00, which was the exchange rate reported for March 31, 2019 by the SBS. The Federal Reserve Bank of New York does not report a noon buying rate for soles. The U.S. dollar equivalent information presented in this prospectus is provided solely for convenience of investors and should not be construed as implying that the soles or other currency amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See “Exchange Rates” for information regarding historical exchange rates of soles to U.S. dollars.

Effect of Rounding

Certain figures included in this prospectus and in our consolidated financial statements have been rounded for ease of presentation. Percentage figures included in this prospectus have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this prospectus may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements. Certain numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them due to rounding.

Market and Industry Data

In this prospectus, unless otherwise indicated, all macroeconomic data relating to Peru is based on information published by the SBS, the Central Reserve Bank of Peru, the Peruvian Ministry of the Economy and Finance (Ministerio de Economía y Finanzas, or “MEF”), and the Peruvian National Institute of Statistics and Information Processing (Instituto Nacional de Estadística e Informática, or “INEI”). References in this prospectus to “GDP” refer to real gross domestic product, except for GDP per capita and penetration ratios of loan products.

References in this prospectus to “peer countries” in Latin America refer to Brazil, Chile, Colombia and Mexico. Certain information about peer countries in Latin America have been derived from the Economist Intelligence Unit (“EIU”), the Chilean Superintendency of Banks and Financial Institutions (Superintendencia de Bancos e Instituciones Financieras, or “SBIF”), the Central Bank of Brazil (Banco Central do Brasil), the Colombian Financial Superintendency (Superintendencia Financiera de Colombia), and the Mexican Commission for Banking and Securities (Comisión Nacional Bancaria y de Valores). References in this prospectus to the “four largest banks in Peru” or the “four largest Peruvian banks” refer to Banco de Crédito del Perú (“BCP”), BBVA Continental, Interbank and Scotiabank Perú S.A.A.

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Unless otherwise indicated, statistical information in this prospectus relating to our Peruvian subsidiaries Interbank and Interseguro, regarding market share, ranking, and other measures, as well as information on other Peruvian financial institutions and the Peruvian financial system generally, has been derived from reports and information published by the SBS, the SMV, the Central Reserve Bank of Peru, the Association of Peruvian Banks (Asociación de Bancos del Perú, or “ASBANC”), Swiss Re Sigma’s report “World Insurance in 2017: solid, but mature life markets weigh on growth” (“Swiss Re Sigma 2017 Report”) or from other publicly available sources and industry publications.

Socioeconomic levels are determined based on the data collected by INEI in their national annual survey Encuesta Nacional de Hogares (“ENAHO”). INEI assigns a score to each household based on their ranking on the following four factors: (i) characteristics of the household living space, (ii) level of living space overcrowding, (iii) level of education of household head and (iv) ownership of durable goods/properties; and then groups them in five socioeconomic segments (A, B, C, D, E).

Other market share information and other statistical information and quantitative statements in this prospectus regarding our market position relative to our competitors, except where otherwise indicated, is not based on published statistical data or information obtained from independent third parties. Rather, such information and statements reflect management estimates based upon our internal records and surveys, statistics published by providers of industry data, information published by our competitors, and information published by trade and business organizations and associations and other sources within the industry in which we operate. We have not independently verified any data produced by third parties or industry or general publications, although we believe such data and publications are reliable. In addition, while we believe our internal data and surveys to be reliable, such data and surveys have not been verified by any independent sources.

Loan Portfolio Data

Unless otherwise indicated, references in this prospectus to performing loans refer to loans in compliance with their original contractual obligations. References to past-due loans refer to overdue loans defined as follows: commercial loans are considered past-due once amortization payments are 15 days overdue; loans to micro-businesses are considered past-due once amortization payments are 30 days overdue; and in the case of consumer, mortgage and leasing loans, the amortization portion of a coupon is considered past-due once 30 days overdue and the total amount of the loan is considered past-due once an amortization payment is 90 days overdue. For IFRS 7 and IFRS 9 disclosure purposes, the entire loan balance is considered past due when debtors have failed to make a payment when contractually due. Past-due loans do not include refinanced and restructured loans. References to total gross loans include total loans outstanding, including past-due loans, refinanced loans and restructured loans, and references to total net loans refer to gross loans plus accrued interest less allowances for loan losses and deferred interest.

Certain Financial Definitions and Conventions

We present return on assets, or “ROA”, return on equity or “ROE”, net interest margin or “NIM”, risk adjusted net interest margin or “risk adjusted NIM”, cost of risk and efficiency ratio in this prospectus. We define our ROA as net profit for the period divided by average total assets; our ROE as net profit for the period divided by average shareholders’ equity; NIM as (x) net interest and similar income divided by average interest earning assets; risk adjusted NIM as net interest margin after impairment loss on loans, net of recoveries; Cost of risk is defined as impairment loss on loans, net of recoveries divided by average gross loans; and Efficiency ratio as the division of (x) salaries and employee benefits plus administrative expenses plus depreciation and amortization by (y) net interest and similar income plus other income, plus net premiums earned.

We present average balances and nominal average interest rates in this prospectus. Except as otherwise indicated, average balances are based on quarterly balances. Nominal average interest rates have been calculated by dividing interest earned on assets or paid on liabilities by the corresponding average balances on such assets or liabilities.

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We present ROA, ROE, and NIM as of March 31, 2019 and March 31, 2018 on an annualized basis. ROA as of March 31, 2019 and March 31, 2018 is calculated as net profit for the three months ended March 31 of each respective year multiplied by four and divided by average total assets. ROE as of March 31, 2019 and March 31, 2018 is calculated as net profit for the three months ended March 31 of each respective year multiplied by four and divided by average shareholders’ equity. Annualized NIM as of March 31, 2019 and March 31, 2018 is calculated as gross financial margin for the period multiplied by four and divided by average of interest earning assets.

Non-GAAP Financial Measures

In this prospectus, we present adjusted net profit, adjusted ROE and adjusted ROA, which are non-GAAP financial measures. A non-IFRS financial measure does not have a standardized meaning prescribed by IFRS. A non-GAAP financial measure is generally defined as a numerical measure of an issuer’s historical or future financial performance, financial position or cash flows that: (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with IFRS in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.

For the year ended December 31, 2018, we define adjusted net profit as net (loss) / profit for the year plus the effect on our insurance technical reserves of the adoption of new mortality tables published by the SBS through Resolution No. 886-2018 in March, 2018. The Resolution adopts the new Peruvian mortality and morbidity tables to be used in mathematical reserve calculations of pensions. These tables gather updated information and show the recent changes in the life expectancy in Peru. As international actuarial and accounting standards, mortality tables need to be updated on a regular basis with information reflecting the reality of the insured, beginning June 1, 2018, we decided to use these new tables for Interseguro’s pension reserve calculation. See Note 15(e) to the audited annual consolidated financial statements. As a result we had a negative impact of S/144.8 million due to the aggregate effect recorded in technical reserves on insurance policies issued prior to the date of adoption of the new mortality tables. We believe that the adoption of further changes to the mortality tables within the next two years is not reasonably likely to occur. We believe that by excluding this effect, supplemental information is provided for our management and investors to analyze our core operating performance on a consistent basis from period to period. The technical reserves calculation is recorded on the income statement in the caption “total net premiums, earned.” See Note 23 to our audited annual consolidated financial statements.

For the three months ended March 31, 2019, in our segment information, we define adjusted net profit as net profit of the banking segment excluding the gain on the sale of Interfondos to Inteligo of S/32.4 million after taxes, which is eliminated upon consolidation. See “Management’s discussion and Analysis of Results of Operations and Financial Condition—Results of Operations for the Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018.”

Additionally, we define for our banking segment: (i) adjusted ROE as adjusted net profit for the three months ended March 31, 2019, divided by average shareholders’ equity, and (ii) adjusted ROA as adjusted net profit for the three months ended March 31, 2019, divided by average total assets. See “Selected Consolidated Financial Information—Non-GAAP Financial Measures.”

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We define adjusted ROE as adjusted net profit for the period divided by average shareholders’ equity, and adjusted ROA as adjusted net profit for the period divided by average total assets. Also, we present adjusted net profit, adjusted ROE and adjusted ROA for segment information. See “Selected Consolidated Financial Information—Non-GAAP Financial Measures.”

There may be limits in the usefulness of these measures to investors. As a result, we encourage readers to consider the consolidated financial statements and other financial information contained in this prospectus in their entirety, and not to rely on any single financial measure.

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SUMMARY

This summary highlights selected information about us and should be read as an introduction to the more detailed information included in this prospectus. You should carefully read this prospectus in its entirety before investing in our common shares, including “Presentation of Financial and Other Information,” “Risk Factors,” “Selected Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our unaudited interim condensed consolidated financial statements and our audited annual consolidated financial statements and related notes. Unless otherwise indicated, all financial information provided in this section has been prepared in accordance with IFRS except for certain information such as CAGR and other comparative market information which is presented under SBS GAAP. We have included in this summary and elsewhere in this prospectus certain information reported by the SBS for the Peruvian banking and insurance sectors as a whole as well as for individual financial institutions in Peru, including Interbank and Interseguro, which report to the SBS and the SMV in SBS GAAP. The information under SBS GAAP has been presented for comparative market purposes only.

Overview

IFS is a leading provider of banking, insurance and wealth management services for retail customers and commercial clients in Peru. Our purpose is to empower all Peruvians to achieve financial well-being, and as such, we have built an integrated financial services platform in the fast-growing, underpenetrated and profitable Peruvian financial system. We have invested in building a leading and scalable digital platform (mobile and online), which is rapidly being adopted by existing and new customers. Our digital platform is complemented by one of the largest distribution networks in the country which includes financial stores, ATMs, correspondent agents, dedicated sales forces, financial advisors, and call centers. Together our digital platform and distribution network provide our more than three million customers and a potential market of more than 30 million Peruvians and 9 million businesses with access to our products and services and a distinctive and convenient customer experience.

We manage our business in three segments, banking, insurance and wealth management, that complement each other and represent diversified sources of revenue. Our banking segment operates through our subsidiary Interbank, which is the second largest provider of consumer loans in Peru, according to the SBS. Interbank provides a full range of retail banking and commercial banking products, and services to individuals, large companies, and small and medium enterprises. Our insurance segment operates through our subsidiary Interseguro, which is the leading provider of annuities in Peru by premiums and one of the leading life insurance companies in the country according to the SBS. Interseguro provides a wide range of retirement, savings, life, unemployment and other insurance products mainly to retail customers. Our wealth management segment operates through our subsidiaries Inteligo Bank, Inteligo SAB and Interfondos, which together provide wealth management, private banking, financing, brokerage, advisory and other investment services mainly to high net worth individuals.

Our key strategic priority is to achieve digital excellence for our customers by providing them with a world-class, flexible and secure digital platform. We believe our digital transformation is vital to our continued growth and profitability, and for this reason we have been investing in developing the capabilities necessary to offer digital products and services to our customers. In March 2019, more than 975,000 retail customers used our digital platform compared to more than 450,000 in December 2016 and more than 380,000 retail customers no longer utilize physical channels other than ATMs in March 2019. We are aiming to allow our customers to have a 100% digital relationship with us in an efficient and secure manner. We have also streamlined our physical presence and reduced the number of branches by approximately 9% since 2016, focusing on educating our customers in the use of our digital platform. To accompany this transformation we are in the process of redesigning our physical presence in order to better serve the evolving needs of our customers. We have

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substantially increased migration of low-value-added transactions to more efficient digital channels, and we have increased sales of products to existing customers, as well as increased new customer acquisition of which a growing number are being acquired digitally or “born-digital.” This process of digital customer acquisition and sales has been accelerating, for example, in March 2019, 17% of new retail clients were acquired digitally compared to 3% in March 2018, and more than 37% of sales of new products to retail customers were performed digitally compared to 28% in March 2018.

We aim to be the company that best knows the needs of Peruvians. Our advanced analytics and CRM capabilities are being enriched with new sources of data and new tools that technology offers, such as cloud, real-time decision, machine learning and artificial intelligence. We believe that a deep knowledge of our current and potential customers allows us to offer them the best solutions for their financial needs across our banking, insurance and wealth management segments. Through this deep knowledge we have also been able to enhance our risk models, helping us to propel growth and continue to improve our profitability.

The following table shows the evolution of our reported net profit, dividends, ROE and ROA and our adjusted net profit, ROE and ROA, from 2016 through 2018 and for the three months ended March 31, 2019 and 2018:

	For the three months ended March 31, (unaudited)								For the years ended December 31,
	2019		2019			2018			2018		2018			2017			2016
	(U.S.$ in millions) (3)		(S/ in millions)						(U.S.$ in millions) (3)		(S/ in millions)
Net profit		106.3		352.7			290.0			328.9		1,091.4			1,033.5			950.2
Adjusted net profit (1)		—		N/A			N/A			372.6		1,236.2			N/A			N/A
Dividends declared for the year (2)		—		—			—			—		654.5			510.7			475.8
ROE (4)		—		19.0	%		19.1	%		—		16.6	%		19.3	%		19.9	%
Adjusted ROE (1)		—		N/A			N/A			—		18.6	%		N/A			N/A
ROA (4)		—		2.2	%		1.9	%		—		1.8	%		2.0	%		1.9	%
Adjusted ROA (1)		—		N/A			N/A			—		2.0	%		N/A			N/A

(1) Net profit, ROA and ROE for the year ended December 31, 2018, excluding S/144.8 million, which is the aggregate effect recorded in our insurance segment’s technical reserves due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted for 2017 and 2016. See Note 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted net profit, adjusted ROA and adjusted ROE are non-GAAP accounting measures and should not be considered in isolation or as a substitute for net profit, ROA or ROE, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP financial measures”.

(2) Dividends are declared and paid in U.S. dollars. Dividends declared for fiscal years 2018, 2017 and 2016 were paid in 2019, 2018 and 2017 and amounted to U.S.$197.2 million, U.S.$157.7 million and U.S.$146.5 million, respectively. See “Dividends and Dividend Policy.”

(3) Amounts stated in U.S. dollars as of and for the three months ended March 31, 2019 and as of and for the year ended December 31, 2018 have been translated from soles at the exchange rate of S/3.318 = U.S.$1.00. See “Exchange Rates”.

(4) Annualized for each interim period.

As of March 31, 2019, we had total assets of S/65.8 billion (approximately U.S.$19.8 billion), total gross loans of S/34.7 billion (approximately U.S.$10.5 billion), total deposits of S/34.8 billion (approximately U.S.$10.5 billion) and shareholders’ equity of S/7.7 billion (approximately U.S.$2.3 billion).

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We operate the following three business segments:

• Banking: Interbank is the second largest provider of consumer loans in Peru with a 22.6% market share in terms of total gross consumer loans outstanding as of March 31, 2019, according to the SBS. Interbank is the largest provider of credit card loans with a 26.3% market share and the largest provider (among non-government owned banks) of payroll deduction loans to public sector employees with a 23.5% market share as of March 31, 2019, according to the SBS. Additionally, it is the fourth largest bank in Peru in terms of retail mortgages and commercial lending, as well as total deposits and total assets. Interbank has built one of the most convenient and extensive retail banking distribution platforms in Peru including, online banking, mobile applications, a total of 264 financial stores, more than 1,900 ATMs and more than 2,500 correspondent agents, as of March 31, 2019.

As of and for the three months ended March 31, 2019, Interbank represented 74.9% of our total assets and 85.0% of our net profit. As of and for the year ended December 31, 2018, Interbank represented 74.4% of our total assets, 92.6% of our net profit and 81.8% of our adjusted net profit. For the 2018 fiscal year, Interbank declared a dividend of S/467.0 million (or approximately U.S.$140.8 million) of which S/463.8 million (or approximately U.S.$139.8 million) were paid to IFS, and represents 66.0% of total dividends received by IFS.

With a significant focus on the emerging middle class, Interbank has a higher percentage of retail loans, which account for 54.0% and 53.2% of its total loan portfolio, compared to the banking system’s average of 35.7% and 35.1%, as of March 31, 2019 and December 31, 2018, respectively. This contributes to a higher risk-adjusted net-interest margin than the banking system’s average.

Interbank’s CAGR in loans, deposits and obligations, and net profit between 2014 and 2018 was 10.5%, 10.3%, and 9.0%, respectively. For 2018, Interbank’s net profit was S/1,010.9 million and ROE was 20.2% and for the three months ended March 31, 2019 its net profit was S/299.7 million and annualized ROE was 22.1%.

• Insurance: Interseguro is the leading provider of annuities (excluding private annuities) in Peru, with a 30.2% market share as measured by total premiums collected during 2018 and a 32.3% market share as measured by total premiums collected in the three months ended March 31, 2019, according to the SBS, and is one of the leading life insurance companies in Peru. In addition, Interseguro offers private annuities, individual life insurance, disability and survivorship insurance, as well as low premium retail insurance products, including credit life, mandatory traffic accident insurance (“SOAT”) and credit card protection insurance, through a comprehensive multi-channel distribution platform which includes Interseguro’s sales force. Interseguro also distributes through Interbank and retailers. According to the SBS, for 2018, Interseguro was the largest insurance company measured by reserves, driven both by organic growth and the acquisition of Seguros Sura in November 2017 which both improved its ROE and doubled its asset size.

As of and for the three months ended March 31, 2019 Interseguro represented 19.7% of our total assets and 8.2% of our net profit and as of and for the year ended December 31, 2018, Interseguro represented 19.7% of our total assets, negative 5.6% of our net profit and 6.7% of our adjusted net profit. For the 2018 fiscal year, Interseguro declared a dividend of S/138.0 million (or U.S.$41.6 million), which represents 19.6% of total dividends received by IFS.

Interseguro’s CAGR in gross premiums plus collections was 8.3% between 2014 and 2018. For 2018, Interseguro’s net loss was S/61.5 million and its adjusted net profit was S/83.3 million, while

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its ROE was negative 0.5% and its adjusted ROE was 9.4%. For the three months ended March 31, 2019 Interseguro’s net profit was S/28.9 million and annualized ROE was 12.8%.

• Wealth management: Inteligo is a provider of wealth management services, which includes banking, financing, brokerage and investing activities for high net worth individuals through three operating subsidiaries, Inteligo Bank, Inteligo SAB (brokerage) and Interfondos (mutual funds). As of and for the three months ended March 31, 2019, Inteligo represented 5.7% of our total assets and 22.2% of our net profit and as of and for the year ended December 31, 2018, Inteligo represented 6.0% of our total assets, 18.1% of our net profit and 16.0% of our adjusted net profit. For the 2018 fiscal year, Inteligo Bank declared a dividend of U.S.$40.0 million (or S/132.7 million), of which S/99.5 million (or U.S.$30.0 million) were paid to IFS and represents 14.4% of total dividends received by IFS.

Inteligo’s CAGR in assets under management was 11.8% between 2014 and 2018. In addition, for the year ended December 31, 2018, Inteligo’s net profit was S/197.5 million and ROE was 25.7% and for the three months ended March 31, 2019, Inteligo’s net profit was S/78.3 million and annualized ROE was 38.1%.

The following tables provide certain financial and other information about our three business segments for the periods indicated.

	As of and for the three months ended March 31, 2019
	Assets						Equity					Net Profit/(Loss)
	(S/ in millions)			%			(S/ in millions)		%			(S/ in millions)			%
Banking (1)		49,231.1			74.9	%		5,380.3		69.6	%		299.7			85.0	%
Insurance		12,967.5			19.7	%		1,028.6		13.3	%		28.9			8.2	%
Wealth management		3,754.2			5.7	%		830.3		10.7	%		78.3			22.2	%
Holding and eliminations (2)		(196.7	)		(0.3	)%		487.6		6.3	%		(54.2	)		(15.4	)%
Total		65,756.2			100.0	%		7,726.8		100.0	%		352.7			100.0	%

(1) Equity and Net Profit figures include the S/32.4 million gain on the sale of Interfondos to Inteligo, net of taxes. This gain was eliminated in the consolidated financial statements.

(2) Holding and eliminations corresponds to expenses of IFS and elimination of intercompany transactions. See Note 20 to our unaudited interim condensed consolidated financial statements.

	As of and for the year ended December 31, 2018
	Assets						Equity					Net Profit/(Loss)						Adjusted Net Profit (Loss) (1)
	(S/ in millions)			%			(S/ in millions)		%			(S/ in millions)			%			(S/ in millions)			%
Banking		47,440.4			74.4	%		5,454.0		76.9	%		1,010.9			92.6	%		1,010.9			81.8	%
Insurance		12,572.4			19.7	%		777.1		11.0	%		(61.5	)		(5.6	)%		83.3			6.7	%
Wealth management		3,808.9			6.0	%		812.8		11.5	%		197.5			18.1	%		197.5			16.0	%
Holding and eliminations (2)		(77.3	)		(0.1	)%		44.7		0.6	%		(55.6	)		(5.1	)%		(55.6	)		(4.5	)%
Total		63,744.4			100.0	%		7,088.5		100.0	%		1,091.4			100.0	%		1,236.2			100	%

(1) Adjusted net profit for the year ended December 31, 2018, is calculated excluding S/144.8 million, which is the aggregate effect recorded in our insurance segment’s technical reserves due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted in 2017

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and 2016. See Note 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted net profit is a non-GAAP financial measure and should not be considered in isolation or as a substitute for net profit, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP Financial Measures.”

(2) Holding and eliminations corresponds to expenses of IFS and elimination of intercompany transactions. See Note 29 to our audited annual consolidated financial statements.

The following table provides relevant information about dividends declared by each of our subsidiaries:

	SBS GAAP																		IFRS
	Banking (Interbank)									Insurance (Interseguro)									Wealth Management (Inteligo) (3)
	For the years ended December 31,
	2018			2017			2016			2018			2017			2016			2018			2017			2016
	(S/ in millions)																		(U.S.$ in millions)
Net profit for the period (1)		1,040.1			902.0			875.1			361.1			103.7			85.8			56.2			58.1			51.0
Dividends declared (2)		467.0			405.9			393.7			138.0			100.0			42.5			40.0			46.5			40.5
Payout ratio		44.9	%		45.0	%		45.0	%		38.2	%		96.4	%		49.5	%		71.2	%		80.0	%		79.4	%

(1) For Interbank and Interseguro, this information is calculated using SBS GAAP. This table is presented in this manner because our Peruvian subsidiaries pay dividends to us on the basis of SBS GAAP and Inteligo pays dividends to us on the basis of IFRS. In all cases, the information is derived from stand-alone information from each entity.

(2) Represents dividends for the fiscal year which are declared and paid in the following year.

(3) Wealth Management includes Inteligo Bank, Interfondos and Inteligo SAB. Wealth Management dividends were declared/paid by Inteligo Bank only.

The following tables provide certain financial and other information about our consolidated business.

	As of and for the three months ended March 31, (unaudited)						As of and for the year ended December 31,
	2019		2019		2018		2018		2018		2017 (restated) (1)		2016 (restated) (1)		2015 (restated) (1)		2014 (restated) (1)
	(U.S.$ in millions) (2)(3)		(S/ in millions) (3)				(U.S.$ in millions)  (2)(3)		(S/ in millions) (3)
Balance Sheet and Income Statement Items
Total assets		19,818.0		65,756.2		60,635.0		19,211.7		63,744.4		60,394.5		51,719.4		50,000.9		40,365.2
Total gross loans		10,463.8		34,719.0		29,780.2		10,263.8		34,055.2		29,174.7		27,907.5		26,757.7		23,197.1
Total deposits and obligations		10,485.2		34,790.0		31,220.4		10,151.3		33,682.0		32,607.6		30,097.9		28,487.7		23,381.4
Total equity, net		2,328.7		7,726.8		6,412.4		2,136.4		7,088.5		5,836.9		4,998.3		4,460.9		4,302.3
Net profit (attributable to IFS’ shareholders)		105.7		350.6		288.2		326.8		1,084.3		1,027.4		944.6		1,013.7		891.5
Other Information
Adjusted net profit (attributable to IFS’ shareholders) (4)		N/A		N/A		N/A		370.4		1,229.1		N/A		N/A		N/A		N/A

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	As of and for the three months ended March 31, (unaudited)						As of and for the year ended December  31,
	2019			2018			2018			2017 (restated) (1)			2016 (restated) (1)
Profitability Ratios
Net interest margin (5)(6)		5.4	%		5.3	%		5.4	%		5.3	%		5.4	%
Risk adjusted NIM (6)(7)		4.2	%		4.1	%		4.3	%		3.7	%		3.8	%
Efficiency ratio (8)		33.7	%		34.0	%		35.6	%		36.8	%		38.0	%
ROA (6)		2.2	%		1.9	%		1.8	%		2.0	%		1.9	%
Adjusted ROA (4)(6)		N/A			N/A			2.0	%		N/A			N/A
ROE (6)		19.0	%		19.1	%		16.6	%		19.3	%		19.9	%
Adjusted ROE (4)(6)		N/A			N/A			18.6	%		N/A			N/A

	As of and for the three months ended March 31, (unaudited)						As of and for the year ended December  31,
	2019			2018			2018			2017 (restated) (1)			2016 (restated) (1)
Asset Quality and Capitalization
Past-due-loans as a % of total gross loans (9)		2.5	%		2.6	%		2.5	%		2.7	%		2.5	%
Cost of risk (6)(10)		2.2	%		2.3	%		2.1	%		2.9	%		2.9	%
Core equity tier 1 ratio of Interbank (11)		10.2	%		10.2	%		10.6	%		10.1	%		9.4	%

	As of and for the three months ended March 31,						As of and for the year ended December 31,
	2019			2018			2018			2017			2016			2015		2014
Distribution Network and Customers
Financial stores		264			272			270			273			289			283		284
ATMs		1,953			1,994			1,973			2,052			2,159			2,297		2,324
Correspondent agents (12)		2,513			2,514			2,506			2,505			2,935			3,001		3,238
Number of digital customers (13)		975,269			667,506			882,437			620,448			454,194			296,184		234,224
Percentage of digital users (13)(14)		56	%		43	%		53	%		40	%		30	%		—		—

(1) Our consolidated financial information for 2017, 2016, 2015 and 2014 was restated as a result of a voluntary change in accounting policy regarding our method of accounting the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited annual consolidated financial statements. The financial information presented for 2014 and 2015 was restated after issuance of the financial statements for those years due to a voluntary change in accounting policy with a negative impact of S/57.6 million for 2014 and S/218.1 million for 2015 in the line Total net premiums earned minus claims and benefits in the consolidated income statement.

(2) Amounts stated in U.S. dollars as of and for the three months ended March 31, 2019 and as of and for the year ended December 31, 2018 have been translated from soles at the exchange rate of S/3.318 = U.S.$1.00. See “Exchange Rates”.

(3) Except for percentages and ratios and distribution and customer data.

(4) Adjusted net profit, adjusted ROA and adjusted ROE for the year ended December 31, 2018, are calculated excluding the effect of S/144.8 million due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted for 2017 and 2016. See Notes 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted net profit, adjusted ROE and adjusted ROA are non-GAAP financial measures and should not be considered in isolation or as a substitute for net profit, ROE or ROA, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP Financial Measures.”

(5) Net interest margin is defined as (x) net interest and similar income divided by (y) average interest-earning assets. See “Selected Statistical Information.”

(6) Annualized for each interim period.

(7) Risk adjusted net interest margin is defined as net interest margin after impairment loss on loans, net of recoveries.

(8) Efficiency ratio is calculated by dividing (x) salaries and employee benefits plus administrative expenses plus depreciation and amortization by (y) net interest and similar income plus other income plus net premiums earned.

(9) At end of period. See “Presentation of financial and other information—Loan Portfolio Data.”

(10) Cost of risk is defined as impairment loss on loans, net of recoveries divided by average gross loans. Cost of risk includes an S/81.0 million recovery of provisions related to the construction sector at Interbank for 2018.

(11) Calculated for Interbank only pursuant to SBS regulations.

(12) ASBANC estimates, for 2014-2017 and Company estimates for 2018.

(13) In the month of December for each full year and in the month of March for each interim period.

(14) Percentage of digital users over total clients that interact with Interbank.

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Market Opportunity

We believe that the ongoing growth of the Peruvian economy, the expanding middle class, the growth of private wealth creation in Peru, the low penetration of financial services and the well-capitalized and profitable Peruvian financial system offer significant opportunities for our continued growth. Moreover, new technological developments are opening up new opportunities for growth, enabling us to efficiently acquire and serve more clients, while providing distinctive and convenient customer service and greater access and inclusion to financial services to previously underserved Peruvians.

High growth economy with strong macroeconomic fundamentals

According to the EIU, Peru’s average GDP growth rate was 3.2% between 2014 and 2018, which is higher than the growth rate of each of the peer countries in Latin America during the same period (Colombia at 2.8%, Mexico at 2.6%, Chile at 2.2%, and Brazil at negative 0.8%). Additionally, Peru’s average inflation rate was 2.9% between 2014 and 2018, which was lower than the inflation rates of each of the peer countries in Latin America during the same period (Brazil at 6.2%, Colombia at 4.6%, Mexico at 4.1% and Chile at 3.5%). The Peruvian government’s prudent management of the economy, conservative fiscal policy, coupled with the Central Reserve Bank of Peru’s cautious management of inflation and international reserves have contributed to economic development, increased internal consumption and strong macroeconomic fundamentals, including low levels of public debt, low inflation, low fiscal deficit and high levels of international reserves. Peru’s strong track record of macroeconomic policy credibility, consistency and ability to adapt to changes has helped it to achieve investment grade ratings of A3 by Moody’s Investor Service (“Moody’s”), BBB+ by Standard & Poor’s Rating Services (“S&P”) and BBB+ by Fitch Ratings Ltd. (“Fitch”) as of December 31, 2018. In its most recent forecast as of March 2019, the Central Reserve Bank of Peru has estimated real GDP growth for Peru of 4.0% for both 2019 and 2020, in line with 2018 growth.

Expansion of the middle class and affluent population

The core of our customer base is Peru’s growing middle class and affluent population. According to INEI, the poverty rate in Peru has declined to 20.5% in 2018, from 30.8% in 2010, and GDP per capita in U.S. dollars has grown from U.S.$5,051 in 2010 to U.S.$6,907 in 2018, according to EIU. Peru has a total population of 32.2 million, and according to the Asociación Peruana de Empresas de Investigación de Mercados (APEIM), Peru’s middle and upper socioeconomic segments (segments A, B and C) have significantly expanded and, as of 2017, represented 53% of the population compared to 42% in 2010. We believe that the increase in the number of people belonging to the middle class and affluent population creates a greater need for financial services, particularly for increasingly sophisticated banking, insurance and wealth management products. The expansion of these segments of the population drives growth and profitability across our business. Additionally, based on macroeconomic trends, we expect the number of high net worth individuals in Peru and the size of their investable assets to continue to grow and further increase the market for wealth management services.

Low financial services penetration

We believe that growth potential in Peru’s financial services sector continues to be significant. Despite sustained recent growth of 8.8% CAGR in total gross loans between 2014 and 2018, banking penetration in Peru, measured as the ratio of loans-to-GDP, was 36.6% as of December 31, 2018, according to the SBS and the Central Reserve Bank of Peru, below the average ratio of 51.2% for the group of peer countries in Latin America according to the EIU, the SBIF, the Central Bank of Brazil, the Colombian Financial Superintendency, and the Mexican Commission for Banking and Securities. In addition, it was less than half of the 93.0% ratio for Chile. We believe that penetration potential is even more significant in retail banking. Total retail loans including credit cards per inhabitant in Peru, is well below its peer countries in Latin America. As of December 31, 2018, the

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estimated total number of debit and credit cards per inhabitant in Peru was 0.9 as compared to 2.3 cards per inhabitant for Chile, according to the SBS and the SBIF, respectively. The ratio of retail loans-to-GDP in Peru was 13.0%, while the average for the group of peer countries in Latin America was 26.3%, as of December 31, 2018. Furthermore, as of December 31, 2018, there were approximately 0.2 million mortgages outstanding in Peru for a population of approximately 32.2 million, compared to approximately 1.6 million mortgages outstanding in Chile for a population of approximately 18.2 million. Similarly, insurance penetration in Peru, measured as the ratio of premiums-to-GDP as of December 31, 2017, is estimated to be 1.6%, which is lower than the average ratio of 3.5% for the group of peer countries in Latin America, and less than half the ratio of 4.9% for Chile, according to the Swiss Re Sigma 2017 Report.

Healthy, well-capitalized and profitable financial system

As a result of sound regulation and prudent management, the Peruvian financial system is healthy, well-capitalized and profitable, according to figures published by the SBS. Gross loans in Peru (measured in soles) have grown at a CAGR of 8.8% between December 31, 2014 and December 31, 2018, and 8.5% between March 31, 2018 and March 31, 2019, while the banking system’s asset quality has remained strong with a ratio of past-due loans as a percentage of total gross loans of 3.0% and a ratio of impairment allowance for loans as a percentage of past-due loans of 153.0% as of March 31, 2019, according to the SBS. Capitalization of the Peruvian banking system has consistently been well above regulatory requirements in the last five years with a total capital ratio of the banking system of 15.3% as of March 31, 2019, according to the SBS, as compared to a minimum requirement established by the SBS of 10.0% plus a 2.3% additional capital requirement. Interbank’s capitalization ratio was 16.4% and Interseguro’s regulatory solvency ratio was 130.4%, according to the SBS as of March 31, 2019. Furthermore, the banking and insurance industries in Peru remain profitable, with an 18.3% annualized ROE for the banking system and a 19.7% annualized ROE for the insurance industry for the three months ended March 31, 2019, according to the SBS.

Development of new technologies and distribution channels

There are many technological trends currently impacting the financial services industry worldwide. For example, the penetration of cell phones, Internet and the 4G mobile network, the ability to process large quantities of data through big data, cloud and machine learning, and the opportunity to utilize robotics and artificial intelligence. As a result, many large banks have started digital transformations with large increases in their level of technological investments and are working on developing their product offerings.

Due to improved technology, banks are now able to offer a better value proposition to their customers that include better solutions with features tailored to the customer’s needs, contextual banking (whereby the customer is offered a connected banking experience, including tailored product offerings), enhanced 24 hour customer support and access and faster approval and response times, all at a lower per capita cost. Additionally, banks are now able to reach a broader base of customers both in terms of income levels and geographic locations and will be able to gradually offer them more products and services and make them a part of the banked segment of the Peruvian population, which constitutes a very important growth opportunity in the country.

Competitive Strengths

We have established a premier financial group with leading market positions in each of our primary business segments. We believe that our market share, focus on targeted and profitable segments, scale and highly recognized and trusted brands, combined with adoption of innovative technologies and increasing integration across our business segments, strongly position us to capitalize on the future expansion of the Peruvian economy.

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Leading financial services provider focused on retail customers and highly attractive businesses

We target retail customers and growing and profitable businesses in Peru. We have highly recognized and trusted brands in each of our segments, Interbank in banking, Interseguro in insurance and Inteligo in wealth management. Within our banking segment, Interbank focuses primarily on retail banking, where we believe we are able to obtain higher profitability, with 54.0% of its loan portfolio constituting retail loans, compared to 35.7% for the Peruvian banking system, as of March 31, 2019, according to the SBS. Interbank is the second largest provider of consumer loans among banks in Peru, with a 22.6% market share as measured by gross consumer loans as of March 31, 2019. Interbank is also the largest provider of credit card loans among banks in Peru, with a 26.3% market share by credit card loans, and the largest privately owned bank provider of payroll deduction loans to public sector employees, with a 23.5% market share by payroll deduction loans, in each case as of March 31, 2019.

We believe that our focus on the retail market has allowed Interbank to obtain a higher ROE than the banking system on average. This higher ROE is driven by a balanced consumer loan portfolio where two of our most profitable products are credit cards and payroll deduction loans. Interbank has one of the highest net interest margins when compared to the three largest banks in Peru, due to its higher weighting in retail banking and credit cards when compared to its peers. Low delinquency rates on our payroll deduction loans reduce the overall credit risk exposure of our consumer loans portfolio. For the three months ended March 31, 2019, Interbank’s NIM was 135 basis points higher than the average for the three largest Peruvian banks and for the three months ended March 31, 2019, Interbank’s risk adjusted NIM was 69 basis points higher than the average for the three largest Peruvian banks, according to the SBS. Under IFRS, Interbank’s net interest margin for the three months ended March 31, 2019 was 5.5%.

Our commercial banking business serves a range of clients spanning large corporates, mid-corporates and SMEs. We are focusing on increasing our market share in mid-corporates and SMEs while maintaining our large corporate business with a profit-oriented approach. This market provides an additional growth opportunity given our 8.4% market share for mid-corporates and 4.0% market share for small businesses as of March 31, 2019, according to the SBS. Moreover, our overall commercial loan portfolio provides us with a lower risk component that balances our total loan portfolio.

We believe that Interseguro provides us with a fast-growing and profitable business. In our insurance segment, Interseguro is the leading provider of annuities in Peru, with a market share of total annuities (excluding private annuities) of 32.3% as measured by premiums collected for the three months ended March 31, 2019, according to the SBS. We focus on the middle class and affluent population in Peru, a segment we believe is substantially underpenetrated in insurance services. During April 2016, the Peruvian Congress enacted a law that allowed retirees to withdraw up to 95.5% of their accumulated capital in cash in their mandatory pension account upon retirement, resulting in a significant reduction of retirement annuities sold by Peruvian insurance companies, including Interseguro. In this context, in order to keep its position as a leading provider in annuities, in 2016, Interseguro launched its private annuities product which allows retirees to receive a fixed income either for life or a fixed period. As of the date of this prospectus, most of the customers of private annuities and their funds originate from retirees who choose to buy a product from an insurance company rather than from a private pension fund. Interseguro is also a leading provider of life insurance with the acquisition of Seguros Sura and we believe this market provides an additional opportunity for growth.

Within our wealth management segment, Inteligo is well positioned to capture an increasing share of the growing number of wealthy individuals, resulting from economic growth and wealth creation in Peru. Inteligo’s CAGR in assets under management was 11.8% between December 31, 2014 and December 31, 2018. We believe that Inteligo’s position as a provider of tailored wealth management services as well as its ability to provide its customers with both local and international investment products will help increase its share of wallet among high net worth individuals, while delivering high levels of growth and profitability.

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Track record of sustained growth supported by our strong market share and high profitability

Our strong track record of growth is supported by our increased market share, improvements in efficiency, and high profitability across our business segments. At Interbank, we are focused primarily on retail banking because we believe that it presents significant growth opportunities and higher profitability. In retail banking, Interbank’s total retail loans outstanding, including consumer and mortgage loans, achieved a CAGR of 11.4%, compared to 9.5% for the Peruvian banking system, between December 31, 2014 and December 31, 2018, according to the SBS. Our market share was 26.3% in credit card loans in March 2019, the largest in the market. In the same period, Interbank has held a strong position across retail products, with market shares of 17.0% and 18.7% of total retail loans in 2014 and March 2019, respectively, according to the SBS. With respect to mortgage loans, Interbank’s market share increased from 12.7% in 2014 to 14.4% in March 2019, according to the SBS. Interbank’s increasing market shares have been accompanied by high profitability, with ROE averaging 23.5% compared to 19.8% for the Peruvian banking system, from 2014 to 2018.

Interseguro is a leading and growing insurance company in Peru, which achieved a CAGR of 8.3% in premiums, compared to the industry’s 6.1%, between December 31, 2014 and December 31, 2018, according to the SBS. Furthermore, in the same period Interseguro’s positioning in the industry increased, with market shares in annuities by premiums (excluding private annuities) of 24.6% in 2014 and 32.3% in March 2019. Interseguro’s assets increased at a CAGR of 27.2% compared to 10.1% for the Peruvian insurance industry between 2014 and 2018. Between 2014 and 2018, Interseguro’s ROE averaged 30.0% compared to 15.8% for the Peruvian insurance industry, both according to the SBS. Interseguro’s recent results have been driven in large part by the acquisition of Seguros Sura. Interseguro’s ROE was 22.1% for the three months ended March 31, 2019, according to the SBS.

Inteligo’s assets under management grew at a CAGR of 11.8% between 2014 and 2018. Similarly, net profit grew at a CAGR of 7.4% between December 31, 2014 and December 31, 2018, supported by strong fees on assets under management. Inteligo’s ROE averaged 26.5% for the three-year period ended December 31, 2018. Inteligo’s ROE was 38.1% for the three months ended March 31, 2019.

Digital suite of products and services with rapidly increasing levels of adoption

IFS is striving to reshape the banking space in Peru, creating a new digital experience driven by convenience and simplicity. Although we believe physical channels are still necessary in an underpenetrated financial system like Peru’s, our digital platform has substantially increased our customers’ interactions with Interbank and provided us with new business opportunities to build on consumer loyalty and cross-sell services, as well as accelerate new customer acquisition and inclusion of previously underserved segments of the population, including individuals, entrepreneurs and micro-businesses. We have a wide offering of digital products and services for existing and new clients, enabling them to get what they want, when they want it, and how they want it.

We believe our digital platform provides us with a competitive advantage as evidenced by our increased market share and improvement in net promoter score (“NPS”). As of March 31, 2019, 95% of total functionalities at Interbank, which include day-to-day transactions, new products and self-service features, are available digitally. Our digital users and 100%-digital customers have reached 56% of total retail customers who interact with the bank for digital users and 22% for 100%-digital retail customers in March 2019. Our penetration of digital sales and self-service transactions increased to 31% of total retail sales and self-service interactions in March 2019, from 21% in March 2018. Digital customer acquisition, or clients that were ‘born digital’, also increased with 17% of new individual clients in March 2019, compared to 3% in March 2018. Similarly, we are continuously improving our digital capabilities for SME and corporate clients, enhancing our value-added proposition and tools to foster our commercial customers’ growth. For example we have streamlined our account

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opening process for businesses from 15 days to a digital 30-minute process. This innovation has driven growth in new customer acquisition for small companies through our digital platform, accounting for 38% of our total new small business accounts in March 2019 compared to 0% in March 2018.

As part of our digital transformation, we have introduced new technologies and processes which enable us to improve time-to-market of new solutions. We have also made significant changes in the way we work. We are currently working with more than 80 teams using an agile framework on a number of projects, ranging from applications, digital products, new functionalities, and we are currently exploring different solutions targeting new customer segments and piloting new initiatives. For example, we have an innovation lab called “LaBentana”, which focuses on continuous innovation and development of new ideas and pilot initiatives, using design thinking methodologies developed together with the consulting firm IDEO.

Convenient and innovative nationwide omni-channel distribution network with a distinctive customer-oriented approach

We believe that our convenient and innovative nationwide retail distribution network together with a dedicated sales force and financial advisors, allow us to better reach our customers, and this combination has differentiated us from our competitors. Interbank has one of the most convenient and extensive retail banking distribution networks in Peru and is currently present in almost all of Peru’s regions. Our focus on digital transformation allows to help our customers to interact with us in an easier and more efficient way, and allows customers to migrate from the use of physical infrastructure to digital platforms. For instance, we have shifted monetary transactions operated through our branches to digital channels. Total monetary transactions have been increasing at a CAGR of 5.6% from 2015 to 2018 driven by monetary transactions through our mobile and internet banking which have increased at a 62.1% CAGR for the corresponding period, even though monetary transactions through our financial stores have been decreasing at a CAGR of 3.9% from 2015 to 2018. We believe this optimization of our distribution footprint has enabled us to reach our clients more efficiently, allowing them to perform transactions when and how they want to, at lower marginal costs for Interbank. This has also allowed us to improve our NPS for digital clients, which was 42 as of March 31, 2019, 16 points higher than NPS for traditional clients.

Interbank has built a convenient omni-channel distribution network in Peru, serving over three million customers. As of March 31, 2019, Interbank had 264 financial stores and operated the third-largest ATM network in Peru with more than 1,953 ATMs, which includes the largest out-of-branch ATM network (under our Global Net brand). Interbank has the largest number of financial stores inside supermarkets in Peru, which are open seven days a week from 9:00 a.m. to 9:00 p.m. Moreover, with the intention of providing underserved customers with more convenient services, Interbank operates a network of correspondent agents, called Interbank Agentes. The correspondent agent concept consists of providing third-party commercial establishments with low-cost electronic terminals which allow Interbank’s customers to perform basic cash-based operations such as cash withdrawals, credit card and bill payments, and deposits at a lower marginal cost to Interbank relative to transactions performed in our financial stores. As of March 31, 2019, Interbank had over 2,500 correspondent agents.

Since 2013 and in line with this strategy, we have implemented a profitability model for financial stores and ATMs which ranks them according to certain profitability metrics relevant to each distribution channel. This has allowed us to identify the less profitable units in order to close them, and to prioritize new openings in more strategic locations with higher demand for value-added financial services. As a result, the number of financial stores, which peaked at 290 in 2016, has decreased to 264 as of March 31, 2019, while productivity of financial stores and service levels have increased, as measured by sales per branch and volumes of retail deposits per branch. Similarly, the number of ATMs has decreased to 1,953 in March 2019 from 2,297 in 2015, while monetary transactions kept growing year over year in this channel.

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Interseguro offers and sells its annuities and individual life insurance products through its own dedicated sales force to ensure the delivery of high-quality service and advice to customers. Interseguro’s specialized sales force is trained to provide a differentiated service for various customer types. As of March 31, 2019, Interseguro employed 117 agents exclusively dedicated to selling annuities and 273 agents to selling other insurance products. In addition to its own sales force, Interseguro leverages on the retail distribution capabilities of Interbank and those of Intercorp and of Intercorp Retail to offer simple low-cost premium insurance products, such as credit life insurance, mandatory traffic accident insurance (“SOAT”), card protection, loan protection, extended warranty and accident insurance.

Inteligo has developed a proprietary financial advisory model that has been a key pillar in sustaining its growth. The model takes into account the financial objectives of its customers and emphasizes risk analysis and continuous monitoring with portfolio rebalancing. Along with this, Inteligo has been able to successfully serve its customer base in order to deliver tailored products and advice.

Prudent risk management resulting in high asset quality, strong liquidity and high investment returns

Risk management has been and will continue to be a primary focus of our operations and at the center of our culture. Our experienced risk management teams focus on monitoring and managing risks across all business areas, including credit, market, liquidity and operational risks, among others. We believe our risk management expertise has allowed us to achieve strong asset quality and high investment returns. Our prudent management has allowed us to build up sufficient capital to allow us to grow strategically, invest in opportunities and pay dividends to our shareholders.

Interbank’s underwriting procedures are based on strong analytics and proprietary models. Additionally Interbank’s investments in technology and improvements in its ability to process and apply data have enriched our risk models and enhanced their accuracy and predictiveness. These models, along with the risk management skills of its experienced risk management team, provide Interbank with a competitive advantage. Interbank’s credit risk policies are approved by its risk committee and board of directors. Despite Interbank’s concentration in retail loans, which tend to have higher levels of delinquency, Interbank’s past-due loans as a percentage of total gross loans ratio as of March 31, 2019 was 2.6%, lower than the 3.1% average of the three largest banks in Peru. As of March 31, 2019, Interbank’s past-due loans coverage ratio was 177.0%, which compares favorably with the average for the Peruvian banking system of 153.0%, according to the SBS.

Interbank’s capitalization ratio, which is calculated as Interbank’s regulatory capital divided by its risk-weighted assets, was the highest compared to the other three largest banks. Additionally as of March 31, 2019, Interbank’s capitalization ratio stood at 16.4% as compared to 15.3% for the Peruvian banking system, according to the SBS. The minimum capitalization ratio required by Peruvian banking regulations is 10.0% plus an additional capital requirement which depends on certain levels of loan concentration in each institution. For Interbank, this additional capital requirement amounts to 1.7% as of March 31, 2019, compared to 2.3% for the Peruvian banking system. Interbank’s core equity tier 1 ratio was 10.2% as of March 31, 2019.

Interseguro’s investment team and its investment management approach have achieved a 6.9% investment return for the three months ended March 31, 2019, compared to the Peruvian insurance industry’s 7.3%, according to the SBS, while maintaining prudent levels of risk and following the SBS risk guidelines.

Inteligo’s lending services are offered through Inteligo Bank to complement its wealth management business. The decision to make loans to wealth management customers only results in Inteligo’s loan portfolio being fully collateralized by its customers’ assets and which to date have had no delinquencies. Regarding the management of capital, Inteligo Bank’s capitalization ratio, which is calculated as Inteligo Bank’s regulatory capital divided by its risk-weighted assets, was 26.9% as of March 31, 2019, above the minimum capitalization ratio required by the Central Bank of Bahamas of 8.0%.

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Increasingly integrated business platform with synergy potential supported by a strong parent group

Since the introduction of our insurance and wealth management operations alongside our banking operations, we have strived to share and leverage key resources and capabilities across all three segments, which has resulted in enhanced revenues.

Our banking operations remain our core competency that binds together all our operations, while our insurance and wealth management operations are expected to continue supporting our growth. We believe that our continuous efforts to better integrate our three segments, combined with our focus on digital transformation, our existing distribution channels, experience and knowledge of our customer base and the Peruvian market, is a significant competitive advantage.

Furthermore, our parent company, Intercorp Peru, is one of Peru’s largest economic conglomerates, with activities spanning financial services, retail, education and real estate, among others. In 2018, Intercorp Peru’s businesses represented approximately 3.4% of Peru’s GDP, while generating U.S.$7,529.7 million in revenues. We believe that being part of this group gives us a competitive edge, because of the group’s deep knowledge of the Peruvian consumer, extensive focus and know-how in the Peruvian retail market, highly visible in-country presence and rapid decision-making capabilities. Intercorp provides significant synergy and cross-selling opportunities for IFS. For example, starting in 2018, we, jointly with Intercorp Peru, launched an effort to strengthen our presence and commercial efforts in seven of Peru’s main regions: Arequipa, Cusco, Trujillo, Chiclayo, Ica, Huancayo and Piura, by leveraging on Intercorp’s already established network.

Diversified funding base with strength in retail deposits

IFS has a competitive funding structure. We have access to diverse sources of funding, including deposits and debt securities placed in local and international capital markets. The majority of our funding comes from low cost customer deposits, which demonstrate our customers’ trust in our franchise and enables us to achieve attractive lending spreads. At Interbank, as of March 31, 2019, 78% of our total funding base was comprised of deposits. Interbank’s deposit base is broad and fragmented, such that we are not dependent on a certain type of customer, which provides Interbank with an average cost of funding of 3.0% for the three months ended March 31, 2019 and 2.5% for the corresponding period of 2018.

Interbank has been a significant player in the Peruvian banking industry with a market share of demand, savings, and term deposits of 12.8%, 15.0%, and 11.1%, respectively, as of March 31, 2019, according to SBS. Moreover, our strategic focus on retail has allowed Interbank to gain market share in retail deposits over the years reaching 13.2% as of March 31, 2019 compared to 12.1% as of December 31, 2014, providing us with a healthy funding base.

Interbank’s strong asset quality and capital and liquidity position have resulted in two of the highest local ratings levels possible, which have allowed it to secure local funding through local short-term and long-term debt market issuances.

Experienced management team with proven ability to foster a merit-based culture and a highly motivated work force

We believe that the strength of our senior and middle management team has enhanced and will continue to be a key driver of our successful business model. We benefit from an experienced, diverse and talented management team. Most of the members of our senior management have held management positions with other major financial institutions in the United States, Latin America and Europe.

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We are focused on attracting, developing and retaining highly qualified personnel and believe that a merit-based culture that emphasizes teamwork enables us to maintain a motivated workforce that delivers high-quality service. Interbank is the only Peruvian company that has been chosen by the Peruvian Great Place to Work Institute as one of the 20 best places to work in Peru for the past 17 consecutive years and one of the top 20 places to work in Latin America in the past nine years. In the most recent rankings, Interbank was selected number two best company to work for in Peru in the large size category (2018) and number three in Latin America (2019). Similarly, Interseguro is the only Peruvian insurance company that has been chosen as one of the top ten best places to work in Peru (medium-size category) by the Peruvian Great Place to Work Institute for the past eight consecutive years. Additionally, Inteligo SAB has been ranked among the top 15 companies in its category (companies with 30 to 250 employees) in Peru since it started participating in the Great Place to Work Institute survey in 2011, and is currently the only Peruvian brokerage house included in the ranking. Inteligo Bank’s branch in Panama began participating in the Great Place to Work Institute survey in 2014 and since 2015 has been ranked among the top 10 companies in its category (companies with 30 to 250 employees) in Panama.

Strategy

Our purpose is to empower all Peruvians to achieve financial well-being. Our aim is to become the top-of-mind partner for Peruvians, individuals and enterprises, when they think about both day-to-day financial needs and medium-term goals and dreams. To achieve this goal and to continue being a fast growing and profitable company, we have defined our key strategic priorities as follows:

Become the foremost financial services company in the heart and mind of Peruvians by putting them at the center of our ecosystem

We aim to become the preferred option for our individual and commercial customers helping them to achieve financial well-being and growth by deeply knowing and anticipating their needs, by building trust and providing transparency in our relationship with them, and by delivering a superior experience which is simple, mobile, agile and suited to that particular customer. We have highly recognized and trusted brands in each of our segments, Interbank in banking, Interseguro in insurance and Inteligo in wealth management.

We help our individual customers throughout their journeys with a personalized approach based on customer segment, which includes Joven, Preferente, Emprendedor, Premium and Select within Interbank and Certia and Private within Inteligo. The customer journey begins with new client acquisition and on-boarding, continues with customer development and loyalty, and finally, we focus on maintaining our customer base through retention and our win-back efforts. We have been implementing a number of initiatives aimed at improving the complete customer relationship. As of March 31, 2019, in retail banking, NPS increased to 33, compared to 11 as of March 31, 2018. In commercial banking, as of March 31, 2019, NPS remained stable at 32 compared to March 31, 2018.

We are continuously improving our value proposition for different customer segments including improvements to basic products such as accounts, payments and financing; introducing new special digital features, such as the loyalty program Interbank Benefit, the budget tool Smart, the digital savings account Piggybank, and the customer relationship program Interbank Cares. We are also developing additional ecosystems such as a financial health platform for customers and other tailored experiences. Towards this end, we use design thinking methodologies, learned through the consulting firm IDEO, that have been deployed in a number of projects.

Additionally, we are creating a payment ecosystem that seeks to create a strong bond with our customers, by focusing on four pillars: (i) increasing current person to business (“P2B”) offline business by extending merchant coverage, improving customer experience and banking the unbanked, (ii) increasing current

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P2B online business by optimizing adoption and fostering usage, (iii) improving the convenience of person to person (“P2P”) payments for customers by developing a better experience, and (iv) eliminating cash by banking the unbanked through pre-paid cards and through our open APIs that allow partners to access our account opening and basic financial-transaction services. Our goal is to develop an ecosystem which creates loyalty from customers and allows us to fulfill their financial needs digitally.

Within commercial banking our priority is also growth with a strong focus on profitability. We aim to provide the best self-service credit experience for commercial clients, by digitally providing them with the information and features necessary to manage their financial needs, and by offering the easiest and most transparent means of managing their cash flow and payments. For this purpose, we are in the process of implementing a new internet banking platform that will deliver most of these features.

For commercial banking we have three client groups based on volume of sales and employ different strategies accordingly. For large corporates we focus our efforts on generation of fees from cash management and corporate finance; for medium-sized companies we focus on growth, productivity and cash management; and for small companies we focus on sustainable growth and productivity with a strong support from analytics and collections. For small businesses, we now can open a Cuenta Negocios account within 30 minutes and have seen the number of new clients opening this account digitally, increasing from no accounts for 2017 to more than 9,700 accounts as of March 2019 since its introduction in August 2018. Moreover, we are testing an application which provides an alternative way of financing based on digital tools and information.

Be the company with the deepest knowledge of Peruvians providing personalized and real-time solutions

Our advanced analytics and CRM capabilities are being enriched with new sources of data and new tools that technology offers, such as cloud, real-time decision, machine learning and artificial intelligence. We aim to have the deepest understanding of Peruvians, both individuals and companies, as we believe that a deep knowledge of our current and potential customers’ characteristics and adapting to their behavior is important to better serve them, and to offer them the best solutions for their needs and risk profile.

Investments in technology represent the pillar of this strategic initiative, and we are working on a variety of areas to achieve this goal, including data and infrastructure, advanced analytics for marketing, and risk profiling and pricing models, as well as improving our CRM capabilities, including contextual marketing. With the support of our team of data scientists, we centrally design and distribute most of our sales campaigns, and have substantially improved our campaign effectiveness and are currently employing real-time decision making on certain campaigns. This combination of investments has helped make us more dynamic, and to be able to approach customers in real time.

These efforts also include different actions undertaken to have a better understanding of the self-employed segment of the population, which constitute a significant opportunity for financial services given the current low penetration levels. We are working on alternative risk profile models for new customer acquisition using new sources and non-traditional sources of data.

Our analytics vision is to have a fully deployed online customer management system which relies on real-time data, cloud processing, automated and reusable variables, real-time decision and actions, and an integrated infrastructure to support these new processes.

Attract and retain customers with a superior experience, which seamlessly integrates our physical and digital platform

We want to deliver a seamless and superior experience to our customers that integrates our physical and digital platforms. We believe this combination will allow us to more effectively serve our customers, enabling them to get what they want, when they want it, and how they want it.

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At Interbank, we have developed the digital capabilities to perform more than 95% of all the functionalities a customer needs within Interbank as of March 31, 2019. These include transactions, sale of new products, and self-service features. The percentage of transactions performed off branches has continued to increase, reaching 95% as of March 31, 2019. Digital sales and other self-service interactions have significantly increased during the last 12 months reaching 31% in March 2019, from 21% in March 2018. This represents a growth of 72% in the volume of digital sales and self-service interactions.

Through our physical channels we continue to focus on providing a superior customer experience and are improving productivity and efficiency through new paperless and digital processes, tools and more advanced analytics. Additionally, we continue to invest in educating our customers to encourage the use of digital and other channels. Deposits, withdrawals, payments of bills and credit cards are being redirected to other more cost-efficient channels.

Furthermore, we are currently redesigning our physical distribution platform to better suit the new digitally-influenced customer needs. Our idea is to focus more on high value-added activities, which include advisory and complex product sales, and less on transactions and simple product sales. For this purpose, we are in the process of redesigning our branch formats and distribution presence, including branches, correspondent agents, contact center and ATMs.

In digital, we are focusing our efforts on expanding the products and self-service interactions, continuing to foster the adoption of digital channels by our customers, adding new features, such as chat robots for employees and customers, and ensuring that interactions with our customers are safe and secure.

At Interseguro, we are expanding our product offering through our digital platform, which started with the launch of the online sale of SOAT in 2016, and continued with the sale of new digital products, such as travel insurance and car insurance. In 2018, premiums sold through digital channels accounted for 1.5% of gross premiums and for the three months ended March 31, 2019 accounted for 2.7% of gross premiums. At Inteligo, we introduced Certia, which focuses on onshore wealth management, and launched a digital platform that allows on-boarding, financial planning, advisory and execution services to our customers.

Create and scale-up new businesses by targeting new customers, segments and businesses

We seek to accelerate growth in the underpenetrated Peruvian market. For this purpose, we carry out thorough research through our lab LaBentana, alongside consumers, to identify areas for improvement and develop a variety of new initiatives to address pain points and make our offering more seamless. This allows us to target new customer segments, aiming to develop new revenue sources and accelerate our digital transformation.

Examples of these initiatives include the piloting of a digital payments solution for users and merchants. It targets cash payments at points of sale and cash peer-to-peer transfers, which account for the majority of total transactions. It offers in store payments through QR codes, online mobile top-ups and peer-to-peer transfers using only the mobile phone number.

Another initiative aims at finding alternative methods to provide access to loans to small and micro enterprises. Through a fully digital experience, which makes it cost-efficient and scalable, it allows small entrepreneurs to request and, if approved, get a loan disbursed in maximum of four hours. Once these initiatives have scaled up, we integrate them into our operations and digital platform, as have been the cases for the Piggybank and the expedited opening of accounts for small businesses through Cuenta Negocios.

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Focus on efficiency and productivity

We will continue to focus on our digital transformation to enhance efficiency through the automation of internal processes and use of technology. Our goal is to be more efficient while utilizing fewer resources in our customer interactions by focusing our efforts on four main areas: (i) becoming paperless, (ii) implementing more independent robot usage which includes artificial intelligence features, (iii) digitalizing end-to-end customer processes and (iv) eliminating low value-added activities.

During 2017 and 2018, we focused on reducing paper-based processes mainly targeting intensive back-office processes and branch processes. During 2018, we implemented our first 38 robotic process automations at Interbank with the aim of improving customer and operational processing times (in particular for low value-added processes) and reducing operational errors. Our target is to implement more than 100 robotic process automations during 2019 at Interbank.

Our focus on profitability has helped us to improve our efficiency ratio from 38.0% in 2016 to 35.6% in 2018, and 33.7% in the three months ended March 31, 2019 with initiatives spanning from branch and ATM rationalization to increases of sales productivity. We will continue to pursue such initiatives which are bolstered by new digital features and processes.

Provide a scalable platform that our customers can trust with world-class technology

A scalable, flexible, stable and secure technological platform is key to achieve our purpose. We believe that we have deployed the key initial investments necessary to scale our platform and are committed to continue improving by maintaining our current levels of investment.

The first phase of investments from 2015 to 2017 consisted of (i) new mobile and internet banking platforms for retail customers, (ii) a new internet banking platform for commercial customers, (iii) investment in data, (iv) significant investment in our core infrastructure and applications to guarantee the stability and operational efficiency needed to support increasing transactional volumes coming from our digital strategy, including the outsourcing of our data centers, and (v) cybersecurity to safeguard our operations and our customers. See “Business—Information Technology Unit” for further information.

Beginning in 2018, in the second phase we have been increasing our efforts on advanced analytics development, including big data, machine-learning, cloud and real time decisions, by working together with world-class partners to build capabilities to serve our customers throughout the life cycle digitally and to explore new business opportunities. We have bolstered our investments in cybersecurity as we believe it is fundamental to provide a secure platform to be able to continue with our digital transformation.

We have moved from working with 17 agile teams in 2017 to more than 80 in 2018, allowing us to substantially decrease time-to-market and to develop more innovative ideas. We also have an internal innovation lab working with design thinking methodologies implemented together with the consulting firm IDEO to further accelerate the development of new ideas using new technologies.

Our ongoing focus is based on four main areas of work: (i) development of a new digital platform based on open technologies and APIs, (ii) focus on the high performance and stability of our technological platforms, including cloud services, (iii) new processes for continuous delivery of new developments, and (iv) focus on cybersecurity.

Be a great place to work with a unique culture and strong sense of achievement for new talent

We believe that a motivated workforce leads to high-quality customer service, which leads to satisfied customers and better results. Our commitment to fostering a motivated workforce and performance-based culture

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is demonstrated by being ranked among the top Peruvian and Latin American companies in all our core segments by the Great Place to Work Institute and recently also in the specific ranking for women.

In the past years, we have been focusing on changing the way we work to agile methodologies, developing digital and analytical capabilities and changing the mindset of our talent. For this purpose, we have introduced a series of initiatives such as Demo Days, Expo Analytics, Interbank Hackathon, Innovaton, Interbank Datathon, as well as our Innovation Day at the Intercorp Peru level. We have also created training programs including the Agile Academy, Tribk, and the Interbank Tek program.

Interbank, Interseguro and Inteligo will continue their efforts to attract, develop and retain highly qualified personnel and to maintain a performance-based culture that emphasizes teamwork to keep a motivated workforce that delivers high-quality service and strong results.

Risks and Challenges

Our ability to leverage our strengths and successfully pursue the strategies described above is subject to a high degree of risk. See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our common shares. Such risks include, but are not limited to, the following:

• We are a holding company, and all of our operations are conducted by our subsidiaries. Our ability to pay dividends to you will depend on the ability of our subsidiaries to pay dividends to us.

• Economic, social and political developments in Peru, including political instability, corruption investigations, inflation and unemployment, could have a material adverse effect on our results of operations and financial condition.

• Weather related events can cause material losses. Peru is affected by El Niño, an oceanic and atmospheric phenomenon that causes a warming of the temperature in the Pacific Ocean. The effects of this phenomenon include flooding and the destruction of fish populations and agriculture, which can have a negative impact on Peru’s economy and the banking system.

• A devaluation of the sol could have a material adverse effect on our financial condition and results of operations.

• Changes in accounting standards and capital requirements could affect our business and results of operations and our ability to distribute dividends.

• Our subsidiaries are subject to extensive supervision and regulation. Changes in existing regulations or the implementation of future regulations may adversely affect our business and results of operations.

• Interest rate changes could have a material adverse effect on our financial condition and results of operations.

• Currency mismatches between deposits and loans could cause losses.

• The investment activities of our subsidiaries are subject to factors beyond their control and losses from their exposures, including concentration of exposure to Peruvian sovereign debt, could result in a material adverse effect on our financial condition and results of operations.

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• Our subsidiaries face intense competition from other banking, insurance, financial institutions and new online fintech entrants, and, if they are unable to compete successfully, our business and results of operations could be materially and adversely affected.

• We may not succeed in keeping up with changes in technology or our digital products may not be adopted in the way or at the rate we expect.

• Cybersecurity attacks and similar technology and security risks.

• We could sustain losses if our asset quality declines.

• Anti-money-laundering, sanctions, corruption and other similar compliance risks could cause losses and damage our reputation.

• Actual mortality and morbidity rates and other factors may differ from those assumed in the calculation of technical reserves and may have a material adverse effect on Interseguro’s financial condition and results of operations.

• The operations of our subsidiaries require the maintenance of banking, insurance and other licenses and any non-compliance with applicable license and operating obligations could have an adverse effect on our business, financial condition and results of operation.

• We may not be able to continue to grow the size and market share of our subsidiaries in the future at the same rates as their historical rates of growth.

Corporate Information

Our principal executive offices are located at Av. Carlos Villarán 140, 5th Floor, Urbanización Santa Catalina, La Victoria, Lima 13, Peru. Our telephone number is +(511) 615-9011. Our website address (the contents of which are not part of, and are not incorporated into, this prospectus) is www.ifs.com.pe.

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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

The following table sets forth our summary consolidated financial information. The consolidated income statements data for the years ended December 31, 2018, 2017 and 2016 and the consolidated statements of financial position data as of December 31, 2018 and 2017 are derived from our audited annual consolidated financial statements and related notes included elsewhere in this prospectus. Our consolidated financial information for 2014 and 2015 is derived from our audited consolidated financial statements for those years restated for the change in accounting policy as described under “Presentation of Financial and Other Information—Comparability of 2018 audited consolidated financial statements to prior years and financial statements restatement.” All years presented have been prepared in accordance with IFRS as issued by the IASB. The consolidated income statements data for the three months ended March 31, 2019 and March 31, 2018 and the consolidated statements of financial position data as of March 31, 2019 are derived from our unaudited interim condensed consolidated financial statements and related notes included elsewhere in this prospectus. Interim data may not be representative of full year results.

Until December 31, 2017, our subsidiary Interseguro recognized in its income statements the effect of the change in the value of liabilities coming from retirement, disability and survivor’s pensions, caused by the variation in the market interest rates used to discount these liabilities. During 2018, Interseguro voluntarily modified its accounting policy in order to show the effect of the change in market interest rates in the statements of other comprehensive income, providing more accurate and relevant information. The resulting impact was retrospectively recorded restating unrealized results, net and retained earnings of our consolidated statements of financial position as of December 31, 2017, 2016, 2015 and 2014 and for the years then ended. For more information about the change in our insurance accounting policy, see Note 4.2.1(i) of our audited annual consolidated financial statements. In addition, minor reclassifications for comparative purposes were made for the periods presented. See Note 4.4(a.i) to our audited annual consolidated financial statements.

As a result of the adoption of IFRS 9 beginning January 1, 2018, our audited consolidated financial statements for 2018 and related ratios are not comparable to prior years.

On January 1, 2019, we adopted for the first time IFRS 16 “Leases” which established that at the commencement date of a lease, a lessee will recognize a liability to reflect lease payments and the asset that represents the right-of-use of the underlying leased asset during the lease term will be recorded. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. As permitted by the transitional provisions of IFRS 16, we elected to apply the modified retrospective approach and we have not restated comparative figures. See Note 2(c) to our unaudited interim condensed consolidated financial statements.

The results included below are not necessarily indicative of our future performance and should not be construed as such. The summary financial and operating information presented below should be read in conjunction with “Presentation of Financial and Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited annual consolidated financial statements and related notes included elsewhere in this prospectus.

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Consolidated Income Statements

	For the three months ended March 31, (unaudited)									For the years ended December 31,
	2019			2019			2018			2018			2018			2017 (Restated)			2016 (Restated)			2015(1) (Restated)			2014(1) (Restated)
	(U.S.$ in millions) (2)(3)			(S/ in millions) (2)						(U.S.$ in millions) (2)(3)			(S/ in millions) (2)
Interest and similar income		351.6			1,166.7			1,036.3			1,302.4			4,321.3			3,809.0			3,704.8			3,342.7			2,828.7
Interest and similar expenses		(101.2	)		(335.8	)		(266.9	)		(352.8	)		(1,170.6	)		(1,119.9	)		(1,081.9	)		(921.7	)		(788.9	)
Net interest and similar income		250.4			831.0			769.4			949.6			3,150.7			2,689.1			2,623.0			2,421.0			2,039.8
Impairment loss on loans, net of recoveries		(56.2	)		(186.4	)		(172.9	)		(198.9	)		(660.1	)		(827.9	)		(783.6	)		(645.8	)		(425.5	)
Recovery (loss) due to impairment of financial investments		0.6			1.9			2.3			3.9			13.1			(20.8	)		(28.3	)		(78.3	)		(20.2	)
Net interest and similar income after impairment loss		194.8			646.4			598.8			754.6			2,503.7			1,840.4			1,811.0			1,696.9			1,594.1
Other income
Fee income from financial services, net		67.2			223.0			216.6			263.5			874.4			849.2			809.5			770.6			668.8
Net gain on foreign exchange transactions		12.4			41.3			40.9			68.8			228.2			201.8			264.2			521.2			216.8
Net gain on sale of financial investments		9.0			29.9			25.3			4.3			14.2			184.8			103.3			134.9			128.1
Net gain (loss) on financial assets at fair value through profit or loss		11.2			37.1			13.2			3.6			12.0			18.4			(47.9	)		(111.8	)		22.3
Net gain on investment property		3.6			11.9			3.2			25.7			85.3			25.4			23.1			43.5			98.9
Other		5.6			18.7			14.4			20.8			69.0			87.4			64.1			75.3			55.7
Total other income		109.1			361.9			313.5			386.7			1,283.1			1,367.2			1,216.3			1,433.6			1,190.7
Insurance premiums and claims
Premiums assumed		52.9			175.5			167.0			229.7			762.1			533.6			730.6			905.0			680.5
Adjustment of technical reserves		(22.1	)		(73.3	)		(42.6	)		(95.5	)		(316.8	)		(240.2	)		(404.9	)		(628.7	)		(572.7	)
Premiums ceded to reinsurers		(1.3	)		(4.2	)		(28.1	)		(35.2	)		(116.7	)		(34.1	)		(138.3	)		(129.9	)		(4.9	)
Net claims and benefits incurred for life insurance contracts and others		(51.8	)		(172.0	)		(175.1	)		(221.8	)		(736.0	)		(412.3	)		(318.2	)		(258.9	)		(181.1	)
Total net premiums earned minus claims and benefits		(22.3	)		(74.1	)		(78.9	)		(122.8	)		(407.5	)		(152.9	)		(130.8	)		(112.6	)		(78.1	)
Other expenses
Salaries and employee benefits		(58.9	)		(195.4	)		(182.4	)		(227.8	)		(755.9	)		(714.6	)		(711.3	)		(692.5	)		(647.4	)
Administrative expenses		(53.3	)		(176.7	)		(180.4	)		(233.7	)		(775.3	)		(730.6	)		(688.9	)		(700.7	)		(627.7	)
Depreciation and amortization		(19.0	)		(62.9	)		(37.6	)		(49.6	)		(164.7	)		(145.2	)		(130.1	)		(111.1	)		(105.4	)
Other		(14.1	)		(46.7	)		(43.4	)		(42.8	)		(141.6	)		(120.3	)		(102.1	)		(115.4	)		(87.2	)
Total other expenses		(145.2	)		(481.7	)		(443.9	)		(553.8	)		(1,837.5	)		(1,710.6	)		(1,632.4	)		(1,619.6	)		(1,467.7	)
Income before translation result and income tax		136.4			452.5			389.5			464.7			1,541.9			1,344.1			1,264.0			1,398.4			1,239.0
Translation result		3.0			10.1			6.0			(10.5	)		(35.0	)		15.9			20.1			(25.1	)		(25.0	)
Income tax		(33.1	)		(109.9	)		(105.5	)		(125.2	)		(415.5	)		(326.5	)		(333.9	)		(352.6	)		(309.1	)
Net profit for the period		106.3			352.7			290.0			328.9			1,091.4			1,033.5			950.2			1,020.7			904.9
Attributable to:
IFS’ shareholders		105.7			350.6			288.2			326.8			1,084.3			1,027.4			944.6			1,013.7			891.5
Non-controlling interest		0.7			2.2			1.8			2.1			7.1			6.1			5.6			7.0			13.4
Earnings per share		0.955			3.167			2.628			2.911			9.818			9.625			8.715			9.295			8.149
Weighted Average number of shares outstanding		—			110.7			109.7			—			110.4			106.7			108.4			109.1			109.4

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Consolidated Statements of Financial Position

	As of March 31, (unaudited)									As of December 31,
	2019			2019			2018			2018			2018			2017 (Restated)			2016 (Restated)			2015 (Restated)			2014 (Restated)
	(U.S.$ in millions) (2)(3)			(S/ in millions) (2)						(U.S.$ in millions) (2)(3)			(S/ in millions) (2)
Assets
Cash and due from banks		2,911.6			9,660.6			9,616.6			2,525.7			8,380.4			11,204.8			11,761.8			12,431.8			6,358.5
Inter-bank funds		21.1			70.0			179.1			149.2			495.0			403.5			5.0			245.0			310.0
Financial investments		5,380.6			17,852.8			18,050.0			5,313.2			17,629.4			16,924.1			10,209.8			8,651.9			8,409.0
Loans, net of unearned interest		10,554.2			35,019.0			30,021.7			10,345.3			34,325.7			29,406.3			28,192.6			27,035.8			23,436.9
Impairment allowance for loans		(420.8	)		(1,396.2	)		(1,258.1	)		(411.3	)		(1,364.8	)		(1,202.1	)		(1,166.8	)		(1,041.6	)		(819.7	)
Investment property		298.3			989.6			943.5			297.3			986.5			1,118.6			745.2			713.3			652.9
Property, furniture and equipment, net (4)		285.9			948.5			597.5			187.6			622.5			612.6			589.8			579.2			577.2
Intangibles and goodwill, net		285.4			946.8			903.0			287.7			954.5			921.6			267.4			199.4			145.8
Other assets (5)		501.8			1,665.2			1,581.7			516.9			1,715.0			1,005.0			1,114.4			1,186.1			1,294.6
Total assets		19,818.0			65,756.2			60,635.0			19,211.7			63,744.4			60,394.5			51,719.4			50,000.9			40,365.2
Liabilities and equity
Deposits and obligations		10,485.2			34,790.0			31,220.4			10,151.3			33,682.0			32,607.6			30,097.9			28,487.7			23,381.4
Inter-bank funds		32.1			106.5			129.5			—			—			30.0			332.3			—			—
Due to banks and correspondents		1,123.0			3,726.1			4,141.4			1,294.0			4,293.4			4,407.4			5,328.6			6,191.7			3,140.9
Bonds, notes and other obligations		2,008.2			6,663.2			6,240.2			1,958.0			6,496.8			5,602.4			4,769.4			4,925.4			4,565.3
Insurance contract liabilities		3,136.6			10,407.2			10,536.9			3,104.4			10,300.5			10,514.5			5,010.5			4,477.1			3,743.0
Other liabilities (4)(6)		704.1			2,336.4			1,954.2			567.6			1,883.4			1,395.7			1,182.4			1,458.0			1,232.3
Total liabilities		17,489.3			58,029.4			54,222.6			17,075.3			56,655.9			54,557.6			46,721.0			45,539.9			36,062.9
Equity, net
Equity attributable to IFS’ shareholders		2,316.7			7,686.8			6,377.7			2,124.2			7,048.1			5,800.5			4,879.1			4,345.6			4,191.0
Non-controlling interest		12.0			40.0			34.7			12.2			40.4			36.4			119.2			115.4			111.2
Total equity, net		2,328.7			7,726.8			6,412.4			2,136.4			7,088.5			5,836.9			4,998.3			4,460.9			4,302.3
Total liabilities and equity net		19,818.0			65,756.2			60,635.0			19,211.7			63,744.4			60,394.5			51,719.4			50,000.9			40,365.2

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Selected Ratios and Operational Data

	As of and for the three months ended March 31, (unaudited)						As of and for the year ended December 31,
	2019			2018			2018			2017			2016
Performance Ratios
Net interest margin (7)(8)		5.4	%		5.3	%		5.4	%		5.3	%		5.4	%
Efficiency ratio (9)		33.7	%		34.0	%		35.6	%		36.8	%		38.0	%
ROA (8)(10)		2.2	%		1.9	%		1.8	%		2.0	%		1.9	%
Adjusted ROA (11)		—			—			2.0	%		—			—
ROE (8)		19.0	%		19.1	%		16.6	%		19.3	%		19.9	%
Adjusted ROE (12)		—			—			18.6	%		—			—
Risk adjusted NIM (8)(13)		4.2	%		4.1	%		4.3	%		3.7	%		3.8	%
Cost of risk (8)(14)		2.2	%		2.3	%		2.1	%		2.9	%		2.9	%
Capital and Balance Sheet Structure
Average total equity as a percentage of average total assets		11.4	%		10.1	%		10.7	%		10.1	%		9.5	%
Total loans, net as a percentage of total deposits		96.6	%		92.1	%		97.9	%		86.5	%		89.8	%
Core equity tier 1 ratio (15)		10.2	%		10.2	%		10.6	%		10.1	%		9.4	%
Capitalization ratio of Interbank (16)		16.4	%		17.5	%		15.8	%		16.1	%		15.9	%
Solvency ratio of Interseguro (17)		130.4	%		143.4	%		137.9	%		134.9	%		145.5	%
Capitalization ratio of Inteligo Bank (18)		26.9	%		28.3	%		25.5	%		32.6	%		24.5	%
Credit Quality
Past-due loans as a percentage of total gross loans (at end of period)		2.5	%		2.6	%		2.5	%		2.7	%		2.5	%
Provision expense as a percentage of total gross loans		2.2	%		2.3	%		2.1	%		2.9	%		2.9	%
Other Data
Assets under management of Inteligo		17,769.0			16,210.7			17,592.7			16,229.9			15,398.3
Inteligo deposits		2,533.1			2,152.5			2,608.7			2,253.3			3,226.1
Dividends declared/paid (19)		—			—			654.5			510.7			475.8
Declared/paid dividends per share (20)		—			—			5.8			4.5			4.2
Exchange rate (S/ per U.S.$1.00 at end of period)		3.318			3.227			3.373			3.241			3.356
Financial stores		264			272			270			273			289
ATMs		1,953			1,994			1,973			2,052			2,159
Correspondent agents (21)		2,513			2,514			2,506			2,505			2,935
Number of digital clients (22)		975,269			667,506			882,437			620,448			454,194
Percentage of digital users (22)(23)		56	%		43	%		53	%		40	%		30	%

(1) Our financial information for 2017, 2016, 2015 and 2014 was restated as a result of a voluntary change in accounting policy regarding our method of accounting the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited annual consolidated financial statements. The financial information presented for 2014 and 2015 were restated after issuance of the financial statements for those years due to a voluntary change in accounting policy with a negative impact of S/57.6 million for 2014 and S/218.1 million for 2015 in the line Total net premiums earned minus claims and benefits in the consolidated income statement. See “Management Discussion and Analysis of Results of Operations and Financial Condition—Change in Accounting Policy.

(2) Except for percentages and ratios, and operational data.

(3) Amounts stated in U.S. dollars as of and for the three months ended March 31, 2019 and as of and for the year ended December 31, 2018 have been translated from soles at the exchange rate of S/3.318 = U.S.$1.00. See “Exchange Rates”.

(4) Due to the adoption of IFRS 16 we have recorded a S/341.7 million, increase in the caption “Property, furniture and equipment (Right-of-use assets)” and recorded simultaneously, an increase for the same amount, in the caption “Accounts payable, provisions and other liabilities (Lease liabilities)”. See Note 2 (c) to our unaudited interim condensed consolidated financial statements.

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(5) “Other assets” is defined as due from customers on acceptances, accounts receivable and other assets, net and deferred income tax assets, net.

(6) “Other liabilities” is defined as due from customers on acceptances, accounts payable, provisions and other liabilities and deferred income tax liabilities, net.

(7) “Net interest margin” is defined as (x) net interest and similar income divided by (y) average interest-earning assets. See “Selected Statistical Information”.

(8) Annualized for each interim period.

(9) “Efficiency ratio” is calculated by dividing (x) salaries and employee benefits plus administrative expenses plus depreciation and amortization by (y) net interest and similar income plus other income, plus net premiums earned.

(10) ROA is calculated as net profit as a percentage of average assets, computed as the simple average of the quarterly balances from December of the previous year to the date as of calculation.

(11) Adjusted ROA for 2018, is calculated as adjusted net profit as a percentage of average assets, computed as the simple average of the quarterly balances from December of the previous year to the date as of calculation. Adjusted net profit excludes S/144.8 million, which is the aggregate effect recorded in technical reserves due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted for 2017 and 2016. See Note 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted net profit and Adjusted ROA are non-GAAP financial measures and should not be considered in isolation or as a substitute for net profit or ROA, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP Financial Measures”.

(12) Adjusted ROE for 2018 is calculated as adjusted net profit as a percentage of average shareholders’ equity, computed as the simple average of the quarterly balances from December of the previous year to the date as of calculation. Adjusted net profit excludes S/144.8 million, which is the aggregate effect recorded in technical reserves due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted for 2017 and 2016. See Note 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted ROE is a non-GAAP financial measures and should not be considered in isolation or as a substitute for Net Profit or ROE, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP financial measures.”

(13) Risk adjusted net interest margin is defined as net interest margin after impairment loss on loans, net of recoveries.

(14) Cost of risk is defined as impairment loss on loans, net of recoveries divided by average gross loans. Cost of risk includes an S/81.0 million recovery of provisions related to the construction sector at Interbank for 2018.

(15) Calculated for Interbank only under SBS GAAP.

(16) Regulatory capital for Interbank is calculated in accordance with the guidelines of the Basel II Accord, as adopted by the SBS and is based on information from Interbank’s financial statements prepared under SBS GAAP. See “Regulation and Supervision—Banking Regulation and Supervision—Capital Adequacy Requirements Basel II”.

(17) Solvency ratio for Interseguro is calculated in accordance with SBS guidelines and is based on information from Interseguro’s financial statements prepared under SBS GAAP. See “Regulation and Supervision—Insurance Regulation and Supervision—Solvency Requirements and Regulatory Capital”.

(18) Capitalization Ratio for Inteligo Bank is calculated in accordance with the guidelines promulgated by the Central Bank of The Bahamas.

(19) Dividends declared for fiscal years 2018, 2017 and 2016 were paid in 2019, 2018 and 2017 and amounted to U.S.$197.2 million, U.S.$157.7 million and U.S.$ 146.5 million, respectively. See “Dividends and Dividend Policy”.

(20) Corresponds to dividends declared divided by outstanding shares for each period reported. Dividends per share amounted to U.S.$1.75, U.S.$1.40 and U.S.$ 1.30 for years 2018, 2017 and 2016. See “Dividends and Dividend Policy”.

(21) ASBANC estimates, for 2014-2017 and company estimates for 2018.

(22) In the month of December for each full year and in the month of March for each interim period.

(23) Percentage of digital users over total clients that interact with Interbank.

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Non-GAAP Financial Measures

In this prospectus, we use adjusted net profit, adjusted ROE and adjusted ROA. These measures are not calculated in accordance with IFRS and we collectively refer to these as non-GAAP financial measures. For more information see “Presentation of Financial and other information – Non-GAAP Financial Measures”.

The following table reflects the reconciliation of adjusted net profit, adjusted ROE and adjusted ROA for our banking segment as of and for the three month period ended March 31, 2019:

	As of March 31, 2019
	Net profit			Adjustment (2)			Adjusted Net Profit			Average total assets			ROA			Adjusted ROA			Average total equity		ROE			Adjusted average total equity		Adjusted ROE
Banking		299.7			(32.4	)		267.3			48,335.7			2.5	%		2.2	%		5,417.1		22.1	%		5,384.7		19.8	%
Insurance		28.9			—			28.9			12,770.0			0.9	%		0.9	%		902.8		12.8	%		902.8		12.8	%
Wealth Management		78.3			—			78.3			3,781.6			8.3	%		8.3	%		821.6		38.1	%		821.6		38.1	%
Holding and eliminations		(54.2	)		32.4			(21.8	)		(137.0	)		—			—			266.1					298.5
Total		352.7			—			352.7			64,750.3			2.2	%		2.2	%		7,407.6		19.0	%		7,407.6		19.0	%

(1) Adjusted net profit of the banking segment, for the three months ended March 31, 2019, is calculated excluding the gain on the sale of Interfondos S/32.4 million after taxes which is eliminated upon consolidation. Adjusted net profit is a non-GAAP financial measure and should not be considered in isolation or as a substitute for net profit, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures.”

The following tables reflect the reconciliation of adjusted net profit, adjusted ROE and adjusted ROA on a consolidated basis and also for our insurance segment as of and for the year ended December 31, 2018.

	For the year ended
	2018
	(S/ in millions)
Net profit (A)		1,091.4
Adjustment of new mortality tables in Total net premiums earned minus claims and benefits (B)		144.8
Adjusted net profit (C) = (A) + (B)		1,236.2
Average total equity (D)		6,558.8
ROE (A) / (D)		16.6	%
Adjusted average total equity (E)		6,645.6
Adjusted ROE (C) / (E)		18.6	%
Average total assets (F)		61,072.6
ROA (A) / (F)		1.8	%
Adjusted ROA (C) / (F)		2.0	%

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	As of December 31, 2018
	Net profit			Adjustment (1)		Adjusted Net Profit			Average total assets			ROA			Adjusted ROA			Average total equity			ROE			Adjusted average total equity			Adjusted ROE
Banking		1,010.9			—		1,010.9			45,515.7			2.2	%		2.2	%		4,994.3			20.2	%		4,994.3			20.2	%
Insurance		(61.5	)		144.8		83.3			12,388.1			(0.5	)%		0.7	%		803.7			(7.6	)%		890.5			9.4	%
Wealth Management		197.5			—		197.5			3,314.3			6.0	%		6.0	%		768.0			25.7	%		768.0			25.7	%
Holding and eliminations		(55.6	)		—		(55.6	)		(145.5	)								(7.3	)					(7.3	)
Total		1,091.4			144.8		1,236.2			61,072.6			1.8	%		2.0	%		6,558.8			16.6	%		6,645.6			18.6	%

(1) Change in accounting estimates recorded in Total net premiums-earned minus claims and benefits driven by the publication by the SBS of new mortality’ tables. See Note 4.4 (d) to our audited annual consolidated financial statements and “Presentation of financial and other information – Non-GAAP financial measures”.

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THE OFFERING

The following is a brief summary of the terms of this offering and should be read together with the more detailed information and financial data and statements contained elsewhere in this prospectus. For a more complete description of our common shares, see “Description of Common Shares” in this prospectus.

Issuer Intercorp Financial Services Inc.

Selling Shareholders Intercorp Peru and our subsidiary Interbank.

Securities Offered Common shares

Offering Price U.S.$            

Option to Purchase Additional Common Shares We and Intercorp Peru are granting the underwriters an option exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of              and              additional common shares, respectively, at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions.

Use of Proceeds We estimate that the net proceeds to us will be approximately U.S.$            , or approximately U.S.$             if the underwriters exercise their option to purchase additional common shares in full from us, to Interbank will be approximately U.S.$            , and to Intercorp Peru will be approximately U.S.$            , or approximately U.S.$             if the underwriters exercise their option to purchase additional common shares from Intercorp Peru in full. We will not receive any proceeds from the sale of shares by Intercorp Peru.

These amounts assume a public offering price of U.S.$             per common share (the last reported sales price of our shares reported on the Lima Stock Exchange on                 , 2019), after deducting the estimated underwriting discounts and commissions and offering expenses.

We and Interbank expect to each use any net proceeds from the sale of shares by us and Interbank for general corporate purposes. In particular, Interbank expects to use the proceeds to strengthen its capital position and increase business activity, and IFS expects to use the proceeds to invest in strengthening its digital and analytical capabilities across its platform by developing a common data infrastructure and new digital products and services.

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Lock-up We, Intercorp Peru and our intermediate holding companies, and our directors and officers, collectively, owning         % of our common shares as of                     , 2019, have agreed, subject to limited exceptions, not to sell any of our common shares for a period of 180 days after the date of this prospectus without the prior approval of the representatives of the underwriters. See “Underwriting”.

Shares Outstanding Immediately Prior to and Following the Offering Immediately following the offering assuming no exercise of the Underwriters’ option to purchase additional shares, we will have              common shares issued and outstanding. If the Underwriters’ option is exercised in full, we will have              common shares issued and outstanding.

Dividends and Dividend Policy We are a holding company and, as such, our ability to pay dividends is subject to the ability of our subsidiaries to pay dividends to us. See “Dividends and Dividend Policy” for further information on our dividend policy.

Listing Our common shares are listed on the Lima Stock Exchange under the symbol “IFS”. We will apply to list our common shares on the New York Stock Exchange under the symbol “IFS”.

Taxation For a discussion of the material Peruvian, U.S. federal and Panamanian income tax consequences relating to an investment in our common shares, see “Taxation”.

Risk Factors Investing in our common shares involves risks. See “Risk Factors” beginning on page 29 and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our common shares.

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RISK FACTORS

An investment in our common shares involves a high degree of risk. In addition to the other information contained in this prospectus, you should carefully consider the following risk factors before purchasing our common shares. If any of the possible events described below occurs, our businesses, financial condition, results of operations or prospects could be materially and adversely affected. As a result, the market prices of our common shares could decline and you could lose all or part of your investment. The risks and uncertainties below are those known to us and that we currently believe may materially affect us and our common shares. We may face additional risks and uncertainties not currently known to us or which as of the date of this prospectus we might not consider significant, which may also adversely affect our businesses.

Risks Relating to Our Businesses

We are a holding company and all of our operations are conducted through our subsidiaries. Our ability to pay dividends to you will depend on the ability of our subsidiaries to pay dividends and make other distributions to us.

As a holding company, all of our operations are conducted through our subsidiaries. Accordingly, our ability to pay dividends to you will depend upon our receipt of dividends and other distributions from our subsidiaries.

There are various regulatory restrictions in Peru and other jurisdictions that may limit our subsidiaries’ ability to pay dividends or make other payments to us, such as their obligations to maintain minimum regulatory capital and minimum liquidity. In addition, our Peruvian subsidiaries pay dividends to us on the basis of the SBS GAAP financial statements, which differ from IFRS. For example, whereas Interseguro had a net loss of S/7.8 million under IFRS in 2018, it had a net profit of S/361.1 million under SBS GAAP and paid to us a related dividend of S/138.0 million in 2018. There is no assurance that the differences in accounting treatment will not render the opposite result, namely that lower or no dividends would be payable to us by any of our Peruvian subsidiaries under SBS GAAP than what it would appear to be able to pay under IFRS, or that dividends will continue to be payable under SBS GAAP in the future.

Furthermore, our subsidiaries may incur indebtedness or enter into other arrangements containing terms that may restrict or prohibit the payment of dividends, the making of other distributions, or the making of loans to us. We cannot assure you that the agreements governing the future indebtedness of our subsidiaries will permit them to provide us with sufficient dividends, distributions or the making of loans to fund dividend payments.

To the extent our subsidiaries do not have funds available or are otherwise restricted from paying dividends to us, our ability to pay dividends to our shareholders will be adversely affected.

As a holding company, our right to receive any distribution of assets of our subsidiaries will be effectively subordinated to the rights of our subsidiaries’ creditors, and you may have limited recourse against our subsidiaries’ assets in case of our liquidation.

As a holding company, our right to receive any distribution of assets of our subsidiaries upon any subsidiary’s liquidation or reorganization or otherwise will be subject to the prior claims of creditors of that subsidiary, except to the extent that any claims by us as a creditor of such subsidiary may be recognized as such. Accordingly, holders of our common shares will have rights that will effectively be subordinated to all existing and future indebtedness of our subsidiaries, and, in the event of any claim against us, our shareholders may have recourse only against our assets, and not those of our subsidiaries, for payments. The only significant assets that we currently hold are our equity interests in our subsidiaries.

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Our subsidiaries are subject to extensive regulation and supervision, and changes in existing regulations or the implementation of future regulations may have a material adverse effect on our financial condition and results of operations.

Interbank and Interseguro are subject to extensive regulation and supervision by the SBS. The SBS also oversees all of Interbank’s and Interseguro’s subsidiaries and their operations as well as Interbank’s branch in Panama. Interbank is also subject to regulation and oversight by the Central Reserve Bank of Peru, which, together with the SBS, has general administrative responsibilities over banks and other financial institutions, including the authority to set loan loss provisions, limits on fees, regulatory capital requirements and other minimum capital adequacy and reserve requirements. In addition, banks are required to provide the SBS, on a periodic basis, with all information necessary to allow for its evaluation of the bank’s financial performance. Similarly, insurance companies are required to periodically provide the SBS, with all information necessary for the SBS to evaluate the company’s management, measure systems, solvency, profitability and liquidity.

Similarly, Inteligo’s subsidiaries are regulated by governmental entities in several jurisdictions, such as The Bahamas, Panama and Peru. Inteligo Bank is subject to the regulation and supervision of the Central Bank of The Bahamas, and its branch is subject to regulation by the Superintendency of Banks of Panama (Superintendencia de Bancos de Panamá), while Inteligo SAB is subject to the regulation and supervision of the SMV in Peru. Also, Interbank and Interseguro are subject to the regulations of the SMV. In addition, Interbank, Interseguro, Inteligo Bank and Inteligo SAB are subject to other regulations, such as the U.S. Foreign Account Tax Compliance Act (FATCA), which could increase compliance costs and, in case of non-compliance could result in liability, additional costs or sanctions imposed by the U.S. Internal Revenue Service.

Changes in the regulation and supervision of Interbank, Interseguro and Inteligo could have a material adverse effect on our financial condition and results of operations. For example, the SBS and the Central Reserve Bank of Peru regulate, and have in the past changed, capital structure and deposit reserve requirements, interest paid on deposit reserves, the amount of deposit reserves for which no interest is payable, rules regarding provisions for loan losses and legal lending limits applicable to Peruvian commercial banks. In addition, Interbank could be subject to limits on the commissions charged to clients. Furthermore, Interbank could be required to increase its level of provisions in response to pro-cyclical provisioning requirements that could be activated by regulators under certain favorable macroeconomic conditions.

Since annuities began to be offered by insurance companies in 1993, the SBS has implemented major changes affecting reserve requirements for insurance companies, such as Interseguro. For example, recent changes by the SBS to mortality tables used for calculating reserves for new annuities in March 2018 resulted in a higher reserve requirement, which in turn could adversely affect Interseguro’s results of operations, or could result in lowered implied interest rates on Interseguro’s annuities. For further information, see Notes 4.6(a) and 4.6(b) to our audited annual consolidated financial statements. New legislation or regulations applicable to the insurance industry may adversely affect Interseguro’s ability to underwrite and price risks accurately as well as affect its revenues and net income. For example, whereas retirees formerly had to choose between remaining with their pension fund or choosing an annuity, since 2016 a law has allowed retirees to withdraw 95.5% of their capital accumulated in cash upon retirement, which has resulted in a significant reduction of annuities sold by Peruvian insurance companies, including Interseguro. In addition, the SBS may change the types of and limits on eligible investments, which could force Interseguro to liquidate current investments on less favorable terms than if they were held to maturity and restrict Interseguro from making investments that its management deems to be beneficial.

The Bahamas has enacted the Commercial Entities (Substance Requirements) Act, 2018 which requires substantial economic presence in The Bahamas for certain Bahamian entities that conduct relevant activities. A relevant activity includes the business of banking as conducted by Inteligo Bank. However Inteligo Bank intends to seek exemption from this legislation as it considers itself to be tax resident in another jurisdiction, Panama, despite being a licensed bank in The Bahamas. As a tax resident in Panama, Inteligo Bank would be exempt from

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the requirements of the Commercial Entities (Substance Requirements) Act, 2018 if it fulfills certain disclosure and governance requirements of the applicable legislation. If Inteligo Bank is not considered to be tax resident in Panama, or does not fulfill the requirements of the applicable legislation, it will have to enhance its economic and business presence in The Bahamas in order to comply with the Commercial Entities (Substance Requirements) Act, 2018.

Changes in existing regulations or the implementation of future regulations may also restrict our existing operations, limit the expansion of our business and require extensive system and operating changes that may be difficult or costly to implement.

We cannot predict whether and to what extent new laws and regulations, or changes to existing laws and regulations, affecting our subsidiaries’ business will be adopted in the future, the timing of any such adoption and what effect such events would have on our financial condition and results of operations.

The operations of our subsidiaries require the maintenance of banking, insurance and other licenses and any non-compliance with applicable license and operating obligations could have a material adverse effect on our business, financial condition and results of operations.

All banks and insurance companies established in Peru require certain authorizations issued by the SBS in order to operate in Peru. In addition, all brokerage firms operating in Peru require certain authorizations issued by the SMV in order to operate in Peru. In The Bahamas and Panama, all banks require a license to operate. Governmental authorities, such as the SBS or the Central Reserve Bank of Peru, the Central Bank of The Bahamas, or the Superintendency of Banks of Panama, have general administrative responsibilities over banks and other financial institutions, including authority to set loan loss provisions, limits on fees, regulatory capital requirements and other minimum capital adequacy and reserve requirements. In addition, banks are generally required to provide the relevant banking supervisory agency, on a periodic basis, with all information that is necessary to allow for its evaluation of a bank’s financial performance. Insurance companies are regulated and supervised by the SBS which has the ability, among other things, to set reserve requirements for insurance companies. Similarly, the SMV has general administrative responsibilities over brokerage firms, including the authority to set minimum capital requirements.

Our subsidiaries currently have the required licenses in order to conduct their operations in their corresponding jurisdictions for all of their operations. Although we believe our subsidiaries are currently in compliance with their respective existing material license and reporting obligations, there is no assurance that our subsidiaries will be able to maintain the necessary licenses in the future. We cannot assure you that future changes to existing laws and regulations, or stricter interpretation or enforcement of existing laws and regulations, will not impair our ability to comply with such laws and regulations and thus with the terms of our licenses.

The loss of a license, a breach of the terms of a license by any of our subsidiaries or the failure to obtain any further required licenses in the future could have a material adverse effect on our business, financial condition and results of operations. If any of our subsidiaries loses its licenses or is required to seek additional licenses, then such subsidiary will be unable to perform its operations as it is currently authorized.

Under certain circumstances, the SBS, the SMV, the Superintendency of Banks of Panama or the Central Bank of The Bahamas, as applicable, may intervene in our subsidiaries’ operations in order to prevent, control and reduce the effects of a failure of our operations.

Under the Peruvian Banking and Insurance Law and the regulations thereunder, the SBS may intervene in Interbank’s and Interseguro’s operations upon the occurrence of any of the following events:

• Interbank or Interseguro suspends payment of its obligations or is unable to pay its obligations as they come due;

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• Interbank or Interseguro breaches any of their respective commitments to the SBS under a surveillance regime imposed by the SBS;

• Interbank’s regulatory capital is less than 50% of the minimum regulatory capital required under the Peruvian Banking and Insurance Law;

• Interbank or Interseguro experiences a deficit or reduction of more than 50% of its regulatory capital during the preceding 12-month period; or

• Interseguro experiences a deficit or reduction of the regulatory capital of more than 50% of its solvency equity.

In the event of an intervention, the SBS has the power to institute measures, such as limiting the decisions that could be taken at a shareholders’ meeting, suspending our normal activities and segregating certain of Interbank’s or Interseguro’s assets and liabilities for transfer to third parties, among others. Furthermore, the SBS has the power under the Peruvian Banking and Insurance Law to declare the wind-up or liquidation of any bank or insurance company if an intervention extends for longer than 45 days, which period may be extended for another 45 days at the sole discretion of the SBS, and/or upon the occurrence of a wind-up or liquidation pursuant to the Peruvian General Corporations Law (Ley General de Sociedades).

Under Peruvian capital markets law and the regulations thereunder, the SMV may revoke the license of Inteligo SAB and/or Interfondos, among others, upon the occurrence of (i) significant irregularities that put the companies at risk to carry out their operations as permitted by law or (ii) significant violations of the law, statutes and regulations promulgated by the SMV.

Under Bahamian banking regulations, the Central Bank of The Bahamas may intervene in Inteligo Bank’s operations under the occurrence of any of the following events:

• Inteligo Bank carries on its business in a manner detrimental to the public interest or the interests of its depositors or other creditors; or

• it contravenes the provisions of Bahamian banking law or any other law, order or regulation made thereunder, or any term or condition subject to which its license was issued, either in The Bahamas or elsewhere.

Under Law Decree 9 of 1998, as amended, the Superintendency of Banks of Panama may seize administrative and operating control of the branch of Inteligo Bank in Panama, based on any of the following grounds:

• upon a reasoned request of Inteligo Bank itself;

• if Inteligo Bank cannot continue operations without endangering the interests of the depositors;

• as a consequence of the evaluation of the report submitted by an appointed advisor;

• non-compliance with the corrective measures ordered by the Superintendency of Banks of Panama;

• if Inteligo Bank carries out its operations in an illegal, negligent or fraudulent manner;

• if Inteligo Bank has suspended payment on its obligations; or

• if the Superintendency of Banks of Panama confirms that the capital adequacy, solvency or liquidity of Inteligo Bank has deteriorated so as to require action by the Superintendency of Banks of Panama.

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The adoption of new international banking and insurance guidelines may cause our subsidiaries to require additional capital and could cause their cost of funds to increase, which could have a material adverse effect on our financial condition and results of operations.

In December 2009, the Basel Committee announced its intention to issue a new framework (“Basel III”), related to the regulation, supervision and risk management of the banking industry. Among the changes adopted by Basel III were raising the quality, consistency and transparency of the capital base; enhancing risk coverage; reducing pro-cyclicality and promoting countercyclical buffers; and addressing systemic risk and interconnectedness.

In July 2011, the SBS issued SBS Resolution No. 8425-2011, establishing the final methodologies in the calculation and the implementation schedule of the additional capital requirements to be implemented in Peru, which, although not completely consistent with Basel III, includes requirements to cover concentration, interest rate and systemic risk, as well as certain pro-cyclical capital requirements. These additional requirements were fully implemented in July 2016. As of the date of this prospectus, we are fully compliant with these additional capital requirements.

In February 2016, the SBS issued Resolution No. 975-2016, which aims to improve the quality of the total regulatory capital and align Peruvian regulations towards Basel III. This resolution changed the conditions that subordinated debt must meet in order to be considered in the calculation of additional capital and the calculation methodology applicable to risk-weighted assets. This resolution is applicable to subordinated debt incurred or created from the date of its approval. However, as established in this regulation, subordinated debt incurred or created prior to its approval (and which does not meet the requirements of this new regulation) will still be considered in the calculation of regulatory capital, subject to certain rules specified therein.

Interbank expects to continue to be in compliance with these additional capital requirements; however, Interbank’s assumptions with respect to compliance may turn out to be incorrect, and, consequently, have a material adverse effect on its financial condition and results of operations. In addition, the complete adoption of the new Basel III framework may have a material adverse effect on Interbank’s financial condition and results of operations.

With respect to Interseguro, Solvency II, a new regulatory framework for the European insurance industry implemented in early 2016, is under consideration by international regulatory bodies, which could result in the SBS raising solvency ratio requirements for insurance companies in Peru in the future.

With respect to Inteligo Bank, The Bahamas currently adheres to Basel I, and has effectively implemented Pillar I and Pillar II of the Basel II framework. The Pillar I framework focuses on the capital adequacy ratio requirements and Pillar II focuses on the ICAAP (the guidelines in relation to the ICAAP were released in August 2016). The Central Bank of The Bahamas has rolled out the capital component of the Basel III framework. In 2018, the Central Bank of The Bahamas published two discussion papers focused on Minimum Disclosures (Pillar III of the Basel II framework) and the Net Stable Funding Ratio and the Liquidity Coverage Ratio (main components of Basel III). It should be noted that the Basel III implementation timeline with respect to these ratios extends to 2020.

We cannot assess the compliance with, or the completion, or the implementation of, the above-mentioned requirements and the impact of any such requirements in the future on our financial condition or results of operations.

Our controlling shareholder, Intercorp Peru, is subject to capital requirements imposed by the SBS, and Intercorp Peru’s failure to comply with these requirements could have a material adverse effect on our financial condition and results of operations.

The SBS has established minimum capital requirements for financial services holding companies on a fully consolidated basis, which the SBS evaluates on an annual basis. As a result of its direct and indirect equity

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interest in Interbank and Interseguro, our controlling shareholder, Intercorp Peru, is subject to these minimum capital requirements. Intercorp Peru owns other businesses in addition to ours, and financial information relating to both our business and those other businesses is used to determine compliance with the minimum capital requirements.

According to Peruvian regulations, the subsidiaries directly and indirectly owned by Intercorp Peru qualify as a mixed conglomerate. Pursuant to Peruvian regulations, Intercorp Peru must maintain a higher regulatory capital requirement than the regulatory capital requirements for its groups.

If Intercorp Peru fails to comply with these requirements, the SBS may request Intercorp Peru to take certain corrective actions to ensure compliance. If Intercorp Peru fails to take such actions, the SBS could suspend or revoke Interbank’s and Interseguro’s licenses to operate in Peru, which would have a material adverse effect on our financial condition and results of operations.

Our subsidiaries face intense competition from other banking, insurance and financial institutions, and from other players including providers of emerging financial technologies and failure to compete successfully could have a material adverse effect on our financial condition and results of operations.

The banking market in Peru is highly competitive. Interbank has experienced strong competition from local and foreign banks, including new entrants attracted by Peru’s low banking penetration, as well as from department stores that offer credit cards, from emerging financial technology companies that offer digital banking and other services both on a regulated and unregulated basis, and from the local and international capital markets that lend to commercial customers. Competition may reduce the average interest rates that Interbank can charge its customers, increase the average rates Interbank must pay on its deposits, and may negatively affect its loan growth and place pressure on margins. Some of Interbank’s competitors may have access to greater resources and be more successful in the development of products and services that compete directly with Interbank’s products and services. If Interbank’s competitors are successful in developing products and services that are more effective or less expensive than the products and services offered by it, Interbank may be unable to compete successfully. Even if Interbank’s products and services prove to be more effective than those developed by other competitors, such other competitors may be more successful in marketing their products and services because of their greater financial resources or marketing strategies, among other factors. Interbank may not be able to grow or maintain its market share if it is not able to match its competitors’ pricing or keep pace with their development of new products, services and technological innovation/developments.

The Peruvian insurance market, particularly the annuity and life insurance sectors, is also highly competitive. Interseguro’s principal competitors are large insurance companies that may have greater resources and offer a wider range of products. These insurance companies may have better access to independent brokers who sell insurance to customers. In addition, Interseguro may also face competition from private pension funds (AFPs), which could in the future be allowed to offer annuities. Moreover, under the private pension system, upon retirement, retirees have the option of choosing to remain with their pension fund, choose an annuity or, since 2016, withdraw 95.5% of their capital accumulated in cash, which potentially reduces demand for Interseguro’s annuities. Any adverse impact on Interseguro resulting from increased competition, as well as a reform of the private pension system, could have a material adverse effect on our financial condition and results of operations.

Similarly, if Inteligo Bank’s competitors are successful in developing products and services that are more effective or less expensive than the products and services offered by Inteligo Bank, it may be unable to compete successfully. Even if Inteligo Bank’s products and services prove to be more effective than those developed by other competitors, such other competitors may be more successful in marketing their products and services because of their greater financial resources or marketing strategies, and other factors. Competitors may also dedicate greater resources to, and be more successful in, the development of products and services that may compete directly with Inteligo Bank’s products and services. Inteligo Bank competes in a global market for

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wealth management services, including wealth management divisions of global banks. Such competition would adversely affect the acceptance of Inteligo Bank’s products and/or lead to adverse changes in the investing habits of Inteligo Bank’s customer base. Inteligo Bank may not be able to grow or maintain its market share if it is not able to keep pace with its competitors’ development of new products and services. Any adverse impact on Inteligo Bank resulting from increased competition could have a material adverse effect on our financial condition and results of operations.

Our failure to effectively anticipate or adapt to emerging technologies or changes in customer behavior could have a material adverse effect on our financial conditions and results of operations.

Our failure to effectively anticipate or adapt to emerging technologies or changes in customer behavior, including among younger customers, could delay or prevent our access to new digital-based markets. Furthermore, the widespread adoption of new technologies, including payment systems, could require substantial expenditures to modify or adapt our existing products and services as we continue to grow our digital capabilities. Our customers may choose to conduct business or offer products on alternative or emerging platforms. Such new technologies could negatively impact our investments in bank premises, equipment and personnel for our branch network, or if we do not properly anticipate trends, render our existing investments in our digital platform moot. If we fail to adapt to changes in technologies or changes in customer behavior, it may have an adverse impact on Interbank resulting from increased competition, which could have a material adverse effect on our financial condition and results of operations.

The banking and insurance markets are exposed to macroeconomic shocks that may negatively impact household income and, consequently, could have a material adverse effect on our financial condition and results of operations.

Interbank’s strategy is to focus on the retail and commercial banking sectors and to grow and gain market share profitably. As a result, Interbank’s loan portfolio will become increasingly vulnerable to macroeconomic shocks that could negatively impact the household income of Interbank’s customers and result in increased loan losses. Furthermore, because the penetration of bank lending products in the Peruvian retail sector has been historically low, there is no basis on which to evaluate how the retail sector will perform in the event of an economic crisis, such as a recession or a significant devaluation of the sol, and Interbank’s historical loan loss experience may not be indicative of the performance of its loan portfolio in the future. In addition, our commercial clients could be negatively affected by global and local macroeconomic trends. For example in past years, our provisions for loan losses, in particular related to credit cards granted to certain vulnerable sectors of the Peruvian economy, have significantly increased during slowdowns of the Peruvian economy. Additionally, in part due to the de-dollarization policy sponsored by the Peruvian government there is a mismatch between our dollar denominated deposits and sol denominated loans. See “Management’s Discussion and Analysis of Results of Operations and Financial Condition—Depreciation and Appreciation of the Sol”.

In the event of a macroeconomic shock, the value of Interseguro’s investments may also suffer losses, including in its investment property. In addition, the amount of savings available to potential annuity holders may be negatively impacted by unemployment or a decline in wages. A macroeconomic shock may also negatively impact wealth generation in Peru and, in turn, impact the demand for our wealth management services.

Our loans, our deposits and our profits have all experienced substantial growth, benefitting from growth in the Peruvian economy. We may not be able to continue our historically strong growth.

We have experienced significant growth over the last ten years and our loans, our deposits and our profits have all experienced substantial growth. We may not be able to continue to grow strongly or at all in the future due to factors beyond our control, in particular considering the slowdown of the Peruvian economy, which could have a material adverse effect on our financial condition and results of operations.

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We could sustain losses if Interbank’s asset quality declines.

Our earnings are significantly affected by Interbank’s ability to properly originate, underwrite and service loans. We could sustain losses if Interbank incorrectly assesses the creditworthiness of its borrowers or fails to detect or respond to deterioration in asset quality in a timely manner. Problems with asset quality could cause our net interest and similar income to decrease and our provisions for loan losses to increase, which could adversely affect our financial condition and results of operations.

Reduced diversification in Interbank’s loan portfolio could have a material adverse effect on our financial condition and results of operations.

While loan portfolio risk associated with lending to certain economic sectors or clients in certain market segments can be mitigated through adequate diversification policies, Interbank’s pursuit of opportunities in which it can charge higher interest rates may reduce diversification of the loan portfolio and expose Interbank to greater credit risk. Reduced diversification could expose Interbank to greater risks in the event of a decline in asset quality. In addition, given the relatively small size of the Peruvian economy, Interbank’s lending diversification is by necessity lower than that of banks with operations in larger economies. Moreover, certain concentrations of borrowers’ commercial sectors may be unavoidable in Peru—principally the natural resources, fishing, agriculture and mining sectors—and deteriorations in such sectors could have a material adverse effect on Interbank’s deposits, loan performance and other businesses.

Furthermore, as of March 31, 2019 and December 31, 2018, retail banking loans accounted for approximately 54.0% and 53.2% of Interbank’s loan portfolio, respectively. Higher than average exposure to retail banking could be accompanied by greater credit risk due to higher risk profiles compared, particularly, to loans to large corporate customers. Given the significant recent growth of Interbank’s loan portfolio, historical loss experience may not be indicative of future doubtful loan experience.

The allowances of Interbank for impairment losses may not be adequate to cover the future losses to its loan portfolio or other assets, which could have a material adverse effect on our financial condition and results of operations.

Interbank records allowances for impairment losses on loans and other assets. The amount of allowances recorded is based on Interbank’s current assessment of and expectations concerning various factors affecting the quality of its loan portfolio. These factors include, among other things, Interbank’s borrowers’ financial condition, repayment abilities and repayment intentions, the realizable value of any collateral, the prospects for support from any guarantor, Peru’s economy, government macroeconomic policies, interest rates and the legal and regulatory environment. Many of these factors are beyond Interbank’s control. In addition, as these factors evolve, the models Interbank uses to determine the appropriate level of allowance for impairment losses on loans and other assets require recalibration, which can lead to increased allowances. For example, allowances for impairment losses on loans have significantly increased mainly as a result of the slowdown of the Peruvian economy. If Interbank’s assessment of and expectations concerning the above-mentioned factors differ from actual developments, or if the quality of its loan portfolio deteriorates or the future actual losses exceed its estimates, Interbank’s allowance for impairment losses may not be adequate to cover actual losses and it may need to make additional allowances for impairment losses, which could have a material adverse effect on our financial condition and results of operations.

Our financial results may be negatively affected by changes to IFRS accounting standards.

We report our results and financial position in accordance with IFRS as issued by the IASB. Changes to IFRS thereof may cause our future reported results and financial position to differ from current expectations, or historical results to differ from those previously reported due to the adoption of new accounting standards on a retrospective basis. We monitor potential accounting changes and, when possible, we determine their potential

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impact and disclose significant future changes in our financial statements that we expect as a result of those changes. Currently, there are a number of issued but not yet effective IFRS changes, as well as potential IFRS changes, some of which are expected to impact our reported results and financial position in the future. For further information, see Notes 4.2 and 4.5 to our audited annual consolidated financial statements and Note 2 (c) to our unaudited interim condensed consolidated financial statements.

In particular, IFRS 9 “Financial Instruments,” which went into effect on January 1, 2018, introduced the concept of expected credit loss, whereas the previous model (IAS 39) was based on incurred loss. Retrospective application is required, but comparative information is not compulsory except for hedging accounting requirements which are generally prospectively applied. The impact of the first adoption of IFRS 9 expected credit loss model for IFS and its subsidiaries amounted to an impact of S/43.9 million and S/57.3 million recorded in the captions unrealized results, net and retained earnings, respectively, as of January 1, 2018. For further information on IFRS 9, see Note 4.7 to our audited annual consolidated financial statements.

Also, IFRS 17 “Insurance Contracts”, which will go in to effect on January 1, 2021, provides a comprehensive accounting model for all types of insurance contracts that provides a more consistent framework for insurers, covering all relevant aspects as recognition, measurement, presentation and disclosures, whereas the requirements in IFRS 4 are largely based on grandfathering local accounting policies. For further information on IFRS 17, see Note 4.5 to our audited annual consolidated financial statements.

IFRS 16 “Leases” which became effective on January 1, 2019, established that at the commencement date of a lease, a lessee will recognize a liability to reflect lease payments and the asset that represents the right-of-use of the underlying leased asset during the lease term will be recorded. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. As permitted by the transitional provisions of IFRS 16, we elected to apply the modified retrospective approach and we have not restated comparative figures. Under this method, we recognized lease liabilities for an amount equivalent to the present value of future payments agreed as of January 1, 2019. The effect of the adoption of IFRS 16 as of January 1, 2019 amounted to S/341.7 million, increasing the caption “Property, furniture and equipment (Right-of-use assets)” and simultaneously, for the same amount, the caption “Accounts payable, provisions and other liabilities (Lease liabilities)”. The adoption of IFRS 16 had no impact on the consolidated statements of changes in equity as of January 1, 2019. For the three months ended March 31, 2019, we have recorded S/0.8 million as interest expense on the lease liabilities and S/19.4 million as depreciation expense on a right-of-use asset, which were recorded in captions “interest and similar expense” and “depreciation and amortization”, respectively, of the unaudited interim condensed consolidated statements of income. For further information on IFRS 16, see Note 2 (c) to our unaudited interim condensed consolidated financial statements.

For further information about developments in financial accounting and reporting standards, see Note 4.7 to our audited annual consolidated financial statements.

Our financial results may be negatively affected by investment losses.

The investment activities of our subsidiaries are subject to factors beyond their control, and losses from their exposures could result in a material adverse effect on our financial condition and results of operations.

As part of its treasury operations, Interbank trades various financial instruments and other assets, including debt, equity, fixed income, currency and related derivatives, as both agent and principal, and derives a proportion of its non-financial income from trading profits. Interbank has established position limits for sol and foreign currency-denominated securities in accordance with its overall risk management policy and with the SBS requirements. However, Interbank is exposed to numerous factors that are beyond its control, including overall market trading activity, interest rate levels, the credit risk of its counterparties and general market volatility. In addition, a significant part of Interbank’s trading is related to customer transactions, and Interbank could be

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exposed to a number of risks related to the movement of market prices in the underlying instruments, including the risk of unfavorable market price movements relative to its long or short positions, a decline in the market liquidity of the related instruments, volatility in market prices, interest rates or foreign currency exchange rates relating to these positions, and the risk that the instruments with which Interbank chooses to hedge certain positions do not track the fair value of those positions. If Interbank incurs any losses from these exposures, it could reduce Interbank’s trading profits or cause it to suffer losses from trading activities, either of which could have a material adverse effect on our financial condition and results of operations.

Inteligo Bank is exposed to similar investment and trading risks as Interbank.

Interseguro is exposed to the risk of a decrease in the value of its investments due to volatility in market conditions, real estate prices, equity values and interest rates, among other factors, many of which are beyond Interseguro’s control. In addition, as a holder of a large portfolio of debt investments and fixed income securities, Interseguro is exposed to the risk that the issuers of its fixed income securities may default.

Furthermore, in all of our segments, our investments may be subject to impairment, due to mark-to-market which could cause volatility in our financial condition and results of operations.

Interest rate changes could have a material adverse effect on our financial condition and results of operations.

Interbank’s and Inteligo’s financial condition and results of operations depend to a large extent on their financial margin, which in turn depends on their ability to charge interest on interest-earning assets, such as loans to customers, that is higher than the interest they pay on interest-bearing liabilities, such as deposits. Market interest rates are sensitive to many factors beyond their control, including the interest rate policies of the Central Reserve Bank of Peru and the U.S. Federal Reserve. It is unclear whether interest rates on U.S. dollars will continue to rise in the future. Increases in market interest rates in Peru could require Interbank to increase the interest rates it pays on deposits. If Interbank or Inteligo were unable to implement commensurate and timely increases in interest rates on loans they originate, their margins would decline. In addition, Interbank’s primary sources of funds are retail deposits with no specific or contractual maturity, and a substantial portion of the loans it originates have a longer term. The difference in maturities between deposits and loans could magnify the effect of any interest rate mismatch, as well as pose a liquidity risk if Interbank were not able to obtain funding as its liabilities mature.

Interseguro faces interest rate risk as a result of the potential variation in interest rates when it reinvests debt instruments to cover its obligations. Interseguro may reinvest when the term of its investments differs from that of its obligations. Interseguro tries to match the cash flows of its obligations with the maturities of its portfolio, but the shortage of instruments with the appropriate maturity profile may result in mismatches with its obligations and, as a result, expose it to interest rate risk.

Interseguro is exposed to the impact of changes in interest rates on other comprehensive income.

Before the second quarter of 2018, Interseguro estimated its technical reserves within the income statement under IFRS by using a discount rate that reflected the interest rate performance of the debt instruments in its portfolio, adjusted for credit risk, and the company’s asset-liability mismatch. As a consequence, Interseguro’s results of operations under IFRS were affected by the volatility in the interest rate.

However, starting in the second quarter of 2018, Interseguro estimates its technical reserves under IFRS on the basis of an updated discount risk-free rate obtained by a matching adjustment methodology. See Note 4.4(d) to our audited annual consolidated financial statements. The volatility of this interest rate is reflected in Interseguro’s balance sheet, under other comprehensive income which could have a material adverse effect on our balance sheet. See Note 11(a) to our audited annual consolidated financial statements.

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Interbank may not be able to obtain the funding required to support growth and implement its strategy.

Interbank’s strategy to grow its loan portfolio will require it to continue to have an active funding strategy. Interbank’s access to funding will depend on many factors, including factors beyond our control, such as any credit crunch or other conditions in global capital markets and investors’ perceptions of the risks of investing in Peru and emerging markets generally. The 2008 and 2009 global financial and economic crisis, the debt crisis in Europe and general market volatility, for example, had a negative impact on the liquidity of global financial markets. In the case of similar events, any equity or debt financing, if available at all, may be on terms that are not favorable to Interbank. If access to funding is limited, Interbank may not be able to implement its strategy, which could have a material adverse effect on our financial condition and results of operations.

A reduction in our subsidiaries’ credit ratings could increase their cost of borrowing funds and make their ability to raise new funds and renew maturing debt more difficult.

Our subsidiaries’ credit ratings are an important component of their respective liquidity profile. Among other factors, Interbank’s credit ratings are based on its financial strength, the credit quality and concentrations in its loan portfolio, the level and volatility of its earnings, its capital adequacy, the quality of management, the liquidity of its balance sheet, the availability of a significant base of core retail and commercial deposits and its ability to access a broad array of funding sources. In addition, our subsidiaries’ lenders may be sensitive to the risk of a ratings downgrade, which could increase the cost of refinancing their existing obligations, raising funds in the capital markets and borrowing funds from private lenders, and could in turn have a material adverse effect on our financial condition and results of operations.

The significant share ownership of our controlling shareholder may conflict with your interests and may have an adverse effect on the future market price of our shares.

Prior to this global offering, our controlling shareholder, Intercorp Peru, owned, directly and indirectly, approximately 74.3% of our outstanding common shares. Following this global offering, we expect that Intercorp Peru will own, directly and indirectly, approximately     % of our outstanding common shares assuming no exercise of the underwriters’ option to purchase additional shares. Actions by Intercorp Peru with respect to the disposition of our common shares that it beneficially owns or the perception that such actions will occur, may negatively affect the trading prices of our common shares.

In addition, Intercorp Peru will continue to be able to elect a majority of the members of our board of directors and thus determine our business strategies, as well as determine the outcome of actions that require shareholder approval, including the approval of mergers and other extraordinary transactions and the payment of dividends. The controlling shareholder of Intercorp Peru may have interests that differ from yours and may take actions that may be adverse to your interests. The concentration of ownership may also delay, prevent or deter a change in control of our company, could deprive our shareholders of an opportunity to receive a premium for their common shares as part of a sale of our company and might ultimately affect the market price of our common shares.

In addition, we and our subsidiaries engage in numerous related party transactions with companies controlled by Intercorp Peru as well as other affiliated companies. Although Peruvian, Panamanian and Bahamian law regulate the amount of credit exposure our subsidiaries are permitted to have with our related parties, conflicts of interest may arise in the future. See “Related Party Transactions.”

Actual mortality and morbidity rates and other factors may differ from those assumed in the calculation of technical reserves and may have a material adverse effect on Interseguro’s financial condition and results of operations.

Actual mortality and morbidity rates may differ from those assumed in the initial calculation of annuity reserves at the time of the issuance of the policy and their periodic adjustments. If Interseguro’s assumptions

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differ materially from actual mortality and morbidity rates, Interseguro could be required to make payments under its annuities for a longer period of time than originally estimated, and existing reserves could fall short of actual payments. Significant shortfalls could have a material adverse effect on our financial condition and results of operations.

Before the second quarter of 2018, Interseguro used the mortality tables approved by the Chilean Superintendency of Securities and Insurance (Superintendencia de Valores y Seguros) and the Chilean Superintendency of Pensions (Superintendencia de Pensiones) which incorporated more up-to-date mortality information than the ones prescribed by the SBS before the approval of Resolution No. 886-2018 by the SBS on March 2018.

Starting the second quarter of 2018, Interseguro adopted new mortality tables approved by the SBS, which showed recent changes in Peruvian life expectancy and longer estimated lives for the calculation of the annuities reserves. As a result, Interseguro had an adjustment of S/144.8 million in technical reserves during the second quarter of 2018. Future changes in mortality tables could have a material adverse effect on our financial condition and results of operations.

Interseguro’s failure to underwrite and price insurance premiums accurately for the products it offers would have a material adverse effect on its financial condition and results of operations.

Interseguro’s financial condition and results of operations depend on its ability to underwrite insurance policies and set premium rates accurately. Interseguro must generate sufficient premiums to offset claim losses and cover operating and underwriting expenses to make a profit. In order to price insurance policies accurately, Interseguro must collect and analyze a substantial volume of data, develop, test and apply appropriate rating formulae, closely monitor changes in trends in a timely fashion and project both severity and frequency of loss with reasonable accuracy. If Interseguro fails to assess accurately the risks that it assumes or does not reinsure an appropriate level of risk, it may fail to establish adequate premium rates, which could reduce income and have a material adverse effect on its financial condition and results of operations.

Interbank’s and Interseguro’s reliance on Peruvian sovereign and global bonds in their respective investment portfolios leaves us vulnerable to a default on such debt.

A substantial portion of our investment portfolio consists of Peruvian sovereign and global bonds and Central Reserve Bank of Peru certificates of deposit, which represented 38.8% and 39.2% of our investment portfolio (before accrued interest) as of March 31, 2019 and December 31, 2018, respectively. A default on Peruvian sovereign debt could have a material adverse effect on our financial condition and results of operations.

Interseguro may suffer losses in its investment portfolio because of risks associated with its real estate investments.

Interseguro’s investment portfolio includes real estate investments located solely in Peru. As of March 31, 2019, Interseguro’s investments in real estate projects totaled S/989.6 million, which represented 8.5% of Interseguro’s total investment portfolio. As of December 31, 2018, Interseguro’s investments in real estate projects totaled S/986.5 million, which represented 8.8% of Interseguro’s total investment portfolio. Real estate investments are relatively illiquid, and Interseguro’s ability to vary its portfolio of properties in response to changes in economic and other conditions is limited. If Interseguro wants or needs to sell a property, it may not be able to do so in the desired time period or on favorable terms, which could have a material adverse effect on our financial condition and results of operations.

Furthermore, Interseguro is exposed to risk in respect of its real estate investments that are under development, including delays in receiving zoning permits, construction delays, changes in regulation or lack of demand.

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Interseguro also faces credit risks with respect to its real estate investments. Interseguro generally invests in land in order to develop commercial real estate projects. For these projects, Interseguro enters into long-term leases with anchor stores (typically 25 to 30 years) and medium-term leases with smaller stores in shopping malls (typically two to five years). In the case of long- and medium-term leases, Interseguro’s tenants may experience a downturn in their businesses, which could weaken their financial condition and result in the tenants’ inability to make lease payments to Interseguro in a timely manner or at all.

Interseguro’s investment properties are carried at fair value, which could result in the value of such investment properties declining if market conditions deteriorate. As a result, we could suffer an adverse impact on our financial condition and results of operations.

Tax exemptions applicable to a substantial portion of Interseguro’s investment earnings could be changed in the future.

Interseguro pays no income tax, primarily because its investment earnings in respect of its life insurance technical reserves are entirely exempt from income tax. Future changes in tax laws or regulations limiting or eliminating the current tax exemption could have an adverse effect on our financial condition and results of operations.

We and our subsidiaries are dependent on key personnel.

Our development, operation and growth have depended significantly upon the efforts and experience of our and our subsidiaries’ board of directors, senior management and key personnel. Most of the members of our senior management have held management positions with other major financial institutions in the United States, Latin America and Europe. Although we currently expect that our and our subsidiaries’ board of directors and other senior managers will continue in their positions, the loss of their services, or our inability to attract and retain qualified personnel to replace them, could have a material adverse effect on our financial condition and results of operations.

Interruption, mismanagement or failure in our subsidiaries’ information technology systems may adversely affect their operations.

As financial and insurance institutions, our success depends on the efficient and uninterrupted operation of our subsidiaries’ computer and communications hardware systems and our applications, including systems and applications that support the operation of Interbank’s financial stores, ATMs, Interbank Agente (correspondent agents), mobile applications and website, as well as the infrastructure components that support our operations (communication devices, networking, etc.). Our subsidiaries’ computer and communications systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, sabotage, computer viruses, cyber-attacks, physical or electronic break-ins and similar events or disruptions. Any of these events could cause system interruptions, delays and losses of critical data and could prevent our subsidiaries from operating at optimal levels or at all.

Any failure, interruption or breach in security of our subsidiaries’ information systems could result in failures or interruptions in their risk management, general ledger, deposit servicing, loan organization and/or other important operations, as applicable. Although our subsidiaries have developed back-up systems and a disaster recovery center, and may continue some of their operations in case of emergency, if their information systems fail, even for a short period of time, then they may be unable to serve some or all of their customers’ needs on a timely basis. Likewise, a temporary shutdown of our subsidiaries’ information systems could result in additional costs for information retrieval and verification. In addition, failure to update and develop our subsidiaries’ existing information systems as effectively as their competitors may result in a loss of the competitive advantages that each subsidiary believes its information systems provide. Furthermore, our subsidiaries may not have adequate insurance coverage or insurance limits to be compensated for losses from a major interruption.

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If our subsidiaries experience a data security breach and confidential customer information is disclosed to or accessed by third parties, their customers could be adversely affected. The collection of data and processing of transactions require our subsidiaries to receive and store a large amount of personally identifiable data. This type of data is subject to legislation and regulation in various jurisdictions, including Peru. Data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting U.S. state and federal legislative proposals addressing data privacy and security. Our Peruvian subsidiaries are subject to requirements to protect the personally identifiable information that they process in connection with their services. Our Peruvian subsidiaries may become exposed to potential liabilities with respect to the data that they collect, manage and process, and may incur legal costs if their information security policies and procedures are not effective or if they are required to defend their methods of collection, processing and storage of personal data. Security breaches, lawsuits or adverse publicity relating to our subsidiaries’ methods of handling personal data could have a material adverse effect on their business, financial condition and results of operations due to the costs and negative market reaction relating to such developments.

In addition, our current strategy involves significant investments to expand and develop our IT, applications and systems in order to unify and simplify them, and increase the volume of transactions and operations performed online by our personnel and clients. We have also contracted with a third-party provider to ensure the stability and security of our systems and IT infrastructure and to also bear the risk of the failure of that third party. However, there can be no assurance that such strategy or its implementation will be successful, or whether it will result in failures, shutdowns or damage to our business and operations.

The occurrence of any failures or interruptions in our subsidiaries’ IT systems, or the failure of our subsidiaries to adequately address them if they do occur, as well as data security breaches incurred by our subsidiaries, could have a material adverse effect on our reputation, financial condition and results of operations, including as a result of facing significant fines, customer notice obligations or costly litigation, maintaining or upgrading their IT systems, or performing other IT services on a timely basis.

Cyber-security events could negatively affect our reputation or results of operations and may result in litigation.

Information security risks have generally increased in recent years as a result of the proliferation of new technologies and the increased sophistication and activities of cyber-attacks as well as increased connections of equipment and systems to the internet. Recently, data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting U.S. state and federal legislative proposals addressing data privacy and security. We depend on a variety of internet-based data processing applications, communication, and information exchange platforms and networks as part of our operations and our digital strategy. Although we are in the process of assessing and improving the effectiveness and security of our systems, we cannot assure you that all of our systems are free from vulnerability or in line with the security standards of companies operating in more developed markets. In the event of a cyber-attack, we could have our business operations disrupted, experience losses and incur response costs, and could be subject to litigation and damage to our reputation. A cyber-attack could have a material adverse effect on our business, financial condition and results of operations. For further information on our cybersecurity protections, see “Business – Information Technology Unit.”

Our subsidiaries are susceptible to fraud, unauthorized transactions and operational errors.

Our subsidiaries are susceptible to, among other things, fraud or bad faith by employees or outsiders, unauthorized transactions by employees and other operational errors (including clerical or record keeping errors and errors resulting from faulty computer or telecommunications systems). Given a high volume of transactions that may occur at a financial institution, errors could be repeated or compounded before they are discovered and remedied. In addition, a number of transactions are not fully automated, which may further increase the risk that human error or employee tampering will result in losses that may be difficult to detect quickly or at all.

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While our subsidiaries maintain a system of internal controls designed to monitor and control operational risk, losses from the failure of their system of internal controls to discover and rectify such risks could have a material adverse effect on our reputation, our financial condition and results of operations.

Our existing insurance coverage may be insufficient and future coverage may be difficult or expensive to obtain.

Although we believe that our insurance policies provide adequate coverage for the risks inherent in our businesses, these insurance policies typically exclude certain risks and are subject to certain thresholds and limits. We cannot assure you that our properties, equipment, inventories and other assets will not suffer damage due to unforeseen events or that the proceeds available from our insurance policies will be sufficient to protect us from all possible loss or damage resulting from such events. Our subsidiaries renew our insurance policies on an annual basis. The cost of coverage may increase to an extent that we may choose to reduce our policy limits or agree to certain exclusions from our coverage. Among other factors, adverse political developments, security concerns and natural disasters may materially adversely affect available insurance coverage and result in increased premiums for available coverage and additional exclusions from coverage. As a result, our insurance coverage may prove to be inadequate for events that may cause significant disruption to our operations, which could have a material adverse effect on our financial condition and results of operations.

Our employees could join labor unions and we could be subject to organized labor actions, including work stoppages that could have a material adverse effect on our business.

Even though the employees of our subsidiaries are not unionized and have not entered into any collective bargaining agreement, nothing prevents them from doing so in the future. Conflicts with our employees and organized labor actions such as work disruptions or stoppages or requirements to increase employee salaries and/or benefits as a result of future collective bargaining agreements, governmental regulations or policies or otherwise could cause us to suffer a material adverse effect on our financial condition and results of operations.

Our trademarks and trade names may be misappropriated or challenged by others.

We own the material trademark and trade name rights used in connection with our brands and businesses and the marketing and sale of their respective products and services. We believe our brand names and related intellectual property are important to our continued success. We attempt to protect our trademarks and trade names by exercising our rights under applicable trademark and copyright laws. Any infringement of our intellectual property rights would likely result in a commitment of our time and resources to protect these rights through litigation or otherwise, which could be expensive and time-consuming. If we were to fail to protect our intellectual property rights for any reason, it could have a material adverse effect on our financial condition and results of operations.

Any failure to comply with anti-corruption, anti-bribery, anti-money laundering, anti-terrorist financing and antitrust laws and regulations could damage our reputation or expose us to penalties.

We are subject to anti-corruption, anti-bribery, anti-money laundering, anti-terrorist financing, antitrust and other international laws and regulations and are required to comply with the applicable laws and regulations of Peru and certain other jurisdictions. In addition, we are subject to economic sanctions regulations that restrict our dealings with certain sanctioned countries, individuals and entities. The Peruvian regulatory regime related to anti-bribery and anti-corruption legislation is still developing and could be less stringent than anti-bribery and anti-corruption legislation which has been implemented in other jurisdictions. We believe our subsidiaries are in compliance with the applicable anti-money laundering and counter-terrorist financing laws and regulations and have adopted policies and procedures, including a “know-your-client” client identification program, and enhanced their due diligence procedures, internal controls, quality assurance and anticorruption program. Our

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compliance program is based upon the applicable Peruvian, Panamanian and Bahamian laws and best international practices. In addition, we perform due diligence on financial institutions to ensure that they have the same standard on anti-money laundering policies and procedures. Although these measures mitigate money laundering and terrorist financing risks, these risks are not fully eliminated. Therefore, when subsidiaries identify suspicious activities, such activities are reported to the authorities as well as risks included in an internal “black list” to block future transactions and protect us against reputational risk. However, these measures, procedures and compliance may not be completely effective in preventing third parties from using any of our subsidiaries (and our correspondent banks) as a conduit for money laundering (including illegal cash operations) or terrorist financing without our (and our correspondent banks’ and reinsurance institutions’) knowledge. If any of our subsidiaries were to be associated with money laundering (including illegal cash operations) or terrorist financing, their reputation could suffer and/or they could become subject to fines, sanctions or legal enforcement, including being added to any “blacklists” that would prohibit certain parties from engaging in transactions with us, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, we are the correspondent bank for certain global banks, and our failure to comply with anti-corruption, anti-bribery, anti-money laundering, anti-terrorist financing and antitrust laws and regulations could also affect our relationship with these global banks.

Our subsidiaries have not been subject to fines or other penalties, and we have not suffered business or other reputational impact, as a result of alleged money laundering activities in the past. However, there can be no assurance that our internal policies and procedures will be sufficient to prevent or detect all inappropriate practices, fraud or violations of law by our affiliates, employees, directors, officers, partners, agents and service providers or that any such persons will not take actions in violation of our policies and procedures. We may in the future discover instances in which we have failed to comply with applicable laws and regulations or internal controls. If any of our employees, contractors, agents, officers or other persons with whom we conduct business engage in fraudulent, corrupt or other improper or unethical business practices or otherwise violate applicable laws, regulations or our own internal compliance systems, we could become subject to one or more enforcement actions by Peruvian or foreign authorities (including the U.S. Department of Justice) or otherwise be found to be in violation of such laws, which may result in penalties, fines and sanctions and in turn adversely affect our reputation, business, financial condition and results of operations.

We are subject to litigation and other legal, administrative and regulatory proceedings.

We are regularly party to litigation and other legal proceedings relating to claims resulting from our operations in the normal course of business. Even though we do not have any material litigation, the interpretation and enforcement of certain provisions of our existing or any additional agreements may result in disputes among us and our customers or third-parties. Litigation is subject to inherent uncertainties, and unfavorable rulings may occur. We cannot assure you that the legal, administrative and regulatory proceedings in which we are involved will not materially and adversely affect our ability to conduct our business in the manner that we expect or otherwise adversely affect our results of operations and financial position should an unfavorable ruling occur.

Legal restrictions on our clients may reduce the demand for our services.

We may be materially affected not only by regulations applicable to us, but also by regulations and changes in enforcement practices applicable to our clients. Our business could be affected by, among other things, existing and proposed tax legislation, antitrust and competition policies, corporate governance initiatives, consumer protection laws, data use regulation and other governmental regulation and policies, and changes in the interpretation or enforcement of existing laws and rules, that affect our clients’ businesses and the financial markets. For example, a focus on tax compliance and changes in enforcement practices could lead to asset outflows from our private banking businesses, including at our subsidiary Inteligo.

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Risks Relating to Peru

Economic, social and political developments in Peru, including political instability, inflation and unemployment, could have a material adverse effect on our businesses.

Substantially all of the operations and customers of our subsidiaries are located in Peru. Accordingly, our financial condition and results of operations will be dependent on the level of economic activity in Peru. Our financial condition and results of operations could be affected by changes in economic and other policies of the Peruvian government (which has exercised and continues to exercise substantial influence over many aspects of the private sector) and by other economic and political developments in Peru, including devaluation, currency exchange controls, inflation, economic downturns, corruption scandals, social unrest and terrorism.

In the past, Peru has experienced political instability that has included a succession of regimes with differing economic policies and programs. At present, Peru is a stable democracy having completed a peaceful transition from the administration of President Ollanta Humala to President Pedro Pablo Kuczynski, who took office in July 2016 and to President Martin Vizcarra after President Kuczynski’s resignation. Previous governments have imposed controls on prices, exchange rates, local and foreign investment and international trade, restricted the ability of companies to dismiss employees, expropriated private sector assets and prohibited the remittance of profits to foreign investors. We cannot be certain whether the Peruvian government will continue to pursue business-friendly and open-market economic policies that stimulate economic growth and social stability.

During the 1980s and the early 1990s, Peru experienced severe terrorist activity targeted against, among others, the government and the private sector. Despite the suppression of terrorist activity, a resurgence of terrorism in Peru may occur, which could disrupt the economy of Peru and our business. In addition, Peru has, from time to time, experienced social and political turmoil, including riots, nationwide protests, strikes and street demonstrations.

During the past 18 years, Peru has experienced a period of relative economic and political stability as compared to the period between 1980 and 2000. Peru’s GDP growth rates, low inflation, and external surplus reflect, in part, the strength of Peru’s economic fundamentals. However, a deterioration of the global economy or a sharp decrease in commodity prices may adversely affect Peru’s economy. In addition, an economic contraction or weak economic growth in Peru’s trading partners may have an adverse effect on Peru’s economy. Despite Peru’s ongoing economic growth and stabilization, the social and political tensions and high levels of poverty and unemployment continue. There can be no assurance that Peru will not face political, economic or social problems in the future or that these problems will not adversely affect our business, financial condition and results of operations. Future government policies to preempt or respond to social unrest could include, among other things, expropriation, nationalization, suspension of the enforcement of creditors’ rights and new taxation policies.

Furthermore, some of the measures proposed by the current administration may generate political and social opposition, which may in turn prevent the government from adopting such measures as proposed. Political parties opposed to the current administration retained a majority of the seats in the Peruvian Congress in the recent elections, which has required the current administration to seek political support from such opposition parties for its economic proposals.

The resignation of former President Kuczynski and the political landscape in Peru could materially and adversely affect us.

On March 22, 2018, President Pedro Pablo Kuczynski presented his resignation, in response to allegations of corruption for vote-buying in connection with the impeachment proceedings against him. On March 23, Congress accepted his resignation and his first vice president, Martín Vizcarra, was sworn in as acting

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president. President Vizcarra may not remain in office for the remainder of the presidential term, which ends in July 2021. If President Vizcarra and the current second vice president both resign, the president of Congress would become acting president and Congress would call for new elections, which may include both new presidential and congressional elections. The political instability caused by these events could affect macroeconomic conditions in the country, including currency volatility, as well as have a material adverse effect on our business, prospects, financial condition, results of operations or cash flows.

When the term of President Martín Vizcarra began, political opposition held the majority of the seats in the Peruvian Congress and prevented the new administration from adopting measures it originally proposed. President Martín Vizcarra sought the support of the public and presented four proposals to reform the Constitution through a popular referendum. On December 9, 2018, three out of the four proposals were approved with more than 80% of the popular vote; the remaining proposal was rejected by 80% of the public after the President requested that the public reflect it as the proposal had been altered by the Peruvian Congress. Currently, President Martín Vizcarra has popular approval of the Peruvian public and minor opposition by other political parties. There can be no assurance that this support will continue. Moreover, should President Martín Vizcarra or any official of his administration become involved in corruption practices or scandals, this may affect popular support and alter the political landscape. The foregoing political uncertainty and presidential decisions could further increase interest rate and currency volatility, as well as adversely and materially affect the Peruvian economy and thus could have a material adverse effect on our financial condition and results of operations

Fluctuations in the value of the sol could have a material adverse effect on our financial condition and results of operations.

As the Peruvian banking system is highly dollarized, with 31.7% of outstanding loans and 39.6% of deposits denominated in U.S. dollars as of March 31, 2019, and 31.5% of outstanding loans and 39.5% of deposits denominated in U.S. dollars as of December 31, 2018, devaluation of the sol against the U.S. dollar could have a negative impact on the ability of Interbank’s clients to repay loans and make premium payments. Within our insurance segment, a similar adverse effect could occur on Interseguro’s local debt holdings denominated in foreign currency. Despite any devaluation, and absent any change in foreign exchange regulations, Interbank and Interseguro would be required to continue to repay dollar-denominated deposits in U.S. dollars. In addition, while we seek to manage the gap between Interbank’s and Interseguro’s foreign currency-denominated assets and liabilities, by matching, for example, the volumes and maturities of Interbank’s sol-denominated loans against Interbank’s sol-denominated deposits, we may not be successful in doing so. Therefore, any significant devaluation of the sol against the U.S. dollar could have a material adverse effect on our financial condition and results of operations. In addition, a devaluation of the sol against the U.S. dollar would decrease the dollar value of any dividends paid to us by our subsidiaries, and, as a result, our ability to pay dividends could be materially and adversely affected. An appreciation of the sol could also have an adverse impact on our results of operations as reported in soles, as Inteligo’s operations are denominated in U.S. dollars but our reporting currency is in soles.

Potential exchange controls implemented by the Peruvian government could adversely affect our ability to pay dividends and have a material adverse effect on our financial condition and results of operations.

Since 1991, the Peruvian economy has undergone a major transformation from a highly protected and regulated system to a free market economy. During this period, protectionist and interventionist laws and policies have been dismantled gradually to create a liberal economy dominated by the private sector. Exchange controls and restrictions on remittances of profits, dividends and royalties have ceased. Prior to 1991, Peru exercised control over the foreign exchange markets by imposing multiple exchange rates and placing restrictions on the possession and use of foreign currencies. The Peruvian economy has responded to this transformation by growing at a compound average annual rate of 10.8% during the period from 1994 to 2013, which growth rate has slowed down in recent years. Currently, foreign exchange rates are determined by market conditions, with regular open-market operations by the Central Reserve Bank of Peru in the foreign exchange market to reduce volatility in the value of Peru’s currency against the U.S. dollar.

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Any dividends paid to us by Interbank, Interseguro and Inteligo SAB will be paid in soles. Peruvian law does not impose any restrictions on the ability of companies having operations in Peru to transfer foreign currencies from Peru to other countries, except for restrictions applicable to companies that have been convicted or have admitted to and/or acknowledged committing crimes against the Peruvian public administration or money laundering or equivalent crimes, as set forth in Urgency Decree No. 003-2017 (Urgency Decree to Ensure Continuity of Public Utility Investment Projects and Safeguard Compensation to the State in Cases of Corruption), which restricts the transfer of both local and foreign currency abroad. Except for the restrictions set forth in such Urgency Decree, companies having operations in Peru may freely transfer foreign currency from Peru to other countries. If the Peruvian government were to implement restrictive exchange rate controls in the future, we might be obligated to seek an authorization from the Peruvian government to make dividend payments. We cannot assure you that such an authorization would be obtained. Any such exchange rate restrictions or the failure to obtain such an authorization could materially and adversely affect our ability to pay our shareholders.

Increased inflation in Peru could have an adverse effect on the Peruvian long-term credit market as well as the Peruvian economy generally and, therefore, on our financial condition and results of operations.

In the past, Peru has suffered through periods of high and hyper-inflation, which has materially undermined the Peruvian economy and the government’s ability to create conditions that support economic growth. In response to increased inflation, the Central Reserve Bank of Peru, which sets the Peruvian basic interest rate, may increase or decrease the basic interest rate in an attempt to control inflation or foster economic growth. Increases in the base interest rate could adversely affect our results of operations, increasing the cost of certain funding. Additionally, a return to a high inflation environment would also undermine Peru’s foreign competitiveness, with negative effects on the level of economic activity and employment, while increasing our operating costs and adversely impacting our operating margins.

The stability of the Peruvian financial system depends on public confidence in Peruvian banking and financial institutions.

Financial institutions, including Interbank and Interseguro, depend on public confidence in the Peruvian financial system. In the event of adverse developments affecting Peru’s economic, political or social conditions or if a bank faces liquidity problems, the general public may withdraw deposits and savings from the troubled bank or from banks generally, thereby precipitating a liquidity crisis, as occurred in Peru in the late 1990s.

If depositors withdraw significant holdings from banks generally, including Interbank, there will be a substantial adverse impact on the manner in which financial institutions, including Interbank and Interseguro, conduct their business, on their ability to operate as financial intermediaries and on their financial condition, which could have a material adverse effect on our financial condition and results of operations.

The Peruvian economy could be adversely affected by economic developments in regional or global markets.

Financial and securities markets in Peru are influenced by economic and market conditions in regional or global markets. Although economic conditions vary from country to country, investors’ perceptions of the events occurring in one country may adversely affect cash flows and securities from issuers in other countries, including Peru. For example, the Peruvian economy was adversely affected by the political and economic events that occurred in several emerging economies in the 1990s, including in Mexico in 1994, which impacted the fair value of securities issued by companies from markets throughout Latin America. The crisis in the Asian markets beginning in 1997 also negatively affected markets throughout Latin America. Similar adverse consequences resulted from the economic crisis in Russia in 1998, the Brazilian devaluation in 1999 and the Argentine crisis in 2001. In addition, Peru’s economy continues to be affected by events in the economies of its major regional partners and in developed economies that are trading partners or that affect the global economy.

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The 2008 and 2009 global financial and economic crisis, principally driven by the subprime mortgage market in the United States, substantially affected the international financial system, including Peru’s securities market and economy. Additionally, the debt crisis in Europe, which began with the financial crises in Greece, Spain, Italy and Portugal, reduced the confidence of foreign investors, which caused volatility in the securities markets and affected the ability of companies to obtain financing globally. Doubts about the pace of global growth, particularly in the United States, contributed to already weak international growth in 2011, 2012 and 2013. More recently Brexit has contributed to increased volatility and uncertainty in a number of financial markets. In addition, the crisis affecting emerging markets that began in the second quarter of 2018 as a result of the rise in interest rates by the U.S. Federal Reserve and the trade war between the United States and China, among other factors, could have an impact on the Peruvian economy. Any interruption to the recovery of the developed economies, the continued effects of the global crisis in 2008 and 2009, a worsening or resurgence of the debt crisis in Europe, impacts due to Brexit or a new economic and/or financial crisis, or a combination of the above, could affect the Peruvian economy, and, consequently, materially adversely affect our business. In particular, the Peruvian economy has recently suffered the effects of lower commodity prices in the international markets, a decrease in export volumes, a decrease in foreign direct investment inflows and, as a result, a decline in foreign reserves and an increase in its current account deficit. Our business is particularly sensitive to economic and market conditions which affect products of various export industries, including textile, fishing, and agriculture. In addition, we are active in the real estate sector, which can also be highly sensitive to macroeconomic developments. Although we have relatively little exposure to the mining sector, a decline in commodity prices could negatively affect the Peruvian economy as a whole. Any increase in the number of delinquencies or defaults would result in higher levels of non-performing assets and provisions for loan losses, which could have a material adverse effect on our financial condition and results of operations.

Additionally, adverse developments in regional or global markets or an increase in the perceived risks associated with investing in emerging markets in the future could adversely affect the Peruvian economy and, as a result, adversely affect our businesses.

A decline in the prices of certain commodities in the international markets could have a material adverse effect on our financial condition and results of operations.

In 2018, traditional exports, in particular mineral products, fishing products, agricultural products and petroleum and its derivatives, represented 72.6% of Peru’s total exports, according to the Central Reserve Bank of Peru figures. A decline in commodity prices in the international markets, especially traditional minerals which represented 58.9% of exports by value in 2018, may have an adverse impact on government finances, which could affect both investor confidence and the sustainability of government expenditure and social programs. Thus, a decline in commodity prices could, ultimately, affect the political environment in Peru, especially as regional and local governments are particularly reliant on tax revenue from mining concerns. By potentially affecting private sector demand and investor confidence, lower commodity prices could also affect the banking and insurance sector, leading to, for example, lower credit demand, deteriorating asset quality and currency devaluation. A decline in commodity prices could also materially affect the finances of some of our clients that rely on revenue from natural resources.

The market volatility generated by distortions in the international financial markets may affect the Peruvian capital markets and the Peruvian banking system.

The global financial and economic crisis of 2008 and 2009 adversely affected and increased the volatility of the performance of the Lima Stock Exchange. In recent years, the Lima Stock Exchange has experienced increased participation from local and international retail investors that react rapidly to the effects from international markets. The general index of the Lima Stock Exchange increased by 58.1% in 2016, increased by 28.3% in 2017 and decreased by 3.1% in the 2018. The volatility in the international markets may adversely affect the Peruvian capital markets and could therefore impact our ability to raise funds from local capital markets at a level necessary to fund our operations.

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The Peruvian banking system has not experienced any significant liquidity problems as a result of the recent international liquidity environment, primarily because the major source of funds for local banks, including Interbank, is represented by the deposit base. Future market volatility, however, may affect the Peruvian banking system, including Interbank, and such volatility could have a material adverse effect on our financial condition and results of operations.

The operations of Interbank, Interseguro, Interfondos and Inteligo SAB could be adversely affected by an earthquake or other natural disasters.

Peru is affected by El Niño, an oceanic and atmospheric phenomenon that causes a warming of temperatures in the Pacific Ocean, resulting in heavy rains off the coast of Peru and various other effects in other parts of the world. The effects of El Niño, which typically occurs every two to seven years, include flooding and the destruction of fish populations and agriculture, and it accordingly can have a negative impact on Peru’s economy. For example, in early 2017, El Niño adversely affected agricultural production, transportation services, tourism and commercial activity, caused widespread damage to infrastructure and displaced people and resulted in a 1.5% drop in GDP growth in 2017 relative to 2016 figures. The Peruvian government estimated that El Niño caused U.S.$2.8 billion in damages in affected regions in the first half of 2017. In particular, El Niño has affected and could in the future affect our loan activity and asset quality, as loan agreements typically allow borrowers to extend payments for a certain amount of time due to El Niño and it could ultimately affect their payment capacity when the extensions run out.

Peru is also located in an area that experiences seismic activity and occasionally is affected by earthquakes. For example, in 2007, an earthquake with a magnitude of 7.9 on the Richter scale struck the central coast of Peru, severely damaging the region south of Lima. Although Interbank’s, Interseguro’s and Inteligo’s headquarters and financial stores in Peru have not been materially affected by an earthquake, a major earthquake could damage the infrastructure necessary to their operations.

Although we have insured against damage caused by an earthquake and other natural disasters, accidents and other similar events (including coverage for losses due to resulting business interruption), the occurrence of an earthquake in particular and any other natural disasters in general could adversely affect our results of operations and financial condition and we may be subject to further requirements from the SBS in order to provide temporary measures for the victims of the natural disasters, such as re-scheduling their credit payments. Further, any natural disaster will increase the probability of Interseguro having to pay the corresponding indemnification to customers under insurance policies that Interseguro sold, which would negatively affect its operating margins.

Corruption and ongoing high profile corruption investigations may hinder the growth of the Peruvian economy and have a negative impact on our business and operations.

Peruvian authorities are currently conducting several high profile corruption investigations relating to the activities of certain Brazilian companies and their Peruvian partners in the construction and infrastructure sectors, which have resulted in suspension or delay of important infrastructure projects, which were otherwise operational and permitted. In 2018, Peru suffered the worst institutional crisis since 2000 due, among others, to the resignation of former President Pedro Pablo Kuczynski, several corruption scandals involving prominent members of the judicial system and the public ministry who are now facing prosecution, and the fragmentation of the most prominent political party in Congress. We expect that, due to the cooperation agreement signed between the Peruvian government and Odebrecht S.A. in 2019, additional investigations and/or corruption scandals may arise. We cannot predict how these or future corruption scandals or investigations may affect the Peruvian economy, hinder the growth of the Peruvian economy and indirectly have a material adverse effect on our business, financial condition and results of operations.

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Changes in tax laws may increase our tax liabilities and, as a result, have a material and adverse effect on us.

The Peruvian government regularly implements changes to its tax regulations and interpretations. Potential changes may include modifications in the taxable events, the taxable bases or the tax rates, or the enactment of temporary taxes that, in some cases, could become permanent taxes. These changes could, if enacted, indirectly affect us. The Peruvian government has recently introduced several changes related, among others, to thin capitalization rules and the general anti-avoidance rule, or GAAR, which may have an impact on our taxable base. We are currently unable to estimate the impact that such reforms may have on our business. The effects of any tax reform that could be proposed in the future and any other changes that could result from the enactment of additional reform or changes in interpretation have not been, and cannot be, quantified. Any changes to the Peruvian tax regime may increase our and our subsidiaries’ tax liabilities or overall compliance costs, which could have a material adverse impact on our business, financial condition and results of operations.

Risks Relating to the Common Shares and the Offering

There may be a lack of liquidity and market for our common shares.

Prior to this offering, there has not been a public market for our common shares in the United States. We will apply to list our common shares on the New York Stock Exchange. We cannot predict whether an active liquid public trading market for our common shares in the United States will develop or be sustained. Active, liquid trading markets generally result in lower price volatility and respond more efficiently to orders from investors to purchase or sell securities. Liquidity of a securities’ market is often a function of the volume of the underlying shares that are publicly-held by unrelated parties. Our common shares are listed on the Lima Stock Exchange, which is generally a less liquid trading market than the New York Stock Exchange.

In addition, investing in securities traded in emerging market countries, such as Peru, frequently involves a greater degree of risk when compared to investments in securities of issuers located in international securities markets with more stable economic conditions and are generally considered being more speculative in nature.

These factors may affect your ability to sell our common shares at your desired price and time, which could have a material adverse effect on the price of our common shares. In the event an active and liquid market for our common shares does not develop or is not maintained, the market price of our common shares that could be negatively impacted.

The price of our common shares may be volatile.

The trading price of our common shares following this offering may fluctuate substantially and may be higher or lower than the price you pay, depending on many factors, some of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose part or all of your investment in our common shares. The factors that could cause fluctuations include, but are not limited to, the following:

• overall price and volume fluctuations affecting the stock exchanges on which our common shares are listed;

• significant volatility in the market price and trading volume of banking or insurance company securities generally, which are not necessarily related to the operating performance of these companies;

• actual or anticipated changes in our earnings, fluctuations in our operating results or the failure to meet the expectations of financial market analysts and investors;

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• risks relating to the global economy and the economies of the United States, Peru and the other countries in which we operate;

• investors’ perceptions of the banking and insurance industries in general and our company in particular;

• potential differences between our actual financial condition and results of operations and those expected by investors;

• additions or departures of key management personnel;

• announcements by us or our competitors of significant acquisitions, divestitures, strategic partnerships, joint ventures or capital commitments;

• increase in interest rates in Peru and the United States;

• reputational issues;

• the operating and stock performance of comparable companies;

• general economic conditions and trends;

• catastrophic events;

• changes in accounting standards, policies, guidance, interpretation or principles;

• regulatory changes;

• loss of external funding sources; or

• sales of large blocks of our stock or sales by insiders.

We may raise additional capital in the future through the issuance of equity securities, which may result in dilution of the interests of our shareholders.

We may need to raise additional capital and may opt for obtaining such capital through the public or private placement of common shares or securities convertible into our common shares. Our articles of incorporation do not provide for preemptive rights for our shareholders in the event of a public or private equity raise, or financing through the issuance of securities convertible into our common shares, such additional funds may dilute the percentage interests of investors in our common shares.

Sales of additional common shares, including by us, the selling shareholders, our controlling shareholder, or our directors and officers, following expiration or early release of certain lock-up agreements, could cause the price of our common shares to decline.

Sales of additional common shares, including by us, the selling shareholders, our controlling shareholder, or our directors and officers, following expiration or early release of certain lock-up agreements, could cause the price of our common shares to decline. Sales of substantial amounts of our common shares in the public market, or the availability of such shares for sale, by us, the selling shareholders, our controlling shareholder, or our directors and officers, could adversely affect the price of our common shares. In connection with the offering of our common shares, we, the selling shareholders, our controlling shareholder, and our directors and officers, have entered into lock-up agreements for a period of 180 days following                 , 2019.

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These lock-up agreements are subject to certain exceptions and described under “Underwriting—No Sales of Similar Securities”. Upon the expiration of such lock-up agreements, we, the selling shareholders, our controlling shareholder and our directors and officers, will be free to sell additional common shares subject to complying with applicable securities laws.

You may have fewer and less well defined rights than shareholders of a company organized in other jurisdictions, such as the United States.

We are a sociedad anónima (corporation) organized under the laws of Panama. Our corporate affairs are governed by our organizational documents and the laws of Panama. Under such documents and laws, our shareholders, and therefore holders of our common shares, may have fewer or less well defined rights than they might have as shareholders of a corporation incorporated in other jurisdictions, such as in the United States.

You may have difficulty enforcing judgments against us, our officers and directors.

Substantially all of our directors, officers and certain of the experts named herein reside outside the United States, and all or substantial portions of our assets are located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon such persons or upon us, including with respect to matters arising under the federal securities laws of the United States, or to enforce against such persons or against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States.

We have been advised by our Peruvian counsel that any final and conclusive judgment for a fixed and final sum obtained against us in any foreign court having jurisdiction in respect of any suit, action or proceeding against us for the enforcement of any of the obligations assumed under this prospectus would, upon request, will be deemed valid and enforceable in Peru through an exequatur judiciary proceeding (which does not involve the reopening of the case), provided that (a) there is in effect a treaty between the country where said foreign court sits and Peru regarding the recognition and enforcement of foreign judgments or, (b) in the absence of such a treaty, the original judgment is ratified by the Peruvian courts under such exequatur proceeding, subject to the provisions of the Peruvian Civil Code and the Peruvian Civil Procedure Code, provided, further, that the following conditions and requirements are met: (i) the foreign judgment does not resolve matters under the exclusive jurisdiction of Peruvian courts, (ii) such foreign court had jurisdiction under its own private international conflicts of law rules and under general principles of international procedural jurisdiction, (iii) the defendant was served in accordance with the laws of the place where such proceeding took place, was granted a reasonable opportunity to appear before such foreign court and was guaranteed due process rights, (iv) the foreign judgment has the status of res judicata in the jurisdiction of the court rendering such judgment, (v) there is no pending litigation in Peru between the same parties for the same dispute, which shall have been initiated before the commencement of the proceeding that concluded with the foreign judgment, (vi) the foreign judgment is not incompatible with another judgment that fulfills the requirements of recognition and enforceability established by Peruvian law unless such foreign judgment was rendered first, (vii) the foreign judgment is not contrary to public order (orden público) or good morals (buenas costumbres), (viii) it is not proven that such foreign court denies enforcement of Peruvian judgments or engages in a review of the merits thereof, (ix) the judgment has been (a) duly apostilled by the competent jurisdiction of the issuing court, in case of jurisdictions that are parties to the Hague Apostille Convention, or (b) certified by Peruvian consular authorities, in case of jurisdictions that are not parties to the Hague Apostille Convention, and is accompanied by a certified and officially translated copy of such judgment into Spanish, and (x) the applicable court taxes and filing fees have been paid.

We have been advised by our Panamanian counsel that there is uncertainty as to the enforceability in original actions in Panamanian courts of liabilities predicated solely on the U.S. federal securities laws and as to the enforceability in Panamanian courts of judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of the federal securities laws of the United States. There is no existing treaty between the

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United States and Panama for the reciprocal enforcement of foreign judgments of courts outside Panama, including without limitation, judgments of U.S. courts. Panamanian courts, however, have enforced judgments rendered in the United States based on legal principles of reciprocity and comity. We have been advised by our Panamanian counsel that judgments rendered by foreign courts may only be recognized and enforced by the courts of Panama in the event that the Supreme Court of Panama validates such judgment by the issuance of a writ of exequatur. Subject to a writ of exequatur, any final judgment rendered by any U.S. court will be recognized, conclusive and enforceable in the courts of Panama without reconsideration of the merits, provided that: (i) such foreign court grants reciprocity to the enforcement of judgments of the courts of Panama; (ii) the party against which the judgment was rendered was personally served (service by mail not being sufficient) in such action within such foreign jurisdiction; (iii) the judgment arises out of a personal action against the defendant; (iv) the obligation in respect of which the judgment was rendered is lawful in Panama and does not contradict the public policy of Panama; (v) the judgment is properly authenticated by diplomatic or consular officers of Panama or pursuant to the 1961 Hague Convention on the Legalization of Documents; and (vi) a copy of the final judgment is translated into Spanish by a licensed translator in Panama. We have no reason to believe that any of our obligations relating to the shares would be contrary to Panamanian law.

In addition, our articles of incorporation contain a general indemnification provision for our officers and directors for any loss, change or payment arising out of any claim or right of action, both individually and on our behalf, against any of them. Directors and officers and their successors and their property will be compensated for and kept safe, during the time devoted to the Company in relation to any of the affairs thereof, from any action, costs, charges, losses, damages and expenses which any of them may incur or sustain by reason of any act or omission done in the performance of their duties, and none of them will be liable for the acts, neglect or omissions of others, even if his signature or action has been provided as internal or external requirement. The indemnity provision does not cover any damage or loss resulting from malice or inexcusable negligence on the part of any of our officers or directors.

Judgments of Peruvian courts with respect to our common shares will be payable only in soles.

If proceedings are brought in the courts of Peru seeking to enforce our obligations in respect of our common shares, we will not be required to discharge our obligations in a currency other than soles. Under Peruvian exchange control limitations, an obligation in Peru to pay amounts denominated in a currency other than soles may be satisfied in Peruvian currency only at the exchange rate, as determined by the Central Reserve Bank of Peru, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Peruvian investors with full compensation for any claim arising out of or related to our obligations under our common shares.

Peru has different corporate disclosure and accounting standards than those you may be familiar with in the United States.

Financial reporting and securities disclosure requirements in Peru differ in certain significant respects from those required in the United States. There are also material differences among IFRS, SBS GAAP and U.S. GAAP. Accordingly, the information about us available to you will not be the same as the information available to holders of shares issued by a U.S. company. Furthermore, we recently adopted IFRS 9 and, as a result, some of our financial data may not be easily comparable from period to period.

In addition, the Peruvian Securities Market Law, which governs open or publicly listed companies, such as us, imposes disclosure requirements that are more limited than those in the U.S. in certain important respects. Although Peruvian law imposes restrictions on insider trading and price manipulation, applicable Peruvian laws are different from those in the United States, and the Peruvian securities markets are not as highly regulated and supervised as the U.S. securities markets.

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We could be considered a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. tax consequences for U.S. investors.

Based on our current expectations regarding the value and nature of our assets, the sources and nature of our income, relevant market and shareholder data and our current business plans, we believe that we will not be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes with respect to our 2018 and current taxable year, and we do not anticipate becoming a PFIC in the future. Characterization as a PFIC could result in adverse U.S. tax consequences to you if you are a U.S. investor. Certain elections may be available to mitigate the consequences if we are treated as a PFIC for U.S. federal income tax purposes. See “Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Companies” included elsewhere in this prospectus.

One or more of our subsidiaries could be classified as a PFIC for U.S. federal income tax purposes.

As discussed in more detail in “Taxation—United States Federal Income Tax Considerations,” U.S. investors face unique U.S. tax issues from indirectly owning interests in a PFIC that may result in adverse U.S. tax consequences to them. See “Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Companies” included elsewhere in this prospectus.

If we are unable to implement and maintain effective internal control over financial reporting in the future, our results of operations and the price of our common shares could be adversely affected.

We are not currently required to comply with Section 404 of the U.S. Sarbanes-Oxley Act of 2002 and, therefore, we have not made a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Section 404 of the U.S. Sarbanes-Oxley Act of 2002 will require us to document and test the effectiveness of our internal control over financial reporting in accordance with an established internal control framework and to report on our conclusion as to the effectiveness of our internal controls. It will also require an independent registered public accounting firm to test our internal control over financial reporting and to report on and attest to the effectiveness of our internal control over financial reporting. Any delays or difficulty in satisfying our requirements could adversely affect our future results of operations and the price of our common shares. Moreover, it may cost us more than we expect to comply with these control-and procedure-related requirements. Failure to comply with Section 404 could potentially subject us to sanctions or investigations by the SEC, the New York Stock Exchange or other regulatory authorities.

Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an unqualified opinion regarding the effectiveness of our internal control over financial reporting as of December 31, 2020 and in subsequent years as required by Section 404, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common shares.

Our status as a foreign private issuer allows us to follow alternate standards to the corporate governance standards of the NYSE, which may limit the protections afforded to investors.

We are a “foreign private issuer” within the meaning of the New York Stock Exchange (“NYSE”) corporate governance standards. Under NYSE rules, a foreign private issuer may elect to comply with the practices of its home country and not comply with certain corporate governance requirements applicable to U.S. companies with securities listed on the exchange. We currently follow certain Panamanian and most Peruvian practices concerning corporate governance and intend to continue to do so. Accordingly, holders of our common shares will not have the same protections afforded to shareholders of companies that are subject to all of the NYSE corporate governance requirements.

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For example, the New York Stock Exchange listing standards provide that the board of directors of a U.S. listed company must have a majority of independent directors at the time the company ceases to be a “controlled company”. The listing standards for the NYSE also require that U.S. listed companies, at the time they cease to be “controlled companies,” have a nominating/corporate governance committee and a compensation committee (in addition to an audit committee). Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Under both Panamanian and Peruvian law, companies may, but are not required to, form special governance committees, which may be composed partially or entirely of non-independent directors. In addition, NYSE rules require the independent non-executive directors of U.S. listed companies to meet on a regular basis without management being present. There is no similar requirement under Peruvian and Panamanian law.

The NYSE’s listing standards also require U.S. listed companies to adopt and disclose corporate governance guidelines. In December 2013, the SMV published the new Code of Good Governance for Peruvian Companies. Although we have implemented most of these measures, those principles are not mandatory and therefore we are not legally required to comply with the corporate governance guidelines, but are required to disclose whether or not we are in compliance. We are fully compliant with Panamanian corporate law and are part of the Index of Good Corporate Governance (Índice de Buen Gobierno Corporativo) maintained by the Lima Stock Exchange.

If securities or industry analysts do not actively follow our business, or if they publish unfavorable research about our business, the price and trading volume of our common shares could decline.

The trading market for our common shares will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. If analysts do not cover our company, the trading price for our common shares may be negatively impacted. If one or more of the analysts who covers us downgrades our common shares or publishes unfavorable research about our business, the price of our common shares would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our common shares could decrease, which could cause the price and trading volume of our common shares to decline.

Future offerings of debt or preferred securities may limit our operating and financial flexibility and may materially adversely affect the market price of, and dilute the value of, the common shares.

If we decide to issue debt or preferred securities in the future or otherwise incur indebtedness, it is possible that these debt or preferred securities or indebtedness will be governed by an indenture or credit agreement or other instrument containing covenants restricting our operating flexibility and limiting our ability to make distributions to holders of the common shares. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges, including with respect to distributions, more favorable than those of the common shares and may result in dilution to holders of the common shares. Because our decision to issue securities in any future offering or otherwise incur indebtedness will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings or financings, any of which could materially reduce the market price of the common shares and dilute the value of the common shares.

Peruvian corporations, including our subsidiaries, may be jointly and severally liable for any unpaid Peruvian capital gains tax related to the transfer of the common shares.

Peruvian corporations, including our subsidiaries, may be jointly and severally liable for any unpaid Peruvian capital gains tax related to the transfer of shares issued by their foreign holding company. Capital gains resulting from the offering are tax exempted as described in “Taxation.”

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In accordance with Peruvian income tax laws and regulations, in the case of the direct or indirect transfer by a non-Peruvian resident of shares issued by a Peruvian corporation, the Peruvian corporation whose shares were directly or indirectly transacted will be jointly liable with the non-Peruvian transferor for any unpaid capital gain tax obligations (plus accrued interest and penalties) arising from such sale/purchase, if during any of the twelve months preceding the transaction, inter alia, (i) the non-Peruvian transferor held an indirect or direct interest of more than 10% in the equity of the Peruvian corporation that issued the shares being directly or indirectly transferred, or (ii) the non-Peruvian transferor and the Peruvian corporation that issued the shares being transferred consolidate financial statements. If such a transfer were to occur and the resulting Peruvian capital gains tax were not paid by the transferor, it could have a material adverse effect on our business, financial condition or results of operations.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. All statements other than statements of historical facts included in this prospectus regarding our business, financial condition, results of operations and certain of our plans, objectives, assumptions, projections, expectations or beliefs and statements regarding other future events or prospects are forward-looking statements. These statements include, without limitation, those concerning: our strategy and our ability to achieve it; expectations regarding sales, profitability and growth; our possible or assumed future results of operations; capital expenditures and investment plans; adequacy of capital; and financing plans. In addition, this prospectus includes forward-looking statements relating to our potential exposure to various types of market risks, such as macroeconomic risk, Peru specific risks, foreign exchange rate risk, interest rate risks and other risks related to our financial performance. The words “aim,” “may,” “will,” “expect,” “is expected to,” “anticipate,” “believe,” “future,” “continue,” “help,” “estimate,” “plan,” “schedule,” “intend,” “should,” “would be,” “seeks,” “estimates,” “shall,” or the negative or other variations thereof, as well as other similar expressions regarding matters that are not historical facts, are or may indicate forward–looking statements.

We have based these forward-looking statements on our management’s current views with respect to future events and financial performance. These views reflect the best judgment of our management but involve a number of risks and uncertainties which could cause actual results to differ materially from those predicted in our forward–looking statements and from past results, performance or achievements. Although we believe that the estimates reflected in the forward-looking statements are reasonable, such estimates may prove to be incorrect. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, among other things:

• our holding company structure;

• economic, business and political developments in Peru and globally;

• changes in Peruvian, Panamanian and Bahamian and other foreign laws and regulations, including the adoption of new capital requirements for banks or insurance companies;

• increased competition in the Peruvian financial services and insurance markets;

• increased inflation;

• exchange rate instability and government measures to control foreign exchange rates;

• developments affecting the purchasing power of middle income consumers or consumer spending generally;

• increases in interest rates;

• downturns in the capital markets and changes in capital markets in general that affect policies or attitudes towards lending to Peru or Peruvian companies or securities issued by Peruvian companies;

• our ability to keep up with technological changes;

• the inability to obtain the capital we need for further expansion of our businesses;

• the inability to attract and retain key personnel;

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• changes in tax laws;

• severe weather, natural disasters and adverse climate changes;

• changes in regional or global markets;

• dependence on sovereign debt in our investment portfolios;

• credit and other risks of lending, such as increases in defaults of borrowers;

• increased costs of funding or our inability to obtain additional debt or equity financing on attractive terms or at all;

• a deterioration in the quality of our assets;

• allowances for impairment losses may be inadequate;

• changes to accounting standards;

• changes in actuarial assumptions upon which our annuity business is based;

• failure to adequately price insurance premiums;

• decreases in the spread between investment yields and implied interest rates in annuities;

• dependence on information technology (“IT”) systems and cybersecurity risks; and

• other risks and uncertainties described in “Risk Factors”.

We urge you to read the sections of this prospectus entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” for a more complete discussion of the factors that could affect our future performance and the industries in which we operate. Additionally, new risks and uncertainties can emerge from time to time, and it is not possible for us to predict all future risks and uncertainties, nor can we assess their potential impact. Accordingly, you should not place undue reliance on forward-looking statements as a prediction of actual results.

All forward-looking statements included in this prospectus are based on information available to us on the date of this prospectus. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by applicable law. All other written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this prospectus.

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EXCHANGE RATES

The Peruvian sol is freely traded in the exchange market. Current Peruvian regulations on foreign investment allow foreign equity holders of Peruvian companies to receive and repatriate 100% of the cash dividends distributed by these companies. Non-Peruvian equity holders are allowed to purchase foreign currency at free market currency rates through any member of the Peruvian banking system and transfer such foreign currency outside Peru without restriction. Peruvian law in the past, however, has imposed restrictions on the conversion of Peruvian currency and the transfer of funds abroad, and we cannot assure you that Peruvian law will continue to permit such payments, transfers, conversions or remittances without restrictions. In addition, under Panamanian law, there are currently no exchange control restrictions imposed on payments made in U.S. dollars. There can be no assurance, however, that Peruvian and Panamanian laws will continue to permit such payments, transfers, conversions or remittances without restrictions.

The following tables set forth the high, low, average and period-end exchange rates for the periods indicated, expressed in sol per U.S. dollar. Exchange rates are derived from the selling rate exchange rates reported by the SBS for sol per U.S. dollar. The Federal Reserve Bank of New York does not report a noon buying rate for sol.

	sol per U.S.$
	High		Low		Average (1)		Period-End
Year ended December 31,
2014		2.988		2.761		2.839		2.986
2015		3.411		2.982		3.185		3.411
2016		3.537		3.249		3.375		3.356
2017		3.392		3.231		3.262		3.241
2018		3.384		3.207		3.286		3.373

(1) Represents the average of exchange rates on each day of each month during the periods indicated.

	sol per U.S.$
	High		Low		Average (1)		Period-End
Month Ended
January 2019		3.373		3.317		3.345		3.334
February 2019		3.340		3.303		3.321		3.303
March 2019		3.318		3.291		3.305		3.318
April 2019		3.331		3.291		3.304		3.309
May 2019		3.369		3.302		3.332		3.369

(1) Represents the average of the daily exchange rates during each day of the respective month indicated.

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USE OF PROCEEDS

We will not receive any of the net proceeds from the sale of our common shares by the selling shareholders. We expect that the net proceeds from the sale of our common shares by us and Interbank will be used by each of us and Interbank for general corporate purposes. In particular, Interbank expects to use the proceeds to strengthen its capital position and increase business activity, and IFS expects to use the proceeds to invest in strengthening its digital and analytical capabilities across its platform by developing a common data infrastructure and new digital products and services.

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CAPITALIZATION

The following table sets forth our total consolidated capitalization as of March 31, 2019, derived from our unaudited interim condensed consolidated financial statements prepared in accordance with IAS 34 as adjusted for the sale of our common shares by Interbank and us. We will not receive any proceeds from the sale of our common shares by the selling shareholders.

This table should be read in conjunction with, and is qualified in its entirety by reference to, “Presentation of Financial and Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Selected Statistical Information,” our unaudited interim condensed consolidated financial statements and our audited annual consolidated financial statements and the related notes included elsewhere in this prospectus.

	As of March 31, 2019 (unaudited)
	Actual						As Adjusted
	(U.S.$ in millions) (1)			(S/in millions)			(U.S.$ in millions) (1)	(S/in millions)
Indebtedness:
Long-term indebtedness (2)		2,593.0			8,603.4
Shareholders’ equity:
Capital stock		290.4			963.4
Treasury stock		(62.7	)		(208.2	)
Capital surplus		80.8			268.1
Reserves		1,416.5			4,700.0
Retained earnings		469.0			1,556.2
Unrealized results, net		122.7			407.2
Equity attributable to our shareholders		2,316.7			7,686.8
Non-controlling interest		12.0			40.0
Total equity		2,328.7			7,726.8
Total capitalization (3)		4,921.7			16,330.2

(1) Calculated based on an exchange rate of S/3.318 to U.S.$1.00 as of March 31, 2019.

(2) Calculated as “due to banks and correspondents”, “bonds, notes and other obligations” plus “lease liabilities” excluding the current portion of long-term debt, which totaled S/2,116.1 million (approximately U.S.$637.8 million) as of March 31, 2019.

(3) Total capitalization is defined as long-term indebtedness and total equity.

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SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth our summary consolidated financial information. The consolidated income statements data for the years ended December 31, 2018, 2017 and 2016 and the consolidated statements of financial position data as of December 31, 2018 and 2017, are derived from our audited annual consolidated financial statements and related notes included elsewhere in this prospectus. Our consolidated financial information for 2014 and 2015 is derived from our audited consolidated financial statements for those years restated for the change in accounting policy as described under “Presentation of Financial and Other Information—Comparability of 2018 audited consolidated financial statements to prior years and financial statements restatement. All years presented have been prepared in accordance with IFRS as issued by the IASB.

The consolidated income statements data for the three months ended March 31, 2019 and March 31, 2018 and the consolidated statements of financial position data as of March 31, 2019, are derived from our unaudited interim condensed consolidated financial statements and related notes included elsewhere in this prospectus. Interim data may not be representative of full year results.

As a result of the adoption of IFRS 9 beginning January 1, 2018, our audited consolidated financial statements for 2018 and related ratios are not comparable to prior years.

On January 1, 2019, we adopted for the first time IFRS 16 “Leases” which established that at the commencement date of a lease, a lessee will recognize a liability to reflect lease payments and the asset that represents the right-of-use of the underlying leased asset during the lease term will be recorded. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. As permitted by the transitional provisions of IFRS 16, we elected to apply the modified retrospective approach and we have not restated comparative figures. See Note 2(c) to our unaudited interim condensed consolidated financial statements.

Until December 31, 2017, our subsidiary Interseguro recognized in its income statements the effect of the change in the value of liabilities coming from retirement, disability and survivor’s pensions, caused by the variation in the market interest rates used to discount these liabilities. During 2018, Interseguro voluntarily modified its accounting policy in order to show the effect of the change in market interest rates in the statements of other comprehensive income, providing more accurate and relevant information. The resulting impact was retrospectively recorded restating unrealized results, net and retained earnings of our consolidated statements of financial position as of December 31, 2017, 2016, 2015 and 2014 and for the years then ended. For more information about the change in our insurance accounting policy, see Note 4.2.1(i) of our audited annual consolidated financial statements. In addition, minor reclassifications for comparative purposes were made for the periods presented. See Note 4.4(a.i) to our audited annual consolidated financial statements.

The results included below are not necessarily indicative of our future performance and should not be construed as such. The summary financial and operating information presented below should be read in conjunction with “Presentation of Financial and Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited annual consolidated financial statements and related notes included elsewhere in this prospectus.

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Consolidated Income Statements

	For the three months ended March 31, (unaudited)									For the years ended December 31,
	2019			2019			2018			2018			2018			2017 (Restated)			2016 (Restated)			2015(1) (Restated)			2014(1) (Restated)
	(U.S.$ in millions) (2)(3)			(S/ in millions) (2)						(U.S.$ in millions) (2)(3)			(S/ in millions) (2)
Interest and similar income		351.6			1,166.7			1,036.3			1,302.4			4,321.3			3,809.0			3,704.8			3,342.7			2,828.7
Interest and similar expenses		(101.2	)		(335.8	)		(266.9	)		(352.8	)		(1,170.6	)		(1,119.9	)		(1,081.9	)		(921.7	)		(788.9	)
Net interest and similar income		250.4			831.0			769.4			949.6			3,150.7			2,689.1			2,623.0			2,421.0			2,039.8
Impairment loss on loans, net of recoveries		(56.2	)		(186.4	)		(172.9	)		(198.9	)		(660.1	)		(827.9	)		(783.6	)		(645.8	)		(425.5	)
Recovery (loss) due to impairment of financial investments		0.6			1.9			2.3			3.9			13.1			(20.8	)		(28.3	)		(78.3	)		(20.2	)
Net interest and similar income after impairment loss		194.8			646.4			598.8			754.6			2,503.7			1,840.4			1,811.0			1,696.9			1,594.1
Other income
Fee income from financial services, net		67.2			223.0			216.6			263.5			874.4			849.2			809.5			770.6			668.8
Net gain on foreign exchange transactions		12.4			41.3			40.9			68.8			228.2			201.8			264.2			521.2			216.8
Net gain on sale of financial investments		9.0			29.9			25.3			4.3			14.2			184.8			103.3			134.9			128.1
Net gain (loss) on financial assets at fair value through profit or loss		11.2			37.1			13.2			3.6			12.0			18.4			(47.9	)		(111.8	)		22.3
Net gain on investment property		3.6			11.9			3.2			25.7			85.3			25.4			23.1			43.5			98.9
Other		5.6			18.7			14.4			20.8			69.0			87.4			64.1			75.3			55.7
Total other income		109.1			361.9			313.5			386.7			1,283.1			1,367.2			1,216.3			1,433.6			1,190.7
Insurance premiums and claims
Premiums assumed		52.9			175.5			167.0			229.7			762.1			533.6			730.6			905.0			680.5
Adjustment of technical reserves		(22.1	)		(73.3	)		(42.6	)		(95.5	)		(316.8	)		(240.2	)		(404.9	)		(628.7	)		(572.7	)
Premiums ceded to reinsurers		(1.3	)		(4.2	)		(28.1	)		(35.2	)		(116.7	)		(34.1	)		(138.3	)		(129.9	)		(4.9	)
Net claims and benefits incurred for life insurance contracts and others		(51.8	)		(172.0	)		(175.1	)		(221.8	)		(736.0	)		(412.3	)		(318.2	)		(258.9	)		(181.1	)
Total net premiums earned minus claims and benefits		(22.3	)		(74.1	)		(78.9	)		(122.8	)		(407.5	)		(152.9	)		(130.8	)		(112.6	)		(78.1	)
Other expenses
Salaries and employee benefits		(58.9	)		(195.4	)		(182.4	)		(227.8	)		(755.9	)		(714.6	)		(711.3	)		(692.5	)		(647.4	)
Administrative expenses		(53.3	)		(176.7	)		(180.4	)		(233.7	)		(775.3	)		(730.6	)		(688.9	)		(700.7	)		(627.7	)
Depreciation and amortization		(19.0	)		(62.9	)		(37.6	)		(49.6	)		(164.7	)		(145.2	)		(130.1	)		(111.1	)		(105.4	)
Other		(14.1	)		(46.7	)		(43.4	)		(42.8	)		(141.6	)		(120.3	)		(102.1	)		(115.4	)		(87.2	)
Total other expenses		(145.2	)		(481.7	)		(443.9	)		(553.8	)		(1,837.5	)		(1,710.6	)		(1,632.4	)		(1,619.6	)		(1,467.7	)
Income before translation result and income tax		136.4			452.5			389.5			464.7			1,541.9			1,344.1			1,264.0			1,398.4			1,239.0
Translation result		3.0			10.1			6.0			(10.5	)		(35.0	)		15.9			20.1			(25.1	)		(25.0	)
Income tax		(33.1	)		(109.9	)		(105.5	)		(125.2	)		(415.5	)		(326.5	)		(333.9	)		(352.6	)		(309.1	)
Net profit for the period		106.3			352.7			290.0			328.9			1,091.4			1,033.5			950.2			1,020.7			904.9
Attributable to:
IFS’ shareholders		105.7			350.6			288.2			326.8			1,084.3			1,027.4			944.6			1,013.7			891.5
Non-controlling interest		0.7			2.2			1.8			2.1			7.1			6.1			5.6			7.0			13.4
Earnings per share		0.955			3.167			2.628			2.911			9.818			9.625			8.715			9.295			8.149
Weighted Average number of shares outstanding		—			110.7			109.7			—			110.4			106.7			108.4			109.1			109.4

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Consolidated Statements of Financial Position

	As of March 31, (unaudited)									As of December 31,
	2019			2019			2018			2018			2018			2017 (Restated)			2016 (Restated)			2015 (Restated)			2014 (Restated)
	(U.S.$ in millions) (2)(3)			(S/ in millions) (2)						(U.S.$ in millions) (2)(3)			(S/ in millions) (2)
Assets
Cash and due from banks		2,911.6			9,660.6			9,616.6			2,525.7			8,380.4			11,204.8			11,761.8			12,431.8			6,358.5
Inter-bank funds		21.1			70.0			179.1			149.2			495.0			403.5			5.0			245.0			310.0
Financial investments		5,380.6			17,852.8			18,050.0			5,313.2			17,629.4			16,924.1			10,209.8			8,651.9			8,409.0
Loans, net of unearned interest		10,554.2			35,019.0			30,021.7			10,345.3			34,325.7			29,406.3			28,192.6			27,035.8			23,436.9
Impairment allowance for loans		(420.8	)		(1,396.2	)		(1,258.1	)		(411.3	)		(1,364.8	)		(1,202.1	)		(1,166.8	)		(1,041.6	)		(819.7	)
Investment property		298.3			989.6			943.5			297.3			986.5			1,118.6			745.2			713.3			652.9
Property, furniture and equipment, net (4)		285.9			948.5			597.5			187.6			622.5			612.6			589.8			579.2			577.2
Intangibles and goodwill, net		285.4			946.8			903.0			287.7			954.5			921.6			267.4			199.4			145.8
Other assets (5)		501.8			1,665.2			1,581.7			516.9			1,715.0			1,005.0			1,114.4			1,186.1			1,294.6
Total assets		19,818.0			65,756.2			60,635.0			19,211.7			63,744.4			60,394.5			51,719.4			50,000.9			40,365.2
Liabilities and equity
Deposits and obligations		10,485.2			34,790.0			31,220.4			10,151.3			33,682.0			32,607.6			30,097.9			28,487.7			23,381.4
Inter-bank funds		32.1			106.5			129.5			—			—			30.0			332.3			—			—
Due to banks and correspondents		1,123.0			3,726.1			4,141.4			1,294.0			4,293.4			4,407.4			5,328.6			6,191.7			3,140.9
Bonds, notes and other obligations		2,008.2			6,663.2			6,240.2			1,958.0			6,496.8			5,602.4			4,769.4			4,925.4			4,565.3
Insurance contract liabilities		3,136.6			10,407.2			10,536.9			3,104.4			10,300.5			10,514.5			5,010.5			4,477.1			3,743.0
Other liabilities (4)(6)		704.1			2,336.4			1,954.2			567.6			1,883.4			1,395.7			1,182.4			1,458.0			1,232.3
Total liabilities		17,489.3			58,029.4			54,222.6			17,075.3			56,655.9			54,557.6			46,721.0			45,539.9			36,062.9
Equity, net
Equity attributable to IFS’ shareholders		2,316.7			7,686.8			6,377.7			2,124.2			7,048.1			5,800.5			4,879.1			4,345.6			4,191.0
Non-controlling interest		12.0			40.0			34.7			12.2			40.4			36.4			119.2			115.4			111.2
Total equity, net		2,328.7			7,726.8			6,412.4			2,136.4			7,088.5			5,836.9			4,998.3			4,460.9			4,302.3
Total liabilities and equity net		19,818.0			65,756.2			60,635.0			19,211.7			63,744.4			60,394.5			51,719.4			50,000.9			40,365.2

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Selected Ratios and Operational Data

	As of and for the three months ended March 31, (unaudited)						As of and for the year ended December 31,
	2019			2018			2018			2017			2016
Performance Ratios
Net interest margin (7)(8)		5.4	%		5.3	%		5.4	%		5.3	%		5.4	%
Efficiency ratio (9)		33.7	%		34.0	%		35.6	%		36.8	%		38.0	%
ROA (8)(10)		2.2	%		1.9	%		1.8	%		2.0	%		1.9	%
Adjusted ROA (11)		—			—			2.0	%		—			—
ROE (8)		19.0	%		19.1	%		16.6	%		19.3	%		19.9	%
Adjusted ROE (12)		—			—			18.6	%		—			—
Risk adjusted NIM (8)(13)		4.2	%		4.1	%		4.3	%		3.7	%		3.8	%
Cost of risk (8)(14)		2.2	%		2.3	%		2.1	%		2.9	%		2.9	%
Capital and Balance Sheet Structure
Average total equity as a percentage of average total assets		11.4	%		10.1	%		10.7	%		10.1	%		9.5	%
Total loans, net as a percentage of total deposits		96.6	%		92.1	%		97.9	%		86.5	%		89.8	%
Core equity tier 1 ratio (15)		10.2	%		10.2	%		10.6	%		10.1	%		9.4	%
Capitalization ratio of Interbank (16)		16.4	%		17.5	%		15.8	%		16.1	%		15.9	%
Solvency ratio of Interseguro (17)		130.4	%		143.4	%		137.9	%		134.9	%		145.5	%
Capitalization ratio of Inteligo Bank (18)		26.9	%		28.3	%		25.5	%		32.6	%		24.5	%
Credit Quality
Past-due loans as a percentage of total gross loans (at end of period)		2.5	%		2.6	%		2.5	%		2.7	%		2.5	%
Provision expense as a percentage of total gross loans		2.2	%		2.3	%		2.1	%		2.9	%		2.9	%
Other Data
Assets under management of Inteligo		17,769.0			16,210.7			17,592.7			16,229.9			15,398.3
Inteligo deposits		2,533.1			2,152.5			2,608.7			2,253.3			3,226.1
Dividends declared/paid (19)		—			—			654.5			510.7			475.8
Declared/paid dividends per share (20)		—			—			5.8			4.5			4.2
Exchange rate (S/ per U.S.$1.00 at end of period)		3.318			3.227			3.373			3.241			3.356
Financial stores		264			272			270			273			289
ATMs		1,953			1,994			1,973			2,052			2,159
Correspondent agents (21)		2,513			2,514			2,506			2,505			2,935
Number of digital clients (22)		975,269			667,506			882,437			620,448			454,194
Percentage of digital users (22)(23)		56	%		43	%		53	%		40	%		30	%

(1) Our financial information for 2017, 2016, 2015 and 2014 was restated as a result of a voluntary change in accounting policy regarding our method of accounting the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited annual consolidated financial statements. The financial information presented for 2014 and 2015 were restated after issuance of the financial statements for those years due to a voluntary change in accounting policy with a negative impact of S/57.6 million for 2014 and S/218.1 million for 2015 in the line Total net premiums earned minus claims and benefits in the consolidated income statement. See “Management Discussion and Analysis of Results of Operations and Financial Condition—Change in Accounting Policy.

(2) Except for percentages and ratios, and operational data.

(3) Amounts stated in U.S. dollars as of and for the three months ended March 31, 2019 and as of and for the year ended December 31, 2018 have been translated from soles at the exchange rate of S/3.318 = U.S.$1.00. See “Exchange Rates”.

(4) Due to the adoption of IFRS 16 we have recorded a S/341.7 million, increase in the caption “Property, furniture and equipment (Right-of-use assets)” and recorded simultaneously, an increase for the same amount, in the caption “Accounts payable, provisions and other liabilities (Lease liabilities)”. See Note 2 (c) to our unaudited interim condensed consolidated financial statements.

(5) “Other assets” is defined as due from customers on acceptances, accounts receivable and other assets, net and deferred income tax assets, net.

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(6) “Other liabilities” is defined as due from customers on acceptances, accounts payable, provisions and other liabilities and deferred income tax liabilities, net.

(7) “Net interest margin” is defined as (x) net interest and similar income divided by (y) average interest-earning assets. See “Selected Statistical Information”.

(8) Annualized for each interim period.

(9) “Efficiency ratio” is calculated by dividing (x) salaries and employee benefits plus administrative expenses plus depreciation and amortization by (y) net interest and similar income plus other income, plus net premiums earned.

(10) ROA is calculated as net profit as a percentage of average assets, computed as the simple average of the quarterly balances from December of the previous year to the date as of calculation.

(11) Adjusted ROA for 2018, is calculated as adjusted net profit as a percentage of average assets, computed as the simple average of the quarterly balances from December of the previous year to the date as of calculation. Adjusted net profit excludes S/144.8 million, which is the aggregate effect recorded in technical reserves due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted for 2017 and 2016. See Note 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted net profit and Adjusted ROA are non-GAAP financial measures and should not be considered in isolation or as a substitute for net profit or ROA, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP Financial Measures”.

(12) Adjusted ROE for 2018 is calculated as adjusted net profit as a percentage of average shareholders’ equity, computed as the simple average of the quarterly balances from December of the previous year to the date as of calculation. Adjusted net profit excludes S/144.8 million, which is the aggregate effect recorded in technical reserves due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted for 2017 and 2016. See Note 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted ROE is a non-GAAP financial measures and should not be considered in isolation or as a substitute for Net Profit or ROE, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP financial measures.”

(13) Risk adjusted net interest margin is defined as net interest margin after impairment loss on loans, net of recoveries.

(14) Cost of risk is defined as impairment loss on loans, net of recoveries divided by average gross loans. Cost of risk includes an S/81.0 million recovery of provisions related to the construction sector at Interbank for 2018.

(15) Calculated for Interbank only under SBS GAAP.

(16) Regulatory capital for Interbank is calculated in accordance with the guidelines of the Basel II Accord, as adopted by the SBS and is based on information from Interbank’s financial statements prepared under SBS GAAP. See “Regulation and Supervision—Banking Regulation and Supervision—Capital Adequacy Requirements Basel II”.

(17) Solvency ratio for Interseguro is calculated in accordance with SBS guidelines and is based on information from Interseguro’s financial statements prepared under SBS GAAP. See “Regulation and Supervision—Insurance Regulation and Supervision—Solvency Requirements and Regulatory Capital”.

(18) Capitalization Ratio for Inteligo Bank is calculated in accordance with the guidelines promulgated by the Central Bank of The Bahamas.

(19) Dividends declared for fiscal years 2018, 2017 and 2016 were paid in 2019, 2018 and 2017 and amounted to U.S.$197.2 million, U.S.$157.7 million and U.S.$ 146.5 million, respectively. See “Dividends and Dividend Policy”.

(20) Corresponds to dividends declared divided by outstanding shares for each period reported. Dividends per share amounted to U.S.$1.75, U.S.$1.40 and U.S.$ 1.30 for years 2018, 2017 and 2016. See “Dividends and Dividend Policy”.

(21) ASBANC estimates, for 2014-2017 and company estimates for 2018.

(22) In the month of December for each full year and in the month of March for each interim period.

(23) Percentage of digital users over total clients that interact with Interbank.

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Non-GAAP Financial Measures

In this prospectus, we use adjusted net profit, adjusted ROE and adjusted ROA. These measures are not calculated in accordance with IFRS and we collectively refer to these as non-GAAP financial measures. For more information see “Presentation of Financial and other information – Non-GAAP Financial Measures”.

The following table reflects the reconciliation of adjusted net profit, adjusted ROE and adjusted ROA for our banking segment as of and for the three month period ended March 31, 2019:

	As of March 31, 2019
	Net profit			Adjustment (2)			Adjusted Net Profit			Average total assets			ROA			Adjusted ROA			Average total equity		ROE			Adjusted average total equity		Adjusted ROE
Banking		299.7			(32.4	)		267.3			48,335.7			2.5	%		2.2	%		5,417.1		22.1	%		5,384.7		19.8	%
Insurance		28.9			—			28.9			12,770.0			0.9	%		0.9	%		902.8		12.8	%		902.8		12.8	%
Wealth Management		78.3			—			78.3			3,781.6			8.3	%		8.3	%		821.6		38.1	%		821.6		38.1	%
Holding and eliminations		(54.2	)		32.4			(21.8	)		(137.0	)		—			—			266.1		—			298.5		—
Total		352.7			—			352.7			64,750.3			2.2	%		2.2	%		7,407.6		19.0	%		7,407.6		19.0	%

(1) Adjusted net profit of the banking segment, for the three months ended March 31, 2019, is calculated excluding the gain on the sale of Interfondos S/32.4 million after taxes which is eliminated upon consolidation. Adjusted net profit is a non-GAAP financial measure and should not be considered in isolation or as a substitute for net profit, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures.”

The following tables reflect the reconciliation of adjusted net profit, adjusted ROE and adjusted ROA on a consolidated basis and also for our insurance segment as of and for the year ended December 31, 2018.

	For the year ended
	2018
	(S/ in millions)
Net profit (A)		1,091.4
Adjustment of new mortality tables in Total net premiums earned minus claims and benefits (B)		144.8
Adjusted net profit (C) = (A) + (B)		1,236.2
Average total equity (D)		6,558.8
ROE (A) / (D)		16.6	%
Adjusted average total equity (E)		6,645.6
Adjusted ROE (C) / (E)		18.6	%
Average total assets (F)		61,072.6
ROA (A) / (F)		1.8	%
Adjusted ROA (C) / (F)		2.0	%

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	As of December 31, 2018
	Net profit			Adjustment (1)		Adjusted Net Profit			Average total assets			ROA			Adjusted ROA			Average total equity			ROE			Adjusted average total equity			Adjusted ROE
Banking		1,010.9			—		1,010.9			45,515.7			2.2	%		2.2	%		4,994.3			20.2	%		4,994.3			20.2	%
Insurance		(61.5	)		144.8		83.3			12,388.1			(0.5	)%		0.7	%		803.7			(7.6	)%		890.5			9.4	%
Wealth Management		197.5			—		197.5			3,314.3			6.0	%		6.0	%		768.0			25.7	%		768.0			25.7	%
Holding and eliminations		(55.6	)		—		(55.6	)		(145.5	)								(7.3	)					(7.3	)
Total		1,091.4			144.8		1,236.2			61,072.6			1.8	%		2.0	%		6,558.8			16.6	%		6,645.6			18.6	%

(1) Change in accounting estimates recorded in Total net premiums-earned minus claims and benefits driven by the publication by the SBS of new mortality’ tables. See Note 4.4 (d) to our audited annual consolidated financial statements and “Presentation of financial and other information – Non-GAAP financial measures”.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF

OPERATIONS AND FINANCIAL CONDITION

The following discussion should be read in conjunction with our audited annual consolidated financial statements, together with the notes thereto, included elsewhere in this prospectus. Unless otherwise indicated, all financial information provided in this section has been prepared in accordance with IFRS.

Overview

IFS is a leading provider of banking, insurance and wealth management services for retail customers and commercial clients in Peru. Our purpose is to empower all Peruvians to achieve financial well-being, and as such, we have built an integrated financial services platform in the fast-growing, underpenetrated and profitable Peruvian financial system. We have invested in building a leading and scalable digital platform (mobile and online), which is rapidly being adopted by existing and new customers. Our digital platform is complemented by one of the largest distribution networks in the country which includes financial stores, ATMs, correspondent agents, dedicated sales forces, financial advisors, and call centers. Together our digital platform and distribution network provide our more than three million customers and a potential market of more than 30 million Peruvians and 9 million businesses with access to our products and services and a distinctive and convenient customer experience.

We manage our business in three segments, banking, insurance and wealth management, that complement each other and represent diversified sources of revenue. Our banking segment operates through our subsidiary Interbank, which is the second largest provider of consumer loans in Peru, according to the SBS. Interbank provides a full range of retail banking and commercial banking products, and services to individuals, large companies, and small and medium enterprises. Our insurance segment operates through our subsidiary Interseguro, which is the leading provider of annuities in Peru by premiums and one of the leading life insurance companies in the country according to the SBS. Interseguro provides a wide range of retirement, savings, life, unemployment and other insurance products mainly to retail customers. Our wealth management segment operates through our subsidiaries Inteligo Bank, Inteligo SAB and Interfondos, which together provide wealth management, private banking, financing, brokerage, advisory and other investment services mainly to high net worth individuals.

Our key strategic priority is to achieve digital excellence for our customers by providing them with a world-class, flexible and secure digital platform. We believe our digital transformation is vital to our continued growth and profitability, and for this reason we have been investing in developing the capabilities necessary to offer digital products and services to our customers. In March 2019, more than 975,000 retail customers used our digital platform compared to more than 450,000 in December 2016 and more than 380,000 retail customers no longer utilize physical channels other than ATMs in March 2019. We are aiming to allow our customers to have a 100% digital relationship with us in an efficient and secure manner. We have also streamlined our physical presence and reduced the number of branches by approximately 9% since 2016, focusing on educating our customers in the use of our digital platform. To accompany this transformation we are in the process of redesigning our physical presence in order to better serve the evolving needs of our customers. We have substantially increased migration of low-value-added transactions to more efficient digital channels, and we have increased sales of products to existing customers, as well as increased new customer acquisition of which a growing number are being acquired digitally or “born-digital.” This process of digital customer acquisition and sales has been accelerating, for example, in March 2019, 17% of new retail clients were acquired digitally compared to 3% in March 2018, and more than 37% of sales of new products to retail customers were performed digitally compared to 28% in March 2018.

We aim to be the company that best knows the needs of Peruvians. Our advanced analytics and CRM capabilities are being enriched with new sources of data and new tools that technology offers, such as cloud, real-time decision, machine learning and artificial intelligence. We believe that a deep knowledge of our current and

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potential customers allows us to offer them the best solutions for their financial needs across our banking, insurance and wealth management segments. Through this deep knowledge we have also been able to enhance our risk models, helping us to propel growth and continue to improve our profitability.

As of March 31, 2019, we had total assets of S/65.8 billion (approximately U.S.$19.8 billion), total gross loans of S/34.7 billion (approximately U.S.$10.5 billion), total deposits of S/34.8 billion (approximately U.S.$10.5 billion) and shareholders’ equity of S/7.7 billion (approximately U.S.$2.3 billion).

We operate the following three business segments:

• Banking: Interbank is the second largest provider of consumer loans in Peru with a 22.6% market share in terms of total gross consumer loans outstanding as of March 31, 2019, according to the SBS. Interbank is the largest provider of credit card loans with a 26.3% market share and the largest provider (among non-government owned banks) of payroll deduction loans to public sector employees with a 23.5% market share as of March 31, 2019, according to the SBS. Additionally, it is the fourth largest bank in Peru in terms of retail mortgages and commercial lending, as well as total deposits and total assets. Interbank has built one of the most convenient and extensive retail banking distribution platforms in Peru including, online banking, mobile applications, a total of 264 financial stores, more than 1,900 ATMs and more than 2,500 correspondent agents, as of March 31, 2019.

As of and for the three months ended March 31, 2019, Interbank represented 74.9% of our total assets and 85.0% of our net profit. As of and for the year ended December 31, 2018, Interbank represented 74.4% of our total assets, 92.6% of our net profit and 81.8% of our adjusted net profit. For the 2018 fiscal year, Interbank declared a dividend of S/467.0 million (or approximately U.S.$140.8 million) of which S/463.8 million (or approximately U.S.$139.8 million) were paid to IFS, and represents 66.0% of total dividends received by IFS.

With a significant focus on the emerging middle class, Interbank has a higher percentage of retail loans, which account for 54.0% and 53.2% of its total loan portfolio, compared to the banking system’s average of 35.7% and 35.1%, as of March 31, 2019 and December 31, 2018, respectively. This contributes to a higher risk-adjusted net-interest margin than the banking system’s average.

Interbank’s CAGR in loans, deposits and obligations, and net profit between 2014 and 2018 was 10.5%, 10.3%, and 9.0%, respectively. For 2018, Interbank’s net profit was S/1,010.9 million and ROE was 20.2% and for the three months ended March 31, 2019 its net profit was S/299.7 million and annualized ROE was 22.1%.

• Insurance: Interseguro is the leading provider of annuities (excluding private annuities) in Peru, with a 30.2% market share as measured by total premiums collected during 2018 and a 32.3% market share as measured by total premiums collected in the three months ended March 31, 2019, according to the SBS, and is one of the leading life insurance companies in Peru. In addition, Interseguro offers private annuities, individual life insurance, disability and survivorship insurance, as well as low premium retail insurance products, including credit life, mandatory traffic accident insurance (“SOAT”) and credit card protection insurance, through a comprehensive multi-channel distribution platform which includes Interseguro’s sales force. Interseguro also distributes through Interbank and retailers. According to the SBS, for 2018, Interseguro was the largest insurance company measured by reserves, driven both by organic growth and the acquisition of Seguros Sura in November 2017 which both improved its ROE and doubled its asset size.

As of and for the three months ended March 31, 2019 Interseguro represented 19.7% of our total assets and 8.2% of our net profit and as of and for the year ended December 31, 2018, Interseguro

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represented 19.7% of our total assets, negative 5.6% of our net profit and 6.7% of our adjusted net profit. For the 2018 fiscal year, Interseguro declared a dividend of S/138.0 million (or U.S.$41.6 million), which represents 19.6% of total dividends received by IFS.

Interseguro’s CAGR in gross premiums plus collections was 8.3% between 2014 and 2018. For 2018, Interseguro’s net loss was S/61.5 million and its adjusted net profit was S/83.3 million, while its ROE was negative 0.5% and its adjusted ROE was 9.4%. For the three months ended March 31, 2019 Interseguro’s net profit was S/28.9 million and annualized ROE was 12.8%.

• Wealth management: Inteligo is a provider of wealth management services, which includes banking, financing, brokerage and investing activities for high net worth individuals through three operating subsidiaries, Inteligo Bank, Inteligo SAB (brokerage) and Interfondos (mutual funds). As of and for the three months ended March 31, 2019, Inteligo represented 5.7% of our total assets and 22.2% of our net profit and as of and for the year ended December 31, 2018, Inteligo represented 6.0% of our total assets, 18.1% of our net profit and 16.0% of our adjusted net profit. For the 2018 fiscal year, Inteligo Bank declared a dividend of U.S.$40.0 million (or S/132.7 million), of which S/99.5 million (or U.S.$30.0 million) were paid to IFS and represents 14.4% of total dividends received by IFS.

Inteligo’s CAGR in assets under management was 11.8% between 2014 and 2018. In addition, for the year ended December 31, 2018, Inteligo’s net profit was S/197.5 million and ROE was 25.7% and for the three months ended March 31, 2019, Inteligo’s net profit was S/78.3 million and annualized ROE was 38.1%

Factors Affecting Our Results of Operations

Substantially all of our subsidiaries’ operations are conducted in Peru. Accordingly, our results of operations and financial condition are dependent on economic conditions, consumer spending and investment levels in Peru. During the 1980s, Peru experienced a severe economic crisis and high levels of inflation. Beginning in the 1990s, however, the Peruvian government implemented a series of structural reforms, which helped stabilize the Peruvian economy and foster continued GDP growth, lower inflation and interest rates, more stable currency and significantly improved public finances. Moreover, and as a result of the financial instability in 2008 and 2009, which was accompanied by the worst global economic downturn in many decades, the Peruvian economy, while affected, was one of the few economies in Latin America to experience growth in 2009. Peru’s real GDP grew at a rate of 1.0% in 2009, supported by the Peruvian government’s fiscal stimulus programs.

Nonetheless, the country has experienced a slowdown in recent years, mainly explained by lower domestic demand, as a result of a lower growth in private investment. This slowdown was intensified during 2017 due to three factors: (i) a strong El Niño phenomenon, which adversely affected agricultural production, transportation services, tourism and commercial activity, and resulted in a 1.5 percentage point drop in GDP growth in 2017 relative to 2016 figures; (ii) corruption scandals related to the activities of certain Brazilian and Peruvian companies in the construction sector, which have resulted in suspension or delay of important infrastructure projects, which were otherwise under construction and had their permits; and (iii) political disputes between the government and the opposition, which resulted in the resignation of former President Pedro Pablo Kuczynski in March 2018 and the appointment of former Vice-President Martin Vizcarra as the new President of Peru. Despite these factors and subsequent corruption scandals related to the Peruvian judiciary system and other political figures, the Peruvian economy saw a recovery during 2018, reaching growth levels similar to those seen in 2016, supported by strong growth in domestic demand.

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The table below sets forth additional details regarding Peru’s recent economic performance.

	March 2019		2018			2017			2016			2015			2014
Peruvian real GDP growth rate		2.3%		4.0%			2.5%			4.0%			3.3%			2.4%
Domestic demand growth		1.7%		4.3%			1.4%			1.1%			2.6%			2.2%
Fixed private investment (real growth)		2.9%		4.4%			0.2%			(5.4%	)		(4.2%	)		(2.2%	)
Reference interest rate		2.8%		2.8%			3.3%			4.3%			3.8%			3.5%
Fiscal (deficit) (% of GDP)		3.6%		(2.3%	)		(3.0%	)		(2.3%	)		(1.9%	)		(0.2%	)
Variation in Consumer Price Index (“CPI”)		2.2%		2.2%			1.4%			3.2%			4.4%			3.2%
Unemployment rate		7.5%		5.7%			6.9%			7.0%			6.2%			5.5%
Disposable income growth		0.5%		4.0%			3.2%			3.7%			1.7%			2.7%
Public external debt as a percentage of Peruvian GDP		8.7%		8.8%			8.8%			10.4%			11.2%			8.8%
Net international reserves (U.S.$ in millions)		63,091		60,121			63,621			61,686			61,485			62,308

Sources: Central Reserve Bank of Peru and INEI.

In this context, Peru continues to have its sovereign debt rated investment grade by S&P, Fitch and Moody’s. The Peruvian government’s conservative fiscal policy, coupled with the Central Reserve Bank of Peru’s responsible management of inflation and international reserves has helped Peru to maintain its investment grade ratings by Moody’s (A3), S&P (BBB+) and Fitch (BBB+). Peru’s credit ratings are subject to periodic review, and may be revised or lowered in the future.

Taking this into consideration, in March 2019, the Central Reserve Bank of Peru estimated a real GDP growth for Peru of 4% for both 2019 and 2020, supported by the development of mining and infrastructure projects, as well as higher private expenditures.

Interest Rates

In general, increases in prevailing interest rates result in more interest revenue from loans. An increase of prevailing interest rates may, however, adversely affect Interbank as a result of reduced overall demand for loans and greater risk of default by its clients. In addition, relatively high interest rates affect Interbank’s funding costs, and can adversely affect spreads on its loan portfolio if Interbank is unable to pass on the increased funding costs to its clients. On the other hand, a decrease in interest rates can reduce Interbank’s revenue from its loan portfolio. This revenue decrease may be offset by an increase in the volume of loans resulting from higher demand and/or a decrease in Interbank’s funding costs.

Increases in interest rates negatively affect the value of Interseguro’s fixed income portfolio. However, higher rates allow Interseguro to reinvest new annuities at a higher yield. At the same time, increases in interest rates result in an increase in the discount rate Interseguro uses to calculate its reserve requirements, which has the effect of reducing Interseguro’s required technical reserves. Conversely, if interest rates fall, Interseguro’s portfolio will have a lower average interest rate, resulting in Interseguro having to record higher technical reserves. See Note 4.6(b) to our audited annual consolidated financial statements.

Similar to Interbank, an increase in prevailing interest rates may adversely affect Inteligo as a result of reduced overall demand for loans, as well as lower interest margins if Inteligo is unable to pass on higher funding costs to its clients. On the other hand, a decrease in interest rates may reduce Inteligo’s revenue from its loan portfolio. Furthermore, a portion of Inteligo’s revenues corresponds to earnings from its investment portfolio and is therefore exposed to interest rates fluctuations that may affect revenue from fixed-income instruments. Increases in interest rates result in additional interest income from Inteligo’s variable-rate investments, but may also result in capital losses on its fixed-rate investments.

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Inflation

Our performance may be impacted by inflation, because substantially all of our assets are not adjusted for the effects of inflation. During the 1980s, Peru experienced hyperinflation, negative economic growth and substantial currency devaluation. Inflation rates in Peru began to decrease in the 1990s and in the last 14 years Peru had one of the lowest average inflation rates in the region, partly due to the monetary policy implemented by the Central Reserve Bank of Peru and partly due to the conservative fiscal policy of the Peruvian government. In 2002, in order to maintain low inflation rates, the Central Reserve Bank of Peru established an annual inflation target of 2.5% within a range of one percentage point. In 2007, the target was lowered to 2%, within a range of one percentage point. The Central Reserve Bank of Peru has maintained its target inflation range ever since. The inflation rate in Peru, as measured by changes in the consumer price index by the INEI, was 3.2% in 2014, 4.4% in 2015, 3.2% in 2016, 1.4% in 2017 and 2.2% in 2018 and 2.2% in the three months ended March 31, 2019. In its most recent forecast as of March 2019, the Central Reserve Bank of Peru has estimated Peru’s inflation to be 2% in both 2019 and 2020.

Depreciation and Appreciation of the Sol

The sol floats freely against other currencies. Nevertheless, the Central Reserve Bank of Peru participates in the market (buying or selling soles) in order to avoid any large fluctuations in the exchange rate because of the effects that it could have on the Peruvian economy, which remains partly dollarized. Because a significant portion of our subsidiaries’ assets and liabilities are denominated in U.S. dollars and our audited annual consolidated financial statements are prepared in soles, the results reflected in our audited annual consolidated financial statements are affected by fluctuations in the exchange rates between the sol and the U.S. dollar.

In 2015 the sol depreciated significantly against the U.S. dollar. Since then, the sol has remained relatively stable. Any future changes in the value of the sol against the U.S. dollar and other foreign currencies could adversely affect our financial condition and results of operations to the extent that our subsidiaries maintain a gap between foreign denominated assets and liabilities. See “Exchange Rates.”

The Peruvian government adopted a policy to encourage the de-dollarization of the Peruvian economy. This policy included promoting the development of a sol capital market and local currency yield curves. The proportion of outstanding loans in the banking system denominated in U.S. dollars has fallen from 51.0% as of December 31, 2011 to 31.7% as of March 31, 2019, according to figures published by the SBS. However, the percentage of deposits in the banking system denominated in U.S. dollars was approximately 47.3% as of December 31, 2011 compared to 39.6% as of March 31, 2019. Interbank’s proportion of loans in soles grew from 53.2% as of December 31, 2011 to 73.4% as of March 31, 2019, while deposits in soles increased from 56.8% as of December 31, 2011 to 60.3% as of March 31, 2019.

As of March 31, 2019, 63.2% of Interseguro’s investment portfolio was invested in soles and 36.8% was invested in U.S. dollars. According to Interseguro’s investment policy, it allocates the currency of its investment portfolio to mitigate potential currency volatility between its investment assets and its insurance liabilities.

Substantially all of Inteligo’s financial assets and liabilities are denominated in U.S. dollars.

Monetary Policy

In April 2010, as a result of significant economic growth, the Central Reserve Bank of Peru began tightening its monetary policy, raising the reference rate and increasing reserve requirements. This tightening policy had the goal of mitigating speculative capital inflows and cooling the expansion of credit.

However, since the beginning of 2017, the Central Reserve Bank of Peru started loosening its monetary policy. In this context, from January 2017 up to July 2018, the minimum legal reserve requirements were reduced

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from 70.0% to 35.0% in foreign currency and from 6.5% to 5.0% in local currency; while the reference rate decreased from 4.25% to 2.75%, where they have remained to date.

Competition

We face intense competition in all of our segments, which can affect our margins, growth and profitability. See “Industry”.

Demographic and Socioeconomic Trends

Peru’s economic growth has been supported by favorable demographic trends. According to INEI, the poverty rate in Peru has declined to 20.5% in 2018, from 30.8% in 2010, while GDP per capita in U.S. dollars has increased from U.S.$5,051 in 2010 to U.S.$6,907 in 2018, reflecting a robust increase in purchasing power, according to the EIU. Peru’s middle and upper socioeconomic segments (segments A, B and C) have significantly expanded and, as of 2017, represented 53% of the population compared to 42% in 2010. From 2008 to 2018, 72,000 people retired under the Peruvian private pension system compared to a total of 619,000 and more than 3.9 million expected retirees over the next 10 and 30 years, respectively, according to the SBS. In addition, the increase in the number of people retiring from the Peruvian private pension fund system will benefit our annuities business, considering the new products launched by Interseguro in 2016.

Impact of Acquisition of Seguros Sura

We acquired 100% of the capital stock of Seguros Sura on November 2, 2017 for an initial base price of U.S.$268 million. Seguros Sura was an important player in the retirement annuities and individual life insurance business in Peru and as of December 31, 2016 represented 12% of the insurance industry’s assets and 17% of the insurance industry’s total annuity premiums, according to the SBS. The acquisition of Seguros Sura and its incorporation to Interseguro’s operations in November 2017 affected Interseguro’s and IFS’ results in particular in the following ways: (i) results from investments increased as a result of the incorporation of Seguros Sura’s portfolio, which increased Interseguro’s investments by 110.4%; (ii) interest and similar expenses grew related to the financing of the acquisition; (iii) net premiums increased, mainly related to annuities, individual life and disability and survivorship insurance; (iv) adjustment of technical reserves and net claims and benefits incurred also grew related to these products; and (v) other expenses increased due to the write-off of certain intangible assets at Seguros Sura.

Regulatory Changes

In April 2016, a new law entered in force which allows retirees to withdraw 95.5% of their pension funds as a one-time transaction. As a second stage of this law, in October 2016, retirees were allowed to withdraw their pension fund in several transactions whenever desired. This regulatory change resulted in a 36% yearly contraction for the Peruvian insurance system in purchases of regular and private annuities from 2015 to 2016, according to the SBS. Interseguro was negatively affected by the law, with annuities collected of S/337.8 million in 2016, a 38% reduction compared to 2015.

However, as of March 2019, the annuities market seems to be stabilizing with the introduction of private annuities, a new type of annuity created to fill the loophole left by the law. This new product, pioneered by Interseguro in October 2016 and soon followed by other providers, helped the industry recover a portion of the lost market. In 2018, private annuities accounted for 50% of the premiums collected in 2018 for the insurance industry. For Interseguro, private annuities represented 40% of its S/438.9 million in collections in annuities in 2018 and 40% of its S/130.2 million collections in annuities as of March 31, 2019.

In December 2016, the Peruvian government passed a tax amnesty bill to promote the declaration and/or repatriation of funds held by Peruvians in offshore jurisdictions. This bill had a negative impact on Inteligo’s assets under management in 2017, although it did not have a significant impact in 2018.

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Change in Accounting Estimates

Adoption of new mortality tables

Through SBS Resolution No.886-2018 dated March 7, 2018, the SBS published the new Peruvian mortality and morbidity tables to be used in mathematical reserve calculations of pensions. These tables gather updated information and show the recent changes in the life expectancy in Peru. Considering that, according to international actuarial and accounting standards, mortality tables need to be updated on a regular basis with information reflecting the reality of the insured, beginning June 1, 2018, we decided to use these new tables for our pension reserve calculation, as they show the recent changes in mortality rates and life expectancy. The effect of the first application of these tables amounted to an impact of S/144.8 million; which, in accordance with IAS 8, has been recognized prospectively, affecting the results of 2018 in the line total net premiums earned minus claims and benefits. See Note 4.6 to our audited annual consolidated financial statements.

Changes in the assumptions used in calculating interest rates to discount pension reserves

From the second quarter 2018, we modified the estimation used in calculating interest rates to discount pension reserves, using the risk-free rate due to the currency of Peruvian government’s sovereign yield curves plus an illiquidity premium as a portion of the corporate bonds spread that is not related to loss given default or the cost of credit rating downgrade. These corporate bond spreads are calculated based on the performance of our insurance asset portfolio designated to cover our pension obligations.

The purpose of changing the method to calculate the interest rate is to show the nature of the insurance business over the long term, therefore preventing changes in liability values in the short term caused by the fluctuation of the interest rate, which occurs due to market volatility, the speculative component and economic cycles.

The effects of the first application of interest rates as of June 1, 2018, amount to S/423,080,000, which, according to IAS 8, has been prospectively recognized and is part of the 2018’s movement in equity. See Note 4.6 to our audited annual consolidated financial statements.

Changes of accounting policies

Until December 31, 2017, we recognized in our consolidated income statements the effect of the change in the value of liabilities coming from retirement, disability and survivor’s pensions, caused by the variation in the market interest rates used to discount these liabilities. In 2018, we decided to modify voluntarily our accounting policy in order to show the effect of the change in market interest rates on the statements of other comprehensive income. This change was made to reduce volatility in the profits or losses associated to the effect of changes in market interest rates, as the financial assets supporting such insurance liabilities are measured at fair value through other comprehensive income. According to IAS 8, as the aforementioned change constitutes a voluntary change in the accounting policy of the Company and, in compliance with the standard, must be applied retrospectively to previously released balances. See Note 4.2.1 to our audited annual consolidated financial statements.

We have adopted for the first time IFRS 9 and IFRS 15, effective for annual periods beginning on or after January 1, 2018. The adoption of IFRS 15 did not have a material effect on our audited annual consolidated financial statements.

IFRS 9

As explained in Note 4.2.2 to our audited annual consolidated financial statements, we have adopted for the first time IFRS 9 “Financial Instruments”, effective for annual periods beginning on or after January 1, 2018. IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” for annual periods starting on or after January 1, 2018.

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The adoption of IFRS 9 has fundamentally changed our classification of financial instruments and the accounting for loan loss impairments by replacing the incurred loss approach under IAS 39 with a forward-looking expected credit loss (ECL) approach. IFRS 9 requires us to record an allowance for expected credit loss for all loans and other debt financial assets not held at fair value through profit or loss, together with financial guarantee contracts. The allowance is based on the expected credit loss associated with the probability of default in the next twelve months unless there has been a significant increase in credit risk since origination. If the financial asset meets the definition of purchased or originated credit impaired (POCI), the allowance is based on the change in the expected credit loss over the life of the asset.

As permitted by IFRS 9, we have not restated the comparative information for 2017 and prior periods for financial instruments within the scope of IFRS 9. Therefore, the comparative information for 2017 and prior periods is reported under IAS 39 and is not comparable to the information presented for 2018. Differences arising from the adoption of IFRS 9 totaling a charge to equity of S/83.3 million net of deferred income taxes have been recognized directly in the captions “retained earnings” and “unrealized results, net” as of January 1, 2018, and are disclosed in Note 4.7 to the audited annual consolidated financial statements included in this prospectus.

IFRS 16

As explained in note 2(c) to our unaudited interim condensed consolidated financial statements, we adopted for the first time IFRS 16 “Leases” which became effective on January 1, 2019. IFRS 16 established that at the commencement date of a lease, a lessee will recognize a liability to reflect lease payments and the asset that represents the right-of-use of the underlying leased asset during the lease term will be recorded. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. As permitted by the transitional provisions of IFRS 16, we elected to apply the modified retrospective approach and have not restated comparative figures. Under this method, we recognized lease liabilities for an amount equivalent to the present value of future payments agreed as of January 1, 2019. The effect of the adoption of IFRS 16 as of January 1, 2019 amounted to S/341.7 million, increasing the caption “Property, furniture and equipment (Right-of-use assets)” and simultaneously, for the same amount, the caption “Accounts payable, provisions and other liabilities (Lease liabilities)”. The adoption of IFRS 16 had no impact on the consolidated statements of changes in equity as of January 1, 2019. For the three months ended March 31, 2019, we have recorded S/0.8 million as interest expense on the lease liabilities and S/19.4 million as depreciation expense on the right-of-use asset, which were recorded in captions “interest and similar expenses” and “depreciation and amortization”, respectively, of the unaudited interim condensed consolidated statements of income.

Critical accounting estimates and judgments

In preparing our audited annual consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), we apply judgment and make estimates and assumptions that may involve significant uncertainty at the time they are made. We regularly reassess those estimates and assumptions, which encompass historical experience, expectations of the future and other pertinent factors, to determine their continuing relevance based on current conditions, and we update them as necessary. Changes in estimates and assumptions may have a significant effect on our audited annual consolidated financial statements. Furthermore, our actual results may differ significantly from our estimates, which could result in significant losses to us or our subsidiaries, beyond what we anticipated or provided for.

Key areas involving a high degree of judgment and areas where estimates and assumptions are significant to the audited annual consolidated financial statements include:

• the calculation of the impairment of the portfolio of loans and financial investments;

• the measurement of the fair value of the financial investments and investment properties;

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• the assessment of the impairment of the goodwill;

• the liabilities for insurance contracts and the measurement of the fair value of derivative financial instruments;

• the estimated useful life of intangible assets, property, furniture and equipment, and

• the estimation of assets and liabilities for deferred income tax.

We believe that the judgments, estimates and assumptions we have made are appropriate under the circumstances and that our audited annual consolidated financial statements fairly present, in all material respects, the financial positions of IFS as of March 31, 2019, December 31, 2018 and 2017 and the results of our operations and cash flows for three-month periods ended March 31, 2019 and 2018, and for the years ended December 31, 2018, 2017 and 2016 in accordance with IFRS or IAS 34, as applicable.

For more information about our critical accounting estimates and judgments, see:

• “Note 4 Significant accounting policies” to our audited annual consolidated financial statements for more information;

• “Note 4.6 Significant accounting judgments, estimates and assumptions” to our audited annual consolidated financial statements for more information on estimations and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of significant events in the notes to the audited annual consolidated financial statements;

• “Note 31.1 Credit Risk” and “Note 31.2 Market Risk management” for a discussion of risk and sensitivity of certain items;

• the “Risk factors” section of this prospectus for more information.

Principal Line Items in Consolidated Income Statements

Below is a description of certain significant line items:

• interest and similar income includes interest from our loan portfolio plus interest and dividends from our investment portfolio and is composed of the following line items: (i) interest on loans, (ii) interest on financial investments, (iii) interest on due from banks and inter-bank funds, and (iv) other interest and similar income. See Note 20(a) to our audited annual consolidated financial statements and Note 14(a) to our unaudited interim condensed consolidated financial statements;

• interests and similar expenses includes all financial expenses incurred to fund our operations and is composed of the following line items: (i) interest on deposits and obligations, (ii) interest on bonds, notes and other obligations, and (iii) interest and fees on obligations with financial institutions. See Note 20(a) to our audited annual consolidated financial statements and Note 14(a) to our unaudited interim condensed consolidated financial statements;

• impairment loss on loans, net of recoveries includes provisions recognized as expense, net of recoveries. See Note 7(d) to our audited annual consolidated financial statements and Note 5(c) to our unaudited interim condensed consolidated financial statements;

• recovery (loss) due to impairment of financial investments includes impairment loss recognized as expense, net of recoveries. See Notes 6(c) and 6(i) to our audited annual consolidated financial statements and Note 5(c) to our unaudited interim condensed consolidated financial statements;

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• fee income from financial services, net includes primarily commissions and other fees we charge to our customers, net from related expenses, and is composed of the following line items: (i) maintenance and mailing of accounts, interchange fees, transfers and credit and debit card services, (ii) funds management, (iii) commissions from banking services, (iv) fees for indirect loans, (v) collection services, and (vi) brokerage and custody services. See Note 21 to our audited annual consolidated financial statements and Note 15 to our unaudited interim condensed consolidated financial statements;

• other income includes: (i) net gain on foreign exchange transactions, (ii) net gain on financial investments, (iii) net gains (losses) on financial assets at fair value through profit or loss, (iv) net gain on investment property;

• total net premiums earned minus claims and benefits includes: (i) net premiums earned, (ii) adjustment of technical reserves, and (iii) net claims and benefits incurred for life insurance contracts and others. See Notes 23 and 24 to our audited annual consolidated financial statements and Note 17 to our unaudited interim condensed consolidated financial statements; and

• other expenses include: (i) salaries and employee benefits, (ii) administrative expenses, (iii) depreciation and amortization, (iv) sundry technical insurance expenses and commission from insurance activities and (v) expenses related to rental income. See Notes 10(a), 19(a), 22, 25, and 26 to our audited annual consolidated financial statements and Note 16 to our unaudited interim condensed consolidated financial statements.

Financial Condition as of March 31, 2019 Compared to December 31, 2018

The following table sets forth the principal components of our consolidated statement of financial position as of March 31, 2019 and December 31, 2018.

	As of March 31, 2019			As of December 31, 2018			Change
	(S/ in millions)						(S/ in millions)			%
Assets
Cash, due from banks and inter-banks funds		9,730.6			8,875.4			855.2			9.6	%
Financial investments		17,852.8			17,629.4			223.3			1.3	%
Loans, net of unearned interest		35,019.0			34,325.7			693.3			2.0	%
Impairment allowance for loans		(1,396.2	)		(1,364.8	)		(31.4	)		2.3	%
Investment property		989.6			986.5			3.1			0.3	%
Property, furniture and equipment, net		948.5			622.5			326.0			52.4	%
Intangibles and goodwill, net		946.8			954.5			(7.8	)		(0.8	)%
Other assets		1,665.2			1,715.0			(49.8	)		(2.9	)%
Total assets		65,756.2			63,744.4			2,011.8			3.2	%
Liabilities and equity
Deposits and obligations		34,790.0			33,682.0			1,108.0			3.3	%
Due to banks and correspondents and inter-bank funds		3,832.6			4,293.4			(460.7	)		(10.7	)%
Bonds, notes and other obligations		6,663.2			6,496.8			166.4			2.6	%
Insurance contract liabilities		10,407.2			10,300.5			106.8			1.0	%
Other liabilities		2,336.4			1,883.4			453.0			24.1	%
Total liabilities		58,029.4			56,655.9			1,373.5			2.4	%
Equity, net
Equity attributable to IFS’s shareholders		7,686.8			7,048.1			638.7			9.1	%
Non-controlling interest		40.0			40.4			(0.4	)		(1.1	)%
Total equity, net		7,726.8			7,088.5			638.3			9.0	%
Total liabilities and equity net		65,756.2			63,744.4			2,011.8			3.2	%

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Our assets were S/65.8 billion as of March 31, 2019, a 3.2% increase from S/63.7 billion as of December 31, 2018. This was mainly driven by growth of 9.6% in cash, due from banks and inter-bank funds, 2.0% in loans, net of unearned interest, 1.3% in financial investments, and 52.4% in property, furniture and equipment,.

The increase in cash, due from banks and inter-bank funds was mainly due to higher reserve funds and deposits at the Central Reserve Bank of Peru from Interbank.

The increase in loans, net of unearned interest was mainly a result of higher retail and commercial loans balances at Interbank. The increase in retail loans was due to growth in credit cards, other consumer loans and mortgages. Growth in commercial loans was due to higher short- and medium-term loans, mostly in medium-sized companies.

The increase in financial investments was mainly explained by a higher volume of Interseguro’s investment portfolio, partially offset by lower balances of sovereign and global bonds at Interbank.

The increase in property, furniture and equipment was mainly explained by the effect of the adoption of IFRS 16 as of January 1, 2019, which amounted to S/341.7 million.

Our liabilities reached S/58.0 billion as of March 31, 2019, a 2.4% increase from S/56.7 billion as of December 31, 2018. This was mainly driven by a 3.3% growth in deposits and obligations, mostly explained by higher commercial and retail deposits at Interbank partially offset by a decrease in due to banks and correspondents and inter-bank funds.

Our net equity was S/7.7 billion as of March 31, 2019, a 9.0% increase from S/7.1 billion as of December 31, 2018, mainly driven by higher unrealized results at Interseguro.

For more information of our liquidity, capital resources and commitments and obligations, see “—Commitments and Contractual Obligations” and “—Liquidity and Capital Resources.”

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Results of Operations for the Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018

The following table sets forth the principal components of our consolidated profit for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar income		1,166.7			1,036.3			130.5			12.6	%
Interest and similar expenses		(335.8	)		(266.9	)		(68.9	)		25.8	%
Net interest and similar income		831.0			769.4			61.6			8.0	%
Impairment loss on loans, net of recoveries		(186.4	)		(172.9	)		(13.5	)		7.8	%
Recovery (loss) due to impairment of financial investments		1.9			2.3			(0.4	)		(16.4	)%
Net interest and similar income after impairment loss		646.4			598.8			47.7			8.0	%
Fee income from financial services, net		223.0			216.6			6.4			3.0	%
Other income		138.9			96.9			42.0			43.3	%
Total net premiums earned minus claims and benefits		(74.1	)		(78.9	)		4.8			6.1	%
Total other expenses		(481.7	)		(443.9	)		(37.9	)		8.5	%
Income before translation result and income tax		452.5			389.5			63.0			16.2	%
Translation result		10.1			6.0			4.1			68.6	%
Income Tax		(109.9	)		(105.5	)		(4.4	)		4.1	%
Net profit for the period		352.7			290.0			62.7			21.6	%
Attributable profit to:
IFS’ shareholders		350.6			288.2			62.4			21.6	%
Non-controlling interest		2.2			1.8			0.4			21.5	%

Our net profit was S/352.7 million in the three months ended March 31, 2019, a 21.6% increase compared to the corresponding period in 2018. This was mainly driven by growth of S/61.6 million in net interest and similar income, S/42.0 million in other income, S/6.4 million in fee income from financial services, and S/4.8 million in total premiums earned less claims and benefits. Moreover, a higher positive translation result and a lower effective tax rate also contributed to our net profit increase compared to the three months ended March 31, 2018. These effects were partially offset by increases of S/37.9 million in other expenses and S/13.5 million in impairment loss on loans.

Furthermore, in the three months ended March 31, 2019, we consolidated our wealth management activities with the sale of Interfondos, Interbank’s previous mutual funds subsidiary, to Inteligo, where asset management is the core business. This sale resulted in a S/52.6 million income at Interbank, net of taxes and workers’ profit sharing for S/20.2 million. The S/52.6 million income at Interbank from the sale of Interfondos to Inteligo was eliminated upon consolidation. At a consolidated level, the sale of Interfondos from Interbank to Inteligo had a negative impact on our profit of S/20.2 million from taxes paid and workers’ profit sharing.

The increase in net interest and similar income was mainly due to higher interest on loans and interest on due from banks and inter-bank funds at Interbank, as well as higher investments in fixed income securities that contributed with incremental coupons at Inteligo as further described in the discussion of our segments below.

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The increase in other income was mainly explained by an increase in mark-to-market valuations on Inteligo’s proprietary portfolio and strong market conditions caused by the market rebound in the three months ended March 31, 2019, that prompted the sale of certain financial investments, in addition to increases in net gain on financial assets at fair value, net gain on investment property and rental income at Interseguro.

The increase in fee income from financial services was mainly a result of an 8.3% increase in commissions from credit card services at Interbank, associated with a higher volume of transactions in this product, as well as lower net debtor’s life insurance premiums, partially offset by decreases in other fee income lines.

The increase in total premiums earned minus claims and benefits was due to a S/32.3 million increase in net premiums assumed less premiums ceded to reinsurers, partially explained by a S/23.9 million reduction in premiums ceded, as well as a S/3.1 million reduction in net claims and benefits incurred, partially offset by a S/30.7 million increase in adjustment of technical reserves.

The increase in other expenses was mainly due to growth in workers’ profit sharing, variable costs related to credit cards and IT services at Interbank.

The increase in impairment loss on loans was mainly related to a higher volume of loans, especially in credit cards, partially offset by lower requirements in payroll deduction loans and by a release of provisions in medium-sized companies, all at Interbank.

Recovery due to impairment of financial investments was S/1.9 million for the three months ended March 31, 2019, a slight S/0.4 million decrease, since a S/0.5 million loss due to impairment of financial investments at Inteligo was offset by a higher recovery at Interseguro.

Our effective tax rate decreased, from 26.7% for the three months ended March 31, 2018 to 23.8% for the corresponding period in 2019, due to a higher contribution from Interseguro and Inteligo to our profit, due to applicable tax exemptions on their results.

Our annualized ROE was 19.0% for the three months ended March 31, 2019, below the 19.1% for the corresponding period of 2018. Our annualized ROA was 2.2%, compared to 1.9% for the corresponding period of 2018.

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Results of Operations by Segment

The following table presents an overview of certain consolidated income statement data for each of our segments for the three months ended March 31, 2019 and 2018.

	Banking						Insurance						Wealth Management						Holding and eliminations						Consolidated
	2019			2018			2019			2018			2019			2018			2019			2018			2019			2018
													(S/ in millions)
Interest and similar income		965.0			843.1			156.8			157.6			45.6			33.7			(0.6	)		1.8			1,166.7			1,036.3
Interest and similar expenses		(307.4	)		(242.5	)		(13.6	)		(13.7	)		(14.9	)		(9.1	)		0.1			(1.6	)		(335.8	)		(266.9	)
Net interest and similar income		657.6			600.7			143.2			143.9			30.7			24.6			(0.5	)		0.2			831.0			769.4
Impairment loss on loans, net of recoveries		(186.3	)		(173.3	)		0.0			0.0			(0.1	)		0.4			0.0			0.0			(186.4	)		(172.9	)
Recovery (loss) due to impairment of financial investments		(0.0	)		(0.1	)		2.4			0.1			(0.5	)		2.3			0.0			0.0			1.9			2.3
Net interest and similar income after impairment loss		471.2			427.3			145.5			144.0			30.2			27.3			(0.5	)		0.2			646.4			598.8
Fee income from financial services, net		193.4			179.7			(1.0	)		(1.7	)		38.9			43.1			(8.3	)		(4.5	)		223.0			216.6
Other income (1)		133.1			90.2			24.8			11.8			36.8			1.1			(55.8	)		(6.2	)		138.9			96.9
Total net premiums earned minus claims and benefits		0.0			0.0			(74.1	)		(78.9	)		0.0			0.0			0.0			0.0			(74.1	)		(78.9	)
Total other expenses		(390.8	)		(362.1	)		(70.7	)		(61.8	)		(26.9	)		(26.4	)		6.7			6.5			(481.7	)		(443.9	)
Income (loss) before translation result and income tax		406.9			335.1			24.6			13.5			79.0			45.0			(57.9	)		(4.1	)		452.5			389.5
Translation result		0.2			1.9			4.4			1.0			0.7			0.5			4.8			2.5			10.1			6.0
Income tax		(107.4	)		(94.5	)		0.0			0.0			(1.4	)		(1.6	)		(1.1	)		(9.5	)		(109.9	)		(105.5	)
Net profit (loss) for the year		299.7			242.6			28.9			14.5			78.3			44.0			(54.2	)		(11.0	)		352.7			290.0
Attributable to:
IFS’ shareholders		299.7			242.6			28.9			14.5			78.3			44.0			(56.4	)		(12.8	)		350.6			288.2
Non-controlling interest		0.0			0.0			0.0			0.0			0.0			0.0			2.2			1.8			2.2			1.8

(1) For the Banking segment “other income” for the three months ended March 31, 2019, includes the S/52.6 million gain on the sale of Interfondos to Inteligo, which is eliminated upon consolidation.

The discussion below covers each of our reported segments, and corresponds to information before adjustments and eliminations for consolidation, as of and for the three months ended March 31, 2019 and 2018, in accordance with IFRS.

Banking

Interbank’s net profit reached S/299.7 million for the three months ended March 31, 2019, a 23.6% increase compared to the corresponding period in 2018. The main factors that contributed to this result were growth of 47.5% in other income, mainly as a result of the sale of Interfondos, 9.5% in net interest and similar income, and 7.6% in fee income from financial services. These factors were partially offset by increases of 7.9% in other expenses and 7.5% in impairment loss on loans.

Interbank’s net interest margin was 5.5% for the three months ended March 31, 2019, compared to 5.4% for the corresponding period in 2018.

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Interbank’s annualized ROE was 22.1% for the three months ended March 31, 2019 and its adjusted ROE was 19.8%, lower than the 20.6% reported in the corresponding period of 2018.

Interest and Similar Income

The following table presents the components of interest and similar income for our banking segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar income
Interest on loan portfolio		888.0			780.9			107.1			13.7	%
Interest on financial investments		51.8			51.9			(0.1	)		(0.2	)%
Interest on due from banks and inter-bank funds		25.2			10.3			14.9			N/M
Total		965.0			843.1			121.9			14.5	%
Nominal average rate		8.1	%		7.5	%

Interest and similar income grew 14.5% due to more than two-fold increases in interest on due from banks and inter-bank funds and 13.7% in interest on loan portfolio, while interest on financial investments remained relatively stable.

Interest on due from banks and inter-bank funds grew S/14.9 million, explained by an 80 basis point increase in the nominal average rate, partially offset by a 13.9% decrease in the average volume. The increase in the nominal average rate was due to higher returns on deposits and reserve funds at the Central Reserve Bank of Peru, while the reduction in the average volume was due to lower balances of such components.

The increase in interest on loan portfolio was due to a 16.7% growth in the average volume of loans, partially offset by a 30 basis point contraction in the average yield, from 11.0% in the three months ended March 31, 2018 to 10.7% in the corresponding period in 2019.

The higher average volume of loans was attributed to growth of 16.9% in commercial loans and 16.6% in retail loans. In the commercial portfolio, volumes increased 40.3% in trade finance loans and 16.9% in short and medium-term loans, while leasing operations declined 1.0%. In the retail portfolio, the higher average volume was mainly due to increases of 24.8% in credit cards, 15.0% in payroll deduction loans and 12.2% in mortgages. The decrease in the average rate on loans was explained by reductions of 40 basis points in retail loans and 20 basis points in commercial loans.

Interest on financial investments remained stable as the 8.8% reduction in the average volume was offset by a 40 basis point increase in the average rate, from 3.3% in the three months ended March 31, 2018 to 3.7% in the corresponding period in 2019. The decrease in the average volume was the result of lower balances of Central Reserve Bank Certificates of Deposits (“CDBCR”) and global bonds, while the growth in the average rate was due to higher returns on corporate bonds from non-financial institutions and sovereign bonds.

The nominal average yield on interest-earning assets increased 60 basis points, from 7.5% in the three months ended March 31, 2018 to 8.1% in the corresponding period in 2019, mainly explained by higher nominal average rates on due from banks and investments, as well as by a higher proportion of loans within interest-earning assets, since they contribute a higher average yield than the rest of components, even if their nominal average rate reduced when compared to the three months ended March 31, 2018.

83

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Interest and Similar Expenses

The following table presents the components of interest and similar expenses for our banking segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar expenses
Interest and fees on deposits and obligations		(179.1	)		(130.9	)		(48.2	)		36.8	%
Interests on bonds, notes and other obligations		(89.3	)		(67.8	)		(21.5	)		31.6	%
Interest and fees on obligations with financial institutions and others		(39.0	)		(43.7	)		4.7			(10.8	)%
Total		(307.4	)		(242.5	)		(65.0	)		26.8	%
Nominal average rate		3.0	%		2.5	%

Interest and similar expenses increased 26.8% due to growth of 36.8% in interest and fees on deposits and obligations and 31.6% in interest on bonds, notes and other obligations, partially offset by a 10.8% decrease in interest and fees on obligations with financial institutions and others.

Interest and fees on deposits and obligations increased S/48.2 million, or 36.8%, explained by growth of 40 basis points in the nominal average cost and 6.9% in the average volume. The increase in the average cost, from 1.8% in the three months ended March 31, 2018 to 2.2% in the corresponding period in 2019, was due to higher rates paid to institutional, commercial and retail deposits. The higher average volume was explained by growth in retail and commercial deposits, partially offset by a decrease in institutional deposits. By currency, average balances of soles deposits grew 10.0% while average dollar deposits increased 2.1%.

Interest on bonds, notes and other obligations grew S/21.5 million, or 31.6%, as a result of the issuances of senior bonds in January 2018 and March 2019. Additionally, a 3.4% depreciation of the exchange rate with respect to the three months of ended March 31, 2018 resulted in an increase in the value of bonds issued in dollars.

The S/4.7 million, or 10.8% decrease in interest and fees on obligations with financial institutions and others was explained by a 12.0% reduction in the average volume, partially offset by a 10 basis point increase in the average cost. The decrease in the average volume was mainly due to lower funding provided by the Central Reserve Bank of Peru, COFIDE and correspondent banks abroad. The increase in the nominal average cost was explained by higher rates on funding from banks abroad, inter-bank funds and COFIDE.

The average cost of funds increased 50 basis points, from 2.5% in the three months ended March 31, 2018 to 3.0% in the corresponding period in 2019, mainly due to the higher costs of deposits and due to banks and correspondents.

84

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Impairment Loss on Loans, Net of Recoveries

The following table presents the components of impairment loss on loans, net of recoveries for our banking segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Impairment loss on loans, net of recoveries		(186.3	)		(173.3	)		(13.1	)		7.5	%
Past-due loan ratio (at period end)		2.6	%		2.7	%
Provision expense as a percentage of average total loans (annualized)		2.3	%		2.5	%
Coverage ratio (at period end)		161.0	%		160.9	%
Impairment allowance for loans (at period end)		1,396.1			1,257.6

Impairment loss on loans, net of recoveries increased 7.5% for the three months ended March 31, 2019 when compared to the corresponding period of 2018. In the three months ended March 31, 2019, impairment loss was driven by a higher volume of loans, especially in credit cards, partially offset by lower requirements in payroll deduction loans and by a release of provisions in medium-sized companies associated with a reduction in balances in such segment.

Interbank’s coverage ratio for the three months ended March 31, 2019 remained relatively stable as compared to the corresponding period of 2018.

85

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Fee Income from Financial Services, Net

The following table presents the components of fee income from financial services, net for our banking segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Income
Maintenance and mailing of accounts, transfer fees and commissions on credit and debit card		154.5			150.4			4.1			2.7	%
Commissions for banking services		76.5			81.4			(4.9	)		(6.1	)%
Funds management fees		0.0			0.0			0.0			N/M
Fees from indirect loans		13.8			15.2			(1.4	)		(9.3	)%
Collection services fees		9.9			8.5			1.4			16.7	%
Brokerage and custody services fees		0.0			0.0			0.0			N/M
Others		8.3			7.5			0.8			10.4	%
Total		263.0			263.1			(0.1	)		0.0	%
Expenses
Credit cards		(24.4	)		(24.1	)		(0.3	)		1.2	%
Debtor’s life insurance premiums		(27.1	)		(41.8	)		14.7			(35.2	)%
Fees paid to foreign banks		(3.7	)		(3.3	)		(0.4	)		12.5	%
Brokerage and custody services		0.0			0.0			0.0			N/M
Others		(14.5	)		(14.2	)		(0.3	)		2.1	%
Total		(69.7	)		(83.4	)		13.7			(16.4	)%
Net		193.4			179.7			13.6			7.6	%

The 7.6% increase in fee income from financial services, net was mainly attributable to higher commissions from credit card services. This factor was partially offset by slight reductions in other components. The S/14.7 million decrease in debtor’s life insurance premiums was partially offset by a S/8.1 million reduction in insurance income within certain income lines.

Other Income

The following table presents the components of other income for our banking segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019		2018		Change
	(S/ in millions)				(S/ in millions)			%
Net gain on foreign exchange transactions		41.3		40.9		0.4			1.0	%
Net gain on sale of financial investments		11.5		11.6		(0.0	)		(0.4	)%
Net gains on financial assets at fair value through profit or loss		8.0		20.6		(12.6	)		(61.1	)%
Other		72.2		17.2		55.0			N/M
Other income		133.1		90.2		42.8			47.5	%

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Other income increased 47.5%, mainly due to the S/52.6 million gain from the sale of Interfondos to Inteligo within the caption “Other” in the three months ended March 31, 2019, partially offset by a S/12.6 million decrease in net gains on financial assets at fair value.

Other Expenses

The following table presents the components of other expenses for our banking segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Salaries and employee benefits		(162.3	)		(150.8	)		(11.4	)		7.6	%
Administrative expenses		(157.9	)		(164.4	)		6.5			(4.0	)%
Depreciation and amortization		(55.4	)		(34.1	)		(21.3	)		62.3	%
Other		(15.3	)		(12.7	)		(2.5	)		19.8	%
Total other expenses		(390.8	)		(362.1	)		(28.7	)		7.9	%

Other expenses increased 7.9% mainly due to growth in workers profit sharing, variable costs related to credit cards and IT services. IFS adopted IFRS 16 which modified the presentation of our operating leases, principally branches. For the three months ended March 31, 2019, instead of recognizing an expense for rental of these leases, IFS recognizes the associated depreciation. The impact of this change resulted in lower administrative expenses and higher depreciation and amortization totaling approximately S/18.6 million.

Our efficiency ratio improved from 40.1% in the three months ended March 31, 2018 to 38.2% in the corresponding period of 2019, mainly explained by higher other income due to the gain on the sale of Interfondos.

Income Before Translation Result and Income Tax

Income before translation result and income tax increased 21.4% for the three months ended March 31, 2019, which was then positively affected by a lower effective tax rate, from 28.0% for the three months ended March 31, 2018 to 26.4% in the corresponding period of 2019, partially offset by a lower positive translation result. As a result of the above, profit for the period increased 23.6% for the three months ended March 31, 2019, compared to the corresponding period in 2018.

Insurance

Interseguro’s profit attributable to shareholders for the three months ended March 31, 2019 was S/28.9 million, an almost two-fold increase compared to the corresponding period in 2018. The main factors that contributed to this result were a more than two-fold growth in other income, mainly explained by higher rental income and gain on financial assets at fair value, as well as a 6.1% increase in total premiums earned minus claims and benefits, and a S/2.3 million recovery due to impairment of financial investments, partially offset by a 14.4% increase in other expenses.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Net Interest and Similar Income

The following table presents the components of net interest and similar income for our insurance segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar income		156.8			157.6			(0.8	)		(0.5	)%
Interest and similar expense		(13.6	)		(13.7	)		0.1			(0.6	)%
Net interest and similar income		143.2			143.9			(0.7	)		(0.5	)%

Net interest and similar income decreased 0.5% as a result of a S/0.8 million reduction in interest and similar income, while interest and similar expense remained relatively stable. The slight reduction in net interest and similar income is mainly explained by a stabilization in results from investments due to the portfolio re-allocation after the acquisition of Seguros Sura.

Other Income, Net

The following table presents the components of other income for our insurance segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March  31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Net (loss) gain on sale of financial investments		(6.2	)		2.1			(8.3	)		N/M
Net gain on financial assets at fair value through profit or loss		15.5			2.9			12.6			N/M
Rental income		10.6			6.7			3.8			57.0	%
Gain on sale of investment property		0.0			1.6			(1.6	)		N/M
Net gain (loss) on investment property		1.3			(5.1	)		6.4			N/M
Other		3.6			3.7			(0.1	)		(1.6	)%
Other income, net		24.8			11.8			13.0			N/M

Other income increased S/13.0 million mainly due to growth of S/12.6 million in net gain on financial assets at fair value, S/6.4 million in net gain on investment property and S/3.8 million in rental income, partially offset by a decrease of S/8.3 million in sale of financial investments.

Recovery (Loss) due to Impairment of Financial Investments

Interseguro registered a S/2.4 million recovery mainly due to a S/2.2 million recovery in the impairment of certain bonds in Interseguro’s portfolio, due to a lower expected loss on such bonds.

88

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Total Net Premiums Earned Minus Claims and Benefits

The following table presents the components of total premiums earned minus claims and benefits for our insurance segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Premiums assumed		175.5			167.0			8.5			5.1	%
Premiums ceded to reinsurers		(4.2	)		(28.1	)		23.9			84.9	%
Adjustment of technical reserves		(73.3	)		(42.6	)		(30.7	)		72.0	%
Net claims and benefits incurred for life insurance contracts and others		(172.0	)		(175.1	)		3.1			(1.8	)%
Total net premiums earned minus claims and benefits		(74.1	)		(78.9	)		4.8			(6.1	)%

Total net premiums earned minus claims and benefits increased S/4.8 million due to a S/32.3 million increase in net premiums, as well as a S/3.1 million reduction in net claims and benefits incurred. These effects were partially offset by a S/30.7 million increase in adjustment of technical reserves.

The increase in net premiums assumed less premiums ceded to reinsurers was mainly explained by a S/23.9 million reduction in premiums ceded, associated with Seguros Sura’s disability and survivorship contract expiration in December 2018. For more information about the auction of the disability and survivorship insurance contract in the Peruvian private pension system, see “Business—Insurance Segment—Annuities—Disability and Survivorship Annuities.”

Net Premiums

Net premiums represent the difference between premiums assumed and premiums ceded to reinsurers. The following table presents net premiums by business line for our insurance segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019		2018		Change
	(S/ in millions)				(S/ in millions)			%
Annuities (1)		81.6		60.9		20.7			34.0	%
Individual Life		32.1		31.1		1.0			3.4	%
Retail Insurance		57.5		46.9		10.6			22.6	%
Credit Life Insurance		31.7		24.6		7.1			29.0	%
Mandatory Traffic Accident (SOAT)		9.8		8.9		0.9			10.6	%
Card Protection		12.0		7.3		4.7			64.0	%
Others		4.0		6.1		(2.1	)		(35.1	)%
Net Premiums (2)		171.2		138.9		32.3			23.3	%

(1) Annuities include premiums from pension-related insurance (disability and survivorship).

(2) Private annuities are not included as premiums assumed. Net premiums are premiums assumed net of premiums ceded.

Net premiums increased 23.3% mainly due to growth of S/20.7 million in annuities, S/10.6 million in retail insurance and S/1.0 million in individual life. Growth in annuities is net of a S/12.2 million decrease in disability and survivorship, associated with Seguros Sura’s disability and survivorship contract that expired in December 2018.

89

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Adjustment of Technical Reserves

The following table presents adjustment of technical reserves by business line for our insurance segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Annuities		(49.6	)		(29.8	)		(19.8	)		66.6	%
Individual Life		(21.9	)		(12.2	)		(9.7	)		79.9	%
Retail Insurance		(1.7	)		(0.6	)		(1.1	)		N/M
Adjustment of technical reserves		(73.3	)		(42.6	)		(30.7	)		72.0	%

Adjustment of technical reserves increased 72.0% mainly explained by growth of S/19.8 million in annuities, S/9.7 million in individual life and S/1.1 million in retail insurance.

Net Claims and Benefits Incurred for Life Insurance Contracts and Others

The following table presents net claims and benefits incurred for life insurance contracts and others by business line for our insurance segment for three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Annuities (1)		(156.2	)		(156.9	)		0.7			0.4	%
Individual Life		0.8			(1.3	)		2.1			N/M
Retail Insurance		(16.6	)		(17.0	)		0.4			(2.2	)%
Credit Life Insurance		(11.5	)		(11.1	)		(0.4	)		3.6	%
Mandatory Traffic Accident (SOAT)		(3.5	)		(4.6	)		1.1			(23.1	)%
Card Protection		(0.6	)		(0.4	)		(0.2	)		56.6	%
Others		(0.9	)		(0.9	)		0.0			7.5	%
Net claims and benefits incurred (2)		(172.0	)		(175.1	)		3.1			(1.8	)%

(1) Annuities include claims from pension-related insurance (disability and survivorship).

(2) Private Annuities are not included as premiums assumed.

Net claims and benefits incurred for life insurance contracts and others decreased 1.8% mainly as a result of decreases of S/2.1 million in individual life claims, S/0.7 million in annuity benefits and S/0.4 million in retail insurance claims. Lower annuity benefits were the result of an S/11.4 million reduction in disability and survivorship claims, associated with Seguros Sura’s disability and survivorship contract expiration in December 2018, net of a S/10.7 million increase in annuities.

90

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Other Expenses

The following table presents the components of other expenses for our insurance segment for three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Salaries and employee benefits		(18.0	)		(17.3	)		(0.7	)		4.1	%
Administrative expenses		(11.1	)		(7.9	)		(3.1	)		39.6	%
Depreciation and amortization		(5.0	)		(2.2	)		(2.8	)		N/M
Expenses related to rental income		(1.5	)		(0.0	)		(1.5	)		N/M
Other		(35.1	)		(34.3	)		(0.8	)		2.2	%
Total other expenses		(70.7	)		(61.8	)		(8.9	)		14.4	%

Other expenses increased 14.4%, mainly due growth of S/3.1 million in administrative expenses, S/2.8 million in depreciation and amortization and S/0.7 million in salaries and employee benefits.

Wealth Management

Inteligo’s net profit was S/78.3 million for the three months ended March 31, 2019, a 78.1% increase compared to the corresponding period of 2018. The main factor that contributed to this result was an increase in other income, which reflected strong gains on sale and valuation of financial investments in the three months ended March 31, 2019, associated with a better performance of Inteligo’s proprietary portfolio, in addition to a 24.8% increase in net interest and similar income. These effects were partially offset by a 9.7% decrease in fee income from financial services.

Inteligo’s annualized ROE was 38.1% for the three months ended March 31, 2019, higher than the 22.4% registered in the corresponding period in 2018.

Interest and Similar Income

The following table presents the components of interest and similar income for our wealth management segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March  31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)		%
Interest and similar income
Interest on loan portfolio		18.2			16.4			1.8		10.8	%
Interest on financial investments		25.3			16.3			9.0		55.0	%
Interest on due from banks and inter-bank funds		2.1			1.0			1.1		N/M
Total		45.6			33.7			11.8		35.1	%
Nominal average rate		5.0	%		4.5	%

Interest and similar income increased 35.1% mainly due to growth of 55.0% in interest on financial investments and 10.8% in interest on loan portfolio.

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Interest on financial investments increased S/9.0 million mainly due to higher investments in fixed income securities that contributed with incremental coupons payments on bonds in Inteligo’s portfolio. Interest on loan portfolio increased S/1.8 million mainly due to an increase in the prime rate and placement of new loans.

Interest and Similar Expenses

The following table presents the components of interest and similar expenses for our wealth management segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March  31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar expenses
Interest and fees on deposits and obligations		(11.3	)		(8.7	)		(2.6	)		30.4	%
Interests on bonds, notes and other obligations		(0.2	)		0.0			(0.2	)		N/M
Interest and fees on obligations with financial institutions and others		(3.4	)		(0.5	)		(2.9	)		N/M
Total		(14.9	)		(9.1	)		(5.7	)		62.7	%
Nominal average rate		2.0	%		1.6	%

Interest and similar expenses increased 62.7% mainly as a result of growth in interest and fees in obligations with financial institutions and others, as well as a 30.4% increase in interest and fees on deposits and obligations.

Interest and fees on obligations with financial institutions and others increased S/2.9 million due to the acquisition of new loans with banks during the first half of 2018.

Interest and fees on deposits and obligations increased S/2.6 million as a result of a S/405.5 million increase in deposit balances.

Impairment Loss on Loans, Net of Recoveries

Inteligo’s loan portfolio had no delinquencies for the three months ended March 31, 2019 and 2018. Inteligo’s impairment loss on loans was S/0.1 million in the three months ended March 31, 2019.

Recovery (Loss) due to Impairment of Financial Investments

In the three months ended March 31, 2019, Inteligo’s impairment loss on financial investments was S/0.5 million, as compared to a S/2.3 million recovery for the corresponding period of 2018.

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Fee Income from Financial Services, Net

The following table presents the components of fee income from financial services, net for our wealth management segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March  31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Income
Maintenance and mailing of accounts, transfer fees and commissions on credit and debit card		0.9			1.0			(0.1	)		(10.0	)%
Funds management fees		35.4			38.2			(2.8	)		(7.3	)%
Brokerage and custody services fees		2.4			3.7			(1.3	)		(34.3	)%
Others		0.6			1.3			(0.7	)		(54.1	)%
Total		39.3			44.2			(4.9	)		(11.0	)%
Expenses
Brokerage and custody services		(0.2	)		(1.0	)		0.7			(74.9	)%
Others		(0.1	)		(0.1	)		(0.0	)		3.6	%
Total		(0.4	)		(1.1	)		0.7			(65.4	)%
Net		38.9			43.1			(4.2	)		(9.7	)%

Fee income from financial services, net decreased 9.7% mainly due to reductions of S/2.8 million in funds management fees and S/1.3 million in brokerage and custody service fees. This was mainly attributable to a lower brokerage activity amid higher volatility in global markets since December 2018 and lower structured products issuance during the three months ended March 31, 2019.

Other Income

The following table presents the components of other income for our wealth management segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March  31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)		%
Net gain on sale of financial investments		24.5			11.6			13.0		N/M
Net gains (losses) on financial assets at fair value through profit or loss		14.8			(7.5	)		22.3		N/M
Other		(2.5	)		(3.0	)		0.5		(17.3	)%
Other income		36.8			1.1			35.8		N/M

Other income increased S/35.8 million due to growth of S/22.3 million in net gains and S/13.0 million in net gain on sale of financial investments, attributable to an increase in mark-to-market valuations on Inteligo’s proprietary portfolio and strong market conditions caused by the market rebound during the three months ended March 31, 2019 that prompted the sale of certain investments.

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Other Expenses

The following table presents the components of other expenses for our wealth management segment for the three months ended March 31, 2019 and 2018.

	For the three months ended March 31, (Unaudited)
	2019			2018			Change
	(S/ in millions)						(S/ in millions)			%
Salaries and employee benefits		(15.1	)		(14.2	)		(0.9	)		6.1	%
Administrative expenses		(9.2	)		(10.0	)		0.7			(7.1	)%
Depreciation and amortization		(2.5	)		(2.2	)		(0.3	)		14.1	%
Other		(0.1	)		(0.1	)		0.0			N/M
Total other expenses		(26.9	)		(26.4	)		(0.5	)		1.7	%

Total other expenses increased 1.7% mainly explained by growth of 14.1% in depreciation and amortization and 6.1% in salaries and employee benefits, partially offset by a 7.1% reduction in administrative expenses.

Depreciation and amortization increased S/0.3 million related to IT investments.

Inteligo’s efficiency ratio is calculated by dividing salaries and employee benefits plus administrative expenses plus depreciation and amortization by net interest and similar income plus net fee income from financial services plus other income. Our wealth management segment’s efficiency ratio improved from 38.3% for the three months ended March 31, 2018 to 25.2% for the corresponding period of 2019.

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Financial Condition as of December 31, 2018 Compared to December 31, 2017

The following table sets forth the principal components of our consolidated statement of financial position as of December 31, 2018 and December 31, 2017.

	As of December 31, 2018			As of December 31, 2017			Change
	(S/ in millions)						(S/ in millions)			%
Assets
Cash, due from banks and inter-banks funds		8,875.4			11,608.4			(2,732.9	)		(23.5	)%
Financial investments		17,629.4			16,924.1			705.3			4.2	%
Loans, net of unearned interest		34,325.7			29,406.3			4,919.4			16.7	%
Impairment allowance for loans		(1,364.8	)		(1,202.1	)		(162.7	)		13.5	%
Investment property		986.5			1,118.6			(132.1	)		(11.8	)%
Property, furniture and equipment, net		622.5			612.6			9.9			1.6	%
Intangibles and goodwill, net		954.5			921.6			33.0			3.6	%
Other assets		1,715.0			1,005.0			710.0			70.7	%
Total assets		63,744.4			60,394.5			3,349.9			5.5	%
Liabilities and equity
Deposits and obligations		33,682.0			32,607.6			1,074.3			3.3	%
Due to banks and correspondents and inter-bank funds		4,293.4			4,437.4			(144.0	)		(3.2	)%
Bonds, notes and other obligations		6,496.8			5,602.4			894.4			16.0	%
Insurance contract liabilities		10,300.5			10,514.5			(214.0	)		(2.0	)%
Other liabilities		1,883.4			1,395.7			487.7			34.9	%
Total liabilities		56,655.9			54,557.6			2,098.3			3.8	%
Equity, net
Equity attributable to IFS’s shareholders		7,048.1			5,800.5			1,247.5			21.5	%
Non-controlling interest		40.4			36.4			4.0			11.1	%
Total equity, net		7,088.5			5,836.9			1,251.6			21.4	%
Total liabilities and equity net		63,744.4			60,394.5			3,349.9			5.5	%

Our assets were S/63.7 billion as of December 31, 2018, a 5.5% increase from S/60.4 billion as of December 31, 2017. This was mainly driven by a 16.7% growth in loans, net of unearned interest, mainly as a result of higher commercial and retail loan balances at Interbank. Growth in commercial loans was due to higher short- and medium-term loans, mostly in corporate and medium-sized companies. The increase in retail loans was due to growth in credit cards, other consumer loans and mortgages.

Our liabilities reached S/56.7 billion as of December 31, 2018, a 3.8% increase from S/54.6 billion as of December 31, 2017. This was mainly driven by growth of 16.0% in bonds, notes and other obligations, and 3.3% in deposits and obligations. Bonds, notes and other obligations increased mainly due to the issuance of a senior bond in the international market at Interbank for U.S.$200 million in January 2018, due January 2023. The increase in deposits and obligations was mainly explained by higher retail and commercial deposits at Interbank, as well as by higher interest-bearing deposits at Inteligo.

Our net equity was S/7.1 billion as of December 31, 2018, a 21.4% increase from S/5.8 billion as of December 31, 2017, mainly driven by the capitalization of earnings at Interbank.

For more information of our liquidity, capital resources and commitments and obligations, see “—Commitments and Contractual Obligations” and “—Liquidity and Capital Resources”.

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Results of Operations for the Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017

The following table sets forth the principal components of our consolidated profit for the year ended December 31, 2018 and 2017.

	For the years ended December 31,
	2018			2017 (restated)(1)			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar income		4,321.3			3,809.0			512.3			13.4	%
Interest and similar expenses		(1,170.6	)		(1,119.9	)		(50.7	)		4.5	%
Net interest and similar income		3,150.7			2,689.1			461.6			17.2	%
Impairment loss on loans, net of recoveries (2)		(660.1	)		(827.9	)		167.9			N/M
Recovery (loss) due to impairment of financial investments (2)		13.1			(20.8	)		33.8			N/M
Net interest and similar income after impairment loss		2,503.7			1,840.4			663.3			36.0	%
Fee income from financial services, net		874.4			849.2			25.2			3.0	%
Other income		408.7			518.0			(109.2	)		N/M
Total net premiums earned minus claims and benefits		(407.5	)		(152.9	)		(254.5	)		N/M
Total other expenses		(1,837.5	)		(1,710.6	)		(126.9	)		7.4	%
Income before translation result and income tax		1,541.9			1,344.1			197.8			14.7	%
Translation result		(35.0	)		15.9			(50.9	)		N/M
Income Tax		(415.5	)		(326.5	)		(89.0	)		27.3	%
Net profit for the year		1,091.4			1,033.5			57.9			5.6	%
Attributable profit to:
IFS’ shareholders		1,084.3			1,027.4			56.9			5.5	%
Non-controlling interest		7.1			6.1			1.0			17.1	%

(1) Our financial information for 2017 was restated as a result of a voluntary change in accounting policy regarding the method of accounting for the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited annual consolidated financial statements.

(2) As permitted by IFRS 9, we have not restated the comparative information for 2017 and prior periods for financial instruments within the scope of IFRS 9. Therefore, the comparative information for 2017 and prior periods is reported under IAS 39 and is not comparable to the information presented for 2018.

Our net profit was S/1,091.4 million for 2018, a 5.6% increase compared to 2017. This was mainly driven by growth of S/461.6 million in net interest and similar income, and S/25.2 million in fee income from financial services, in addition to a S/167.9 million decrease in impairment loss on loans and a S/13.1 million recovery due to impairment of financial investments. These effects were partially offset by reductions of S/254.5 million in total premiums earned minus claims and benefits, and S/109.2 million in other income, as well as by a S/126.9 million increase in other expenses.

The increase in net interest and similar income was mainly due to higher interest on financial investments related to the acquisition of Seguros Sura’s portfolio at Interseguro, higher interest on loan portfolio at Interbank, and lower interest and similar expenses at Inteligo, partially offset by an increase in interest and fees on deposits and obligations at Interbank.

The increase in fee income from financial services was mainly a result of higher commissions from credit card services at Interbank, as well as the increase in assets under management at Inteligo.

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Impairment loss on loans for 2017 and prior periods is reported under IAS 39 and is therefore not comparable to the information presented for 2018 reported under IFRS 9. In 2018, impairment loss was driven by increases in provisions due to an increase in the volume of consumer loans, offset by a release of provisions related to the construction sector that were established upon the adoption of IFRS 9, as of January 1, 2018, and an improving risk profile of our retail customers. Our impairment loss for 2017 included an increase in provisions driven by the negative effect on the risk profile of our loan portfolio caused by El Niño.

The S/13.1 million recovery due to impairment of financial investments was mainly due to impairment loss of S/15.3 million of certain funds reported in 2017 at Inteligo, as well as a S/11.3 million recovery at Interseguro, due to the reversion of provisions for impairment loss on investments which were sold in 2018.

The decrease in total premiums earned minus claims and benefits was due to growth of S/323.8 million in net claims and benefits incurred for life insurance contracts and others, and S/76.6 million in adjustments of technical reserves, partially offset by an increase of S/145.9 million in net premiums. In particular, we adopted new mortality tables for our insurance business during 2018, which resulted in a negative impact of S/144.8 million due to the aggregate effect recorded in technical reserves on policies issued prior to the date of adoption. See “—Change in accounting estimate.” This negative impact was partially offset by increased premiums due to the incorporation of a full year of Seguros Sura’s results compared to two months in 2017.

The decrease in other income was mainly explained by lower net gain on sale of financial investments at all of our subsidiaries, partially offset by a higher net gain on investment property at Interseguro. Due to the adoption of IFRS 9 starting in 2018 gain on sale of equity instruments at fair value through other comprehensive income is accounted in equity and accordingly is not comparable with 2017.

The increase in other expenses was mainly due to growth in depreciation and amortization charges, salaries and employee benefits, and administrative expenses at Interbank, as well as to higher salaries and employee benefits at Interseguro.

Our ROE was 16.6% and our adjusted ROE was 18.6% for 2018, lower than the 19.3% for 2017. Our ROA was 1.8% and our adjusted ROA was 2.0% compared to 2.0% for 2017.

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Results of Operations by Segment

The following table presents an overview of certain consolidated income statement data for each of our segments for the year ended December 31, 2018 and 2017.

	Banking						Insurance						Wealth Management						Holding and eliminations						Consolidated
	2018			2017			2018			2017 (1)			2018			2017			2018			2017			2018			2017 (1)
										(restated)			(S/ in millions)															(restated)
Interest and similar income		3,559.1			3,346.2			611.0			334.8			154.1			151.8			(2.9	)		(23.8	)		4,321.3			3,809.0
Interest and similar expenses		(1,067.7	)		(1,047.1	)		(54.3	)		(19.7	)		(44.1	)		(53.9	)		(4.4	)		0.8			(1,170.6	)		(1,119.9	)
Net interest and similar income		2,491.4			2,299.1			556.6			315.0			110.0			97.9			(7.3	)		(23.0	)		3,150.7			2,689.1
Impairment loss on loans, net of recoveries (2)		(660.9	)		(830.5	)		0.0			0.0			0.8			2.5			0.0			0.0			(660.1	)		(827.9	)
Recovery (loss) due to impairment of financial investments (2)		(0.1	)		0.0			11.3			(5.5	)		1.8			(15.3	)		0.0			0.0			13.1			(20.8	)
Net interest and similar income after impairment loss		1,830.5			1,468.7			568.0			309.5			112.6			85.2			(7.3	)		(23.0	)		2,503.7			1,840.4
Fee income from financial services, net		759.5			740.5			(4.6	)		(3.7	)		164.2			152.0			(44.7	)		(39.6	)		874.4			849.2
Other income		309.7			368.3			67.6			112.9			33.2			76.7			(1.9	)		(39.9	)		408.7			518.0
Total net premiums earned minus claims and benefits		0.0			0.0			(407.5	)		(152.9	)		0.0			0.0			0.0			0.0			(407.5	)		(152.9	)
Total other expenses		(1,502.7	)		(1,399.2	)		(273.7	)		(226.8	)		(106.5	)		(111.7	)		45.4			27.1			(1,837.5	)		(1,710.6	)
Income (loss) before translation result and income tax		1,397.0			1,178.2			(50.1	)		39.0			203.5			202.2			(8.5	)		(75.4	)		1,541.9			1,344.1
Translation result		(10.2	)		13.9			(11.4	)		0.9			(0.2	)		1.2			(13.2	)		(0.1	)		(35.0	)		15.9
Income tax		(375.9	)		(298.6	)		0.0			0.0			(5.7	)		(4.3	)		(33.9	)		(23.6	)		(415.5	)		(326.5	)
Net profit (loss) for the year		1,010.9			893.5			(61.5	)		39.9			197.5			199.2			(55.6	)		(99.1	)		1,091.4			1,033.5
Attributable to:
IFS’ shareholders		1,010.9			893.5			(61.5	)		40.0			197.5			199.2			(62.7	)		(105.3	)		1,084.3			1,027.4
Non-controlling interest		0.0			0.0			0.0			(0.1	)		0.0			0.0			7.1			6.2			7.1			6.1

(1) Our financial information for 2017 was restated as a result of a voluntary change in accounting policy regarding our method of accounting for the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited annual consolidated financial statements.

(2) As permitted by IFRS 9, we have not restated the comparative information for 2017 and prior periods for financial instruments within the scope of IFRS 9. Therefore, the comparative information for 2017 and prior periods is reported under IAS 39 and is not comparable to the information presented for 2018.

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The discussion below covers each of our reported segments, and corresponds to information before adjustments and eliminations for consolidation, and for 2018 and 2017, in accordance with IFRS.

Banking

Interbank’s net profit reached S/1,010.9 million for 2018, a 13.1% increase compared to 2017. The main factors that contributed to this result were growth of 8.4% in net interest and similar income, and 2.6% in fee income from financial services, as well as a 20.4% reduction in impairment loss on loans. These factors were partially offset by a 15.9% decrease in other income, in addition to a 7.4% increase in other expenses and a higher effective tax rate.

Interbank’s net interest margin was 5.5% for 2018, in line with 2017.

Interbank’s ROE was 20.2% for 2018, slightly higher than the 20.1% reported for 2017.

Interest and Similar Income

The following table presents the components of interest and similar income for our banking segment for the year ended December 31, 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)		%
Interest and similar income
Interest on loan portfolio		3,290.9			3,120.4			170.5		5.5	%
Interest on financial investments		221.0			200.0			21.1		10.5	%
Interest on due from banks and inter-bank funds		47.2			25.9			21.3		82.3	%
Total		3,559.1			3,346.2			212.9		6.4	%
Nominal average rate		7.9	%		8.0	%

Interest and similar income grew 6.4% due to increases of 82.3% in interest on due from banks and inter-bank funds, 10.5% in interest on financial investments and 5.5% in interest on loan portfolio.

Interest on due from banks and inter-bank funds grew S/21.3 million, or 82.3%, explained by an increase of 20 basis points in the nominal average rate, partially offset by a 10.8% reduction in the average volume. The increase in the nominal average rate was due to higher returns on deposits and reserve requirements at the Central Reserve Bank of Peru, partially offset by a lower return on inter-bank funds. On the other hand, the reduction in the average volume was the result of lower balances on reserve requirements at the Central Reserve Bank of Peru, partially offset by higher inter-bank funds and deposits at the Central Reserve Bank of Peru.

The S/21.1 million higher interest on financial investments was due to a 20.7% growth in the average volume, partially offset by a 30 basis point decrease in the average rate. The increase in volume was a result of higher investments in sovereign, global and corporate bonds from non-financial institutions, partially offset by lower balances on Central Reserve Bank Certificates of Deposits (“CDBCR”). On the other hand, the reduction in the average rate was the result of lower returns on CDBCR, sovereign bonds and corporate bonds from financial institutions.

The increase in interest on loan portfolio accounted for most of the growth in interest and similar income, and was attributed to a 11.6% higher average volume, partially offset by a 60 basis point decrease in the nominal average rate, from 11.5% in 2017 to 10.9% in 2018. The higher average volume of loans was attributed

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to increases of 12.1% in retail loans and 11.0% in commercial loans. In the retail portfolio, the increase was mainly explained by growth of 13.8% in mortgages, 11.8% in payroll deduction loans and 11.5% in credit cards; while in the commercial portfolio, by increases of 40.5% in trade finance loans and 8.0% in short and medium-term loans, partially offset by a 1.6% reduction in leasing operations. The decrease in the average rate was mainly explained by yield reductions of 80 basis points in retail loans and 50 basis points in commercial loans. In the retail loan portfolio, the average yield decreased as a consequence of lower rates on consumer loans and mortgages; while in the commercial portfolio, it mainly decreased due to lower yields on trade finance loans, short and medium-term loans, and leasing operations.

The nominal average yield on interest-earning assets decreased slightly from 8.0% 2017 to 7.9% in 2018, mainly explained by lower returns on investments and loans, which were partially offset by a higher yield on cash and due from banks.

Interest and Similar Expenses

The following table presents the components of interest and similar expenses for our banking segment for the year ended December 31, 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar expenses
Interest and fees on deposits and obligations		(570.0	)		(522.0	)		(47.9	)		9.2	%
Interests on bonds, notes and other obligations		(330.7	)		(303.5	)		(27.2	)		9.0	%
Interest and fees on obligations with financial institutions and others		(167.1	)		(221.6	)		54.5			(24.6	)%
Total		(1,067.7	)		(1,047.1	)		(20.6	)		2.0	%
Nominal average rate		2.7	%		2.9	%

Interest and similar expenses increased 2.0% due to growth of 9.2% in interest and fees on deposits and obligations, and 9.0% in interest on bonds, notes and other obligations, partially offset by a decrease of 24.6% in interest and fees on obligations with financial institutions and others.

The growth in interest and fees on deposits and obligations was due to an 11.2% increase in the average volume, while the average cost remained stable. The growth in volume was attributed to increases in commercial, retail and institutional deposits. By currency, average balances of soles deposits grew 16.5% while average dollar deposits increased 3.8%. The stable average cost of deposits resulted from higher rates paid to retail deposits that were offset by lower rates on institutional deposits, while the average cost of commercial deposits remained stable in 2018.

Interest on bonds, notes and other obligations grew mainly explained by the issuance of a senior bond in the international market for U.S.$200 million in January 2018, in addition to hedging transactions for a total amount of U.S.$400 million (notional) executed throughout the year. In addition to the issuance of new debt, an exchange offer was executed for existing senior bonds due October 2020. As a result of this transaction, U.S.$285 million were exchanged from 5.750% senior notes due 2020 to 3.375% senior notes due 2023.

Interest and fees on obligations with financial institutions and others decreased as a result of reductions of 21.0% in the average volume and 20 basis points in the average cost. The reduction in the average volume was mainly due to lower funding provided by the Central Reserve Bank of Peru and from correspondent banks abroad, as well as from COFIDE. The decrease in the nominal average cost was explained by lower rates on funding provided by the Central Reserve Bank of Peru and from banks abroad, partially offset by higher rates on inter-bank funds and funding provided by COFIDE.

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The average cost of funds decreased from 2.9% in 2017 to 2.7% in 2018; mainly due to the lower cost of obligations with financial institutions and others, from 4.2% in 2017 to 4.0% in 2018, as well as to a decline in the cost of bonds, notes and other obligations, from 6.7% in 2017 to 6.5% in 2018.

Impairment Loss on Loans, Net of Recoveries

The following table presents the components of impairment loss on loans, net of recoveries for our banking segment for 2018 under IFRS 9 and 2017 under IAS 39. Information for 2017 and prior periods reported under IAS 39 are not comparable to the information presented for 2018.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)		%
Impairment loss on loans, net of recoveries		(660.9	)		(830.5	)		169.6		N/M
Past-due loan ratio (at period end)		2.6	%		2.9	%
Provision expense as a percentage of average total loans		2.2	%		3.1	%
Coverage ratio (at period end)		130.4	%		151.2	%
Impairment allowance for loans (at period end)		1,364.7			1,201.2

Impairment loss on loans, net of recoveries decreased 20.4% for 2018 when compared to 2017. In 2018, impairment loss was driven by increases in provisions due to an increase in the volume of consumer loans, offset by a release of provisions related to the construction sector that were established upon the adoption of IFRS 9 as of January 1, 2018, and an improving risk profile of our retail customers. Our impairment loss for 2017 included an increase in provisions driven by the negative effect on the risk profile of our loan portfolio caused by El Niño.

Coverage ratios for 2018 and 2017 are not comparable. For 2017, the ratio is defined as impairment allowance for loan losses divided by average past due loans, while for 2018, as impairment allowance for loan losses divided by the sum of Exposure at Default in Stage 3 and refinanced loans, as defined in Notes 4.4 (h) and 31.1 (d) to the audited annual consolidated financial statements.

101

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Fee Income from Financial Services, Net

The following table presents the components of fee income from financial services, net for our banking segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Income
Maintenance and mailing of accounts, transfer fees and commissions on credit and debit card		620.6			596.8			23.9			4.0	%
Commissions for banking services		316.5			317.6			(1.1	)		(0.4	)%
Funds management fees		0.0			0.0			0.0			N/M
Fees from indirect loans		61.8			60.4			1.4			2.3	%
Collection services fees		37.3			32.9			4.4			13.2	%
Brokerage and custody services fees		0.0			0.0			0.0			N/M
Others		30.0			29.1			0.9			3.1	%
Total		1,066.3			1,036.9			29.4			2.8	%
Expenses
Credit cards		(103.6	)		(81.5	)		(22.2	)		27.2	%
Debtor’s life insurance premiums		(143.4	)		(161.7	)		18.3			(11.3	)%
Fees paid to foreign banks		(15.3	)		(12.9	)		(2.4	)		18.5	%
Brokerage and custody services		0.0			0.0			0.0			N/M
Others		(44.4	)		(40.3	)		(4.1	)		10.2	%
Total		(306.7	)		(296.3	)		(10.4	)		3.5	%
Net		759.5			740.5			19.0			2.6	%

The 2.6% increase in fee income from financial services, net was mainly attributable to growth of S/23.9 million in maintenance and mailing of accounts, transfer fees and commissions on credit and debit card services, and S/4.4 million in fees from collection services, as well as S/18.3 million decrease in expenses on debtor’s life insurance premiums. These effects were partially offset by a S/22.2 million increase in credit card expenses.

Other Income

Due to the adoption of IFRS 9 starting in 2018, gain on sale of equity instruments at fair value through other comprehensive income is accounted in equity and accordingly is not comparable with 2017. The following table presents the components of other income for our banking segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017		Change
	(S/ in millions)					(S/ in millions)			%
Net gain on foreign exchange transactions		228.2			201.8		26.4			13.1	%
Net gain on sale of financial investments		16.4			64.8		(48.5	)		(74.8	)%
Net gains (losses) on financial assets at fair value through profit or loss		(8.6	)		11.4		(20.0	)		N/M
Other		73.8			90.2		(16.4	)		(18.2	)%
Other income		309.7			368.3		(58.6	)		(15.9	)%

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Other income decreased 15.9%, mainly due to a S/48.5 million decrease in net gain on sale of financial investments and a S/8.6 million net loss on financial assets at fair value in 2018. Income from sale of financial investments increased considerably under the prevailing IAS 39 accounting standards in 2017, due to the sale of part of an equity investment, which resulted in a S/27.2 million gain. The sale of another portion of the same equity investment in 2018 was accounted for under IFRS 9 standards, with the effect being recorded in retained earnings instead of through profit or loss.

Other Expenses

The following table presents the components of other expenses for our banking segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Salaries and employee benefits		(622.8	)		(594.0	)		(28.8	)		4.8	%
Administrative expenses		(693.7	)		(640.8	)		(52.9	)		8.3	%
Depreciation and amortization		(138.5	)		(127.4	)		(11.1	)		8.7	%
Other		(47.6	)		(37.0	)		(10.7	)		28.8	%
Total other expenses		(1,502.7	)		(1,399.2	)		(103.5	)		7.4	%

The efficiency ratio deteriorated from 40.0% in 2017 to 40.9% in 2018, mainly due to increases of 8.7% in depreciation and amortization, 8.3% in administrative expenses, and 4.8% in salaries and employee benefits.

Income Before Translation Result and Income Tax

Income before translation result and income tax increased 18.6% for 2018 compared to 2017, which was then affected by a negative translation result and a higher effective tax rate, from 25.1% for 2017 to 27.1% for 2018. As a result, profit for the period increased 13.1% compared to 2017.

Insurance

Interseguro’s result attributable to shareholders for 2018 was a loss of S/61.5 million, compared to a profit of S/39.9 million for 2017.

This performance was mainly due to decreases of 166.4% in total premiums earned minus claims and benefits, and 40.1% in other income, in addition to a 20.6% growth in other expenses. These effects were partially offset by a 76.7% increase in net interest and similar income. The decline in total premiums earned minus claims and benefits was mainly explained by the effect in technical reserves of S/144.8 million as a result of the adoption of new mortality tables published by the SBS in 2018. See Notes 4.6(a) and 4.6(b) of our audited annual consolidated financial statements.

103

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Net Interest and Similar Income

The following table presents the components of net interest and similar income for our insurance segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar income		611.0			334.8			276.2			82.5	%
Interest and similar expense		(54.3	)		(19.7	)		(34.6	)		N/M
Net interest and similar income		556.6			315.0			241.6			76.7	%

Net interest and similar income increased 76.7% mainly due to higher interest on fixed income investments as a result of a higher volume of assets due to the acquisition of Seguros Sura in November 2017 the effect of which was felt only in the results of the final quarter of 2017.

Other Income, Net

The following table presents the components of other income for our insurance segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Net (loss) gain on sale of financial investments		(30.7	)		65.0			(95.7	)		N/M
Net (loss) gain on financial assets at fair value through profit or loss		(1.4	)		8.2			(9.6	)		N/M
Rental income		32.9			27.3			5.5			20.3	%
Gain on sale of investment property		4.7			0.0			4.7			N/M
Net gain (loss) on investment property		47.8			(1.9	)		49.6			N/M
Other		14.4			14.2			0.2			1.5	%
Other income, net		67.6			112.9			(45.2	)		(40.1	)%

Other income decreased 40.1% mainly explained by a S/95.7 million reduction in net gain on sale of financial investments due to a loss recognized on a portion of the investment portfolio acquired from Seguros Sura, partially offset by a S/47.8 million net gain on investment property in 2018.

Recovery (Loss) due to Impairment of Financial Investments

Interseguro registered a S/11.3 million recovery due to impairment of financial investments, mainly due to the reversion of provisions for impairment loss on certain investments which were sold.

104

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Total Net Premiums earned Minus Claims and benefits

The following table presents the components of total premiums earned minus claims and benefits for our insurance segment for the year ended December 31, 2018 and 2017.

	For the years ended December 31,
	2018			2017 (restated) (1)			Change
	(S/ in millions)						(S/in millions)			%
Premiums assumed		762.1			533.6			228.5			42.8	%
Premiums ceded to reinsurers		(116.7	)		(34.1	)		(82.6	)		N/M
Adjustment of technical reserves		(316.8	)		(240.2	)		(76.6	)		31.9	%
Net claims and benefits incurred for life insurance contracts and others		(736.0	)		(412.3	)		(323.8	)		78.5	%
Total net premiums earned minus claims and benefits		(407.5	)		(152.9	)		(254.5	)		N/M

(1) Our financial information for 2017 was restated as a result of a voluntary change in accounting policy regarding our method of accounting for the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited annual consolidated financial statements.

Total net premiums earned minus claims and benefits decreased S/254.5 million due to increases of S/323.8 million in net claims and benefits incurred for life insurance contracts and others, and S/76.6 million in adjustment of technical reserves, partially offset by a S/145.9 million increase in net premiums.

The acquisition of Seguros Sura was the main driver for growth in net claims and benefits incurred for life insurance contracts and others for the year ended December 31, 2018, as Interseguro acquired Seguros Sura’s client portfolio in annuities and individual life. On the other hand, the increase in net premiums was related mainly to new annuity policies written during the year.

105

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Net Premiums

Net premiums represent the difference between premiums assumed and premiums ceded to reinsurers. The following table presents net premiums by business line for our insurance segment for the year ended December 31, 2018 and 2017.

	For the years ended December 31,
	2018		2017		Change
	(S/ in millions)				(S/ in millions)			%
Annuities (1)		317.4		236.8		80.6			34.0	%
Individual Life		126.7		61.7		65.0			N/M
Retail Insurance		201.2		201.0		0.2			0.1	%
Credit Life Insurance		105.1		123.5		(18.4	)		(14.9	)%
Mandatory Traffic Accident (SOAT)		33.6		30.7		2.9			9.4	%
Card Protection		42.3		28.3		14.0			49.7	%
Others		20.3		18.5		1.8			9.4	%
Net Premiums (2)		645.4		499.5		145.9			29.2	%

(1) Annuities include premiums from pension-related insurance (disability and survivorship).

(2) Private annuities are not included as premiums assumed.

Net premiums increased 29.2% mainly due to growth of S/80.6 million in annuities and S/65.0 million in individual life. These increases, supported mainly by pensions for disability and survivorship, were boosted by the acquisition of Seguros Sura in November 2017.

Adjustment of Technical Reserves

The following table presents adjustment of technical reserves by business line for our insurance segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017     (restated) (1)			Change
	(S/ in millions)						(S/ in millions)			%
Annuities		(271.7	)		(203.4	)		(68.3	)		33.6	%
Individual Life		(40.9	)		(36.0	)		(4.9	)		13.5	%
Retail Insurance		(4.2	)		(0.8	)		(3.4	)		N/M
Adjustment of technical reserves		(316.8	)		(240.2	)		(76.6	)		31.9	%

(1) Our financial information for 2017 was restated as a result of a voluntary change in accounting policy regarding our method of accounting the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited annual consolidated financial statements.

Adjustment of technical reserves increased 31.9% mainly explained by the accounting policy change due the adoption of new mortality tables which show recent changes in life expectancy, that resulted in a negative impact of S/144.8 million due to the aggregate effect recorded in technical reserves on policies issued prior to the date of adoption, as well as higher net premiums, partially offset by the release of technical reserves as a result of policies acquired from Seguros Sura that had begun to pay benefits. This is a change in accounting estimates and is described in Note 4.6(a) to our audited annual consolidated financial statements.

106

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Net Claims and Benefits Incurred for Life Insurance Contracts and Others

The following table presents net claims and benefits incurred for life insurance contracts and others by business line for our insurance segment.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Annuities (1)		(666.1	)		(353.0	)		(313.1	)		88.7	%
Individual Life		(6.1	)		(1.9	)		(4.2	)		N/M
Retail Insurance		(63.8	)		(57.3	)		(6.5	)		11.3	%
Credit Life Insurance		(45.0	)		(37.9	)		(7.1	)		18.8	%
Mandatory Traffic Accident (SOAT)		(14.3	)		(17.1	)		2.9			(16.7	)%
Card Protection		(1.5	)		(0.7	)		(0.7	)		N/M
Others		(3.1	)		(1.6	)		(1.5	)		92.4	%
Net claims and benefits incurred (2)		(736.0	)		(412.3	)		(323.8	)		78.5	%

(1) Annuities include claims from pension-related insurance (disability and survivorship).

(2) Private Annuities are not included as premiums assumed.

Net claims and benefits incurred for life insurance contracts and others increased 78.5% mainly as a result of higher claims related to annuities during the period. Annuity claims increased S/313.1 million, reflecting the growth of Interseguro’s annuities business due to the acquisition of Seguros Sura in November 2017.

Other Expenses

The following table presents the components of other expenses for our insurance segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Salaries and employee benefits		(74.8	)		(61.0	)		(13.8	)		22.6%
Administrative expenses		(44.6	)		(37.7	)		(6.9	)		18.2%
Depreciation and amortization		(17.0	)		(9.7	)		(7.3	)		75.9%
Expenses related to rental income		(3.9	)		(0.7	)		(3.2	)		N/M
Other		(133.3	)		(117.7	)		(15.6	)		13.2%
Total other expenses		(273.7	)		(226.8	)		(46.8	)		20.6%

Other expenses increased 20.6%, mainly due growth of S/13.8 million in salaries and employee benefits, S/7.3 million in depreciation and amortization and S/6.9 million in administrative expenses.

Wealth Management

Inteligo’s net profit was S/197.5 million for 2018, a 0.8% decrease compared to 2017. The main factor that contributed to this result was a reduction of capital gains in the investment portfolio, partially offset by growth of 12.4% in net interest and similar income and 8.0% in fee income, in addition to an impairment loss of S/15.3 million of certain investments reported in 2017. Inteligo’s ROE was 25.7% for 2018, below the 26.7% registered in the same period in 2017.

107

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Interest and Similar Income

The following table presents the components of interest and similar income for our wealth management segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar income
Interest on loan portfolio		65.9			81.2			(15.3	)		(18.9	)%
Interest on financial investments		83.7			66.4			17.3			26.1	%
Interest on due from banks and inter-bank funds		4.5			4.2			0.3			6.9	%
Total		154.1			151.8			2.3			1.5	%
Nominal average rate		4.8	%		4.3	%

Interest and similar income increased 1.5% due to growth of 26.1% in interest on financial investments and 6.9% in interest on due from banks and inter-bank funds, partially offset by a 18.9% decrease in interest on loan portfolio.

Interest on financial investments increased S/17.3 million mainly due to higher interest on fixed income securities. Interest on loan portfolio decreased S/15.3 million mainly due to a decrease in cash collateralized loans.

Interest and Similar Expenses

The following table presents the components of interest and similar expenses for our wealth management segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar expenses
Interest and fees on deposits and obligations		(36.6	)		(51.6	)		15.0			(29.1	)%
Interests on bonds, notes and other obligations		(1.2	)		(1.9	)		0.7			(38.3	)%
Interest and fees on obligations with financial institutions and others		(6.4	)		(0.4	)		(6.0	)		N/M
Total		(44.1	)		(53.9	)		9.8			(18.1	)%
Nominal average rate		1.8	%		1.9	%

Interest and similar expenses decreased 18.1% mainly as a result of a 29.1% reduction in interest and fees on deposits and obligations, partially offset by an increase in interest and fees on obligations with financial institutions and others.

Interest and fees on deposits and obligations decreased S/15.0 million as a result of a 29.8% decrease in deposits pledged as collateral of loans, which have a higher nominal average rate than other deposits.

Interest and fees on obligations with financial institutions and others increased S/6.0 million due to the acquisition of new loans with banks.

108

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Impairment Loss on Loans, Net of Recoveries

Impairment loss on loans for 2017 and prior periods is reported under IAS 39 and is therefore not comparable to the information presented for 2018 reported under IFRS 9. Inteligo’s loan portfolio had no delinquencies in 2018 or 2017. Inteligo’s impairment loss on loans decreased by S/1.7 million in 2018 compared to 2017 as a result of the net effect of (1) the expected credit loss calculation according to IFRS 9 in 2018 and (2) the adjustment by S/2.5 million for 2017 after an update of credit risk parameters under IAS 39.

Recovery (Loss) due to Impairment of Financial Investments

Impairment recovery due to impairment of financial investments for 2017 and prior periods is reported under IAS 39 and is therefore not comparable to the information presented for 2018 reported under IFRS 9. In 2017, Inteligo’s loss due to impairment of financial investments was S/15.3 million. In 2018 no impairment loss was reported.

Fee Income from Financial Services, Net

The following table presents the components of fee income from financial services, net for our wealth management segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Income
Maintenance and mailing of accounts, transfer fees and commissions on credit and debit card		2.9			4.3			(1.5	)		(34.2	)%
Funds management fees		148.1			139.2			8.9			6.4	%
Brokerage and custody services fees		12.3			12.6			(0.4	)		(2.9	)%
Others		3.8			0.0			3.7			N/M
Total		167.0			156.2			10.8			6.9	%
Expenses
Brokerage and custody services		(2.4	)		(3.8	)		1.4			(36.1	)%
Others		(0.4	)		(0.4	)		0.0			(1.6	)%
Total		(2.8	)		(4.2	)		1.4			(32.6	)%
Net		164.2			152.0			12.2			8.0	%

Fee income from financial services, net increased 8.0% due to an S/8.9 million growth in funds management fees. This was mainly attributable to an 8.4% growth in assets under management. Fees from brokerage and custody services remained relatively stable.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Other Income

The following table presents the components of other income for our wealth management segment for 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Net gain on sale of financial investments		28.6			83.9			(55.4	)		(66.0	)%
Net gains (losses) on financial assets at fair value through profit or loss		14.3			(0.0	)		14.3			N/M
Other		(9.6	)		(7.2	)		(2.4	)		33.2	%
Other income		33.2			76.7			(43.5	)		(56.7	)%

Other income decreased 56.7% due to a S/55.4 million reduction in net gain on sale of financial investments, explained by high volatility and unfavorable market conditions. This was partially offset by a S/14.3 million net gain on financial assets at fair value, attributable to positive mark-to-market valuations of securities, which had an impact on Inteligo’s results since the implementation of IFRS 9. Under IAS 39 such mark-to-market valuations were recorded as unrealized gains (loss) in equity.

Other Expenses

The following table presents the components of other expenses for our wealth management segment 2018 and 2017.

	For the years ended December 31,
	2018			2017			Change
	(S/ in millions)						(S/ in millions)			%
Salaries and employee benefits		(58.8	)		(59.4	)		0.6			(1.1	)%
Administrative expenses		(40.2	)		(42.1	)		1.8			(4.4	)%
Depreciation and amortization		(9.1	)		(8.1	)		(1.1	)		13.4	%
Other		1.6			(2.2	)		3.8			N/M
Total other expenses		(106.5	)		(111.7	)		5.2			(4.6	)%

Total other expenses decreased 4.6% mainly explained by reductions of 4.4% in administrative expenses, due to lower third-party related services and a 1.1% reduction in salaries and employee benefits, partially offset by a 13.4% increase in depreciation and amortization charges.

Depreciation and amortization increased S/1.1 million as a result of higher amortization of software, due to the update of Inteligo Bank’s core banking system and the implementation of new digital services.

Inteligo’s efficiency ratio is calculated by dividing salaries and employee benefits plus administrative expenses plus depreciation and amortization by net interest and similar income plus net fee income from financial services plus other income. Our wealth management segment’s efficiency ratio deteriorated from 33.5% for 2017 to 35.2% for 2018.

110

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Financial Condition as of December 31, 2017 Compared to December 31, 2016

The following table sets forth the principal components of our consolidated statement of financial position as of December 31, 2017 and December 31, 2016.

	As of December 31,			As of December 31,
	2017 (restated)			2016 (restated)			Change
	(S/ in millions)						(S/ in millions)			%
Assets
Cash, due from banks and inter-banks funds		11,608.4			11,766.8			(158.4	)		(1.3	)%
Financial investments		16,924.1			10,209.8			6,714.3			65.8	%
Loans, net of unearned interest		29,406.3			28,192.6			1,213.6			4.3	%
Impairment allowance for loans		(1,202.1	)		(1,166.8	)		(35.3	)		3.0	%
Investment property		1,118.6			745.2			373.4			50.1	%
Property, furniture and equipment, net		612.6			589.8			22.8			3.9	%
Intangibles and goodwill, net		921.6			267.4			654.2			N/M
Other assets		1,005.0			1,114.4			(109.5	)		(9.8	)%
Total assets		60,394.5			51,719.4			8,675.1			16.8	%
Liabilities and equity
Deposits and obligations		32,607.6			30,097.9			2,509.8			8.3	%
Due to banks and correspondents and inter-bank funds		4,437.4			5,660.9			(1,223.5	)		(21.6	)%
Bonds, notes and other obligations		5,602.4			4,769.4			833.0			17.5	%
Insurance contract liabilities		10,514.5			5,010.5			5,504.0			N/M
Other liabilities		1,395.7			1,182.4			213.3			18.0	%
Total liabilities		54,557.6			46,721.0			7,836.6			16.8	%
Equity, net
Equity attributable to IFS’s shareholders		5,800.5			4,879.1			921.4			18.9	%
Non-controlling interest		36.4			119.2			(82.9	)		(69.5	)%
Total equity, net		5,836.9			4,998.3			838.6			16.8	%
Total liabilities and equity net		60,394.5			51,719.4			8,675.1			16.8	%

Our assets were S/60.4 billion as of December 31, 2017, a 16.8% increase from S/51.7 billion as of December 31, 2016. This was mainly driven by growth of 65.8% in financial investments, 50.1% in investment property, and 4.3% in loans, net of unearned interest, as well as a more than three-fold increase in intangibles and goodwill.

The increases in financial investments, investment property, and intangibles and goodwill were mainly a result of the acquisition of Seguros Sura in November 2017.

The increase in loans, net of unearned interest was mainly due to higher retail and commercial loans balances at Interbank. Growth in retail loans was explained by increases in mortgages and other consumer loans. The increase in commercial loans was mainly due to higher short- and medium-term lending, related mostly to corporate and small-sized companies.

Our liabilities reached S/54.6 billion as of December 31, 2017, a 16.8% increase from S/46.7 billion as of December 31, 2016. This was mainly driven by a more than two-fold increase in insurance contract liabilities, as well as an 8.3% growth in deposits and obligations.

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The increase in insurance contract liabilities was mainly a result of the acquisition of Seguros Sura in November 2017.

The increase in deposits and obligations was mainly explained by higher institutional, commercial and retail deposits at Interbank.

Our net equity was S/5.8 billion as of December 31, 2017, a 16.8% increase from S/5.0 billion as of December 31, 2016, mainly driven by the capitalization of earnings at Interbank and Interseguro, as well as by higher unrealized results at Interseguro.

For more information of our liquidity, capital resources and commitments and obligations, see “—Commitments and Contractual Obligations” and “—Liquidity and Capital Resources.”

Results of Operations for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

The following table sets forth the principal components of our consolidated profit for 2017 and 2016.

	For the years ended December 31,
	2017 (restated) (1)			2016 (restated) (1)			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar income		3,809.0			3,704.8			104.2			2.8	%
Interest and similar expenses		(1,119.9	)		(1,081.9	)		(38.0	)		3.5	%
Net interest and similar income		2,689.1			2,623.0			66.2			2.5	%
Impairment loss on loans, net of recoveries		(827.9	)		(783.6	)		(44.3	)		5.7	%
(Loss) due to impairment of financial investments		(20.8	)		(28.3	)		7.6			(26.7	)%
Net interest and similar income after impairment loss		1,840.4			1,811.0			29.5			1.6	%
Fee income from financial services, net		849.2			809.5			39.8			4.9	%
Other income		518.0			406.8			111.1			27.3	%
Total net premiums earned minus claims and benefits		(152.9	)		(130.8	)		(22.1	)		16.9	%
Total other expenses		(1,710.6	)		(1,632.4	)		(78.2	)		4.8	%
Income before translation result and income tax		1,344.1			1,264.0			80.1			6.3	%
Translation result		15.9			20.1			(4.2	)		(20.7	)%
Income Tax		(326.5	)		(333.9	)		7.3			(2.2	)%
Net profit for the year		1,033.5			950.2			83.3			8.8	%
IFS’ shareholders		1,027.4			944.6			82.8			8.8	%
Non-controlling interest		6.1			5.6			0.5			8.9	%

(1) Our financial information for 2017 and 2016 was a result of a voluntary change in the accounting policy regarding our method of accounting for the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited consolidated financial statements.

Our net profit was S/1,033.5 million for 2017, an 8.8% increase compared to 2016. This was mainly driven by growth of S/111.1 million in other income, S/66.2 million in net interest and similar income and S/39.8 million in fee income from financial services, in addition to a S/7.6 million decrease in loss due to impairment of financial investments. These effects were partially offset by a decrease of S/22.1 million in total premiums earned minus claims and benefits, as well as increases of S/78.2 million in other expenses and S/44.3 million in impairment loss on loans.

The increase in other income was mainly due to higher gains on sale of financial investments at Interbank, Interseguro and Inteligo, in addition to higher gains on sale and valuation of investment property at Interseguro, attributable to the acquisition of Seguros Sura in November 2017.

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The increase in net interest and similar income was mainly explained by higher interest on financial investments at Interseguro related to the acquisition of Seguros Sura’s portfolio in November 2017 and by higher interest on loan portfolio and on financial investments at Interbank. These factors were partially offset by an increase in interest and fees on deposits and obligations, at Interbank.

The increase in fee income from financial services was mainly a result of higher fees from maintenance of accounts and commissions from credit and debit card services at Interbank.

The decrease in loss due to impairment of financial investments was mainly explained by a S/22.8 million decrease in impairment of financial investments at Interseguro, partially offset by an S/15.3 million impairment loss of financial investments at Inteligo in 2017.

The decrease in total premiums earned minus claims and benefits was due to a S/94.1 million increase in net claims and benefits incurred for life insurance contracts and others, as a result of the acquisition of Seguros Sura as well as a S/92.7 million reduction in net premiums, partially offset by a S/164.7 million decrease in adjustment of technical reserves as a result of the reduction in premiums.

The increase in other expenses was mainly due to growth in administrative expenses, salaries and employee benefits, and depreciation and amortization charges at Interbank and Interseguro.

The increase in impairment loss on loans was mainly explained by higher provision requirements in commercial and consumer loans at Interbank.

Our ROE was 19.3% in 2017, lower than the 19.9% reported in 2016.

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Results of Operations by Segment

The following table presents an overview of certain consolidated income statements data for each of our segments for 2017 and 2016.

	Banking						Insurance						Wealth Management						Holding and eliminations						Consolidated
	2017			2016			2017(1)			2016(1)			2017			2016			2017			2016			2017			2016
	(S/ in millions)
Interest and similar income		3,346.2			3,274.1			334.8			293.0			151.8			157.6			(23.8	)		(19.8	)		3,809.0			3,704.8
Interest and similar expenses		(1,047.1	)		(1,009.9	)		(19.7	)		(14.4	)		(53.9	)		(59.4	)		0.8			1.9			(1,119.9	)		(1,081.9	)
Net interest and similar income		2,299.1			2,264.2			315.0			278.5			97.9			98.2			(23.0	)		(18.0	)		2,689.1			2,623.0
Impairment loss on loans, net of recoveries		(830.5	)		(783.6	)		0.0			0.0			2.5			0.0			0.0			0.0			(827.9	)		(783.6	)
(Loss) due to impairment of financial investments		0.0			0.0			(5.5	)		(28.3	)		(15.3	)		0.0			0.0			0.0			(20.8	)		(28.3	)
Net interest and similar income after impairment loss		1,468.7			1,480.6			309.5			250.2			85.2			98.2			(23.0	)		(18.0	)		1,840.4			1,811.0
Fee income from financial services, net		740.5			707.6			(3.7	)		(3.0	)		152.0			146.7			(39.6	)		(41.8	)		849.2			809.5
Other income		368.3			318.9			112.9			78.0			76.7			45.5			(39.9	)		(35.6	)		518.0			406.8
Total net premiums earned minus claims and benefits		0.0			0.0			(152.9	)		(130.8	)		0.0			0.0			0.0			0.0			(152.9	)		(130.8	)
Total other expenses		(1,399.2	)		(1,368.7	)		(226.8	)		(200.5	)		(111.7	)		(107.4	)		27.1			44.1			(1,710.6	)		(1,632.4	)
Income before translation result and income tax		1,178.2			1,138.4			39.0			(6.1	)		202.2			182.9			(75.4	)		(51.3	)		1,344.1			1,264.0
Translation result		13.9			1.2			0.9			8.1			1.2			(1.3	)		(0.1	)		12.0			15.9			20.1
Income Tax		(298.6	)		(300.6	)		0.0			(0.7	)		(4.3	)		(3.0	)		(23.6	)		(29.6	)		(326.5	)		(333.9	)
Net profit for the year		893.5			839.1			39.9			1.4			199.2			178.7			(99.1	)		(68.9	)		1,033.5			950.2
IFS’ shareholders		893.5			839.1			40.0			1.7			199.2			178.7			(105.3	)		(74.8	)		1,027.4			944.6
Non-controlling interest		0.0			0.0			(0.1	)		(0.3	)		0.0			0.0			6.2			5.9			6.1			5.6

(1) Our financial information for 2017 and 2016 was a result of a voluntary change in the accounting policy regarding our method of accounting for the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited consolidated financial statements.

The discussion below covers each of our reported segments, and corresponds to information before adjustments and eliminations for consolidation, as of and for the year ended December 31, 2017 and 2016, in accordance with IFRS.

Banking

Interbank’s net profit reached S/893.5 million for the year ended December 31, 2017, a 6.5% increase compared to the same period in 2016. The main factors that contributed to this result were growth of 15.5% in other income, 4.7% in fee income from financial services and 1.5% in net interest and similar income. These factors were partially offset by increases of 6.0% in impairment loss on loans and 2.2% in other expenses.

Interbank’s net interest margin was 5.5% for the year ended December 31, 2017, lower than the 5.6% reported in the same period in 2016.

Interbank’s ROE was 20.1% for 2017, lower than the 21.5% reported in the same period in 2016.

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Interest and Similar Income

The following table presents the components of interest and similar income for our banking segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)		%
Interest and similar income
Interest on loan portfolio		3,120.4			3,099.5			20.9		0.7	%
Interest on financial investments		200.0			155.5			44.4		28.6	%
Interest on due from banks and inter-bank funds		25.9			19.1			6.8		35.3	%
Total		3,346.2			3,274.1			72.1		2.2	%
Nominal average rate		8.0	%		8.1	%

Interest and similar income grew 2.2% due to increases of 28.6% in interest on financial investments, and 0.7% in interest on loan portfolio.

The S/44.4 million higher interest on financial investments was due to a 29.5% growth in the average volume, while the average rate remained relatively stable. The increase in volume was a result of higher investments in sovereign bonds, CDBCR, global bonds and corporate bonds from financial institutions. Regarding the average rate, higher returns on CDBCR were offset by lower yields on sovereign and global bonds.

The increase in interest on loan portfolio was attributed to a 4.5% higher average volume, partially offset by a 40 basis point decrease in the nominal average rate, from 11.9% in the year ended December 31, 2016 to 11.5% in the corresponding period in 2017. The higher average volume of loans was attributed to increases of 4.7% in retail loans and 4.2% in commercial loans. In the retail portfolio, the increase was mainly explained by growth of 7.7% in mortgages and 5.6% in payroll deduction loans; while in the commercial portfolio, by increases of 7.9% in short and medium-term loans and 4.8% in trade finance loans. The decrease in the average rate was mainly explained by yield reductions of 70 basis points in retail loans and 10 basis points in commercial loans. In the retail loan portfolio, the average yield decreased as a consequence of lower rates on credit cards, payroll deduction loans and mortgages; while in the commercial portfolio, mainly due to lower yields on trade finance loans and leasing operations.

The nominal average yield on interest-earning assets decreased slightly from 8.1% in the year ended December 31, 2016 to 8.0% in the corresponding period in 2017, mainly explained by lower returns on loans.

Interest and Similar Expenses

The following table presents the components of interest and similar expenses for our banking segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar expenses
Interest and fees on deposits and obligations		(522.0	)		(442.5	)		(79.5	)		18.0	%
Interests on bonds, notes and other obligations		(303.5	)		(314.7	)		11.2			(3.6	)%
Interest and fees on obligations with financial institutions and others		(221.6	)		(252.7	)		31.1			(12.3	)%
Total		(1,047.1	)		(1,009.9	)		(37.2	)		3.7	%
Nominal average rate		2.9	%		2.8	%

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Interest and similar expenses increased 3.7% explained by an 18.0% growth in interest and fees on deposits and obligations, partially offset by decreases of 12.3% in interest and fees on obligations with financial institutions and others, and 3.6% in interest on bonds, notes and other obligations.

The growth in interest and fees on deposits and obligations was due to increases of 5.7% in the average volume and 20 basis points in the average cost. The growth in volume was attributed to increases in institutional, retail and commercial deposits. By currency, average balances of soles deposits grew 16.5% while average dollar deposits decreased 6.5%. The higher average cost was due to homogeneous increases across institutional, retail and commercial deposits.

Interest and fees on obligations with financial institutions and others decreased as a result of a 11.6% reduction in the average volume, while the average cost remained relatively stable. The reduction in the average volume was mainly due to lower funding provided by correspondent banks and by the Central Reserve Bank of Peru.

Interest on bonds, notes and other obligations decreased mainly explained by a 1.7% reduction in the average volume, which in turn was attributed to an appreciation of the exchange rate, as the majority of bonds outstanding were denominated in dollars.

The average cost of funds increased slightly from 2.8% in the year ended December 31, 2016 to 2.9% in the corresponding period in 2017, mainly due to higher cost of deposits and obligations.

Impairment Loss on Loans, Net of Recoveries

The following table presents the components of impairment loss on loans, net of recoveries for our banking segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Impairment loss on loans, net of recoveries		(830.5	)		(783.6	)		(46.8	)		6.0	%
Past-due loan ratio (at period end)		2.9	%		2.6	%
Provision expense as a percentage of average total loans		3.1	%		3.1	%
Coverage ratio (at period end)		151.2	%		167.8	%
Impairment allowance for loans (at period end)		1,201.2			1,163.2

Impairment loss on loans, net of recoveries increased 6.0% for the year ended December 31, 2017 when compared to the same period in 2016. The increase in impairment loss on loans was mainly a result of higher provision requirements in commercial and consumer loans.

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Fee Income from Financial Services, Net

The following table presents the components of fee income from financial services, net for our banking segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Income
Maintenance and mailing of accounts, transfer fees and commissions on credit and debit card		596.8			572.0			24.8			4.3	%
Commissions for banking services		317.6			308.3			9.3			3.0	%
Funds management fees		0.0			0.0			0.0			N/M
Fees from indirect loans		60.4			60.5			(0.1	)		(0.2	)%
Collection services fees		32.9			30.3			2.6			8.6	%
Brokerage and custody services fees		0.0			0.0			0.0			N/M
Others		29.1			29.8			(0.7	)		(2.4	)%
Total		1,036.9			1,001.0			35.9			3.6	%
Expenses
Credit cards		(81.5	)		(80.4	)		(1.1	)		1.4	%
Debtor’s life insurance premiums		(161.7	)		(164.2	)		2.5			(1.5	)%
Fees paid to foreign banks		(12.9	)		(10.7	)		(2.2	)		20.4	%
Brokerage and custody services		0.0			0.0			0.0			N/M
Others		(40.3	)		(38.1	)		(2.2	)		5.8	%
Total		(296.3	)		(293.4	)		(3.0	)		1.0	%
Net		740.5			707.6			32.9			4.7	%

The 4.7% increase in fee income from financial services, net was mainly attributable to growth of S/24.8 million in maintenance and mailing of accounts, transfer fees and commissions on credit and debit card services, and S/9.3 million in commissions for banking services. These effects were partially offset by increases of S/2.2 million in fees paid to foreign banks and S/1.1 million in credit cards expenses.

Other Income

The following table presents the components of other income for our banking segment for 2017 and 2016.

	For the years ended December 31,
	2017		2016			Change
	(S/ in millions)					(S/ in millions)			%
Net gain on foreign exchange transactions		201.8		264.2			(62.4	)		(23.6	)%
Net gain on sale of financial investments		64.8		19.6			45.2			N/M
Net gains (losses) on financial assets at fair value through profit or loss		11.4		(28.7	)		40.1			N/M
Other		90.2		63.9			26.4			41.3	%
Other income		368.3		318.9			49.4			15.5	%

Other income increased 15.5%, mainly due to a S/45.2 million growth in net gain on sale of financial investments due to the sale of an equity investment, which resulted in a S/27.2 million income. In addition, the

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increase in other income was also explained by a S/11.4 million net gain on financial assets at fair value in 2017. These effects were partially offset by a S/62.4 million decrease in net gain on foreign exchange transactions.

Other Expenses

The following table presents the components of other expenses for our banking segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Salaries and employee benefits		(594.0	)		(593.8	)		(0.2	)		0.0	%
Administrative expenses		(640.8	)		(616.7	)		(24.1	)		3.9	%
Depreciation and amortization		(127.4	)		(118.1	)		(9.3	)		7.9	%
Other		(37.0	)		(40.0	)		3.1			(7.6	)%
Total other expenses		(1,399.2	)		(1,368.7	)		(30.5	)		2.2	%

The efficiency ratio improved from 40.4% in the year ended December 31, 2016 to 40.0% for the corresponding period in 2017, mainly explained by reductions of S/24.1 million in administrative expenses and S/9.3 million in depreciation and amortization charges.

Income Before Translation Result and Income Tax

Income before translation result and income tax increased 3.5% for the year ended December 31, 2017 compared to the same period in 2016, which was then positively affected by a recovery in translation result and a lower effective tax rate, from 26.4% for the year ended December 31, 2016 to 25.1% in the same period in 2017. As a result, profit for the period increased 6.5% compared to the year ended December 31, 2016.

Insurance

Interseguro’s profit attributable to shareholders increased from S/1.7 million for the year ended December 31, 2016 to S/40.0 million for the corresponding period in 2017.

This increase was mainly due to growth of S/36.5 million in net interest and similar income and S/34.9 million in other income, partially offset by a S/22.1 million decrease in total premiums earned minus claims and benefits.

The acquisition of Seguros Sura became effective on November 2, 2017. This acquisition consolidated Interseguro’s position in the insurance industry by doubling its investment portfolio and gaining a larger contribution of premiums from Seguros Sura’s operations.

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Net Interest and Similar Income

The following table presents the components of net interest and similar income for our insurance segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar income		334.8			293.0			41.8			14.3	%
Interest and similar expense		(19.7	)		(14.4	)		(5.3	)		36.7	%
Net interest and similar income		315.0			278.5			36.5			13.1	%

Net interest and similar income increased 13.1% mainly due to higher interest on fixed income and equity investments as a result of growth of 110.4% in the average volume of Interseguro’s investment portfolio due the acquisition of Seguros Sura increasing the average volume in the fourth quarter.

Other Income

The following table sets forth our other income for our insurance segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Net gain on sale of financial investments		65.0			46.4			18.6			40.1	%
Net gains (losses) on financial assets at fair value through profit or loss		8.2			(3.1	)		11.3			N/M
Rental income		27.3			21.9			5.4			24.8	%
Gain on sale of investment property		0.0			2.7			(2.7	)		N/M
Net loss on investment property		(1.9	)		(1.4	)		(0.5	)		36.0	%
Other		14.2			11.5			2.7			23.6	%
Other income		112.9			78.0			34.9			44.7	%

Other income increased 44.7% mainly explained by growth of S/18.6 million in net gain on sale of financial investments, S/11.3 million in net gain on financial assets at fair value and S/5.4 million in rental income.

Total Net Premiums Earned Minus Claims and Benefits

The following table presents the components of total premiums earned minus claims and benefits for our insurance segment for 2017 and 2016.

	For the years ended December 31,
	2017 (restated) (1)		2016 (restated) (1)			Change
	(S/ in millions)					(S/ in millions)			%
Premiums assumed		533.6		730.6			(196.9	)		(27.0	)%
Premiums ceded to reinsurers		(34.1)		(138.3	)		104.2			(75.3	)%
Adjustment of technical reserves		(240.2)		(404.9	)		164.7			(40.7	)%
Net claims and benefits incurred for life insurance contracts and others		(412.3)		(318.2	)		(94.1	)		29.6	%
Total net premiums earned minus claims and benefits		(152.9)		(130.8	)		(22.1	)		16.9	%

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(1) Our financial information for 2017 and 2016 was restated as a result of a voluntary change in accounting policy regarding market interest rates. See Note 4.2.1(i) to our audited annual consolidated financial statements.

Total net premiums earned minus claims and benefits decreased 16.9% explained by a S/94.1 million increase in net claims and benefits incurred for life insurance contracts and others, and a S/92.7 million decrease in net premiums, partially offset by a S/164.7 million decrease in adjustment of technical reserves.

Net Premiums

Net premiums represent the difference between premiums assumed and premiums ceded to reinsurers. The following table presents net premiums by business line for our insurance segment for 2017 and 2016.

	For the years ended December 31,
	2017 (restated) (1)		2016 (restated) (1)		Change
	(S/ in millions)				(S/ in millions)			%
Annuities (1)		236.8		346.9		(110.1	)		(31.7	)%
Individual Life		61.7		46.8		14.9			31.8	%
Retail Insurance		201.0		198.6		2.4			1.2	%
Credit Life Insurance		123.5		114.5		9.0			7.9	%
Mandatory Traffic Accident (SOAT)		30.7		30.0		0.7			2.4	%
Card Protection		28.3		28.3		0.0			0.1	%
Others		18.5		25.8		(7.3	)		(28.3	)%
Net Premiums		499.5		592.3		(92.8	)		(15.7	)%

(1) Annuities include premiums from pension-related insurance (disability and survivorship).

Net premiums decreased 15.7% mainly due to a S/110.1 million reduction in annuities, partially offset by increases of S/14.9 million in individual life and S/2.4 million in retail insurance. The reduction in annuity premiums was driven by a market contraction by the implementation of Law No. 30425 in 2016, which allowed retirees to withdraw 95.5% of their pension funds. The increase in individual life premiums was mainly due to the contribution of Seguros Sura’s premiums in November and December of 2017, while the increase in retail insurance premiums was observed particularly in credit life insurance.

Adjustment of Technical Reserves

The following table presents adjustment of technical reserves by business line for our insurance segment for 2017 and 2016.

	For the years ended December 31,
	2017 (restated) (1)			2016 (restated) (1)			Change
	(S/ in millions)						(S/ in millions)			%
Annuities		(203.4	)		(376.8	)		173.4			(46.0	)%
Individual Life		(36.0	)		(20.2	)		(15.8	)		78.0	%
Retail Insurance		(0.8	)		(7.8	)		7.0			(89.8	)%
Adjustment of technical reserves		(240.2	)		(404.9	)		164.7			(40.7	)%

(1) Our financial information for 2017 and 2016 was restated as a result of a voluntary change in accounting policy regarding our method of accounting for the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited annual consolidated financial statements.

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Adjustment of technical reserves decreased 40.7% mainly explained by a S/173.4 million reduction in annuities due to the decrease in annuities premiums during the year, partially offset by a S/15.8 million reduction in individual life.

Net Claims and Benefits Incurred for Life Insurance Contracts and Others

The following table presents net claims and benefits incurred for life insurance contracts and others by business line for our insurance segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Annuities (1)		(353.0	)		(259.1	)		(93.9	)		36.2	%
Individual Life		(1.9	)		(2.6	)		0.6			(24.8	)%
Retail Insurance		(57.3	)		(56.5	)		(0.8	)		1.5	%
Credit Life Insurance		(37.9	)		(36.2	)		(1.6	)		4.5	%
Mandatory Traffic Accident (SOAT)		(17.1	)		(13.1	)		(4.0	)		30.5	%
Card Protection		(0.7	)		(0.5	)		(0.3	)		54.5	%
Others		(1.6	)		(6.7	)		5.1			(76.0	)%
Net claims and benefits incurred		(412.3	)		(318.2	)		(94.1	)		29.6	%

(1) Annuities include claims from pension-related insurance (disability and survivorship).

Net claims and benefits incurred for life insurance contracts and others increased 29.6% mainly as a result of higher annuity claims during the period. Annuity claims increased S/95.3 million explained by a higher number of pensioners at Interseguro due to the acquisition of Seguros Sura.

Other Expenses

The following table presents the components of other expenses for our insurance segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Salaries and employee benefits		(61.0	)		(59.9	)		(1.2	)		1.9	%
Administrative expenses		(37.7	)		(35.5	)		(2.2	)		6.2	%
Depreciation and amortization		(9.7	)		(4.5	)		(5.2	)		116.7	%
Expenses related to rental income		(0.7	)		(1.1	)		0.4			(39.6	)%
Other		(117.7	)		(99.5	)		(18.2	)		18.3	%
Total other expenses		(226.8	)		(200.5	)		(26.3	)		13.1	%

Other expenses increased 13.1% mainly due to growth of S/16.7 million in fees from insurance activities, S/5.2 million in depreciation and amortization, S/2.2 million in administrative expenses and S/1.2 million in salaries and employee benefits.

Wealth Management

Inteligo’s net profit reached S/199.2 million for the year ended December 31, 2017, an 11.5% increase compared to the same period in 2016. The main factors that contributed to this result were increases of

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S/31.2 million in other income, driven by the sale of portfolio investments due to favorable market conditions, and S/5.4 million in fee income from financial services, due to a 5.4% growth in assets under management. These factors were partially offset by a S/15.3 million impairment loss of financial investments.

Inteligo’s ROE was 26.7% for 2017, below the 27.0% registered in 2016.

Interest and Similar Income

The following table presents the components of interest and similar income for our wealth management segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Interest and similar income
Interest on loan portfolio		81.2			85.3			(4.1	)		(4.8	)%
Interest on financial investments		66.4			70.1			(3.7	)		(5.3	)%
Interest on due from banks and inter-bank funds		4.2			2.1			2.1			98.2	%
Total		151.8			157.6			(5.8	)		(3.7	)%
Nominal average rate		4.3	%		4.4	%

Interest and similar income decreased 3.7% due to reductions of 5.3% in interest on financial investments and 4.8% in interest on loan portfolio, partially offset by an increase in interest on due from banks and inter-bank funds.

Interest on financial investments decreased S/3.7 million due to lower dividends in the equity investments of the portfolio. Interest on loans decreased S/4.1 million due to a 5.3% reduction in the average volume of Inteligo’s loan portfolio, mainly in the cash collateralized loans.

Interest on due from banks and inter-bank funds increased S/2.1 million due to an increase in the allocation of excess cash into short-term time deposits.

Interest and Similar Expenses

The following table presents the components of interest and similar expenses for our wealth management segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)		%
Interest and similar expenses
Interest and fees on deposits and obligations		(51.6	)		(55.7	)		4.1		(7.3	)%
Interests on bonds, notes and other obligations		(1.9	)		(3.1	)		1.2		(38.5	)%
Interest and fees on obligations with financial institutions and others		(0.4	)		(0.6	)		0.3		(44.3	)%
Total		(53.9	)		(59.4	)		5.5		(9.3	)%
Nominal average rate		1.9	%		2.0	%

Total interest and similar expenses decreased 9.3% mainly as a result of a S/4.1 million decrease in interest and fees on deposits and obligations.

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Interest and fees on deposits and obligations decreased S/4.1 million as a result of a 10.7% reduction in the average volume of interest-bearing deposits, mainly explained by the repatriation program launched by the Peruvian government in 2017.

Impairment Loss on Loans, Net of Recoveries

Inteligo’s loan portfolio had no delinquencies in 2017. Inteligo’s impairment loss on loans was positively adjusted by S/2.5 million for the year ended December 31, 2017 after an update of credit risk parameters.

Recovery (Loss) due to Impairment of Financial Investments

Inteligo recognized a S/15.3 million loss due to impairment of financial investments in 2017.

Fee Income from Financial Services, Net

The following table presents the components of fee income from financial services, net for our wealth management segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Income
Maintenance and mailing of accounts, transfer fees and commissions on credit and debit card		4.3			4.0			0.4			9.4	%
Funds management fees		139.2			132.0			7.2			5.5	%
Brokerage and custody services fees		12.6			13.9			(1.2	)		(8.9	)%
Others		0.0			0.0			0.0			N/M
Total		156.2			149.8			6.4			4.3	%
Expenses
Brokerage and custody services		(3.8	)		(2.8	)		(1.0	)		35.2	%
Others		(0.4	)		(0.4	)		(0.0	)		12.3	%
Total		(4.2	)		(3.2	)		(1.0	)		32.5	%
Net		152.0			146.7			5.4			3.7	%

Fee income from financial services, net increased 3.7% mainly due to a S/7.2 million increase in funds management fees, attributable to a 5.4% growth in assets under management, partially offset by a S/1.2 million reduction in fees from brokerage and custody services.

The decrease in fees from brokerage and custody services was mainly explained by lower sales and trading activity at Inteligo SAB.

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Other Income

The following table shows presents the components of income for our wealth management segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Net gain on sale of financial investments		83.9			34.3			49.6			N/M
Net gains (losses) on financial assets at fair value through profit or loss		(0.0	)		13.3			(13.3	)		N/M
Other		(7.2	)		(2.2	)		(5.0	)		N/M
Other income		76.7			45.5			31.2			68.5	%

Other income increased 68.5% due to a S/49.6 million increase in net gain on sale of financial investments, mostly related to the sale of portfolio investments due to favorable market conditions.

Other Expenses

The following table presents the components of other expenses for our wealth management segment for 2017 and 2016.

	For the years ended December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Salaries and employee benefits		(59.4	)		(57.5	)		(1.9	)		3.3	%
Administrative expenses		(42.1	)		(42.3	)		0.3			(0.6	)%
Depreciation and amortization		(8.1	)		(7.5	)		(0.5	)		7.1	%
Other		(2.2	)		(0.0	)		(2.1	)		N/M
Total other expenses		(111.7	)		(107.4	)		(4.3	)		4.0	%

Total other expenses increased 4.0% explained by a S/1.9 million growth in salaries and employee benefits, partially offset by a slight decrease in administrative expenses.

Depreciation and amortization increased S/0.5 million for 2017 compared to 2016 as a result of higher amortization of software due to the implementation of a business intelligence solution.

Inteligo’s efficiency ratio is calculated by dividing salaries and employee benefits plus administrative expenses plus depreciation and amortization by net interest and similar income plus net fee income from financial services plus other income. Our wealth management segment’s efficiency ratio improved to 33.5% for 2017 from 37.0% for 2016.

Liquidity and Capital Resources

Our primary source of liquidity is dividends received from our subsidiaries and an issuance of senior debt and our primary use of funds is the payment of dividends to our shareholders and interest payments associated with the indebtedness described below.

As of March 31, 2019, our outstanding indebtedness included the following:

• U.S.$300,000,000 aggregate principal amount of 4.125% senior notes due 2027 issued pursuant to the indenture, dated October 19, 2017 among the Registrant, The Bank of New York Mellon, as

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trustee, and The Bank of New York Mellon SA/NV, Luxembourg Branch, as Luxembourg transfer and paying agent. The use of proceeds was to fund the acquisition of 100% of the capital stock of Seguros Sura S.A. and Hipotecaria Sura Empresa Administradora Hipotecaria S.A.

The following discussion of liquidity and capital resources is on a segment basis. See “Dividends and Dividend Policy.

Interbank

The following table presents Interbank’s primary sources of funds as of March 31, 2019 and December 31, 2018:

	As of March 31,		As of December 31,
	2019		2018		Change
	(S/ in millions)				(S/ in millions)			%
Total deposits and obligations		32,561.7		31,291.8		1,270.0			4.1	%
Due to banks and correspondents and inter-bank funds		3,512.6		3,968.8		(456.2	)		(11.5	)%
Bonds, notes and other obligations		5,610.9		5,386.9		224.0			4.2	%
Total		41,685.3		40,647.5		1,037.8			2.6	%

In our banking segment, our primary sources of funds have traditionally consisted of deposits and obligations, which amounted to S/32,561.7 million as of March 31, 2019. Interbank’s deposits include retail and commercial deposits, generated mainly through its financial stores distribution network, and its relationships with commercial clients.

Interbank is required to maintain deposits with the Central Reserve Bank of Peru, as legal reserves, in an amount determined by the percentage of deposits and other liabilities owed to its clients. For a description of the legal reserve (encaje) regulations, see “Regulation and Supervision–Banking Regulation and Supervision–Reserve Requirements from the Central Reserve Bank of Peru”.

At times, Interbank has utilized Peru’s short-term interbank loans market to satisfy liquidity needs. The Central Reserve Bank of Peru’s discount window, which makes short-term loans to banks at premium rates, is another potential, short-term funding source, although Interbank has used it infrequently. As part of Interbank’s liquidity management, it sometimes enter into repos on Central Reserve Bank of Peru certificates of deposit, which are a cost and tax efficient source of funds in Peruvian currency.

Amounts due to banks and correspondents of Interbank (including both short and long-term amounts) decreased S/456.2 million, or 11.5%, to S/3,512.6 million as of March 31, 2019 from S/3,968.8 million as of December 31, 2018, as a result of lower long-term funding from the Central Reserve Bank of Peru. See Note 9 to our unaudited interim condensed consolidated financial statements.

Interbank has issued senior, senior-subordinated, junior-subordinated, mortgage and leasing bonds in the Peruvian and international capital markets. Interest payable accounted for an additional S/86.7 million in the caption bonds and other obligations. See Note 10 to our unaudited interim condensed consolidated financial statements.

Outstanding Indebtedness of Interbank

As of March 31, 2019, Interbank’s outstanding indebtedness included the following:

• U.S.$200 million aggregate principal amount of 8.500% non-cumulative fixed/floating rate step-up junior subordinated notes due 2070 issued by Interbank through its Panamanian branch on April 23, 2010.

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• U.S.$300 million aggregate principal amount of 6.625% fixed-to-floating rate subordinated notes due 2029 issued by Interbank on March 18, 2014.

• U.S.$386.7 million principal amount of 5.750% senior notes due 2020 issued by Interbank through its Panamanian branch on October 7, 2010, and September 27, 2012. The aggregate principal amount of our 5.750% senior notes due 2020 was U.S.$650 million, but on January 2018, the Bank executed an exchange offer addressed to the holders of these corporate bonds for an aggregate amount of U.S.$263.3 million. The latter generated an exchange premium of approximately U.S.$21.6 million.

• U.S.$200 million principal amount of 3.375% senior notes due 2023 issued by Interbank on January 18, 2018. Also, as mentioned before, Interbank made an exchange offer that resulted in U.S.$284.9 million of new 3.375% senior notes due 2023. The total aggregate amount is U.S.$484.9 million as of December 31, 2018. Furthermore, the exchange did not generate a substantial change in the terms and conditions of the financial liability; therefore, no new financial obligation was recognized. The transactional costs associated with these exchanged bonds will continue to be amortized based on the schedule of the new issuance.

• A U.S.$50 million loan under a master trade Financing agreement between Interbank and Sumitomo Bank dated as of October 17, 2003.

• A U.S.$40 million loan under a credit facility agreement between Interbank and Development Bank of Latin America – CAF dated as of October 18, 2016. The credit facility agreement contains covenants which limit, among other things, the ability of Interbank to: (i) enter into new financing without maintaining the pari passu ranking; (ii) create any lien over its property; or (iii) dispose of over 25% of its property.

• A U.S.$25 million loan under the terms supplement No. 3 of a master facility agreement between Interbank and Wells Fargo Bank, N.A. dated as of November 19, 2013, as amended. The Master Facility Agreement contains certain covenants which limit, among other things, the ability of Interbank to: (i) create, agree to create, incur, assume or suffer to exist any lien upon or with respect to any property; (ii) wind up, liquidate or dissolve its affairs or enter into any merger or consolidation, or convey, sell, lease or otherwise dispose of all or substantially all of its assets; and (iii) enter into any transactions or series of related transactions with any affiliates out of the ordinary course of business and in non-market conditions.

• A U.S.$25 million loan under a credit agreement between Interbank and Citibank N.A. dated as of November 9, 2018. The credit agreement contains certain affirmative and negative covenants, as well as the following financial covenants: (i) permit at any time, its total capital adequacy ratio to be less than the higher the percentage specified by the Bank Regulatory Authority and 11% at any time; (ii) permit, at any time, its loan loss reserves to non-performing loans ratio to be less than the higher of the percentage specified by the Bank regulatory authority and 125%; and (iii) permit its non-performing loans to total loans to be greater than the lower of the percentage specified by the Bank regulatory authority and 4%.

The following represent individual amounts of subordinated debt from a total amount of U.S.$95.1 million, S/401.2 million (U.S.$120.9 million) of local bonds which qualify as second tier equity (“Tier 2”) in the determination of the regulatory capital, according to SBS, S/150.0 million (U.S.$45.2 million) of local corporate inflation-linked bonds and S/150.0 million (U.S.$45.2 million) of fixed rate certificates of deposit. These bonds do not have specific guarantees:

• U.S.$30 million aggregate principal amount of 9.500% fixed rate subordinated notes due 2023 issued by Interbank on October 31, 2008. The issuance contains certain covenants which limit,

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among other things, the ability of Interbank to: (i) pay dividends in case an event of default under the notes occurs (ii) enter into transactions with affiliates in non-market conditions (ii) maintain indebtedness levels in accordance with article 199 of the Peruvian Banking and Insurance Law.

• S/110 million aggregate principal amount of VAC+ 3.500% floating rate subordinated notes due 2023 issued by Interbank on September 10, 2008. The issuance contains certain covenants which limit, among other things, the ability of Interbank to: (i) pay dividends in case an event of default under the notes occurs (ii) enter into transactions with affiliates in non-market conditions (ii) maintain indebtedness levels in accordance with article 199 of the Peruvian Banking and Insurance Law.

• S/3.3 million aggregate principal amount of 8.500% fixed rate subordinated notes due 2019 issued by Interbank on July 17, 2009. The issuance contains certain covenants which limit, among other things, the ability of Interbank to: (i) pay dividends in case an event of default under the notes occurs (ii) enter into transactions with affiliates in non- market conditions (ii) maintain indebtedness levels in accordance with article 199 of the Peruvian Banking and Insurance Law.

• U.S.$15.1 million aggregate principal amount of 8.156% fixed rate subordinated notes due 2019 issued by Interbank on July 17, 2009. The issuance contains certain covenants which limit, among other things, the ability of Interbank to: (i) pay dividends in case an event of default under the notes occurs (ii) enter into transactions with affiliates in non-market conditions (ii) maintain indebtedness levels in accordance with article 199 of the Peruvian Banking and Insurance Law.

• S/137.9 million aggregate principal amount of 6.906% fixed rate subordinated notes due 2022 issued by Interbank on June 25, 2012. The issuance contains certain covenants which limit, among other things, the ability of Interbank to: (i) pay dividends in case an event of default under the notes occurs (ii) enter into transactions with affiliates in non-market conditions (ii) maintain indebtedness levels in accordance with article 199 of the Peruvian Banking and Insurance Law.

• S/150 million aggregate principal amount of 5.813% fixed rate subordinated notes due 2023 issued by Interbank on January 11, 2013. The issuance contains certain covenants which limit, among other things, the ability of Interbank to: (i) pay dividends in case an event of default under the notes occurs (ii) enter into transactions with affiliates in non-market conditions (ii) maintain indebtedness levels in accordance with article 199 of the Peruvian Banking and Insurance Law.

• U.S.$50 million aggregate principal amount of 7.500% fixed rate subordinated notes due 2023 issued by Interbank on December 13, 2013. The issuance contains certain covenants which limit, among other things, the ability of Interbank to: (i) pay dividends in case an event of default under the notes occurs (ii) enter into transactions with affiliates in non-market conditions (ii) maintain indebtedness levels in accordance with article 199 of the Peruvian Banking and Insurance Law.

• S/150 million aggregate principal amount of 4.28125% fixed rate certificates of deposit due 2020 issued by Interbank on March 26, 2019.

• S/150 million aggregate principal amount of 3.40625% corporate inflation-linked bonds due 2029 issued by Interbank on March 26, 2019.

Additional outstanding indebtedness is mainly related to short term bank facilities for working capital and general purposes.

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Interseguro

Interseguro’s primary source of funds is premiums collected.

Interseguro has issued subordinated bonds in the Peruvian market. As of March 31, 2019 and as of December 31, 2018, Interseguro had S/116.1 million and S/168.7 million, respectively, in bonds outstanding. Additionally, Interseguro works with credit lines for promissory notes and letters of guarantee. As of March 31, 2019, the outstanding balance for lines with Banco de Crédito del Peru and Interbank was U.S.$4.0 million and U.S.$49.1 million, respectively. See Note 10 to our unaudited interim condensed consolidated financial statements.

Inteligo

The following table presents Inteligo’s primary sources of funds as of March 31, 2019 and as of December 31, 2018:

	As of March 31,		As of December 31,
	2019		2018		Change
	(S/ in millions)				(S/ in millions)			%
Total deposits and obligations		2,548.3		2,622.4		(74.1	)		(2.8	)%
Due to banks and correspondents and inter-bank funds		318.6		323.8		(5.2	)		(1.6	)%
Total		2,867.0		2,946.2		(79.3	)		(2.7	)%

In our wealth management segment, the primary source of funds has consisted of deposits and obligations, which amounted to S/2,548.3 million as of March 31, 2019. Inteligo Bank’s deposits are retail deposits, from its private wealth clients. Retail deposits provide Inteligo with a low-cost, diverse and stable source of funding. Amounts due to banks and correspondents consist of the credit facilities provided to Inteligo Bank.

Deposits and obligations decreased S/74.1 million or 2.8% as of March 31, 2019 from December 31, 2018 as a result of a S/174.3 million reductions in interest bearing deposits. Funds due to banks and correspondents decreased slightly from S/323.8 million as of December 31, 2018 to S/318.6 million as of March 31, 2019.

Regulatory Capital

We are not required to establish a regulatory capital for statutory purposes. However, Interbank and Interseguro are required to maintain minimum regulatory capital pursuant to guidelines issued by the SBS, and Inteligo Bank is required to maintain minimum regulatory capital pursuant to guidelines issued by the Central Bank of The Bahamas.

Interbank

As of March 31, 2019, the minimum regulatory capital as a percentage of risk-weighted assets for Interbank was 11.7% and its ratio of regulatory capital to total risk weighted assets was 16.4%, the highest among the four largest banks in Peru, according to the SBS. As of December 31, 2018, the minimum regulatory capital as a percentage of risk-weighted assets for Interbank was 11.7% and its ratio of regulatory capital to total risk weighted assets was 15.8%, the highest among the four largest banks in Peru, according to the SBS. As of December 31, 2017, the minimum regulatory capital as a percentage of risk-weighted assets for Interbank was 11.9%. As of December 31, 2017, Interbank’s ratio of regulatory capital to total risk weighted assets was 16.1%,

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the highest among the four largest banks in Peru. See Note 17(f) to our audited annual consolidated financial statements and “Regulation and Supervision of the Banking and Insurance Sector in Peru and the Bahamas Financial Regulatory Framework” section in this prospectus for a discussion of regulatory capital requirements applicable to Interbank.

The following tables present Interbank’s regulatory capital as of March 31, 2019 and as of December 31, 2018, 2017 and 2016, in accordance with SBS GAAP, as required by the Peruvian Banking and Insurance Law.

Interbank’s Regulatory Capital

	As of March 31, 2019			As of December 31, 2018
							Change
	(S/ in millions)						(S/ in millions)			%
Paid-in-capital		3,937.5			3,470.4			467.0			13.5	%
Legal and special reserves		898.5			794.8			103.8			13.1	%
Treasury stock		(33.9	)		(33.9	)		—			0.0	%
Earnings pending capitalization (1)		286.7			400.0			(113.3	)		(28.3	)%
Unrealized gains in investments available-for-sale		—			—			—			0.0	%
Subordinated bonds		464.5			539.7			(75.2	)		(13.9	)%
Shares of IFS (2)		(93.2	)		(94.8	)		1.5			(1.6	)%
Others		(7.2	)		(34.1	)		26.9			(78.8	)%
Total Tier I		5,452.8			5,042.0			410.8			8.1	%
Subordinated bonds		1,697.2			1,682.6			14.6			0.9	%
Generic allowances for loan losses		417.5			411.7			5.8			1.4	%
Shares of IFS (2)		(93.2	)		(94.8	)		1.5			(1.6	)%
Others		(7.2	)		(34.1	)		26.9			(78.8	)%
Total Tier 2		2,014.1			1,965.3			48.8			2.5	%
Total Regulatory Capital		7,466.9			7,007.4			459.5			6.6	%
Risk-weighted assets		45,448.1			44,391.0			1,055.8			2.4	%
Regulatory capital as a percentage of risk-weighted assets		16.4	%		15.8	%

(1) Corresponds to retained earnings to be capitalized as directed by the board of directors.

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(2) Corresponds to 1,986,233 IFS shares held by Interbank as of March 31, 2019 and December 31, 2018.

	As of December 31,
	2018			2017			Change
	(S/ in millions)						(S/in millions)			%
Paid-in-capital		3,470.4			3,064.5			405.9			13.2	%
Legal and special reserves		794.8			704.6			90.2			12.8	%
Treasury stock		(33.9	)		(33.9	)		—			0.0	%
Earnings pending capitalization (1)		400.0			199.6			200.4			100.4	%
Unrealized gains in investments available-for-sale		—			—			—			0.0	%
Subordinated bonds		539.7			583.4			(43.7	)		(7.5	)%
Shares of IFS (2)		(94.8	)		(229.1	)		134.3			(58.6	)%
Others		(34.1	)		(38.7	)		4.5			(11.8	)%
Total Tier I		5,042.0			4,250.4			791.6			18.6	%
Subordinated bonds		1,682.6			1,710.5			(27.9	)		(1.6	)%
Generic allowances for loan losses		411.7			373.2			38.5			10.3	%
Shares of IFS (2)		(94.8	)		(229.1	)		134.3			(58.6	)%
Others		(34.1	)		(38.7	)		4.5			(11.8	)%
Total Tier 2		1,965.3			1,815.9			149.4			8.2	%
Total Regulatory Capital		7,007.4			6,066.3			941.0			15.5	%
Risk-weighted assets		44,391.0			37,745.5			6,645.5			17.6	%
Regulatory capital as a percentage of risk-weighted assets		15.8	%		16.1	%

(1) Corresponds to retained earnings to be capitalized as directed by the board of directors.

(2) Corresponds to 1,986,233 and 4,995,723 IFS shares held by Interbank as of December 31, 2018 and 2017, respectively.

	As of December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Paid-in-capital		3,064.5			2,670.7			393.8			14.7	%
Legal and special reserves		704.6			617.0			87.5			14.2	%
Treasury stock		(33.9	)		(33.9	)		—			0.0	%
Earnings pending capitalization (1)		199.6			220.2			(20.6	)		(9.4	%)
Subordinated bonds		583.4			613.2			(29.8	)		(4.9	%)
Shares of IFS (2)		(229.1	)		(257.5	)		28.5			(11.0	%)
Others		(38.7	)		(40.4	)		1.8			(4.4	%)
Total Tier I		4,250.4			3,789.3			461.1			12.2	%
Subordinated bonds		1,710.5			1,783.9			(73.4	)		(4.1	%)
Generic allowances for loan losses		373.2			363.5			9.6			2.7	%
Shares of IFS (2)		(229.1	)		(257.5	)		28.5			(11.0	%)
Others		(38.7	)		(40.4	)		1.8			(4.4	%)
Total Tier 2		1,815.9			1,849.5			(33.6	)		(1.8	%)
Total Regulatory Capital		6,066.3			5,638.9			427.5			7.6	%
Risk-weighted assets		37,745.5			35,475.3			2,270.2			6.4	%
Regulatory capital as a percentage of risk-weighted assets		16.1	%		15.9	%		18.8	%

(1) Corresponds to retained earnings to be capitalized as directed by the board of directors.

(2) Corresponds to 4,995,723 and 5,495,723 IFS shares held by Interbank as of December 31, 2017 and 2016, respectively.

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Interseguro

Interseguro is required to maintain a minimum regulatory capital, also known as solvency equity, pursuant to guidelines issued by the SBS. The capital requirement is the sum of solvency equity and the guarantee fund. Solvency equity is determined by the level of risk and the risk profile assumed by an insurance company in Peru in accordance with SBS regulations. The guarantee fund is equivalent to 35% of solvency equity. See Note 17(f) to our audited annual consolidated financial statements and “Regulation and Supervision of the Banking and Insurance Sector in Peru and the Bahamas Financial Regulatory Framework” in this prospectus for a discussion of regulatory capital requirements applicable to Interseguro.

The following tables present Interseguro’s solvency ratio as of March 31, 2019 and as of December 31, 2018, 2017 and 2016 in accordance with SBS GAAP as required by the Peruvian Banking and Insurance Law. Seguros Sura is presented stand alone in this table as the merger with Interseguro did not take place until March 2018 and until that time, it was separately reporting to the SBS.

	As of March 31, 2019			As of December 31,  2018			Change
	(S/ in millions)						(S/ in millions)			%
Regulatory Capital		990.2			1,042.7			(52.5	)		(5.0	)%
Less:
Solvency equity (solvency margin) (1)		562.5			559.9			2.6			0.5	%
Guarantee fund (2)		196.9			196.0			0.9			0.5	%
Required capital		759.4			755.9			3.5			0.5	%
Surplus		230.8			286.8			(56.0	)		(19.5	)%
Solvency Ratio (3)		130.4	%		137.9	%

	As of December 31,											Seguros Sura As of December 31,
	2018			2017			Change					2017
	(S/ in millions)						(S/ in millions)		%			(S/ in millions)
Regulatory Capital		1,042.7			549.3			493.4		89.8	%		488.3
Less:
Solvency equity (solvency margin) (1)		559.9			301.7			258.3		85.6	%		231.7
Guarantee fund (2)		196.0			105.6			90.4		85.6	%		81.1
Required capital		755.9			407.3			348.7		85.6	%		312.8
Surplus		286.8			142.0			144.8		101.9	%		175.4
Solvency Ratio (3)		137.9	%		134.9	%							156.1	%

	As of December 31,
	2017			2016			Change
	(S/ in millions)						(S/ in millions)			%
Regulatory Capital		549.3			584.8			(35.5	)		(6.1	)%
Less:
Solvency margin (1)		301.7			297.7			4.0			1.3	%
Guarantee fund (2)		105.6			104.2			1.4			1.3	%
Required capital		407.3			401.8			5.4			1.3	%
Surplus		142.0			182.9			(40.9	)		(22.4	)%
Solvency ratio (3)		134.9	%		145.5	%

(1) Corresponds to an amount determined by the level of risk and the risk profile assumed by an insurance company in Peru in accordance with SBS regulations.

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(2) Equal to 35% of solvency margin.

(3) Solvency ratio for Interseguro is calculated in accordance with SBS guidelines. See “Regulation and Supervision—Insurance Regulation and Supervision—Solvency Requirements and Regulatory Capital.

Inteligo Bank

The following tables present Inteligo Bank’s risk-weighted assets and regulatory capital as a percentage of risk-weighted assets as of March 31, 2019 and as of December 31, 2018, 2017 and 2016.

	As of March 31,			As of December 31,
	2019			2018			Change
	(U.S.$ in millions)						(S/ in millions)		%
Total eligible capital		240.4			217.0			23.5		10.8	%
Total risk-weighted assets		894.7			850.1			44.7		5.3	%
Capital ratio		26.9	%		25.5	%

	As of December 31,
	2018			2017			Change
	(U.S.$ in millions)						(S/ in millions)		%
Total eligible capital		217.0			212.5			4.5		2.1	%
Total risk-weighted assets		850.1			652.2			197.8		30.3	%
Capital ratio		25.5	%		32.6	%

	As of December 31,
	2017			2016			Change
	(U.S.$ in millions)						(S/ in millions)			%
Total eligible capital		212.5			187.5			25.0			13.3	%
Total risk-weighted assets		652.2			764.5			(112.3	)		-14.7	%
Capital ratio		32.6	%		24.5	%

Banking regulations on capital adequacy in The Bahamas take into account the recommendations of the Basel I Committee. The Central Bank of the Bahamas implemented Basel III requirements regarding capital adequacy in 2016. Its guidelines for the management of capital provide that Inteligo’s regulatory capital must be equal to or greater than 8.0% of the total risk-weighted assets. Risk-weighted assets are the sum of (i) the total amount of credit risk weighted assets and indirect loans; (ii) ten times the regulatory capital allocated to cover market risk only if the bank’s market risk position is higher than (a) 5% of the total on and off-balance sheet assets; (b) U.S.$100 million; and (iii) 12.5 times the regulatory capital allocated to cover operational risk. As of March 31, 2019, Inteligo Bank’s ratio of regulatory capital to total risk-weighted assets was 26.9%. In 2018, the Central Bank of the Bahamas published two discussion papers focused on Minimum Disclosures (Pillar III of the Basel II framework) and the Net Stable Funding Ratio and the Liquidity Coverage Ratio (main components of Basel III).

In Peru, Inteligo SAB is regulated by the SMV, which is responsible for determining the minimum capital requirement for the companies under its supervision. As of March 31, 2019, the capital requirement for brokerage houses is the sum of (i) the minimum regulatory capital required of S/2.0 million; and (ii) the regulatory capital allocated to cover operational risks. As of March 31, 2019, Inteligo SAB held capital exceeding S/12.0 million.

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Commitments and Contractual Obligations

We enter into various commitments and contractual obligations that may require future cash payments. The following tables summarize our commitments and contractual obligations as of March 31, 2019 and December 31, 2018, respectively.

As of March 31, 2019	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	(S/ in millions)
Deposits and obligations		33,712.9		906.9		49.9		120.3		34,790.0
Inter-bank funds		106.5		—		—		—		106.5
Due to banks and correspondents		1953.3		729.5		225.2		820.9		3,726.1
Bonds, notes and other obligations		145.2		1,431.1		2,190.8		2,896.2		6,663.2
Due from customers on acceptances		89.7		—		—		—		89.7
Accounts payable, provisions and other liabilities		1,916.4		—		—		—		1,916.4
Lease liabilities		17.6		67.5		175.3		69.8		330.2
Total (1)		37,941.6		3,135.1		2,638.4		3,907.1		47,622.1

As of December 31, 2018	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	(S/ in millions)
Deposits and obligations		32,783.6		735.7		47.9		114.8		33,682.0
Due to banks and correspondents		2,507.6		752.2		225.2		808.3		4,293.4
Bonds, notes and other obligations		132.5		1,309.2		2,214.7		2,840.3		6,496.8
Due from customers on acceptances		132.9		—		—		—		132.9
Accounts payable, provisions and other liabilities		1,750.4		—		—		—		1,750.4
Total (1)		37,307.0		2,797.1		2,487.8		3,763.4		46,355.4

All contractual obligations included in this table are recognized as liabilities on our consolidated statement of financial position and represent principal payments on an undiscounted basis without including payment of future interest. For more information see “Note 31.3 Liquidity Risk” of our audited annual consolidated financial statements.

(1) For insurance contract liabilities, see Notes 15 of our audited annual consolidated financial statements.

Capital Expenditures Program

We have made significant investments and in particular, in our banking segment, Interbank has made substantial investments in recent years targeting both digital and physical infrastructure. Our capital expenditures amounted to S/200.6 million for 2018, S/245.2 million for 2017 and S/212.4 million for 2016. Some of the key investments include:

• significant improvements in our digital platform, including new functionalities and a complete new customer interface aimed to enhance user experience, in both retail and commercial segments;

• building up of data and implementation of tools to improve our CRM and risk analytical capabilities to better understand our customers;

• strengthening our data center through an outsourcing contract with IBM;

• the renewal of a large portion of our ATM’s network to be able to provide new functionalities with an omni-channel approach; and

• significant improvement of our operational efficiency.

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Interbank believes that it has built the foundations to capture current and future market opportunities and continue to grow. It has a capital expenditure plan to ensure the accomplishment of its medium-term strategic plan, as it believes that not only operating efficiency and the proximity to its customers, but also digital transformation and innovation, are key competitive advantages.

While we budget for investments across our subsidiaries, Interbank accounts for the substantial majority or our capital expenditures budget. We budget for year long periods. Interbank’s budget for capital expenditures for the next three years is approximately S/700 million, approximately 75% of which is related to information technology expenditures including investments in our digital platform. Some of the key technological expenditures include:

• develop new business ideas and business models;

• intensify analytical capabilities through data, big data, artificial intelligence and real time decision, to enrich our understanding of Peruvian clients;

• improve customer experience through digital solutions, including products, services, and processes;

• strengthen operational efficiency and productivity through robotic process automation;

• update our cybersecurity standards to protect our customers; and

• migrate and develop new applications through the cloud.

Interseguro has invested in technology to support its rapidly expanding operations. In 2013 it started the implementation of an operations system in order to support Interseguro’s planned growth in individual life and retail insurance products, a CRM platform, and business intelligence capabilities, among others. Aside from its technology investments program and upgrades, Interseguro is also considering minor investments to improve its office infrastructure.

In our wealth management segment, Inteligo Bank implemented a new core system to support its rapidly expanding operations and has continued working on complementing its IT infrastructure and further developing of its technology platform, which will allow it to leverage its existing CRM platform and develop stronger business intelligence capabilities.

Off-Balance Sheet Arrangements

Our subsidiaries Interbank, Interseguro and Inteligo have various contractual arrangements, such as contingent operations, that are not recognized as liabilities in our audited annual consolidated financial statements but are required to be recorded as off-balance sheet items. See Note 19 to our audited annual consolidated financial statements.

We enter into contingent operations to generate fees from guarantees, stand-by letters of credit, import and export letters of credit, due from bank acceptances and foreign currency forward obligations.

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Off-Balance Sheet Arrangements as of March 31, 2019 and December 31, 2018

The following table presents our consolidated off-balance sheet arrangements as of March 31, 2019 and December 31, 2018.

	As of March 31,		As of December 31,
	2019		2018		Change
	(S/ in millions)				(S/in millions)			%
Contingent credits—Indirect loans
Guarantees and standby letters		3,696.4		3.763.6		(67.2	)		(1.8	)%
Import and export letters of credit		295.6		307.9		(12.2	)		(4.0	)%
		3,992.0		4,071.5		(79.4	)		(2.0	)%
Derivatives—Notional amounts
Held for trading
Forward currency contracts—buy		725.3		2,023.8		(1,298.6	)		(64.2	)%
Forward currency contracts—sell		1,741.9		2,709.6		(967.8	)		(35.7	)%
Foreign currency forward contracts on currencies other than sol		590.5		443.8		146.7			33.1	%
Interest rate swaps		2,385.0		2,018.2		366.8			18.2	%
Currency swaps		1,018.9		909.1		109.8			12.1	%
Cross currency swap		195.3		198.5		(3.2	)		(1.6	)%
Foreign currency options		129.0		234.8		(105.8	)		(45.1	)%
Held as hedges
Cash flow hedges:
Interest rate swaps		298.6		303.6		(5.0	)		(1.6	)%
Cross currency swap		1,957.6		1,922.6		35.0			1.8	%
		9,042		10,764.0		(1,722.0	)		(16.0	)%
Responsibilities under credit lines agreements		9,560.8		9,172.6		388.2			4.2	%
Total		22,594.9		24,008.1		(1,413.2	)		(5.9	)%

Guarantees and standby letters decreased by S/67.2 million, or 1.8%, from S/3,763.6 million as of December 31, 2018 to S/3,696.4 million as of March 31, 2019. Import and export letters of credit decreased S/12.2 million in the corresponding period.

As of March 31, 2019, foreign currency forwards, including purchase and sale agreements decreased S/2,119.6 million from S/5,177.2 million as of December 31, 2018 to S/3,057.6 million as of March 31, 2019. We also use derivative financial instruments as hedges. See Note 11(b) to our audited annual consolidated financial statements for derivative financial instruments valuation.

Responsibilities under credit line agreements increased S/388.2 million for the three months ended March 31, 2019, compared to the amount registered as of December 31, 2018. These credit line agreements are cancellable at any time by Interbank.

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Off-Balance Sheet Arrangements as of December 31, 2018 and 2017

The following table presents our consolidated off-balance sheet arrangements as of December 31, 2018, 2017.

	As of December 31,
	2018		2017		Change
	(S/ in millions)				(S/ in millions)			%
Contingent credits—Indirect loans
Guarantees and standby letters		3,763.6		4,044.6		(281.0	)		(6.9	%)
Import and export letters of credit		307.9		221.9		86.0			38.8	%
		4,071.5		4,266.5		(195.0	)		(4.6	%)
Derivatives—Notional amounts
Held for trading
Forward currency contracts—buy		2,023.8		2,317.9		(294.1	)		(12.7	%)
Forward currency contracts—sell		2,709.6		2,776.3		(66.7	)		(2.4	%)
Foreign currency forward contracts on currencies other than sol		443.8		379.4		64.4			17.0	%
Interest rate swaps		2,018.2		2,220.1		(201.9	)		(9.1	%)
Currency swaps		909.1		989.2		(80.1	)		(8.1	%)
Cross currency swap		198.5		190.8		7.8			4.1	%
Foreign currency options		234.8		227.6		7.1			3.1	%
Held as hedges
Cash flow hedges:
Interest rate swaps		303.6		453.7		(150.2	)		(33.1	%)
Cross currency swap		1,922.6		551.0		1,371.6			249.0	%
		10,764.0		10,106.0		658.0			6.5	%
Responsibilities under credit lines agreements		9,172.6		7,989.6		1,183.0			14.8	%
Total		24,008.1		22,362.2		1,645.9			7.4	%

Guarantees and standby letters decreased S/281.0 million, or 6.9% from S/4,044.6 million as of December 31, 2017 to S/3,763.6 million as of December 31, 2018. Import and export letters of credit increased S/86.0 million in the corresponding period.

As of December 31, 2018, foreign currency forwards, including purchase and sale agreements decreased S/296.4 million from S/5,473.6 million as of December 31, 2017 to S/5,177.2 million as of December 31, 2018. We also use derivative financial instruments as hedges. See Note 11 (b) to our audited annual consolidated financial statements for derivative financial instruments valuation.

Responsibilities under credit line agreements increased S/1,183.0 million as of December 31, 2018, compared to the amount registered as of December 31, 2017. These credit line agreements are cancellable at any time by Interbank.

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Off-Balance Sheet Arrangements as of December 31, 2017 and 2016

The following table presents our consolidated off-balance sheet arrangements as of December 31, 2017 and 2016.

	As of December 31,				Change
	2017		2016		(S/ in millions)			%
Contingent credits—Indirect loans
Guarantees and standby letters		4,044.6		4,193.7		(149.1	)		(3.6	%)
Import and export letters of credit		221.9		256.7		(34.8	)		(13.6	%)
		4,266.5		4,450.5		(184.0	)		(4.1	%)
Derivatives
Held for trading
Forward currency contracts—buy		2,317.9		1,742.8		575.1			33.0	%
Forward currency contracts—sell		2,776.3		2,013.7		762.7			37.9	%
Foreign currency forward contracts on currencies other than sol		379.4		204.6		174.8			85.4	%
Interest rate swaps		2,220.1		2,761.1		(541.0	)		(19.6	%)
Currency swaps		989.2		1,464.3		(475.1	)		(32.4	%)
Cross currency swap		190.8		197.5		(6.8	)		(3.4	%)
Foreign currency options		227.6		192.6		35.1			18.2	%
Held as hedges
Cash flow hedges:
Interest rate swaps		453.7		469.8		(16.1	)		(3.4	%)
Cross currency swap		551.0		—		551.0			0.0	%
		10,106.0		9,046.4		1,059.6			11.7	%
Responsibilities under credit lines agreements		7,989.6		9,000.9		(1,011.2	)		(11.2	%)
Total		22,362.2		22,497.8		(135.6	)		(0.6	%)

Guarantees and standby letters decreased by S/149.1 million, or 3.6%, from S/4,193.7 million as of December 31, 2016 to S/4,044.6 million as of December 31, 2017. Import and export letters of credit decreased S/34.8 million in the corresponding period.

As of December 31, 2017, foreign currency forwards, including purchase and sale agreements increased S/1,512.6 million from S/3,961.1 million as of December 31, 2016 to S/5,473.6 million as of December 31, 2017. We also use derivative financial instruments as hedges. See Note 11(b) to our audited annual consolidated financial statements for derivative financial instruments valuation.

Responsibilities under credit line agreements decreased S/1,011.2 million as of December 31, 2017, compared to the amount registered as of December 31, 2016. These credit line agreements are cancellable at any time by Interbank.

Quantitative and Qualitative Disclosures about Market Risk

For a discussion of quantitative and qualitative market risk, see Note 31.2 to our audited annual consolidated financial statements.

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SELECTED STATISTICAL INFORMATION

The following tables present certain selected statistical information and ratios for IFS for the periods indicated. The following information is included for analytical purposes and should be read in conjunction with the information included in “Management’s Discussion and Analysis of Results of Operations and Financial Conditions” and our audited annual consolidated financial statements and notes thereto included elsewhere in this prospectus. The statistical information and discussion and analysis presented below for the fiscal years ended December 31, 2018 and December 31, 2017 reflect our consolidated financial position with our subsidiaries, Inteligo, Interbank and Interseguro, as of December 31, 2018 and 2017 and their results of operations for 2018, 2017 and 2016. The statistical information presented below for the three months ended March 31, 2019 and March 31, 2018 reflect our consolidated financial position with our subsidiaries Inteligo, Interbank and Interseguro, as of March 31, 2019 and 2018 and their results of operations for the three months ended 2019 and 2018.

Average annual balances are based on five quarterly balances. Nominal average interest rates have been calculated by dividing interest earned on assets or paid on liabilities by the corresponding average balances on such assets or liabilities. Certain figures have been annualized for interim periods.

As explained in Note 4.2.2 to our financial statements, we have adopted for the first time IFRS 9 “Financial Instruments”, effective for annual periods beginning on or after January 1, 2018. IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” for annual periods starting on or after January 1, 2018.

The adoption of IFRS 9 has fundamentally changed the Company’s accounting for loan loss impairments by replacing the incurred loss approach under IAS 39 with a forward-looking expected credit loss (ECL) approach. IFRS 9 requires us to record an allowance for expected credit loss for all loans and other debt financial assets not held at fair value through profit or loss, together with financial guarantee contracts. The allowance is based on the expected credit loss associated with the probability of default in the next twelve months unless there has been a significant increase in credit risk since origination. If the financial asset meets the definition of purchased or originated credit impaired (POCI), the allowance is based on the change in the expected credit loss over the life of the asset.

As permitted by IFRS 9, we have not restated the comparative information for prior years. Therefore, the comparative information for 2017 and prior periods is reported under IAS 39 and is not comparable to the information presented for 2018.

On January 1, 2019, we adopted for the first time IFRS 16 “Leases” which established that at the commencement date of a lease, a lessee will recognize a liability to reflect lease payments and the asset that represents the right-of-use of the underlying leased asset during the lease term will be recorded. Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. As permitted by the transitional provisions of IFRS 16, we elected to apply the modified retrospective approach and we have not restated comparative figures. See Note 2(c) to our unaudited interim condensed consolidated financial statements.

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Average Balance Sheets, Income Earned from Interest-Earning Assets, Interest Paid on Interest-Bearing Liabilities

The tables below set forth, by currency of denomination, average balances for IFS prepared on a consolidated basis, and, where applicable, interest earned on interest-earning assets and interest paid on interest-bearing liabilities for the periods indicated. Except as otherwise indicated, average balances, when used, have been classified by currency (soles or foreign currency (primarily U.S. dollars)), regardless of the domestic or international origin of the relevant balances. In addition, unless otherwise set forth in this prospectus, such average balances are based on quarterly balances. Nominal average interest rates have been calculated by dividing interest earned on assets or paid on liabilities by the corresponding average balances on such assets or liabilities.

	For the three months ended March 31, (unaudited)														For the year ended December 31,
	2019							2018							2018							2017							2016
	(S/ in millions, except for percentages)														(S/ in millions, except for percentages)
	Average Balance		Interest Earned		Nominal Average Rate			Average Balance		Interest Earned		Nominal Average Rate			Average Balance		Interest Earned		Nominal Average Rate			Average Balance		Interest Earned		Nominal Average Rate			Average Balance		Interest Earned		Nominal Average Rate
Interest-earning assets:
Cash and due from banks
Soles		1,400.3		1.3		0.4	%		1,629.9		2.9		0.7	%		1,431.3		5.4		0.4	%		1,246.8		8.9		0.7	%		1,197.9		11.0		0.9	%
Foreign Currency		7,902.7		26.0		1.3	%		9,072.1		8.4		0.4	%		7,654.1		46.2		0.6	%		9,011.4		21.2		0.2	%		10,205.8		9.6		0.1	%
Total		9,303.0		27.3		1.2	%		10,702.0		11.3		0.4	%		9,085.4		51.6		0.6	%		10,258.2		30.1		0.3	%		11,403.8		20.5		0.2	%
Investments
Soles		10,048.9		142.8		5.7	%		9,956.4		160.6		6.5	%		10,019.9		528.7		5.3	%		6,523.1		341.6		5.2	%		4,640.8		277.8		6.0	%
Foreign Currency		7,692.2		91.5		4.8	%		7,539.7		67.1		3.6	%		7,688.7		384.3		5.0	%		5,407.1		235.8		4.4	%		4,707.7		222.2		4.7	%
Total		17,741.1		234.2		5.3	%		17,496.1		227.7		5.2	%		17,708.7		913.0		5.2	%		11,930.2		577.4		4.8	%		9,348.4		499.9		5.3	%
Loans
Soles		24,319.5		744.0		12.2	%		21,054.7		669.7		12.7	%		22,161.0		2,801.1		12.6	%		19,980.3		2,683.0		13.4	%		18,894.0		2,643.1		14.0	%
Foreign Currency		10,352.8		161.2		6.2	%		8,659.3		127.5		5.9	%		9,445.2		555.6		5.9	%		8,718.4		518.5		5.9	%		8,723.6		541.3		6.2	%
Total		34,672.4		905.2		10.4	%		29,714.0		797.3		10.7	%		31,606.2		3,356.7		10.6	%		28,698.7		3,201.5		11.2	%		27,617.5		3,184.3		11.5	%
Total interest-earning assets
Soles		35,768.7		888.0		9.9	%		32,641.0		833.2		10.2	%		33,612.2		3,335.2		9.9	%		27,750.2		3,033.6		10.9	%		24,732.6		2,931.8		11.9	%
Foreign Currency		25,947.8		278.8		4.3	%		25,271.1		203.0		3.2	%		24,788.1		986.1		4.0	%		23,136.9		775.5		3.4	%		23,637.1		773.0		3.3	%
Total		61,716.5		1,166.7		7.6	%		57,912.1		1,036.3		7.2	%		58,400.2		4,321.3		7.4	%		50,887.1		3,809.0		7.5	%		48,369.7		3,704.8		7.7	%
Taxable interest income		—		915.2		—			—		861.5		—			—		3,356.2		—			—		3,166.7		—			—		3,139.7		—
Non-taxable interest income		—		251.5		—			—		174.8		—			—		965.1		—			—		642.3		—			—		565.1		—

139

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	For the three months ended March 31, (unaudited)																For the year ended December 31,
	2019								2018								2018								2017								2016
	(S/ in millions, except for percentages)																(S/ in millions, except for percentages)
	Average Balance		Interest Paid			Nominal Average Rate			Average Balance		Interest Paid			Nominal Average Rate			Average Balance		Interest Paid			Nominal Average Rate			Average Balance		Interest Paid			Nominal Average Rate			Average Balance		Interest Paid			Nominal Average Rate
Interest-bearing liabilities:
Deposits and obligations
Soles		19,672.8		(142.1	)		(2.9	%)		17,875.5		(109.9	)		(2.5	%)		18,225.8		(468.1	)		(2.6	%)		15,675.5		(461.5	)		(2.9	%)		13,466.8		(392.4	)		(2.9	%)
Foreign Currency		14,563.1		(46.9	)		(1.3	%)		14,038.5		(29.3	)		(0.8	%)		13,672.6		(135.1	)		(1.0	%)		13,881.7		(110.0	)		(0.8	%)		14,759.8		(104.7	)		(0.7	%)
Total		34,236.0		(189.1	)		(2.2	%)		31,914.0		(139.2	)		(1.7	%)		31,898.4		(603.2	)		(1.9	%)		29,557.2		(571.5	)		(1.9	%)		28,226.6		(497.1	)		(1.8	%)
Due to banks and correspondents (1)
Soles		3,024.6		(30.8	)		(4.1	%)		3,455.7		(36.4	)		(4.2	%)		3,473.8		(137.6	)		(4.0	%)		3,984.4		(181.4	)		(4.6	%)		4,329.5		(199.5	)		(4.6	%)
Foreign Currency		1,038.4		(11.5	)		(4.4	%)		898.4		(7.9	)		(3.5	%)		922.5		(36.2	)		(3.9	%)		1,323.8		(41.0	)		(3.1	%)		1,733.3		(55.7	)		(3.2	%)
Total		4,063.0		(42.4	)		(4.2	%)		4,354.2		(44.3	)		(4.1	%)		4,396.3		(173.7	)		(4.0	%)		5,308.2		(222.4	)		(4.2	%)		6,062.7		(255.3	)		(4.2	%)
Bonds, notes and other obligations
Soles		1,904.9		(28.0	)		(5.9	%)		628.9		(15.8	)		(10.0	%)		1,180.3		(90.0	)		(7.6	%)		427.9		(30.6	)		(7.2	%)		434.4		(27.3	)		(6.3	%)
Foreign Currency		4,675.1		(76.4	)		(6.5	%)		5,292.4		(67.6	)		(5.1	%)		5,024.6		(303.7	)		(6.0	%)		4,460.8		(295.4	)		(6.6	%)		4,377.9		(302.1	)		(6.9	%)
Total		6,580.0		(104.4	)		(6.3	%)		5,921.3		(83.4	)		(5.6	%)		6,204.9		(393.7	)		(6.3	%)		4,888.7		(326.0	)		(6.7	%)		4,812.3		(329.5	)		(6.8	%)
Total Interest-bearing liabilities:
Soles		24,602.3		(200.9	)		(3.3	%)		21,960.1		(162.1	)		(3.0	%)		22,879.9		(695.6	)		(3.0	%)		20,087.8		(673.5	)		(3.4	%)		18,230.7		(619.3	)		(3.4	%)
Foreign Currency		20,276.6		(134.8	)		(2.7	%)		20,229.3		(104.8	)		(2.1	%)		19,619.7		(475.0	)		(2.4	%)		19,666.3		(446.4	)		(2.3	%)		20,871.0		(462.5	)		(2.2	%)
Total		44,879.0		(335.8	)		(3.0	%)		42,189.4		(266.9	)		(2.5	%)		42,499.6		(1,170.6	)		(2.8	%)		39,754.1		(1,119.9	)		(2.8	%)		39,101.7		(1,081.9	)		(2.8	%)

(1) Includes inter-bank funds.

140

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The following tables set forth, by currency of denomination, average balances for our non-interest earning assets and non-interest bearing liabilities and shareholders’ equity for the periods indicated.

	For the three months ended March 31, (unaudited)						For the year ended December 31,
	2019			2018			2018			2017			2016
	(S/ in millions)						(S/ in millions)
	Average Balance			Average Balance			Average Balance			Average Balance			Average Balance
Impairment allowance for loans
Soles		(1,109.3	)		(1,020.0	)		(1,025.8	)		(1,020.7	)		(932.5	)
Foreign Currency		(271.2	)		(239.2	)		(261.7	)		(183.4	)		(179.1	)
Total		(1,380.5	)		(1,259.2	)		(1,287.6	)		(1,204.1	)		(1,111.7	)
Investment property
Soles		864.9			1,031.1			924.9			833.7			736.2
Foreign Currency		123.2			—			97.7			—			—
Total		988.1			1,031.1			1,022.6			833.7			736.2
Property, furniture and equipment, net
Soles		781.0			605.1			607.3			589.9			589.9
Foreign Currency		4.5			—			—			0.0			0.0
Total		785.5			605.1			607.3			589.9			589.9
Accounts receivable and other assets, net
Soles		1,240.6			831.5			979.1			834.6			969.2
Foreign Currency		257.6			344.1			300.1			208.5			351.4
Total		1,498.1			1,175.5			1,279.2			1,043.1			1,320.6
Intangibles and goodwill, net
Soles		950.7			817.6			888.1			421.9			220.0
Foreign Currency		0.0			0.0			0.0			0.0			0.0
Total		950.7			817.6			888.1			421.9			220.0
Due from customers on acceptances
Soles		—			—			—			—			—
Foreign Currency		111.4			53.4			88.3			26.9			17.0
Total		111.4			53.4			88.3			26.9			17.0
Deferred Income Tax asset, net
Soles		80.6			85.7			74.6			53.5			30.0
Foreign Currency		—			—			—			—			—
Total		80.6			85.7			74.6			53.5			30.0
Total non-interest-earning assets:
Soles		2,808.4			2,350.9			2,448.1			1,713.0			1,612.7
Foreign Currency		225.4			158.2			224.3			52.1			189.2
Total		3,033.8			2,509.2			2,672.4			1,765.0			1,802.0

141

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	For the three months ended March 31, (unaudited)				For the year ended December 31,
	2019		2018		2018		2017		2016
	(S/ in millions)				(S/ in millions, except for percentages)
	Average Balance		Average Balance		Average Balance		Average Balance		Average Balance
Non-interest-bearing liabilities:
Due from customers on acceptances
Soles		—		—		—		—		—
Foreign Currency		111.4		53.4		88.3		26.9		17.0
Total		111.4		53.4		88.3		26.9		17.0
Accounts payable, provisions and other liabilities
Soles		1,594.3		1,141.8		1,322.6		941.1		1,012.1
Foreign Currency		404.2		522.6		434.2		315.6		458.6
Total		1,998.5		1,664.4		1,756.9		1,256.7		1,470.7
Insurance contract liabilities
Soles		6,397.9		6,369.1		6,142.0		3,816.7		2,850.0
Foreign Currency		3,956.0		4,061.9		4,073.9		2,452.1		1,948.0
Total		10,353.9		10,431.0		10,215.9		6,268.8		4,798.0
Deferred Income Tax Liability, net
Soles		0.1		0.3		0.1		2.1		3.8
Foreign Currency		—		—		—		—		—
Total		0.1		0.3		0.1		2.1		3.8
Total non-interest-bearing liabilities:
Soles		7,992.2		7,511.2		7,464.7		4,759.9		3,865.9
Foreign Currency		4,471.5		4,637.9		4,596.4		2,794.6		2,423.5
Total		12,463.7		12,149.1		12,061.1		7,554.5		6,289.4

Return on Equity and Assets

The following table sets forth our return on average total assets and average shareholders’ equity and related information for the periods indicated:

	For the three months ended March 31, (unaudited) (3)						For the year ended December 31,
	2019			2018			2018			2017			2016
Return on average total assets		2.2	%		1.9	%		1.8	%		2.0	%		1.9	%
Return on average shareholders’ equity		19.0	%		19.1	%		16.6	%		19.3	%		19.9	%
Equity to assets ratio (1)		11.4	%		10.1	%		10.7	%		10.1	%		9.5	%
Dividend payout ratio (2)		—			—			60.0	%		49.4	%		50.1	%

(1) Average shareholders’ equity as a percentage of average assets.

(2) Dividends divided by net profit. Dividends declared in 2018, 2017 and 2016 were paid in 2019, 2018 and 2017, respectively. Dividends are declared and paid in U.S. dollars.

(3) Annualized for interim periods.

142

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Changes in Net Interest and Similar Income and Net Interest and Similar Expense: Volume and Rate Analysis

The following table sets forth, by currency of denomination, changes in our interest revenue and expenses between changes in the average volume of interest-earning assets and interest-bearing liabilities and changes in their respective nominal interest rates from the three months ended March 31, 2018 to the three months ended March 31, 2019 and from the year ended December 31, 2016 to the year ended December 31, 2017 and from the year ended December 31, 2017 to the year ended December 31, 2018. Volume and rate variances have been calculated based on movements in average quarterly balances and changes in nominal interest rates, average interest-earning assets and average interest-bearing liabilities. The net change attributable to changes in both volume and rate has been allocated proportionately to the change due to volume and the change due to rate.

	For the three months ended March 31, 2019/March 31, 2018 (unaudited)									December 31, 2018/2017									December 31, 2017/2016
	Increase (Decrease) Due to Changes in:									Increase (Decrease) Due to Changes in:									Increase (Decrease) Due to Changes in:
	Rate			Volume			Net Change			Rate			Volume			Net Change			Rate			Volume			Net Change
										(S/ in millions)
Interest-earning assets:
Cash and due from banks (1)
Soles		(1.4	)		(0.2	)		(1.6	)		(4.2	)		0.7			(3.5	)		(2.4	)		0.3			(2.1	)
Foreign Currency		21.5			(3.9	)		17.7			33.2			(8.2	)		25.0			14.4			(2.8	)		11.6
Total		20.1			(4.1	)		16.0			29.0			(7.5	)		21.5			12.0			(2.5	)		9.5
Investments
Soles		(19.1	)		1.3			(17.8	)		2.5			184.5			187.0			(34.7	)		98.6			63.9
Foreign Currency		22.5			1.8			24.3			34.5			114.0			148.5			(16.9	)		30.5			13.6
Total		3.4			3.1			6.5			37.0			298.5			335.5			(51.6	)		129.1			77.5
Loans
Soles		(25.7	)		99.9			74.2			(157.6	)		275.6			118.1			(105.9	)		145.9			40.0
Foreign Currency		7.3			26.4			33.7			(5.6	)		42.7			37.1			(22.5	)		(0.3	)		(22.8	)
Total		(18.3	)		126.3			107.9			(163.2	)		318.4			155.2			(128.4	)		145.6			17.2
Total interest-earning assets:
Soles		(46.2	)		101.0			54.7			(159.2	)		460.8			301.7			(143.1	)		244.8			101.8
Foreign Currency		51.4			24.3			75.7			62.0			148.6			210.6			(24.9	)		27.4			2.5
Total		5.1			125.3			130.5			(97.2	)		609.4			512.3			(168.0	)		272.2			104.2
Interest-bearing liabilities:
Deposits and obligations
Soles		(19.2	)		(13.0	)		(32.2	)		58.9			(65.5	)		(6.6	)		(4.0	)		(65.0	)		(69.0	)
Foreign Currency		(16.0	)		(1.7	)		(17.7	)		(27.2	)		2.1			(25.1	)		(12.3	)		7.0			(5.4	)
Total		(35.2	)		(14.7	)		(49.9	)		31.7			(63.4	)		(31.7	)		(16.3	)		(58.1	)		(74.4	)
Due to banks and correspondents
Soles		1.1			4.4			5.5			23.7			20.2			43.9			2.4			15.7			18.1
Foreign Currency		(2.1	)		(1.6	)		(3.7	)		(10.9	)		15.7			4.8			2.1			12.7			14.8
Total		(1.0	)		2.8			1.9			12.7			36.0			48.7			4.5			28.4			32.9
Bonds, notes and other obligations
Soles		6.6			(18.7	)		(12.2	)		(2.0	)		(57.4	)		(59.4	)		(3.7	)		0.5			(3.3	)
Foreign Currency		(18.8	)		10.1			(8.7	)		25.8			(34.1	)		(8.3	)		12.3			(5.5	)		6.8
Total		(12.3	)		(8.7	)		(20.9	)		23.8			(91.4	)		(67.7	)		8.5			(5.0	)		3.5
Total Interest-bearing liabilities:
Soles		(11.5	)		(27.3	)		(38.8	)		80.5			(102.6	)		(22.1	)		(5.4	)		(48.8	)		(54.2	)
Foreign Currency		(36.9	)		6.8			(30.1	)		(12.3	)		(16.3	)		(28.6	)		2.0			14.1			16.2
Total		(48.4	)		(20.5	)		(68.9	)		68.2			(118.9	)		(50.7	)		(3.3	)		(34.7	)		(38.0	)

(1) Includes inter-bank funds.

143

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Interest-Earning Assets: Net Interest Margin and Yield Spread

The following table set forth for each of the periods indicated, by currency of denomination, our levels of average interest-earning assets, net interest income, gross yield, net interest margin and yield spread, all on a nominal basis.

	For the three months ended March 31,  (unaudited)						For the year ended December 31,
	2019			2018			2018			2017			2016
	(S/ in millions, except for percentages)						(S/ in millions, except for percentages)
Average interest-earning assets
Soles		35,768.7			32,641.0			33,612.2			27,750.2			24,732.6
Foreign Currency		25,947.8			25,271.1			24,788.1			23,136.9			23,637.1
Total		61,716.5			57,912.1			58,400.2			50,887.1			48,369.7
Net interest income (1)
Soles		687.0			671.1			2,639.6			2,360.1			2,312.5
Foreign Currency		143.9			98.3			511.1			329.1			310.5
Total		831.0			769.4			3,150.7			2,689.1			2,623.0
Gross yield (2)
Soles		9.9	%		10.2	%		9.9	%		10.9	%		11.9	%
Foreign Currency		4.3	%		3.2	%		4.0	%		3.4	%		3.3	%
Total		7.6	%		7.2	%		7.4	%		7.5	%		7.7	%
Net interest margin (3)
Soles		7.7	%		8.2	%		7.9	%		8.5	%		9.3	%
Foreign Currency		2.2	%		1.6	%		2.1	%		1.4	%		1.3	%
Total		5.4	%		5.3	%		5.4	%		5.3	%		5.4	%
Yield spread (4)
Soles		6.7	%		7.3	%		6.9	%		7.6	%		8.5	%
Foreign Currency		1.6	%		1.1	%		1.6	%		1.1	%		1.1	%

(1) “Net interest income” is defined as interest and similar income less interest and similar expense.

(2) “Gross yield” is defined as interest and similar income divided by average interest-earning assets.

(3) “Net interest margin” is defined as net interest and similar income divided by average interest-earning assets.

(4) “Yield spread”, on a nominal basis, represents the difference between gross yield on average interest-earning assets and average cost of interest-bearing liabilities.

144

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Investment Portfolio

The following table sets forth our financial investment portfolio by type on the dates indicated. For more information on our financial investment portfolio as of December 31, 2018 and 2017, see Note 6 to our audited annual consolidated financial statements appearing elsewhere in this prospectus.

	As of March 31,					As of December 31,
	2019					2018					2017					2016					2015					2014
	S/ in   millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%
Equity securities		1,320.1		7.5	%		1,180.2		6.8	%		771.8		4.6	%		588.8		5.8	%		705.2		8.2	%		771.5		9.3	%
Bonds		8,968.1		50.7	%		8,806.8		50.6	%		8,519.5		50.9	%		4,749.7		47.0	%		3,554.2		41.5	%		3,502.5		42.0	%
Investment in Peruvian sovereign and global bonds		4,786.7		27.1	%		4,868.3		28.0	%		4,189.5		25.0	%		1,904.6		18.8	%		1,835.4		21.4	%		1,305.9		15.7	%
Negotiable bank certificates issued by the Central Reserve Bank of Peru		1,491.3		8.4	%		1,380.5		7.9	%		2,124.8		12.7	%		1,751.7		17.3	%		1,541.7		18.0	%		1,829.1		21.9	%
Mutual funds and investment funds participations		1,126.4		6.4	%		1,168.5		6.7	%		1,120.8		6.7	%		1,111.3		11.0	%		925.6		10.8	%		931.2		11.2	%
Total		17,692.6		100.0	%		17,404.3		100.0	%		16,726.5		100.0	%		10,106.3		100.0	%		8,562.3		100.0	%		8,340.2		100.0	%
Plus: Accrued interest		160.2					225.2					197.7					104.4					91.3					69.6
Total investments, net		17,852.8					17,629.4					16,924.1					10,209.8					8,651.9					8,409.0

145

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The following tables set forth the maturities of our financial investment portfolio as of March 31, 2019 and December 31, 2018, before accrued interest.

Maturities of Investment Portfolio

	As of March 31, 2019
	1 month			Average Yield			1-3 months			Average Yield			3 months -1 year			Average Yield			1-5 years			Average Yield			5-10 years			Average Yield			Over 10 years			Average Yield			No maturity			Average Yield			Total
	(S/ In millions except for percentages)
Investments at fair value through profit or loss:
Equity securities		—			—			—			—			—			—			—			—			—			—			—			—			391.4			—			391.4
Bonds		—			—			—			—			—			—			—			—			—			—			—			—			31.6			4.7	%		31.6
Peruvian sovereign and global Bonds		—			—			—			—			—			—			—			—			—			—			—			—			15.5			5.3	%		15.5
Mutual funds and investments participations		—			—			—			—			—			—			—			—			—			—			—			—			1,126.4			—			1,126.4
Total Investments at fair value through profit or loss		—						—						—						—						—						—						1,564.8						1,564.8
Instruments measured at fair value through other comprehensive income:
Equity securities (with no recycling to PL)		—			—			—			—			—			—			—			—			—			—			—			—			928.7			—			928.7
Bonds		69.5			4.0	%		96.4			2.9	%		238.3			3.5	%		1,010.6			4.4	%		1,302.7			6.1	%		6,219.1			6.3	%		—			—			8,936.6
Peruvian sovereign and global Bonds		—			—			—						—						149.5			4.1	%		484.1			3.5	%		2,300.1			5.4	%		—			—			2,933.7
Negotiable bank certificates issued by the Central Reserve Bank of Peru		156.9			2.6	%		67.8			2.6	%		1,183.3			2.6	%		83.3			2.8	%		—			—			—			—			—			—			1,491.3
Mutual funds and investments funds participations		—			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Total Instruments measured at fair value through other comprehensive income		226.4						164.1						1,421.6						1,243.4						1,786.8						8,519.2						928.7						14,290.3
Investments at amortized cost:
Peruvian sovereign Bonds		—			—			—			—			—			—			658.5			4.1	%		1,143.2			4.6	%		35.8			5.7	%		—			—			1,837.5
Total Investments at amortized cost		—						—						—						658.5						1,143.2						35.8						—						1,837.5
Total investments		226.4						164.1						1,421.6						1,901.8						2,930.1						8,555.0						2,493.5						17,692.6
%		1.3	%					0.9	%					8.0	%					10.8	%					16.6	%					48.4	%					14.1	%					100.0	%

146

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	As of December 31, 2018
	1 month			Average Yield			1-3 months			Average Yield			3 months -1 year			Average Yield			1-5 years			Average Yield			5-10 years			Average Yield			Over 10 years			Average Yield			No maturity			Average Yield			Total
	(S/ In millions except for percentages)
Investments at fair value through profit or loss:
Equity securities		—			—			—			—			—			—			—			—			—			—			—			—			334.9			—			334.9
Bonds		—			—			—			—			—			—			—			—			—			—			—			—			46.1			4.6	%		46.1
Peruvian sovereign and global Bonds		—			—			—			—			—			—			—			—			—			—			—			—			21.9			4.9	%		21.9
Mutual funds and investments participations		—			—			—			—			—			—			—			—			—			—			—			—			1,168.5			—			1,168.5
Total Investments at fair value through profit or loss		—						—						—						—						—						—						1,571.5						1,571.5
Instruments measured at fair value through other comprehensive income:
Equity securities (with no recycling to PL)		—			—			—			—			—			—			—			—			—			—			—			—			845.3			—			845.3
Bonds		0.4			6.7	%		183.2			2.3	%		340.7			3.4	%		1,004.3			4.8	%		1,298.0			6.4	%		5,934.1			6.3	%		—			—			8,760.7
Peruvian sovereign and global Bonds		—			—			—						—						232.2			4.6	%		570.2			4.3	%		2,200.0			5.5	%		—			—			3,002.4
Negotiable bank certificates issued by the Central Reserve Bank of Peru		271.8			2.8	%		308.1			2.7	%		625.3			2.8	%		175.2			3.0	%		—			—			—			—			—			—			1,380.5
Mutual funds and investments funds participations		—			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Total Instruments measured at fair value through other comprehensive income		272.2						491.3						966.0						1,411.8						1,868.2						8,134.0						845.3			—			13,988.8
Investments at amortized cost:
Peruvian sovereign Bonds		—			—			—			—			—			—			661.5			4.2	%		1,146.7			5.1	%		35.8			6.0	%		—			—			1,843.9
Total Investments at amortized cost		—						—						—						661.5						1,146.7						35.8						—						1,843.9
Total investments		272.2						491.3						966.0						2,073.2						3,014.8						8,169.9						2,416.8						17,404.3
		1.6	%					2.8	%					5.6	%					11.9	%					17.3	%					46.9	%					13.9	%					100.0	%

147

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Loan Portfolio

The following table sets forth our loans by type of loan, at the dates indicated.

	As of March 31,						As of December 31,
	2019						2018						2017						2016						2015						2014
	S/ in millions			%			S/ in millions			%			S/ in millions			%			S/ in millions			%			S/ in millions			%			S/ in millions			%
Loan Portfolio
Loans		26,107.3			75.2	%		25,569.2			75.1	%		21,833.1			74.8	%		20,638.2			74.0	%		19,481.9			72.8	%		16,341.7			70.4	%
Credit cards		5,131.8			14.8	%		4,881.4			14.3	%		3,798.7			13.0	%		3,859.1			13.8	%		3,708.6			13.9	%		3,188.0			13.7	%
Leasing		1,635.6			4.7	%		1,682.6			4.9	%		1,706.7			5.9	%		1,771.5			6.3	%		2,010.3			7.5	%		2,179.4			9.4	%
Discounted notes		467.3			1.3	%		495.0			1.5	%		547.9			1.9	%		407.4			1.5	%		438.0			1.6	%		373.0			1.6	%
Factoring receivables		256.1			0.7	%		309.6			0.9	%		162.6			0.6	%		201.9			0.7	%		213.8			0.8	%		294.7			1.3	%
Advances and overdrafts		39.9			0.1	%		50.2			0.1	%		57.8			0.2	%		39.5			0.1	%		66.7			0.2	%		139.0			0.6	%
Refinanced loans		213.7			0.6	%		210.4			0.6	%		273.4			0.9	%		296.5			1.1	%		249.2			0.9	%		140.7			0.6	%
Past-due and under legal collection loans		867.2			2.5	%		856.9			2.5	%		794.5			2.7	%		693.3			2.5	%		589.1			2.2	%		540.7			2.3	%
Total gross loans		34,719.0			100.0	%		34,055.2			100.0	%		29,174.7			100.0	%		27,907.5			100.0	%		26,757.7			100.0	%		23,197.1			100.0	%
Add:
Accrued interest from performing loans		342.3						318.3						286.5						311.7						302.6						256.2
Less:
Impairment allowance for loans		(1,396.2	)					(1,364.8	)					(1,202.1	)					(1,166.8	)					(1,041.6	)					(819.7	)
Unearned interest and interest collected in advance		(42.3	)					(47.7	)					(55.0	)					(26.5	)					(24.4	)					(16.4	)
Total direct loans, net		33,622.7						32,960.9						28,204.2						27,025.9						25,994.2						22,617.2

Loans by Economic Activity

The following table sets forth the composition of our loan portfolio at the dates indicated based on the borrower’s principal economic activity.

	As of March 31,					As of December 31,
	2019					2018					2017					2016					2015					2014
	S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%
Loans by economic activity
Retail loans		18,835.8		54.3	%		18,202.3		53.4	%		15,394.1		52.8	%		14,497.1		51.9	%		13,795.8		51.6	%		11,252.4		48.5	%
Manufacturing		3,553.5		10.2	%		3,494.1		10.3	%		3,044.4		10.4	%		3,130.1		11.2	%		2,465.4		9.2	%		2,567.9		11.1	%
Commerce		2,780.1		8.0	%		2,874.1		8.4	%		2,352.7		8.1	%		2,146.4		7.7	%		1,754.5		6.6	%		1,831.4		7.9	%
Lease and real estate activities		1,046.1		3.0	%		1,044.2		3.1	%		868.0		3.0	%		967.7		3.5	%		1,106.5		4.1	%		1,117.2		4.8	%
Agriculture		1,018.3		2.9	%		1,001.8		2.9	%		989.0		3.4	%		1,015.4		3.6	%		1,122.4		4.2	%		1,035.7		4.5	%
Financial services		661.7		1.9	%		557.7		1.6	%		620.9		2.1	%		581.8		2.1	%		575.6		2.2	%		1,015.3		4.4	%
Communication, storage and transportation		935.6		2.7	%		946.6		2.8	%		757.7		2.6	%		747.2		2.7	%		745.5		2.8	%		828.5		3.6	%
Construction		618.9		1.8	%		666.7		2.0	%		716.2		2.5	%		789.9		2.8	%		797.9		3.0	%		722.7		3.1	%
Electricity, gas and water		858.9		2.5	%		892.3		2.6	%		999.2		3.4	%		1,203.6		4.3	%		979.8		3.7	%		418.8		1.8	%
Mining		584.4		1.7	%		601.9		1.8	%		551.2		1.9	%		388.1		1.4	%		457.4		1.7	%		295.2		1.3	%
Fishing		332.0		1.0	%		253.7		0.7	%		189.1		0.6	%		248.7		0.9	%		120.7		0.5	%		92.9		0.4	%
Education, health and other		231.7		0.7	%		598.2		1.8	%		114.7		0.4	%		121.2		0.4	%		126.1		0.5	%		144.5		0.6	%
Others		3,262.0		9.4	%		2,921.6		8.6	%		2,577.4		8.8	%		2,070.2		7.4	%		2,710.0		10.1	%		1,874.5		8.1	%
Total direct gross loans		34,719.0		100.0	%		34,055.2		100.0	%		29,174.7		100.0	%		27,907.5		100.0	%		26,757.7		100.0	%		23,197.1		100.0	%

148

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Loans by Business Lines

The following table shows the composition of our loan portfolio divided by our lines of business for the periods indicated.

	As of March 31,					As of December 31,
	2019					2018					2017					2016					2015					2014
	S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%
Commercial loans		16,013.1		46.1	%		16,032.1		47.1	%		13,545.2		46.4	%		13,407.9		48.0	%		13,042.8		48.7	%		11,368.8		49.0	%
Consumer loans		11,380.6		32.8	%		10,891.3		32.0	%		9,187.0		31.5	%		8,888.6		31.9	%		8,416.0		31.5	%		7,091.9		30.6	%
Mortgage loans		6,586.9		19.0	%		6,407.5		18.8	%		5,756.4		19.7	%		5,041.1		18.1	%		4,766.5		17.8	%		4,162.0		17.9	%
Small and micro-business loans		738.4		2.1	%		724.4		2.1	%		686.1		2.4	%		569.9		2.0	%		532.3		2.0	%		574.4		2.5	%
Total direct gross loans (1)		34,719.0		100.0	%		34,055.2		100.0	%		29,174.7		100.0	%		27,907.5		100.0	%		26,757.7		100.0	%		23,197.1		100.0	%

(1) Includes refinanced loans and past due and under legal collection loans for all periods reported.

Loans by Currency

The following table presents our loan portfolio divided by currency at the dates indicated.

	As of March 31,					As of December 31,
	2019					2018					2017					2016					2015					2014
	S/ in millions		%			S/ in millions		%			S/in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%
Foreign currency denominated		10,281.2		29.6	%		10,236.4		30.1	%		8,689.4		29.8	%		8,759.1		31.4	%		8,907.0		33.3	%		9,403.4		40.5	%
Sol denominated		24,437.8		70.4	%		23,818.8		69.9	%		20,485.3		70.2	%		19,148.4		68.6	%		17,850.7		66.7	%		13,793.7		59.5	%
Total gross loans		34,719.0		100.0	%		34,055.2		100.0	%		29,174.7		100.0	%		27,907.5		100.0	%		26,757.7		100.0	%		23,197.1		100.0	%

As of March 31, 2019, December 31, 2018, 2017, 2016, 2015 and 2014, we did not have foreign loans that exceeded 1% of our total consolidated assets.

Maturity Composition of Our Portfolio of Loans

The following tables set forth an analysis of our portfolio of loans as of March 31, 2019, December 31, 2018, 2017, 2016, 2015 and 2014 by type and by the time remaining to maturity. Loan amounts are presented before deduction of allowances for loan losses.

	As of March 31, 2019
	1 month		1-3 months		3 months – 1 year		1 – 5 years		More than 5 years		Past-due loans		Total
Loans		1,877.6		3,305.7		5,154.2		11,286.2		4,483.6		867.2		26,974.5
Credit cards		715.2		860.9		1,572.2		1,983.4		—		—		5,131.8
Leasing		40.6		94.6		588.8		768.9		142.7		—		1,635.6
Discounted notes		171.4		244.5		51.3		—		—		—		467.3
Factoring receivables		106.1		122.4		27.7		—		—		—		256.1
Advances and overdrafts		39.9		—		—		—		—		—		39.9
Refinanced loans		11.5		9.4		43.3		124.4		25.1		—		213.7
Total gross loans		2,962.4		4,637.5		7,437.5		14,162.9		4,651.4		867.2		34,719.0

149

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	As of December 31, 2018
	1 month		1-3 months		3 months – 1 year		1 – 5 years		More than 5 years		Past-due loans		Total
Loans		1,937.0		2,821.9		5,268.7		11,183.1		4,358.5		856.9		26,426.1
Credit cards		696.9		837.4		1,474.6		1,872.5		—		—		4,881.4
Leasing		41.2		94.4		638.9		766.5		141.6		—		1,682.6
Discounted notes		205.5		235.3		54.1		—		—		—		495.0
Factoring receivables		149.2		93.8		66.5		—		—		—		309.6
Advances and overdrafts		50.2		—		—		—		—		—		50.2
Refinanced loans		4.6		10.0		43.9		128.3		23.5		—		210.4
Total gross loans		3,084.7		4,092.9		7,546.7		13,950.5		4,523.6		856.9		34,055.2

	As of December 31, 2017
	1 month		1-3 months		3 months – 1 year		1 – 5 years		More than 5 years		Past-due loans		Total
Loans		1,628.3		2,403.2		4,192.5		8,441.5		5,167.5		794.5		22,627.6
Credit cards		596.5		706.3		1,162.9		1,333.1		—		—		3,798.7
Leasing		57.0		98.5		610.3		774.2		166.7		—		1,706.7
Discounted notes		259.2		248.3		40.3		—		—		—		547.9
Factoring receivables		50.6		96.5		15.5		—		—		—		162.6
Advances and overdrafts		57.8		—		—		—		—		—		57.8
Refinanced loans		9.8		31.5		52.9		158.6		20.6		—		273.4
Total gross loans		2,659.1		3,584.4		6,074.5		10,707.4		5,354.8		794.5		29,174.7

	As of December 31, 2016
	1 month		1-3 months		3 months – 1 year		1 – 5 years		More than 5 years		Past-due loans		Total
Loans		1,569.1		2,168.2		4,377.6		7,870.5		4,652.8		693.3		21,331.5
Credit cards		899.1		579.5		1,014.4		1,366.3		0.0		0.0		3,859.1
Leasing		54.6		105.6		701.4		816.3		93.6		0.0		1,771.5
Discounted notes		191.5		189.4		26.6		0.0		0.0		0.0		407.4
Factoring receivables		22.1		129.5		50.3		0.0		0.0		0.0		201.9
Advances and overdrafts		39.5		0.0		0.0		0.0		0.0		0.0		39.5
Refinanced loans		17.0		19.6		63.5		177.0		19.4		0.0		296.5
Total direct gross loans (1)		2,792.8		3,191.8		6,233.8		10,230.0		4,765.8		693.3		27,907.5

	As of December 31, 2015
	1 month		1-3 months		3 months – 1 year		1 – 5 years		More than 5 years		Past-due loans		Total
Loans		1,334.4		2,236.4		4,244.1		7,268.5		4,398.6		589.1		20,071.0
Credit cards		875.1		535.3		993.9		1,304.3		0.0		0.0		3,708.6
Leasing		63.5		126.5		781.5		940.4		98.3		0.0		2,010.3
Discounted notes		177.5		212.2		48.4		0.0		0.0		0.0		438.0
Factoring receivables		50.8		70.3		92.8		0.0		0.0		0.0		213.8
Advances and overdrafts		66.7		0.0		0.0		0.0		0.0		0.0		66.7
Refinanced loans		7.1		13.6		47.2		157.2		24.0		0.0		249.2
Total gross loans		2,575.1		3,194.3		6,207.8		9,670.4		4,520.9		589.1		26,757.7

150

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	As of December 31, 2014
	1 month		1-3 months		3 months – 1 year		1 – 5 years		More than 5 years		Past-due loans		Total
Loans		1,269.0		1,716.7		3,650.5		6,023.4		3,682.0		540.7		16,882.4
Credit cards		674.0		514.2		827.9		1,172.0		0.0		0.0		3,188.0
Leasing		70.9		125.7		849.0		1,073.6		60.2		0.0		2,179.4
Discounted notes		169.0		163.8		39.2		0.9		0.0		0.0		373.0
Factoring receivables		85.6		87.3		121.8		0.0		0.0		0.0		294.7
Advances and overdrafts		139.0		0.0		0.0		0.0		0.0		0.0		139.0
Refinanced loans		3.7		6.5		31.1		85.3		14.2		0.0		140.7
Total gross loans		2,411.2		2,614.2		5,519.5		8,355.2		3,756.4		540.7		23,197.1

Classification of Our Loan Portfolio

The following tables provide the classification of our loans as of March 31, 2019 and December 31, 2018, calculated under the requirements of IFRS 9:

	As of March 31, 2019
Direct and indirect Loans	Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		28,428.6		569.5		—		28,998.1
Standard grade		3,991.9		919.7		—		4,911.6
Sub-standard grade		351.9		1,190.4		—		1,542.3
Past due but not impaired		1,576.7		829.4		—		2,406.1
Impaired
Individually impaired		—		—		35.7		35.7
Collectively impaired		—		—		817.2		817.2
Total gross loans		34,349.1		3,509.0		852.9		38,711.0
Direct loan portfolio		30,859.9		3,041.3		817.8		34,719.0
Indirect loan portfolio		3,489.3		467.6		35.1		3,992.0
Total gross loans		34,349.1		3,509.0		852.9		38,711.0

	As of December 31, 2018
Direct and indirect Loans	Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		28,318.7		595.9		—		28,914.7
Standard grade		4,065.4		959.5		—		5,024.9
Sub-standard grade		451.2		1,038.7		—		1,489.9
Past due but not impaired		1,048.4		791.1		—		1,839.5
Impaired
Individually impaired		—		—		43.1		43.1
Collectively impaired		—		—		814.7		814.7
Total gross loans		33,883.7		3,385.2		857.7		38,126.7
Direct loan portfolio		30,382.2		2,858.4		814.7		34,055.2
Indirect loan portfolio		3,501.5		526.9		43.1		4,071.5
Total gross loans		33,883.7		3,385.2		857.7		38,126.7

151

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

As explained in Note 31.1(e) to our consolidated financial statements, until December 31, 2017, IFS classified each client that is part of its credit portfolio in one of the following five risk categories, depending on the degree of risk of default in the payment of each debtor: (i) Normal—A, (ii) with potential problems—B, (iii) deficient—C, (iv) doubtful—D, and (v) loss-E.

The following tables provide the classification of our loans (calculated under the requirements of IAS 39) as of the end of the periods indicated:

	As of December 31,
	2017				2016					2015					2014
	S/ in millions		%		S/ in millions		%			S/ in millions		%			S/ in millions		%
A: Normal		30,964.5		92.6		30,103.7		93.0	%		29,842.2		94.1	%		26,124.0		94.4	%
B: With potential problems		909.9		2.7		824.3		2.5	%		612.2		1.9	%		480.1		1.7	%
C: Substandard		418.4		1.3		366.2		1.1	%		330.3		1.0	%		348.2		1.3	%
D: Doubtful		509.6		1.5		514.7		1.6	%		433.8		1.4	%		360.9		1.3	%
E: Loss		638.8		1.9		549.0		1.7	%		482.0		1.5	%		367.7		1.3	%
Total		33,441.2		100.0		32,357.9		100.0	%		31,700.5		100.0	%		27,680.9		100.0	%
Direct loan portfolio before impairment allowance for loans		29,174.7		87.2		27,907.5		86.2	%		26,757.7		84.4	%		23,197.1		83.8	%
Indirect loan portfolio before impairment allowance for loans		4,266.5		12.8		4,450.5		13.8	%		4,942.7		15.6	%		4,483.8		16.2	%
Total		33,441.2		100.0		32,357.9		100.0	%		31,700.5		100.0	%		27,680.9		100.0	%

Impairment Allowance for Loans

The following tables show the allocation for our impairment allowance for loans as of March 31, 2019 and December 31, 2018 (under IFRS 9) and for 2017, 2016, 2015 and 2014 under (IAS 39):

	As of March 31,					As of December 31,
	2019					2018					2017					2016					2015					2014
	S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%			S/ in millions		%
Commercial loans		244.5		16.9	%		255.8		17.9	%		243.1		19.4	%		221.1		18.6	%		197.2		18.5	%		192.2		23.0	%
Consumer loans		1,019.1		70.4	%		987.0		69.2	%		881.9		70.3	%		851.9		71.5	%		771.3		72.4	%		574.8		68.8	%
Mortgage loans		115.6		8.0	%		114.6		8.0	%		66.5		5.3	%		60.5		5.1	%		46.5		4.4	%		31.7		3.8	%
Small and micro-business loans		67.5		4.7	%		69.5		4.9	%		63.4		5.1	%		57.2		4.8	%		50.3		4.7	%		36.6		4.4	%
Total (1)		1,446.7		100.0	%		1,426.9		100.0	%		1,255.0		100.0	%		1,190.8		100.0	%		1,065.2		100.0	%		835.2		100.0	%

(1) Includes impairment allowance for indirect loans amounting to S/50.4 million as of March 31, 2019 S/62.1 million and S/52.8 million as of December 31, 2018 and 2017. See Note 7(d) to our audited annual consolidated financial statements and Note 5(c) to our unaudited interim condensed consolidated financial statements.

152

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The following table shows the changes in our impairment allowance for loans for the periods indicated.

	For the three months Ended March 31,						For the years ended December 31,
	2019			2018			2018 (1)			2017			2016			2015			2014
							S/ in millions
Balance as of January 1		1,426.9			1,399.5			1,399.5			1,190.8			1,065.2			835.2			707.5
Provision		186.4			172.9			660.1			827.9			783.6			645.8			425.5
Recoveries of written-off loans		31.3			35.1			145.6			128.1			119.1			108.7			94.0
Written-off loans and sales		(193.0	)		(213.8	)		(791.1	)		(857.7	)		(772.0	)		(564.8	)		(406.5	)
Translation result and others		(4.9	)		(1.6	)		12.8			(34.2	)		(5.1	)		40.2			14.7
Balance as of December 31,		1,446.7			1,392.2			1,426.9			1,255.0			1,190.8			1,065.2			835.2
Allowances for indirect loans		50.4			134.1			62.1			52.8			24.0			23.6			15.5
Allowances for direct loans		1,396.2			1,258.1			1,364.8			1,202.1			1,166.8			1,041.6			819.7
Total allowances for loan losses		1,446.7			1,392.2			1,426.9			1,255.0			1,190.8			1,065.2			835.2

(1) For 2018, calculations are made under IFRS 9 that includes an adjustment to the opening balance of S/144.5 million.

The following tables show the changes in our impairment allowance for loans (direct and indirect) by line of business for the periods indicated.

	For the Three Months Ended March 31, 2019
	Commercial loans			Mortgage loans			Consumer loans			Small and micro- business loans			Total
	(S/ in millions)
Balance as of January 1		255.8			114.6			987.0			69.5			1,426.9
Provision		(9.1	)		1.6			184.2			9.7			186.4
Recovery of written-off loans		0.2			—			30.1			1.0			31.3
Written-off loans and sales		(1.1	)		—			(179.4	)		(12.6	)		(193.0	)
Translation result and others		(1.4	)		(0.7	)		(2.7	)		(0.1	)		(4.9	)
Balance as of		244.5			115.6			1,019.1			67.5			1,446.7

	For the Three Months Ended March 31, 2018
	Commercial loans			Mortgage loans			Consumer loans			Small and micro- business loans			Total
	(S/ in millions)
Balance as of January 1		291.4			105.1			946.6			56.4			1,399.5
Provision		2.7			3.7			154.8			11.6			172.9
Recovery of written-off loans		0.3			—			33.9			0.9			35.1
Written-off loans and sales		(2.6	)		(0.5	)		(201.9	)		(8.9	)		(213.8	)
Translation result and others		(0.5	)		(0.2	)		(0.9	)		(0.0	)		(1.6	)
Balance as of		291.4			108.2			932.6			60.1			1,392.2

153

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	For the Year Ended December 31, 2018 (1)
	Commercial loans			Mortgage loans			Consumer loans			Small and micro- business loans			Total
	(S/ in millions)
Balance as of January 1		291.4			105.1			946.6			56.4			1,399.5
Provision		(6.5	)		10.6			604.3			51.6			660.1
Recovery of written-off loans		1.2			—			140.0			4.4			145.6
Written-off loans and sales		(34.4	)		(2.7	)		(711.0	)		(43.0	)		(791.1	)
Translation result and others		4.1			1.6			6.9			0.1			12.8
Balance as of		255.8			114.6			987.0			69.5			1,426.9

(1) For information regarding changes in our impairment allowance for loans (direct or indirect) according to the requirement of IFRS 9, see Note 7(d) of our audited annual consolidated financial statements.

	For the Year Ended December 31, 2017
	Commercial loans			Mortgage loans			Consumer loans			Small and micro- business loans			Total
	(S/ in millions)
Balance as of January 1		221.1			60.5			851.9			57.2			1,190.8
Provision		47.3			9.1			743.5			28.0			827.9
Recovery of written-off loans		0.2			—			123.2			4.7			128.1
Written-off loans and sales		(19.8	)		(1.0	)		(810.8	)		(26.2	)		(857.7	)
Translation result and others		(5.8	)		(2.1	)		(26.0	)		(0.3	)		(34.2	)
Balance as of		243.1			66.5			881.9			63.4			1,255.0

	For the Year Ended December 31, 2016
	Commercial loans			Mortgage loans			Consumer loans			Small and micro- business loans			Total
	(S/ in millions)
Balance as of January 1		197.2			46.5			771.3			50.3			1,065.2
Provision		46.3			12.2			703.7			21.4			783.6
Recovery of written-off loans		0.5			0.0			115.1			3.4			119.1
Written-off loans and sales		(14.1	)		(1.0	)		(733.4	)		(23.5	)		(772.0	)
Translation result and others		(8.8	)		2.9			(4.8	)		5.6			(5.1	)
Balance as of		221.1			60.5			851.9			57.2			1,190.8

	For the Year Ended December 31, 2015
	Commercial loans			Mortgage loans			Consumer loans			Small and micro- business loans			Total
	(S/ in millions)
Balance as of January 1		192.2			31.7			574.8			36.6			835.2
Provision		40.2			7.4			564.5			33.7			645.8
Recovery of written-off loans		5.2			—			100.5			3.0			108.7
Written-off loans and sales		(50.9	)		(0.1	)		(488.5	)		(25.3	)		(564.8	)
Translation result and others		10.6			7.5			20.0			2.2			40.2
Balance as of		197.2			46.5			771.3			50.3			1,065.2

154

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	For the Year Ended December 31, 2014
	Commercial loans			Mortgage loans			Consumer loans			Small and micro- business loans			Total
	(S/ in millions)
Balance as of January 1		139.3			24.8			510.1			33.3			707.5
Provision		48.5			3.9			352.7			20.5			425.5
Recovery of written-off loans		1.3			—			89.9			2.8			94.0
Written-off loans and sales		(6.0	)		(0.1	)		(380.0	)		(20.4	)		(406.5	)
Translation result and others		9.1			3.0			2.1			0.5			14.7
Balance as of		192.2			31.7			574.8			36.6			835.2

Composition of Deposits and Other Commitments

The following tables provide information on the composition of our deposits and other commitments for the periods indicated.

	As of March 31,					As of December 31,
	2019					2018					2017					2016					2015					2014
	(S/ in millions)		%			(S/ in millions)		%			(S/ in millions)		%			(S/ in millions)		%			(S/ in millions)		%			(S/ in millions)		%
Demand deposits
Soles		6,537.2		18.8	%		5,560.2		16.5	%		5,313.8		16.3	%		3,752.1		12.5	%		3,429.8		12.0	%		2,553.2		10.9	%
Foreign currency		5,184.2		14.9	%		4,549.3		13.5	%		5,050.8		15.5	%		5,834.9		19.4	%		5,623.5		19.7	%		3,482.2		14.9	%
Total		11,721.4		33.7	%		10,109.5		30.0	%		10,364.7		31.8	%		9,587.0		31.9	%		9,053.3		31.8	%		6,035.4		25.8	%
Savings deposits
Soles		5,872.1		16.9	%		5,878.3		17.5	%		4,784.3		14.7	%		4,558.8		15.1	%		4,435.7		15.6	%		3,705.8		15.8	%
Foreign currency		4,806.9		13.8	%		4,850.0		14.4	%		4,308.5		13.2	%		4,356.6		14.5	%		3,762.8		13.2	%		3,122.3		13.4	%
Total		10,679.0		30.7	%		10,728.3		31.9	%		9,092.8		27.9	%		8,915.4		29.6	%		8,198.5		28.8	%		6,828.1		29.2	%
Time deposits
Soles		5,877.0		16.9	%		7,050.5		20.9	%		6,636.7		20.4	%		5,235.7		17.4	%		3,720.0		13.1	%		4,805.7		20.6	%
Foreign currency		4,833.5		13.9	%		4,023.8		11.9	%		4,925.3		15.1	%		4,863.8		16.2	%		6,099.2		21.4	%		4,520.6		19.3	%
Total		10,710.4		30.8	%		11,074.3		32.9	%		11,562.0		35.5	%		10,099.6		33.6	%		9,819.3		34.5	%		9,326.3		39.9	%
Others
Soles		1,251.8		3.6	%		1,318.7		3.9	%		1,142.5		3.5	%		1,028.9		3.4	%		908.9		3.2	%		765.6		3.3	%
Foreign currency		427.4		1.2	%		451.2		1.3	%		445.6		1.4	%		467.0		1.6	%		507.7		1.8	%		426.0		1.8	%
Total		1,679.2		4.8	%		1,769.9		5.3	%		1,588.1		4.9	%		1,495.9		5.0	%		1,416.6		5.0	%		1,191.6		5.1	%
Total deposits
Soles		19,538.0		56.2	%		19,807.6		58.8	%		17,877.3		54.8	%		14,575.5		48.4	%		12,494.4		43.9	%		11,830.3		50.6	%
Foreign currency		15,252.0		43.8	%		13,874.3		41.2	%		14,730.3		45.2	%		15,522.3		51.6	%		15,993.2		56.1	%		11,551.1		49.4	%
Total		34,790.0		100.0	%		33,682.0		100.0	%		32,607.6		100.0	%		30,097.9		100.0	%		28,487.7		100.0	%		23,381.4		100.0	%

As of March 31, 2019, December 31, 2018, 2017, 2016, 2015 and 2014, we did not have individual material deposits by foreign depositors that exceeded 10% of our total Deposits and Other Commitments.

155

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The following table provides information on the composition of our domestic and foreign deposits, by average balances and average nominal rate, for the periods indicated.

	For the three months ended March 31, (unaudited)			For the year ended December 31,
	2019			2018			2017			2016
	(S/ in millions)			(S/ in millions)
Deposits in Domestic Offices
Demand deposits
Average balance
Soles		6,048.7			5,289.4			4,388.7			3,545.6
Foreign currency		3,878.4			3,669.1			3,467.5			4,124.4
Total		9,927.1			8,958.5			7,856.2			7,670.0
Average nominal rate
Soles		2.8	%		2.2	%		2.4	%		2.3	%
Foreign currency		1.1	%		0.8	%		0.3	%		0.1	%
Total		2.1	%		1.6	%		1.5	%		1.1	%
Savings deposits
Average balance
Soles		5,875.2			5,329.6			4,621.7			4,804.1
Foreign currency		4,828.4			4,508.9			4,195.2			4,384.7
Total		10,703.6			9,838.5			8,816.9			9,188.8
Average nominal rate
Soles		1.4	%		1.3	%		1.2	%		1.3	%
Foreign currency		0.4	%		0.4	%		0.2	%		0.2	%
Total		0.9	%		0.8	%		0.7	%		0.8	%
Time deposits
Average balance
Soles		6,463.7			6,419.4			5,619.6			4,182.7
Foreign currency		3,035.3			2,845.8			2,926.5			2,853.1
Total		9,499.1			9,265.2			8,546.1			7,035.8
Average nominal rate
Soles		3.9	%		3.4	%		4.4	%		4.8	%
Foreign currency		2.2	%		1.2	%		0.6	%		0.4	%
Total		3.3	%		2.8	%		3.1	%		3.0	%
Others
Average balance
Soles		1,285.2			1,187.4			1,045.6			934.0
Foreign currency		439.3			441.3			447.0			466.8
Total		1,724.5			1,628.7			1,492.6			1,400.8
Average nominal rate
Soles		3.0	%		3.0	%		2.9	%		3.0	%
Foreign currency		1.5	%		1.5	%		1.6	%		2.2	%
Total		2.6	%		2.6	%		2.5	%		2.7	%

156

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	For the three months ended March 31, (unaudited)			For the year ended December 31,
	2019			2018			2017			2016
	(S/ in millions)			(S/ in millions)
Deposits in Foreign Offices
Demand deposits
Average balance
Soles		—			—			—			—
Foreign currency		988.3			998.4			1,284.8			1,180.7
Total		988.3			998.4			1,284.8			1,180.7
Average nominal rate
Soles		0.0	%		0.0	%		0.0	%		0.0	%
Foreign currency		0.0	%		0.0	%		0.0	%		0.0	%
Total		0.0	%		0.0	%		0.0	%		0.0	%
Time deposits
Average balance
Soles		—			—			—			—
Foreign currency		1,393.3			1,209.0			1,560.5			1,750.2
Total		1,393.3			1,209.0			1,560.5			1,750.2
Average nominal rate
Soles		0.0	%		0.0	%		0.0	%		0.0	%
Foreign currency		3.3	%		3.0	%		3.3	%		3.2	%
Total		3.3	%		3.0	%		3.3	%		3.2	%

The following table sets forth information regarding the maturity of our time deposits in our domestic and foreign offices in denominations of more than U.S.$100,000 (equivalent to S/331,800 and S/337,300 as of March 31, 2019 and December 31, 2018, respectively):

	As of March 31, 2019		As of December 31, 2018
Domestic Offices	(S/ in Millions)		(S/ in Millions)
Up to 1 month		3,092.9		3,539.9
From 1 to 3 months		961.8		1,446.7
From 3 months to 6 months		906.4		801.9
From 6 months to 1 year		1,324.4		1,396.7
From 1 to 5 years		316.3		411.2
Over 5 years		104.3		112.4
Total time deposits		6,706.1		7,708.8

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	As of March 31, 2019		As of December 31, 2018
Foreign Offices	(S/ in Millions)		(S/ in Millions)
Up to 1 month		290.9		223.1
From 1 to 3 months		165.0		125.1
From 3 months to 6 months		232.6		346.5
From 6 months to 1 year		497.0		694.1
From 1 to 5 years		243.8		228.8
Over 5 years		—		—
Total time deposits		1,429.2		1,617.7

	As of March 31, 2019
	1 month			1-3 months			3 months- 1 year			1-5 years			More than 5 years			Total
	(S/ in millions)
Maturity of Deposits
Demand deposits		11,721.4			—			—			—			—			11,721.4
Saving deposits		10,679.0			—			—			—			—			10,679.0
Time deposits		3,397.4			1,888.1			4,347.8			956.9			120.3			10,710.4
Total		25,797.8			1,888.1			4,347.8			956.9			120.3			33,110.8
Percentage of Total		77.9	%		5.7	%		13.1	%		2.9	%		0.4	%		100.0	%

	As of December 31, 2018
	1 month			1-3 months			3 months- 1 year			1-5 years			More than 5 years			Total
	(S/ in millions)
Maturity of Deposits
Demand deposits		10,109.5			0.0			0.0			0.0			0.0			10,109.5
Saving deposits		10,728.3			0.0			0.0			0.0			0.0			10,728.3
Time deposits		3,779.2			2,219.8			4,176.9			783.6			114.8			11,074.3
Total		24,616.9			2,219.8			4,176.9			783.6			114.8			31,912.1
Percentage of Total		77.1	%		7.0	%		13.1	%		2.5	%		0.4	%		100.0	%

Short-Term Borrowings

	As of March 31,			As of December 31,
	2019			2018			2017			2016
Year-end balance		1,935.6			2,507.6			2,477.1			2,211.3
Average balance		2,192.7			2,538.6			2,529.2			2,126.1
Maximum quarter-end balance		1,935.6			2,914.5			3,579.3			2,499.8
Weighted-average nominal year-end interest rate		2.8	%		3.6	%		4.1	%		3.7	%
Weighted-average nominal interest rate		2.8	%		3.8	%		3.9	%		3.1	%

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INDUSTRY

Strong Macroeconomic Fundamentals

The Peruvian economy has been one of the best performing in Latin America as a result of prudent macroeconomic policy and strong fundamentals. From 2014 to 2018, according to the Economist Intelligence Unit (“EIU”), the Peruvian economy was the fastest growing as compared to the peer countries in Latin America in terms of average real GDP growth rates. Economic growth has been mostly driven by higher internal demand which grew at a CAGR of 2.4% for the period from 2014 to 2018. In its most recent forecast as of March 2019, the Central Reserve Bank of Peru has estimated real GDP growth for Peru of 4.0%, and 4.0% in 2019, and 2020, respectively.

The following chart sets forth Peru’s average real GDP growth rate from 2014 to 2018, as compared to selected peer countries in Latin America.

Average Real GDP Growth Rate (2014 - 2018)

Source: EIU.

From 2014 to 2018, Peru maintained one of the lowest inflation rates in Latin America, due to the monetary policy implemented by the Central Reserve Bank of Peru and the conservative fiscal policy of the Peruvian government. In 2002, in order to maintain low inflation rates, the Central Reserve Bank of Peru established an annual inflation target of 2.5% within a range of one percentage point, which was lowered to 2.0% in 2007. The Central Reserve Bank of Peru has maintained this target inflation range since then. From 2014 to 2018, Peru’s inflation, as measured by changes of the consumer price index, averaged 2.9%, below the average consumer price inflation rate of 4.6% for the group of peer countries in Latin America during the same period, according to the EIU and the Central Reserve Bank of Peru.

The following chart sets forth Peru’s average consumer price inflation rate from 2014 to 2018, as compared to the group of peer countries in Latin America.

Average Consumer Price Inflation Rate (2014 - 2018)

Sources: EIU and BCRP.

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The Peruvian government’s conservative fiscal policy, coupled with the Central Reserve Bank of Peru’s management of inflation and international reserves, has helped Peru improve and maintain investment grade ratings by Moody’s (A3), S&P (BBB+) and Fitch (BBB+), according to Bloomberg. In July 2014, Moody’s upgraded Peru’s credit rating from Baa2 to A3, making Peru one of three countries in Latin America to benefit from such ratings.

The following chart displays Peru’s net international reserves and public external debt-to-GDP ratio from 2014 to March 2019.

Peru’s Net International Reserves and Public External Debt-to-GDP

Source: BCRP.

Peru’s unemployment rate has remained relatively stable over the past five years, mainly supported by both monetary and fiscal stimulus, which have fueled economic growth and demand for labor. According to the Central Reserve Bank of Peru, the unemployment rate has reached 7.5% as of March 31, 2019.

The following chart displays Peru’s unemployment rate from 2014 to March 2019.

Peruvian Unemployment Rate

Source: BCRP.

Since 2008, the sol has remained one of the most stable currencies in Latin America, maintaining its value against the U.S. dollar and other foreign currencies, mainly supported by Peru’s strong monetary policy. The Central Reserve Bank of Peru participates in the market (buying or selling soles) in order to avoid large exchange rate fluctuations and their adverse effects on the Peruvian economy, which remains partially dollarized.

The following chart displays the local currency exchange rate versus the U.S. dollar indexed to January 2014 for Peru and the group of peer countries in Latin America.

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Local Currency Exchange Rate Versus The U.S. Dollar (Indexed to 100)

Source: FactSet. From January 1, 2014 to March 31, 2019.

Demographic Trends

Peru’s strong economic growth has been supported by favorable demographic trends. According to INEI, the poverty rate in Peru declined to 20.5% in 2018, from 30.8% in 2010. Moreover, GDP per capita in U.S. dollars increased from U.S.$5,051 in 2010 to U.S.$6,907 in 2018, reflecting a robust increase in consumer purchasing power according to the EIU.

The following chart displays Peru’s GDP per capita in U.S. dollars and the poverty rate from 2010 to 2018.

Peru’s GDP Per Capita in U.S. Dollars and Poverty Rate

Source: EIU and INEI.

Peruvian Banking System and Competition

During the 1990s, the Peruvian economy underwent a major transformation, from being a highly protected and regulated system prevailing in the 1980s to a free-market economy. During this period, protectionist and interventionist laws and policies were gradually dismantled to create a liberal economy dominated by the private sector. Similarly, the Peruvian financial industry underwent deep structural changes that resulted in a significant expansion of credit. From 1993 to 1998, performing loans in the Peruvian financial system grew at a five-year CAGR of 45.9%, and banking penetration in Peru, measured as the ratio of loans-to-GDP, rose from 10.2% to 26.4% according to the SBS.

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In 1998, the rise in international interest rates that followed the Russian default led to large outflows of capital from Peru, resulting in a 15.8% depreciation of the nuevo sol. The strong depreciation of the nuevo sol, coupled with the strong dollarization of the Peruvian Banking system prevalent at that time (81% of the loans were denominated in U.S. dollars) led to a sharp deterioration of the Peruvian banking system’s loan portfolio quality and to a contraction in total loans. Past-due loans in the system peaked at 9.4% of total gross loans as of January 31, 2000, resulting in increased provisions and large capital losses for financial institutions.

However, from 2001 onwards, as macroeconomic conditions improved, the general banking industry indicators in Peru began also to improve. Past-due loans dropped from 9.0% of total gross loans as of December 31, 2001 to 3.7% as of December 31, 2004, and loan reserves over past-due loans increased from 118.9% as of December 31, 2001 to 176.5% as of December 31, 2004 according to the SBS.

From 2005 to 2008, fostered by a steady and sustained improvement in Peru’s macroeconomic indicators, credit expanded again, with performing loans growing 25.2% in 2005, 18.0% in 2006, 34.7% in 2007 and 38.2% in 2008. The global financial crisis that started in late 2008 temporarily reduced credit growth as performing loans remained flat in 2009. Growth returned following the crisis, with the banking system in Peru experiencing a significant expansion of credit from December 31, 2008 to December 31, 2013. During this period, gross loans in the Peruvian banking system grew at a five-year CAGR of 13.0% and banking penetration in Peru, measured as the ratio of loans-to-GDP, rose from 24.8% to 30.4%, according to the SBS and the Central Reserve Bank of Peru.

From December 31, 2014 to December 31, 2018, the banking system in Peru continued to grow steadily, with gross loans expanding at a four-year CAGR of 8.8% and banking penetration in Peru rising from 33.6% to 36.6%, according to the SBS and the BCRP. A significant part of the growth experienced by the Peruvian financial system since 2014 has been generated by the retail banking sector. Retail loans (including consumer loans and mortgages) grew at a four-year CAGR of 9.5% for the period ended December 31, 2018.

As of March 31, 2019, approximately 35.7% of the Peruvian banking sector’s total loans were retail loans, up from 34.2% as of December 31, 2014. In particular, consumer loans, in which Interbank is one of the leading banks, grew at a four-year CAGR of 10.6% for the period ended December 31, 2018.

According to the SBS, the total number of credit cards issued in Peru as of March 31, 2019 was approximately 8.3 million, of which approximately 28.7% were issued by non-banking entities, including store-branded cards. For the period ended December 31, 2018, the Peruvian banking system’s credit card loans grew at a four-year CAGR of 11.2%, while credit cards loans grew 11.3% between March 31, 2018 and March 31, 2019, as a result of high economic growth and increased consumer spending. During the same period, Interbank’s credit card loans grew at a four-year CAGR of 11.3%, and grew 26.0% between March 31, 2018 and March 31, 2019.

Although the number of mortgages of the Peruvian banking system also grew at a four-year CAGR of 2.9% for the period ended December 31, 2018 and 4.2% between March 31, 2018 and March 31, 2019, there is still substantial room for growth, with only approximately 0.2 million mortgages outstanding in Peru among a population of approximately 32.2 million, compared to approximately 1.6 million mortgages outstanding in Chile for a population of 18.2 million each as of December 31, 2018. Peru’s mortgage penetration, calculated as the ratio of mortgage loans to GDP, was 6.2% as of December 31, 2018 compared to 26.1% for Chile. A stable macroeconomic environment and the promotion of housing programs over the past four years have been the main drivers of mortgage loan growth in Peru and are expected to continue fueling mortgage lending.

Despite this growth, the Peruvian banking system remains underpenetrated in comparison to the banking systems from the group of peer countries in Latin America. As of December 31, 2018, Peru’s loans-to-GDP ratio was 36.6%, below the average ratio of 51.2% for the group of peer countries in Latin America and less than half the ratio of 93.0% for Chile, according to the BCRP, the EIU, the SBS and other local regulators.

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The following chart shows banking penetration as of December 31, 2018 as measured by deposits-to-GDP and loans-to-GDP.

Deposits-to-GDP and Loans-to-GDP

Source: BCRP, EIU, SBS and other local regulators.

Note: Mexico’s Deposits-to-GDP and Loans-to-GDP as of September 30, 2018.

The Peruvian banking system is highly concentrated in a small number of relatively large participants. The four largest banks accounted for 83.0% of total gross loans and 82.1% of total deposits in the system as of March 31, 2019. Furthermore, foreign banks play a significant role in the Peruvian financial system. As of March 31, 2019, BBVA and Scotiabank, two of the four largest banks in the system, which accounted for a combined 37.7% of total gross loans and 36.2% of total deposits, according to the SBS, were under foreign control. Although other major global banks such as BNP Paribas, Standard Chartered, Intesa, BankBoston, HSBC and Deutsche Bank have ceased operations in Peru over the past 15 years, other foreign banks have entered or have shown interest in entering or increasing their exposure in the Peruvian market.

Interbank is currently the fourth-largest bank in Peru, as measured by total assets, gross loans and deposits, as of March 31, 2019, and has faced strong competition, including increased pressure on margins, primarily as a result of the presence of commercial banks in the Peruvian market with substantial capital, technology and marketing resources, as well as from Peruvian pension funds that lend to Interbank’s current and potential commercial customers. This increased competition has affected the average interest rates that the Peruvian banking system has been able to charge its customers. Despite being the fourth-largest bank in Peru, Interbank is strongly positioned in the consumer sector, being the second largest bank in gross consumer loans and largest in consumer credit cards as of March 31, 2019, according to the SBS.

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The following tables show Interbank, the rest of the Peruvian banking system and their respective market shares as of March 31, 2019.

	As of March 31, 2019
	Assets							Deposits							Total Gross Loans
	Balance		Market Share %			Rank		Balance		Market Share %			Rank		Balance		Market Share %			Rank
	(S/ in millions)							(S/ in millions)							(S/ in millions)
BCP		133,464.1		33.9	%		1		83,217.4		33.2	%		1		88,640.4		33.0	%		1
BBVA		80,268.6		20.4	%		2		54,038.7		21.6	%		2		55,786.8		20.8	%		2
Scotiabank		65,932.7		16.7	%		3		36,591.2		14.6	%		3		45,448.2		16.9	%		3
Interbank		49,260.5		12.5	%		4		31,919.8		12.7	%		4		33,297.3		12.4	%		4
BanBif		14,357.7		3.6	%		5		10,194.6		4.1	%		5		10,191.7		3.8	%		5
Mibanco		12,754.9		3.2	%		6		8,279.7		3.3	%		6		10,091.1		3.8	%		6
Pichincha		9,392.0		2.4	%		7		6,408.9		2.6	%		7		7,608.6		2.8	%		7
Citibank		6,364.9		1.6	%		8		5,173.4		2.1	%		8		2,591.0		1.0	%		11
Santander		6,199.1		1.6	%		9		4,392.8		1.8	%		9		4,080.9		1.5	%		8
GNB		5,647.2		1.4	%		10		4,128.6		1.6	%		10		3,771.5		1.4	%		9
Falabella		4,004.8		1.0	%		11		2,504.0		1.0	%		11		2,983.5		1.1	%		10
Ripley		2,452.1		0.6	%		12		1,237.3		0.5	%		13		1,871.9		0.7	%		12
Comercio		2,066.1		0.5	%		13		1,405.0		0.6	%		12		1,504.8		0.6	%		13
ICBC		1,268.7		0.3	%		14		863.1		0.3	%		14		535.1		0.2	%		14
Azteca		499.7		0.1	%		15		322.1		0.1	%		15		359.5		0.1	%		15
Total		393,933.1		100.0	%				250,676.6		100.0	%				268,762.4		100	%

Source: SBS.

Note: Banks do not include international branches.

As of March 31, 2019
Gross Consumer Loans (1)								Gross Consumer Credit Cards (2)
Bank	Balance		Market Share (%)			Rank		Bank	Balance		Market Share (%)			Rank
	(S/ in millions)								(S/ in millions)
BCP		7,135.9		24.1	%		1	Interbank		5,442.8		26.3	%		1
Interbank		5,937.8		20.1	%		2	BCP		5,314.1		25.6	%		2
Scotiabank		5,595.5		18.9	%		3	Scotiabank		3,006.1		14.5	%		3
BBVA		3,677.8		12.4	%		4	Falabella		2,933.9		14.2	%		4
Pichincha		1,861.2		6.3	%		5	BBVA		2,169.0		10.5	%		5
Comercio		1,175.9		4.0	%		6	Ripley		841.8		4.1	%		6
GNB		1,169.7		4.0	%		7	Pichincha		489.3		2.4	%		7
BanBif		1,058.6		3.6	%		8	BanBif		448.3		2.2	%		8
Ripley		1,030.2		3.5	%		9	Azteca		45.1		0.2	%		9
Mibanco		576.6		1.9	%		10	GNB		36.7		0.2	%		10
Azteca		314.5		1.1	%		11	Comercio		3.0		0.0	%		11
Falabella		46.7		0.2	%		12	Citibank		0.0		0.0	%		12
Santander		2.5		0.0	%		13	Mibanco		0.0		0.0	%		13
Citibank		0.0		0.0	%		14	Santander		0.0		0.0	%		14
ICBC		0.0		0.0	%		15	ICBC		0.0		0.0	%		15
Total		29,582.8		100.0	%			Total		20,730.0		100.0	%

Source: SBS.

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(1) Gross consumer loans do not include mortgage loans and consumer credit cards.

(2) Gross consumer credit cards do not include credit cards issued by non-banking entities.

Note: Banks do not include international branches.

As of March 31, 2019
Gross Commercial Loans								Gross Mortgage Loans
Bank	Balance		Market Share (%)			Rank		Bank	Balance		Market Share (%)			Rank
	(S/ in millions)								(S/ in millions)
BCP		61,057.1		35.4	%		1	BCP		15,133.3		32.9	%		1
BBVA		37,101.5		21.5	%		2	BBVA		12,838.4		27.9	%		2
Scotiabank		29,917.7		17.3	%		3	Scotiabank		6,929.0		15.1	%		3
Interbank		15,315.4		8.9	%		4	Interbank		6,601.3		14.4	%		4
Mibanco		9,001.9		5.2	%		5	BanBif		1,796.3		3.9	%		5
BanBif		6,888.5		4.0	%		6	GNB		1,079.7		2.3	%		6
Pichincha		4,211.0		2.4	%		7	Pichincha		1,047.1		2.3	%		7
Santander		4,078.4		2.4	%		8	Mibanco		512.7		1.1	%		8
Citibank		2,591.0		1.5	%		9	Comercio		56.3		0.1	%		9
GNB		1,485.4		0.9	%		10	Falabella		3.0		0.0	%		10
ICBC		535.1		0.3	%		11	Citibank		0.0		0.0	%		11
Comercio		269.5		0.2	%		12	Santander		0.0		0.0	%		12
Falabella		0.0		0.0	%		13	Ripley		0.0		0.0	%		13
Ripley		0.0		0.0	%		14	Azteca		0.0		0.0	%		14
Azteca		0.0		0.0	%		15	ICBC		0.0		0.0	%		15
Total		172,452.5		100.0	%			Total		45,997.1		100.0	%

Source: SBS.

Note: Banks do not include international branches.

The following table shows key industry metrics for the four largest banks by assets and the Peruvian banking system.

	March 2019 (1)			2018			2017			2016			2015			2014
ROE
Interbank		21.9	%		21.3	%		20.7	%		23.2	%		26.6	%		25.5	%
BCP		21.8	%		21.4	%		21.4	%		23.6	%		26.0	%		21.5	%
BBVA		17.5	%		19.0	%		19.6	%		20.8	%		24.1	%		26.8	%
Scotiabank		15.0	%		15.3	%		16.0	%		17.5	%		17.3	%		18.3	%
Peruvian banking system		18.3	%		18.5	%		18.3	%		20.0	%		22.3	%		19.8	%
ROA
Interbank		2.4	%		2.3	%		2.1	%		2.1	%		2.3	%		2.3	%
BCP		2.7	%		2.6	%		2.4	%		2.4	%		2.5	%		2.0	%
BBVA		1.8	%		2.0	%		1.8	%		1.7	%		1.9	%		2.3	%
Scotiabank		2.0	%		2.1	%		2.1	%		2.1	%		2.0	%		2.3	%
Peruvian banking system		2.2	%		2.2	%		2.1	%		2.0	%		2.2	%		1.9	%
Efficiency Ratio
Interbank		38.7	%		40.4	%		42.3	%		42.1	%		42.3	%		46.4	%
BCP		36.9	%		40.1	%		39.7	%		38.8	%		38.6	%		42.8	%
BBVA		37.0	%		37.5	%		37.9	%		39.4	%		38.9	%		36.4	%
Scotiabank		38.6	%		37.0	%		37.0	%		37.4	%		38.3	%		39.7	%
Peruvian banking system		41.0	%		42.2	%		42.5	%		43.0	%		43.0	%		45.3	%
Past-Due-Loan Ratio

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	March 2019 (1)			2018			2017			2016			2015			2014
Interbank		2.6	%		2.6	%		2.9	%		2.6	%		2.4	%		2.5	%
BCP		2.7	%		2.7	%		3.0	%		2.7	%		2.4	%		2.3	%
BBVA		3.0	%		2.9	%		2.7	%		2.4	%		2.2	%		2.2	%
Scotiabank		3.6	%		3.5	%		3.2	%		3.1	%		2.9	%		2.4	%
Peruvian banking system		3.0	%		3.0	%		3.0	%		2.8	%		2.5	%		2.5	%
Coverage Ratio
Interbank		177.0	%		175.0	%		167.2	%		179.8	%		193.9	%		167.9	%
BCP		141.8	%		143.0	%		139.6	%		154.6	%		157.1	%		153.9	%
BBVA		161.1	%		163.4	%		168.5	%		187.5	%		203.6	%		202.1	%
Scotiabank		130.1	%		128.9	%		137.7	%		132.6	%		132.3	%		142.8	%
Peruvian banking system		153.0	%		153.6	%		152.6	%		160.6	%		166.6	%		165.0	%
Total Capital Ratio
Interbank		16.4	%		15.8	%		16.1	%		15.9	%		15.5	%		15.2	%
BCP		15.6	%		14.2	%		15.1	%		15.4	%		14.3	%		14.5	%
BBVA		14.8	%		15.0	%		14.2	%		14.3	%		13.3	%		13.8	%
Scotiabank		14.7	%		14.6	%		15.5	%		14.4	%		14.0	%		12.9	%
Peruvian banking system		15.3	%		14.7	%		15.2	%		15.0	%		14.2	%		14.1	%

Source: SBS and ASBANC.

Note: ROE calculated as net income for the period divided by the average of total equity at the end of the last five quarters. ROA calculated as net income for the period divided by the average of total assets at the end of the last five quarters. ROE as of March 31, 2019 calculated as net income for the three-month period times four and divided by the average of total equity at the end of the last two quarters. ROA as of March 31, 2019 calculated as net income for the three-month period times four and divided by the average of total assets at the end of the last two quarters.

(1) ROE and ROA as of March 31, 2019 are annualized figures.

Among the four largest banks, Interbank is one of the fastest growing bank in terms of net profit with a CAGR of 10.1% from 2014 to 2018, under SBS GAAP. Interbank’s CAGR was higher than BBVA (2.4%) and Scotiabank (7.6%).

The following chart sets forth the CAGR in net profit from 2014 to 2018 and the year-over-year growth as of March 31, 2019 for the four largest banks in Peru under SBS GAAP.

Net Profit Four-Year CAGR (2014 - 2018) and

Year-Over-Year Growth (As of March 31, 2019 vs. As of March 31, 2018)

Source: SBS.

Note: Banks include international branches.

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(1) The 1% year-over-year growth (as of March 31, 2019 vs. as of March 31, 2018) for Interbank’s results includes S/129 million gain on sale of securities, partially offset by voluntary provisions for the construction sector for S/100 million, net of taxes and workers’ profit sharing for S/28 million, as of March 31, 2018.

Interbank’s share of the Peruvian banking system’s net profit increased from 12.7% for the year ended December 31, 2018 to 13.3% for the three months ended March 31, 2019.

Interbank was also the fastest growing bank by total loans, among the four largest banks in Peru between March 31, 2018 and March 31, 2019. The following chart sets forth the four-year CAGR from 2014 to 2018 and the year-over-year growth as of March 31, 2019 of total loans under SBS GAAP for the four largest banks in Peru.

Total Loans CAGR (2014 - 2018) and

Year-Over-Year Growth (As of March 31, 2019 vs. As of March 31, 2018)

Source: SBS

Note: Banks include international branches.

Interbank was also the fastest growing bank by total deposits, among the four largest banks in Peru with a four-year CAGR from 2014 to 2018 of 10.5%. The following chart sets forth the CAGR from 2014 to 2018 and the year-over-year growth as of March 31, 2019 of total deposits for the four largest banks in Peru.

Total Deposits CAGR (2014 - 2018) and

Year-Over-Year Growth (As of March 31, 2019 vs. As of March 31, 2018)

Source: SBS.

Note: Banks include international branches.

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Interbank’s asset quality is the best when compared to the four largest banks in Peru on the basis of past-due-loan and coverage ratios. Interbank’s past-due-loan ratio was the lowest among the four largest Peruvian banks, and lower than the banking system’s average of 3.0%. The following chart sets forth the past-due-loan and coverage ratios under Peruvian SBS GAAP for the four largest banks in Peru as of March 31, 2019.

Past-Due-Loan and Coverage Ratios (As of March 31, 2019)

Source: SBS.

Note: Banks include international branches.

As of March 31, 2019 Interbank’s past-due-loan ratio in consumer loans was the second highest among the four largest Peruvian banks, due to our clients’ profile and the importance of credit cards in our portfolio, which results in a higher NIM. The following chart sets forth the past-due-loan ratios in consumer loans for the four largest banks in Peru as of March 31, 2019.

Consumer Loans Past-Due-Loan Ratio (As of March 31, 2019)

Source: SBS.

Note: Banks include international branches.

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Interbank had the lowest commercial past-due-loan ratio among the four largest Peruvian banks as of March 31, 2019. The following chart sets forth the commercial past-due-loan ratio for the four largest banks as of March 31, 2019.

Commercial Loans Past-Due-Loan Ratio (As of March 31, 2019)

Source: SBS.

Note: Banks include international branches.

From 2014 to March 2019, Interbank had the highest net interest margin, gross of impairment loss on loans, among the four largest Peruvian banks. The following chart sets forth the net interest margin before impairment loss on loans from 2014 to March 2019, for the four largest banks in Peru under SBS GAAP.

Net Interest Margin, Before Impairment Loss on Loans

Source: SBS.

Note: Banks include international branches. Annual net interest margin calculated as gross financial margin for the period divided by the average of interest-earning assets at the end of the last five quarters. Annualized net interest margin as of March 31, 2019 calculated as gross financial margin for the three-month period times four and divided by the average of interest earning assets at the end of the last two quarters. Interest-earning assets consider gross loans, cash & equivalents and net investments.

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The following chart sets forth the net interest margin, net of impairment loss on loans, from 2014 to March 2019, for the four largest banks under SBS GAAP.

Net Interest Margin, After Impairment Loss on Loans

Source: SBS.

Note: Banks include international branches. Annual net interest margin calculated as net financial margin for the period divided by the average of interest-earning assets at the end of the last five quarters. Annualized net interest margin as of March 31, 2019 calculated as net financial margin for the period times four and divided by the average of interest earning assets at the end of the last two quarters. Interest-earning assets consider gross loans, cash & equivalents and net investments.

In March 2019, Interbank had the highest annualized ROE and second highest annualized ROA among the four largest banks. The following chart sets forth the annualized ROE and annualized ROA for the four largest banks in Peru for March 2019 under SBS GAAP.

ROE and ROA (For the three months ended March 31, 2019 - Annualized)

Source: SBS.

Note: Banks include international branches.

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The following chart sets forth Interbank’s total capital ratio compared to the Peruvian banking system’s total capital ratio from December 31, 2014 to March 31, 2019 under SBS GAAP.

Historical Interbank Capital Ratios

Source: SBS and ASBANC.

Note: Interbank includes international branches.

Peruvian Insurance Industry and Competition

The Peruvian insurance industry is well-capitalized, with a solvency ratio (patrimonio efectivo / requerimientos patrimoniales) of 143.0% under Peruvian SBS GAAP as of December 31, 2018, and operates under a well-established regulatory framework. Over the past years, the industry has experienced strong growth. Insurance premiums grew at a four-year CAGR of 6.1% for the period ended December 31, 2018, equivalent to approximately 1.8x Peru’s real GDP CAGR over the same period. Insurance premiums in Peru reached S/3.4 billion for the three months ended March 31, 2019, representing a 12.7% year-over-year increase. Despite such growth, insurance penetration in Peru, measured as the ratio of premiums-to-GDP as of December 31, 2017, is estimated to be 1.6%, which is lower than the average ratio of 3.5% for selected peer countries in Latin America, and less than half the ratio of 4.9% for Chile, according to the Swiss Re Sigma 2017 Report.

We believe that Peru’s growing middle class will increase penetration in the Peruvian insurance industry. The following chart shows insurance penetration for the year ended December 31, 2017 as measured by premiums-to-GDP.

Premiums-to-GDP

Source: Swiss Re Sigma 2017 Report.

Life insurance premiums represented approximately 51.3% of total insurance premiums for the three months ended March 31, 2019. In April 2016, a new regulation was approved in Peru, allowing pensioners to

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withdraw up to 95.5% of their retirement funds. This measure had a negative impact on life insurance annuities, which have decreased at a CAGR of 26.8% from 2015 to 2018.

Growth of the annuities’ segment is expected to resume as the number of Peruvian private pension system’s retirees and their respective average pension balances increase. Currently, Peru’s private pension system covers seven million citizens, 97.7% of which are under 65 years (legal retirement age).

From 2008 to 2018, approximately 72,000 people retired under the Peruvian private pension system compared to a total of approximately 633,000 and more than 3.9 million expected retirees over the next ten and 30 years, respectively, according to the SBS as of March 31, 2019.

The table below sets forth the number of members in the Peruvian private pension system as of March 31, 2019.

As of March 31, 2019
Age (years)	Number of Members (in thousands)		Percentage of Total
Less than 25		973		13.6	%
26-35		2,028		28.4	%
36-45		1,980		27.8	%
46-55		1,351		18.9	%
56-65		633		8.9	%
More than 65		167		2.3	%
Total		7,132		100.0	%

Source: SBS

The chart below sets forth Peruvian insurance premiums for the periods indicated.

Insurance Premiums (S/ in Millions)

Source: SBS.

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For the three months ended March 31, 2019, Interseguro was the leading provider of annuities in Peru, with a market share of 32.3%, as measured by premiums among Peruvian insurance companies. The chart below shows market share by annuities premiums from 2014 to March 2019.

Market Share by Annuities (Excluding Private Annuities) Premiums

Source: SBS.

Note: Interseguro’s figures incorporate Seguros Sura starting November 2017.

As of March 31, 2019, a total of twenty companies comprised the Peruvian insurance industry. As of March 31, 2019, in terms of assets, on a consolidated basis, the four largest insurance companies had an 86.0% market share, and the leading two insurance companies had a combined market share of 51.5%. The Peruvian insurance industry is largely represented by Peruvian companies with three of the six largest companies controlled by Peruvian economic groups.

The following table presents market shares by assets and premiums of the six largest insurance companies in Peru as of and for the last three months ended March 31, 2019.

Company	Life	Non-Life	Total Assets as of March 31, 2019					Total Premiums for the three months ended March 31, 2019
			(S/ in million)		Market Share         (%)			(S/ in million)		Market Share     (%)
Rimac	✓	✓		14,021.5		27.7	%		1,033.1		30.3	%
Pacífico Seguros	✓	✓		12,067.7		23.8	%		924.8		27.1	%
Interseguro	✓	✓		11,873.2		23.5	%		227.3		6.7	%
La Positiva (1)	✓	✓		5,595.3		11.1	%		404.8		11.9	%
Mapfre (1)	✓	✓		3,802.7		7.5	%		435.6		12.8	%
Protecta Security	✓	✓		1,291.6		2.6	%		90.4		2.7	%

Source: SBS.

⁽¹⁾ La Positiva consolidates La Positiva and La Positiva Vida. Mapfre consolidates Mapfre Peru and Mapfre Peru Vida.

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Interseguro’s average ROE, under Peruvian SBS GAAP was 28.8% from 2014 to March 2019, higher than the industry’s average of 16.5% for the corresponding period. The following chart sets forth the ROEs for Interseguro, its main competitors and the Peruvian insurance industry, from 2014 to March 2019.

ROE

Source: SBS.

Note: Interseguro’s figures incorporate Seguros Sura starting November 2017.

From 2014 to March 2019, Interseguro had higher average investment portfolio returns than the Peruvian insurance industry. The following chart shows investment portfolio returns for Interseguro and the Peruvian insurance industry from 2014 to March 2019.

Investment Portfolio Returns (2014-March 2019)

Source: SBS.

Note: Interseguro’s figures incorporate Seguros Sura starting November 2017. Annual Investment portfolio returns calculated as return from investments for the period divided by the average of total investments at the last five quarters. Annualized investment portfolio returns as of March 31, 2019 calculated as return from investments for the period times four and divided by the average of total investments at the last two quarters.

Wealth Management Industry and Competition

Inteligo Bank operates in the highly competitive and regulated wealth management industry, competing with independent advisors, global banks and Peruvian firms, such as its main competitor Credicorp Ltd. through its subsidiary Atlantic Security Bank (“ASB”). The Peruvian wealth management industry has also recently attracted several new participants, including representative offices of global banks such as JP Morgan, UBS, RBC, Credit Suisse, and Julius Baer among others.

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Inteligo Bank had a four-year CAGR of assets under management of 7.5%, higher than ASB’s CAGR of 6.4% for the period ended December 31, 2018.

The chart below shows assets under management in U.S. dollars for Inteligo Bank and ASB, from December 31, 2014 to March 31, 2019.

Assets Under Management

(U.S.$ in millions)

Source: Company information and Credicorp Ltd.’s quarterly reports.

Inteligo Bank’s average ROE from 2016 to March 2019 was 31.9% which was higher than ASB’s average ROE of 20.0% during the same period. In addition, for the three months ended March 31, 2019, Inteligo Bank’s annualized ROE was 42.9% compared to ASB’s 26.1%. The following chart compares ROE for Inteligo Bank and ASB from 2016 to March 31, 2019.

ROE

Source: Company information and Credicorp Ltd.’s quarterly reports.

Note: ROE is calculated as net profit divided by the average shareholders’ equity, computed as the simple equity average of the last five quarters. Annualized ROE as of March 31, 2019 is calculated as net profit for the period times four divided by the average shareholders’ equity, computed as the simple equity average of the last two quarters.

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Additionally, Inteligo Bank has generated higher returns on assets under management than ASB from 2016 to March 2019. The following chart sets forth fee income as a percentage of average assets under management for Inteligo Bank and ASB from 2016 to March 2019.

Fee Income / Average Assets under Management

Source: Company information and Credicorp Ltd.’s quarterly reports. Note: Figures as of March 31, 2019 are calculated using the fee income for the period times four divided by the average assets under management of the last two quarters.

Interfondos provides mutual fund management services in Peru. Interfondos has been the fourth largest mutual fund manager in Peru in each of the last five years according to the SMV. As of March 31, 2019, Interfondos had a 14.7% market share based on assets under management.

Inteligo SAB provides brokerage services, including sales and trading operations, in Peru’s domestic capital markets. As of March 31, 2019, the Peruvian brokerage industry consisted of 22 brokerage firms. Inteligo SAB has ranked among the five largest equity trading platforms in each of the last seven years in terms of trading volumes on the Lima Stock Exchange.

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BUSINESS

Overview

IFS is a leading provider of banking, insurance and wealth management services for retail customers and commercial clients in Peru. Our purpose is to empower all Peruvians to achieve financial well-being, and as such, we have built an integrated financial services platform in the fast-growing, underpenetrated and profitable Peruvian financial system. We have invested in building a leading and scalable digital platform (mobile and online), which is rapidly being adopted by existing and new customers. Our digital platform is complemented by one of the largest distribution networks in the country which includes financial stores, ATMs, correspondent agents, dedicated sales forces, financial advisors, and call centers. Together our digital platform and distribution network provide our more than three million customers and a potential market of more than 30 million Peruvians and 9 million businesses with access to our products and services and a distinctive and convenient customer experience.

We manage our business in three segments, banking, insurance and wealth management, that complement each other and represent diversified sources of revenue. Our banking segment operates through our subsidiary Interbank, which is the second largest provider of consumer loans in Peru, according to the SBS. Interbank provides a full range of retail banking and commercial banking products, and services to individuals, large companies, and small and medium enterprises. Our insurance segment operates through our subsidiary Interseguro, which is the leading provider of annuities in Peru by premiums and one of the leading life insurance companies in the country according to the SBS. Interseguro provides a wide range of retirement, savings, life, unemployment and other insurance products mainly to retail customers. Our wealth management segment operates through our subsidiaries Inteligo Bank, Inteligo SAB and Interfondos, which together provide wealth management, private banking, financing, brokerage, advisory and other investment services mainly to high net worth individuals.

Our key strategic priority is to achieve digital excellence for our customers by providing them with a world-class, flexible and secure digital platform. We believe our digital transformation is vital to our continued growth and profitability, and for this reason we have been investing in developing the capabilities necessary to offer digital products and services to our customers. In March 2019, more than 975,000 retail customers used our digital platform compared to more than 450,000 in December 2016 and more than 380,000 retail customers no longer utilize physical channels other than ATMs in March 2019. We are aiming to allow our customers to have a 100% digital relationship with us in an efficient and secure manner. We have also streamlined our physical presence and reduced the number of branches by approximately 9% since 2016, focusing on educating our customers in the use of our digital platform. To accompany this transformation we are in the process of redesigning our physical presence in order to better serve the evolving needs of our customers. We have substantially increased migration of low-value-added transactions to more efficient digital channels, and we have increased sales of products to existing customers, as well as increased new customer acquisition of which a growing number are being acquired digitally or “born-digital.” This process of digital customer acquisition and sales has been accelerating, for example, in March 2019, 17% of new retail clients were acquired digitally compared to 3% in March 2018, and more than 37% of sales of new products to retail customers were performed digitally compared to 28% in March 2018.

We aim to be the company that best knows the needs of Peruvians. Our advanced analytics and CRM capabilities are being enriched with new sources of data and new tools that technology offers, such as cloud, real-time decision, machine learning and artificial intelligence. We believe that a deep knowledge of our current and potential customers allows us to offer them the best solutions for their financial needs across our banking, insurance and wealth management segments. Through this deep knowledge we have also been able to enhance our risk models, helping us to propel growth and continue to improve our profitability.

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The following table shows the evolution of our reported net profit, dividends, ROE and ROA and our adjusted net profit, ROE and ROA, from 2016 through 2018 and for the three months ended March 31, 2019 and 2018:

	For the three months ended March 31, (unaudited)								For the years ended December 31,
	2019		2019			2018			2018		2018			2017			2016
	(U.S.$ in millions) (3)		(S/ in millions)						(U.S.$ in millions) (3)		(S/ in millions)
Net profit		106.3		352.7			290.0			328.9		1,091.4			1,033.5			950.2
Adjusted net profit (1)		—		N/A			N/A			372.6		1,236.2			N/A			N/A
Dividends declared for the year (2)		—		—			—			—		654.5			510.7			475.8
ROE (4)		—		19.0	%		19.1	%		—		16.6	%		19.3	%		19.9	%
Adjusted ROE (1)		—		N/A			N/A			—		18.6	%		N/A			N/A
ROA (4)		—		2.2	%		1.9	%		—		1.8	%		2.0	%		1.9	%
Adjusted ROA (1)		—		N/A			N/A			—		2.0	%		N/A			N/A

(1) Net profit, ROA and ROE for the year ended December 31, 2018, excluding S/144.8 million, which is the aggregate effect recorded in our insurance segment’s technical reserves due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted for 2017 and 2016. See Note 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted net profit, adjusted ROA and adjusted ROE are non-GAAP accounting measures and should not be considered in isolation or as a substitute for net profit, ROA or ROE, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP financial measures”.

(2) Dividends are declared and paid in U.S. dollars. Dividends declared for fiscal years 2018, 2017 and 2016 were paid in 2019, 2018 and 2017 and amounted to U.S.$197.2 million, U.S.$157.7 million and U.S.$146.5 million, respectively. See “Dividends and Dividend Policy.”

(3) Amounts stated in U.S. dollars as of and for the three months ended March 31, 2019 and as of and for the year ended December 31, 2018 have been translated from soles at the exchange rate of S/3.318 = U.S.$1.00. See “Exchange Rates”.

(4) Annualized for each interim period.

As of March 31, 2019, we had total assets of S/65.8 billion (approximately U.S.$19.8 billion), total gross loans of S/34.7 billion (approximately U.S.$10.5 billion), total deposits of S/34.8 billion (approximately U.S.$10.5 billion) and shareholders’ equity of S/7.7 billion (approximately U.S.$2.3 billion).

We operate the following three business segments:

• Banking: Interbank is the second largest provider of consumer loans in Peru with a 22.6% market share in terms of total gross consumer loans outstanding as of March 31, 2019, according to the SBS. Interbank is the largest provider of credit card loans with a 26.3% market share and the largest provider (among non-government owned banks) of payroll deduction loans to public sector employees with a 23.5% market share as of March 31, 2019, according to the SBS. Additionally, it is the fourth largest bank in Peru in terms of retail mortgages and commercial lending, as well as total deposits and total assets. Interbank has built one of the most convenient and extensive retail banking distribution platforms in Peru including, online banking, mobile applications, a total of 264 financial stores, more than 1,900 ATMs and more than 2,500 correspondent agents, as of March 31, 2019.

As of and for the three months ended March 31, 2019, Interbank represented 74.9% of our total assets and 85.0% of our net profit. As of and for the year ended December 31, 2018, Interbank represented 74.4% of our total assets, 92.6% of our net profit and 81.8% of our adjusted net profit.

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For the 2018 fiscal year, Interbank declared a dividend of S/467.0 million (or approximately U.S.$140.8 million) of which S/463.8 million (or approximately U.S.$139.8 million) were paid to IFS, and represents 66.0% of total dividends received by IFS.

With a significant focus on the emerging middle class, Interbank has a higher percentage of retail loans, which account for 54.0% and 53.2% of its total loan portfolio, compared to the banking system’s average of 35.7% and 35.1%, as of March 31, 2019 and December 31, 2018, respectively. This contributes to a higher risk-adjusted net-interest margin than the banking system’s average.

Interbank’s CAGR in loans, deposits and obligations, and net profit between 2014 and 2018 was 10.5%, 10.3%, and 9.0%, respectively. For 2018, Interbank’s net profit was S/1,010.9 million and ROE was 20.2% and for the three months ended March 31, 2019 its net profit was S/299.7 million and annualized ROE was 22.1%.

• Insurance: Interseguro is the leading provider of annuities (excluding private annuities) in Peru, with a 30.2% market share as measured by total premiums collected during 2018 and a 32.3% market share as measured by total premiums collected in the three months ended March 31, 2019, according to the SBS, and is one of the leading life insurance companies in Peru. In addition, Interseguro offers private annuities, individual life insurance, disability and survivorship insurance, as well as low premium retail insurance products, including credit life, mandatory traffic accident insurance (“SOAT”) and credit card protection insurance, through a comprehensive multi-channel distribution platform which includes Interseguro’s sales force. Interseguro also distributes through Interbank and retailers. According to the SBS, for 2018, Interseguro was the largest insurance company measured by reserves, driven both by organic growth and the acquisition of Seguros Sura in November 2017 which both improved its ROE and doubled its asset size.

As of and for the three months ended March 31, 2019 Interseguro represented 19.7% of our total assets and 8.2% of our net profit and as of and for the year ended December 31, 2018, Interseguro represented 19.7% of our total assets, negative 5.6% of our net profit and 6.7% of our adjusted net profit. For the 2018 fiscal year, Interseguro declared a dividend of S/138.0 million (or U.S.$41.6 million), which represents 19.6% of total dividends received by IFS.

Interseguro’s CAGR in gross premiums plus collections was 8.3% between 2014 and 2018. For 2018, Interseguro’s net loss was S/61.5 million and its adjusted net profit was S/83.3 million, while its ROE was negative 0.5% and its adjusted ROE was 9.4%. For the three months ended March 31, 2019 Interseguro’s net profit was S/28.9 million and annualized ROE was 12.8%.

• Wealth management: Inteligo is a provider of wealth management services, which includes banking, financing, brokerage and investing activities for high net worth individuals through three operating subsidiaries, Inteligo Bank, Inteligo SAB (brokerage) and Interfondos (mutual funds). As of and for the three months ended March 31, 2019, Inteligo represented 5.7% of our total assets and 22.2% of our net profit and as of and for the year ended December 31, 2018, Inteligo represented 6.0% of our total assets, 18.1% of our net profit and 16.0% of our adjusted net profit. For the 2018 fiscal year, Inteligo Bank declared a dividend of U.S.$40.0 million (or S/132.7 million), of which S/99.5 million (or U.S.$30.0 million) were paid to IFS and represents 14.4% of total dividends received by IFS.

Inteligo’s CAGR in assets under management was 11.8% between 2014 and 2018. In addition, for the year ended December 31, 2018, Inteligo’s net profit was S/197.5 million and ROE was 25.7% and for the three months ended March 31, 2019, Inteligo’s net profit was S/78.3 million and annualized ROE was 38.1%.

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The following tables provide certain financial and other information about our three business segments for the periods indicated.

	As of and for the three months ended March 31, 2019
	Assets						Equity					Net Profit/(Loss)
	(S/ in millions)			%			(S/ in millions)		%			(S/ in millions)			%
Banking (1)		49,231.1			74.9	%		5,380.3		69.6	%		299.7			85.0	%
Insurance		12,967.5			19.7	%		1,028.6		13.3	%		28.9			8.2	%
Wealth management		3,754.2			5.7	%		830.3		10.7	%		78.3			22.2	%
Holding and eliminations (2)		(196.7	)		(0.3	)%		487.6		6.3	%		(54.2	)		(15.4	)%
Total		65,756.2			100.0	%		7,726.8		100.0	%		352.7			100.0	%

(1) Equity and Net Profit figures include the S/32.4 million gain on the sale of Interfondos to Inteligo, net of taxes. This gain was eliminated in the consolidated financial statements.

(2) Holding and eliminations corresponds to expenses of IFS and elimination of intercompany transactions. See Note 20 to our unaudited interim condensed consolidated financial statements.

	As of and for the year ended December 31, 2018
	Assets						Equity					Net Profit/(Loss)						Adjusted Net Profit (Loss) (1)
	(S/ in millions)			%			(S/ in millions)		%			(S/ in millions)			%			(S/ in millions)			%
Banking		47,440.4			74.4	%		5,454.0		76.9	%		1,010.9			92.6	%		1,010.9			81.8	%
Insurance		12,572.4			19.7	%		777.1		11.0	%		(61.5	)		(5.6	)%		83.3			6.7	%
Wealth management		3,808.9			6.0	%		812.8		11.5	%		197.5			18.1	%		197.5			16.0	%
Holding and eliminations (2)		(77.3	)		(0.1	)%		44.7		0.6	%		(55.6	)		(5.1	)%		(55.6	)		(4.5	)%
Total		63,744.4			100.0	%		7,088.5		100.0	%		1,091.4			100.0	%		1,236.2			100	%

(1) Adjusted net profit for the year ended December 31, 2018, is calculated excluding S/144.8 million, which is the aggregate effect recorded in our insurance segment’s technical reserves due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted in 2017 and 2016. See Note 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted net profit is a non-GAAP financial measure and should not be considered in isolation or as a substitute for net profit, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP Financial Measures.”

(2) Holding and eliminations corresponds to expenses of IFS and elimination of intercompany transactions. See Note 29 to our audited annual consolidated financial statements.

The following table provides relevant information about dividends declared by each of our subsidiaries:

	SBS GAAP																		IFRS
	Banking (Interbank)									Insurance (Interseguro)									Wealth Management (Inteligo) (3)
	For the years ended December 31,
	2018			2017			2016			2018			2017			2016			2018			2017			2016
	(S/ in millions)																		(U.S.$ in millions)
Net profit for the period (1)		1,040.1			902.0			875.1			361.1			103.7			85.8			56.2			58.1			51.0
Dividends declared (2)		467.0			405.9			393.7			138.0			100.0			42.5			40.0			46.5			40.5
Payout ratio		44.9	%		45.0	%		45.0	%		38.2	%		96.4	%		49.5	%		71.2	%		80.0	%		79.4	%

(1) For Interbank and Interseguro, this information is calculated using SBS GAAP. This table is presented in this manner because our Peruvian subsidiaries pay dividends to us on the basis of SBS GAAP and Inteligo

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pays dividends to us on the basis of IFRS. In all cases, the information is derived from stand-alone information from each entity.

(2) Represents dividends for the fiscal year which are declared and paid in the following year.

(3) Wealth Management includes Inteligo Bank, Interfondos and Inteligo SAB. Wealth Management dividends were declared/paid by Inteligo Bank only.

The following tables provide certain financial and other information about our consolidated business.

	As of and for the three months ended March 31, (unaudited)						As of and for the year ended December 31,
	2019		2019		2018		2018		2018		2017 (restated) (1)		2016 (restated) (1)		2015 (restated) (1)		2014 (restated) (1)
	(U.S.$ in millions) (2)(3)		(S/ in millions) (3)				(U.S.$ in millions)  (2)(3)		(S/ in millions) (3)
Balance Sheet and Income Statement Items
Total assets		19,818.0		65,756.2		60,635.0		19,211.7		63,744.4		60,394.5		51,719.4		50,000.9		40,365.2
Total gross loans		10,463.8		34,719.0		29,780.2		10,263.8		34,055.2		29,174.7		27,907.5		26,757.7		23,197.1
Total deposits and obligations		10,485.2		34,790.0		31,220.4		10,151.3		33,682.0		32,607.6		30,097.9		28,487.7		23,381.4
Total equity, net		2,328.7		7,726.8		6,412.4		2,136.4		7,088.5		5,836.9		4,998.3		4,460.9		4,302.3
Net profit (attributable to IFS’ shareholders)		105.7		350.6		288.2		326.8		1,084.3		1,027.4		944.6		1,013.7		891.5
Other Information
Adjusted net profit (attributable to IFS’ shareholders) (4)		N/A		N/A		N/A		370.4		1,229.1		N/A		N/A		N/A		N/A

	As of and for the three months ended March 31, (unaudited)						As of and for the year ended December  31,
	2019			2018			2018			2017 (restated) (1)			2016 (restated) (1)
Profitability Ratios
Net interest margin (5)(6)		5.4	%		5.3	%		5.4	%		5.3	%		5.4	%
Risk adjusted NIM (6)(7)		4.2	%		4.1	%		4.3	%		3.7	%		3.8	%
Efficiency ratio (8)		33.7	%		34.0	%		35.6	%		36.8	%		38.0	%
ROA (6)		2.2	%		1.9	%		1.8	%		2.0	%		1.9	%
Adjusted ROA (4)(6)		N/A			N/A			2.0	%		N/A			N/A
ROE (6)		19.0	%		19.1	%		16.6	%		19.3	%		19.9	%
Adjusted ROE (4)(6)		N/A			N/A			18.6	%		N/A			N/A

	As of and for the three months ended March 31, (unaudited)						As of and for the year ended December  31,
	2019			2018			2018			2017 (restated) (1)			2016 (restated) (1)
Asset Quality and Capitalization
Past-due-loans as a % of total gross loans (9)		2.5	%		2.6	%		2.5	%		2.7	%		2.5	%
Cost of risk (6)(10)		2.2	%		2.3	%		2.1	%		2.9	%		2.9	%
Core equity tier 1 ratio of Interbank (11)		10.2	%		10.2	%		10.6	%		10.1	%		9.4	%

	As of and for the three months ended March 31,						As of and for the year ended December 31,
	2019			2018			2018			2017			2016			2015		2014
Distribution Network and Customers
Financial stores		264			272			270			273			289			283		284
ATMs		1,953			1,994			1,973			2,052			2,159			2,297		2,324
Correspondent agents (12)		2,513			2,514			2,506			2,505			2,935			3,001		3,238
Number of digital customers (13)		975,269			667,506			882,437			620,448			454,194			296,184		234,224
Percentage of digital users (13)(14)		56	%		43	%		53	%		40	%		30	%		—		—

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(1) Our consolidated financial information for 2017, 2016, 2015 and 2014 was restated as a result of a voluntary change in accounting policy regarding our method of accounting the variation in market interest rates on insurance contract liabilities. See Note 4.2.1(i) to our audited annual consolidated financial statements. The financial information presented for 2014 and 2015 was restated after issuance of the financial statements for those years due to a voluntary change in accounting policy with a negative impact of S/57.6 million for 2014 and S/218.1 million for 2015 in the line Total net premiums earned minus claims and benefits in the consolidated income statement.

(2) Amounts stated in U.S. dollars as of and for the three months ended March 31, 2019 and as of and for the year ended December 31, 2018 have been translated from soles at the exchange rate of S/3.318 = U.S.$1.00. See “Exchange Rates”.

(3) Except for percentages and ratios and distribution and customer data.

(4) Adjusted net profit, adjusted ROA and adjusted ROE for the year ended December 31, 2018, are calculated excluding the effect of S/144.8 million due to a change in accounting estimates driven by the publication by the SBS of new mortality tables. Net profit was not adjusted for 2017 and 2016. See Notes 4.4 (d) and 4.6 to our audited annual consolidated financial statements. Adjusted net profit, adjusted ROE and adjusted ROA are non-GAAP financial measures and should not be considered in isolation or as a substitute for net profit, ROE or ROA, or other performance measures. See “Presentation of financial and other information—Non-GAAP financial measures” and “Selected Consolidated Financial Information—Non-GAAP Financial Measures.”

(5) Net interest margin is defined as (x) net interest and similar income divided by (y) average interest-earning assets. See “Selected Statistical Information.”

(6) Annualized for each interim period.

(7) Risk adjusted net interest margin is defined as net interest margin after impairment loss on loans, net of recoveries.

(8) Efficiency ratio is calculated by dividing (x) salaries and employee benefits plus administrative expenses plus depreciation and amortization by (y) net interest and similar income plus other income plus net premiums earned.

(9) At end of period. See “Presentation of financial and other information—Loan Portfolio Data.”

(10) Cost of risk is defined as impairment loss on loans, net of recoveries divided by average gross loans. Cost of risk includes an S/81.0 million recovery of provisions related to the construction sector at Interbank for 2018.

(11) Calculated for Interbank only pursuant to SBS regulations.

(12) ASBANC estimates, for 2014-2017 and Company estimates for 2018.

(13) In the month of December for each full year and in the month of March for each interim period.

(14) Percentage of digital users over total clients that interact with Interbank.

Market Opportunity

We believe that the ongoing growth of the Peruvian economy, the expanding middle class, the growth of private wealth creation in Peru, the low penetration of financial services and the well-capitalized and profitable Peruvian financial system offer significant opportunities for our continued growth. Moreover, new technological developments are opening up new opportunities for growth, enabling us to efficiently acquire and serve more clients, while providing distinctive and convenient customer service and greater access and inclusion to financial services to previously underserved Peruvians.

High growth economy with strong macroeconomic fundamentals

According to the EIU, Peru’s average GDP growth rate was 3.2% between 2014 and 2018, which is higher than the growth rate of each of the peer countries in Latin America during the same period (Colombia at 2.8%, Mexico at 2.6%, Chile at 2.2%, and Brazil at negative 0.8%). Additionally, Peru’s average inflation rate was 2.9% between 2014 and 2018, which was lower than the inflation rates of each of the peer countries in Latin America during the same period (Brazil at 6.2%, Colombia at 4.6%, Mexico at 4.1% and Chile at 3.5%). The Peruvian government’s prudent management of the economy, conservative fiscal policy, coupled with the Central Reserve Bank of Peru’s cautious management of inflation and international reserves have contributed to economic development, increased internal consumption and strong macroeconomic fundamentals, including low levels of public debt, low inflation, low fiscal deficit and high levels of international reserves. Peru’s strong track record of macroeconomic policy credibility, consistency and ability to adapt to changes has helped it to achieve investment grade ratings of A3 by Moody’s Investor Service (“Moody’s”), BBB+ by Standard & Poor’s Rating Services (“S&P”) and BBB+ by Fitch Ratings Ltd. (“Fitch”) as of December 31, 2018. In its most recent forecast as of March 2019, the Central Reserve Bank of Peru has estimated real GDP growth for Peru of 4.0% for both 2019 and 2020, in line with 2018 growth.

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Expansion of the middle class and affluent population

The core of our customer base is Peru’s growing middle class and affluent population. According to INEI, the poverty rate in Peru has declined to 20.5% in 2018, from 30.8% in 2010, and GDP per capita in U.S. dollars has grown from U.S.$5,051 in 2010 to U.S.$6,907 in 2018, according to EIU. Peru has a total population of 32.2 million, and according to the Asociación Peruana de Empresas de Investigación de Mercados (APEIM), Peru’s middle and upper socioeconomic segments (segments A, B and C) have significantly expanded and, as of 2017, represented 53% of the population compared to 42% in 2010. We believe that the increase in the number of people belonging to the middle class and affluent population creates a greater need for financial services, particularly for increasingly sophisticated banking, insurance and wealth management products. The expansion of these segments of the population drives growth and profitability across our business. Additionally, based on macroeconomic trends, we expect the number of high net worth individuals in Peru and the size of their investable assets to continue to grow and further increase the market for wealth management services.

Low financial services penetration

We believe that growth potential in Peru’s financial services sector continues to be significant. Despite sustained recent growth of 8.8% CAGR in total gross loans between 2014 and 2018, banking penetration in Peru, measured as the ratio of loans-to-GDP, was 36.6% as of December 31, 2018, according to the SBS and the Central Reserve Bank of Peru, below the average ratio of 51.2% for the group of peer countries in Latin America according to the EIU, the SBIF, the Central Bank of Brazil, the Colombian Financial Superintendency, and the Mexican Commission for Banking and Securities. In addition, it was less than half of the 93.0% ratio for Chile. We believe that penetration potential is even more significant in retail banking. Total retail loans including credit cards per inhabitant in Peru, is well below its peer countries in Latin America. As of December 31, 2018, the estimated total number of debit and credit cards per inhabitant in Peru was 0.9 as compared to 2.3 cards per inhabitant for Chile, according to the SBS and the SBIF, respectively. The ratio of retail loans-to-GDP in Peru was 13.0%, while the average for the group of peer countries in Latin America was 26.3%, as of December 31, 2018. Furthermore, as of December 31, 2018, there were approximately 0.2 million mortgages outstanding in Peru for a population of approximately 32.2 million, compared to approximately 1.6 million mortgages outstanding in Chile for a population of approximately 18.2 million. Similarly, insurance penetration in Peru, measured as the ratio of premiums-to-GDP as of December 31, 2017, is estimated to be 1.6%, which is lower than the average ratio of 3.5% for the group of peer countries in Latin America, and less than half the ratio of 4.9% for Chile, according to the Swiss Re Sigma 2017 Report.

Healthy, well-capitalized and profitable financial system

As a result of sound regulation and prudent management, the Peruvian financial system is healthy, well-capitalized and profitable, according to figures published by the SBS. Gross loans in Peru (measured in soles) have grown at a CAGR of 8.8% between December 31, 2014 and December 31, 2018, and 8.5% between March 31, 2018 and March 31, 2019, while the banking system’s asset quality has remained strong with a ratio of past-due loans as a percentage of total gross loans of 3.0% and a ratio of impairment allowance for loans as a percentage of past-due loans of 153.0% as of March 31, 2019, according to the SBS. Capitalization of the Peruvian banking system has consistently been well above regulatory requirements in the last five years with a total capital ratio of the banking system of 15.3% as of March 31, 2019, according to the SBS, as compared to a minimum requirement established by the SBS of 10.0% plus a 2.3% additional capital requirement. Interbank’s capitalization ratio was 16.4% and Interseguro’s regulatory solvency ratio was 130.4%, according to the SBS as of March 31, 2019. Furthermore, the banking and insurance industries in Peru remain profitable, with an 18.3% annualized ROE for the banking system and a 19.7% annualized ROE for the insurance industry for the three months ended March 31, 2019, according to the SBS.

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Development of new technologies and distribution channels

There are many technological trends currently impacting the financial services industry worldwide. For example, the penetration of cell phones, Internet and the 4G mobile network, the ability to process large quantities of data through big data, cloud and machine learning, and the opportunity to utilize robotics and artificial intelligence. As a result, many large banks have started digital transformations with large increases in their level of technological investments and are working on developing their product offerings.

Due to improved technology, banks are now able to offer a better value proposition to their customers that include better solutions with features tailored to the customer’s needs, contextual banking (whereby the customer is offered a connected banking experience, including tailored product offerings), enhanced 24 hour customer support and access and faster approval and response times, all at a lower per capita cost. Additionally, banks are now able to reach a broader base of customers both in terms of income levels and geographic locations and will be able to gradually offer them more products and services and make them a part of the banked segment of the Peruvian population, which constitutes a very important growth opportunity in the country.

Competitive Strengths

We have established a premier financial group with leading market positions in each of our primary business segments. We believe that our market share, focus on targeted and profitable segments, scale and highly recognized and trusted brands, combined with adoption of innovative technologies and increasing integration across our business segments, strongly position us to capitalize on the future expansion of the Peruvian economy.

Leading financial services provider focused on retail customers and highly attractive businesses

We target retail customers and growing and profitable businesses in Peru. We have highly recognized and trusted brands in each of our segments, Interbank in banking, Interseguro in insurance and Inteligo in wealth management. Within our banking segment, Interbank focuses primarily on retail banking, where we believe we are able to obtain higher profitability, with 54.0% of its loan portfolio constituting retail loans, compared to 35.7% for the Peruvian banking system, as of March 31, 2019, according to the SBS. Interbank is the second largest provider of consumer loans among banks in Peru, with a 22.6% market share as measured by gross consumer loans as of March 31, 2019. Interbank is also the largest provider of credit card loans among banks in Peru, with a 26.3% market share by credit card loans, and the largest privately owned bank provider of payroll deduction loans to public sector employees, with a 23.5% market share by payroll deduction loans, in each case as of March 31, 2019.

We believe that our focus on the retail market has allowed Interbank to obtain a higher ROE than the banking system on average. This higher ROE is driven by a balanced consumer loan portfolio where two of our most profitable products are credit cards and payroll deduction loans. Interbank has one of the highest net interest margins when compared to the three largest banks in Peru, due to its higher weighting in retail banking and credit cards when compared to its peers. Low delinquency rates on our payroll deduction loans reduce the overall credit risk exposure of our consumer loans portfolio. For the three months ended March 31, 2019, Interbank’s NIM was 135 basis points higher than the average for the three largest Peruvian banks and for the three months ended March 31, 2019, Interbank’s risk adjusted NIM was 69 basis points higher than the average for the three largest Peruvian banks, according to the SBS. Under IFRS, Interbank’s net interest margin for the three months ended March 31, 2019 was 5.5%.

Our commercial banking business serves a range of clients spanning large corporates, mid-corporates and SMEs. We are focusing on increasing our market share in mid-corporates and SMEs while maintaining our large corporate business with a profit-oriented approach. This market provides an additional growth opportunity given our 8.4% market share for mid-corporates and 4.0% market share for small businesses as of March 31, 2019, according to the SBS. Moreover, our overall commercial loan portfolio provides us with a lower risk component that balances our total loan portfolio.

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We believe that Interseguro provides us with a fast-growing and profitable business. In our insurance segment, Interseguro is the leading provider of annuities in Peru, with a market share of total annuities (excluding private annuities) of 32.3% as measured by premiums collected for the three months ended March 31, 2019, according to the SBS. We focus on the middle class and affluent population in Peru, a segment we believe is substantially underpenetrated in insurance services. During April 2016, the Peruvian Congress enacted a law that allowed retirees to withdraw up to 95.5% of their accumulated capital in cash in their mandatory pension account upon retirement, resulting in a significant reduction of retirement annuities sold by Peruvian insurance companies, including Interseguro. In this context, in order to keep its position as a leading provider in annuities, in 2016, Interseguro launched its private annuities product which allows retirees to receive a fixed income either for life or a fixed period. As of the date of this prospectus, most of the customers of private annuities and their funds originate from retirees who choose to buy a product from an insurance company rather than from a private pension fund. Interseguro is also a leading provider of life insurance with the acquisition of Seguros Sura and we believe this market provides an additional opportunity for growth.

Within our wealth management segment, Inteligo is well positioned to capture an increasing share of the growing number of wealthy individuals, resulting from economic growth and wealth creation in Peru. Inteligo’s CAGR in assets under management was 11.8% between December 31, 2014 and December 31, 2018. We believe that Inteligo’s position as a provider of tailored wealth management services as well as its ability to provide its customers with both local and international investment products will help increase its share of wallet among high net worth individuals, while delivering high levels of growth and profitability.

Track record of sustained growth supported by our strong market share and high profitability

Our strong track record of growth is supported by our increased market share, improvements in efficiency, and high profitability across our business segments. At Interbank, we are focused primarily on retail banking because we believe that it presents significant growth opportunities and higher profitability. In retail banking, Interbank’s total retail loans outstanding, including consumer and mortgage loans, achieved a CAGR of 11.4%, compared to 9.5% for the Peruvian banking system, between December 31, 2014 and December 31, 2018, according to the SBS. Our market share was 26.3% in credit card loans in March 2019, the largest in the market. In the same period, Interbank has held a strong position across retail products, with market shares of 17.0% and 18.7% of total retail loans in 2014 and March 2019, respectively, according to the SBS. With respect to mortgage loans, Interbank’s market share increased from 12.7% in 2014 to 14.4% in March 2019, according to the SBS. Interbank’s increasing market shares have been accompanied by high profitability, with ROE averaging 23.5% compared to 19.8% for the Peruvian banking system, from 2014 to 2018.

Interseguro is a leading and growing insurance company in Peru, which achieved a CAGR of 8.3% in premiums, compared to the industry’s 6.1%, between December 31, 2014 and December 31, 2018, according to the SBS. Furthermore, in the same period Interseguro’s positioning in the industry increased, with market shares in annuities by premiums (excluding private annuities) of 24.6% in 2014 and 32.3% in March 2019. Interseguro’s assets increased at a CAGR of 27.2% compared to 10.1% for the Peruvian insurance industry between 2014 and 2018. Between 2014 and 2018, Interseguro’s ROE averaged 30.0% compared to 15.8% for the Peruvian insurance industry, both according to the SBS. Interseguro’s recent results have been driven in large part by the acquisition of Seguros Sura. Interseguro’s ROE was 22.1% for the three months ended March 31, 2019, according to the SBS.

Inteligo’s assets under management grew at a CAGR of 11.8% between 2014 and 2018. Similarly, net profit grew at a CAGR of 7.4% between December 31, 2014 and December 31, 2018, supported by strong fees on assets under management. Inteligo’s ROE averaged 26.5% for the three-year period ended December 31, 2018. Inteligo’s ROE was 38.1% for the three months ended March 31, 2019.

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Digital suite of products and services with rapidly increasing levels of adoption

IFS is striving to reshape the banking space in Peru, creating a new digital experience driven by convenience and simplicity. Although we believe physical channels are still necessary in an underpenetrated financial system like Peru’s, our digital platform has substantially increased our customers’ interactions with Interbank and provided us with new business opportunities to build on consumer loyalty and cross-sell services, as well as accelerate new customer acquisition and inclusion of previously underserved segments of the population, including individuals, entrepreneurs and micro-businesses. We have a wide offering of digital products and services for existing and new clients, enabling them to get what they want, when they want it, and how they want it.

We believe our digital platform provides us with a competitive advantage as evidenced by our increased market share and improvement in net promoter score (“NPS”). As of March 31, 2019, 95% of total functionalities at Interbank, which include day-to-day transactions, new products and self-service features, are available digitally. Our digital users and 100%-digital customers have reached 56% of total retail customers who interact with the bank for digital users and 22% for 100%-digital retail customers in March 2019. Our penetration of digital sales and self-service transactions increased to 31% of total retail sales and self-service interactions in March 2019, from 21% in March 2018. Digital customer acquisition, or clients that were ‘born digital’, also increased with 17% of new individual clients in March 2019, compared to 3% in March 2018. Similarly, we are continuously improving our digital capabilities for SME and corporate clients, enhancing our value-added proposition and tools to foster our commercial customers’ growth. For example we have streamlined our account opening process for businesses from 15 days to a digital 30-minute process. This innovation has driven growth in new customer acquisition for small companies through our digital platform, accounting for 38% of our total new small business accounts in March 2019 compared to 0% in March 2018.

As part of our digital transformation, we have introduced new technologies and processes which enable us to improve time-to-market of new solutions. We have also made significant changes in the way we work. We are currently working with more than 80 teams using an agile framework on a number of projects, ranging from applications, digital products, new functionalities, and we are currently exploring different solutions targeting new customer segments and piloting new initiatives. For example, we have an innovation lab called “LaBentana”, which focuses on continuous innovation and development of new ideas and pilot initiatives, using design thinking methodologies developed together with the consulting firm IDEO.

Convenient and innovative nationwide omni-channel distribution network with a distinctive customer-oriented approach

We believe that our convenient and innovative nationwide retail distribution network together with a dedicated sales force and financial advisors, allow us to better reach our customers, and this combination has differentiated us from our competitors. Interbank has one of the most convenient and extensive retail banking distribution networks in Peru and is currently present in almost all of Peru’s regions. Our focus on digital transformation allows to help our customers to interact with us in an easier and more efficient way, and allows customers to migrate from the use of physical infrastructure to digital platforms. For instance, we have shifted monetary transactions operated through our branches to digital channels. Total monetary transactions have been increasing at a CAGR of 5.6% from 2015 to 2018 driven by monetary transactions through our mobile and internet banking which have increased at a 62.1% CAGR for the corresponding period, even though monetary transactions through our financial stores have been decreasing at a CAGR of 3.9% from 2015 to 2018. We believe this optimization of our distribution footprint has enabled us to reach our clients more efficiently, allowing them to perform transactions when and how they want to, at lower marginal costs for Interbank. This has also allowed us to improve our NPS for digital clients, which was 42 as of March 31, 2019, 16 points higher than NPS for traditional clients.

Interbank has built a convenient omni-channel distribution network in Peru, serving over three million customers. As of March 31, 2019, Interbank had 264 financial stores and operated the third-largest ATM network in

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Peru with more than 1,953 ATMs, which includes the largest out-of-branch ATM network (under our Global Net brand). Interbank has the largest number of financial stores inside supermarkets in Peru, which are open seven days a week from 9:00 a.m. to 9:00 p.m. Moreover, with the intention of providing underserved customers with more convenient services, Interbank operates a network of correspondent agents, called Interbank Agentes. The correspondent agent concept consists of providing third-party commercial establishments with low-cost electronic terminals which allow Interbank’s customers to perform basic cash-based operations such as cash withdrawals, credit card and bill payments, and deposits at a lower marginal cost to Interbank relative to transactions performed in our financial stores. As of March 31, 2019, Interbank had over 2,500 correspondent agents.

Since 2013 and in line with this strategy, we have implemented a profitability model for financial stores and ATMs which ranks them according to certain profitability metrics relevant to each distribution channel. This has allowed us to identify the less profitable units in order to close them, and to prioritize new openings in more strategic locations with higher demand for value-added financial services. As a result, the number of financial stores, which peaked at 290 in 2016, has decreased to 264 as of March 31, 2019, while productivity of financial stores and service levels have increased, as measured by sales per branch and volumes of retail deposits per branch. Similarly, the number of ATMs has decreased to 1,953 in March 2019 from 2,297 in 2015, while monetary transactions kept growing year over year in this channel.

Interseguro offers and sells its annuities and individual life insurance products through its own dedicated sales force to ensure the delivery of high-quality service and advice to customers. Interseguro’s specialized sales force is trained to provide a differentiated service for various customer types. As of March 31, 2019, Interseguro employed 117 agents exclusively dedicated to selling annuities and 273 agents to selling other insurance products. In addition to its own sales force, Interseguro leverages on the retail distribution capabilities of Interbank and those of Intercorp and of Intercorp Retail to offer simple low-cost premium insurance products, such as credit life insurance, mandatory traffic accident insurance (“SOAT”), card protection, loan protection, extended warranty and accident insurance.

Inteligo has developed a proprietary financial advisory model that has been a key pillar in sustaining its growth. The model takes into account the financial objectives of its customers and emphasizes risk analysis and continuous monitoring with portfolio rebalancing. Along with this, Inteligo has been able to successfully serve its customer base in order to deliver tailored products and advice.

Prudent risk management resulting in high asset quality, strong liquidity and high investment returns

Risk management has been and will continue to be a primary focus of our operations and at the center of our culture. Our experienced risk management teams focus on monitoring and managing risks across all business areas, including credit, market, liquidity and operational risks, among others. We believe our risk management expertise has allowed us to achieve strong asset quality and high investment returns. Our prudent management has allowed us to build up sufficient capital to allow us to grow strategically, invest in opportunities and pay dividends to our shareholders.

Interbank’s underwriting procedures are based on strong analytics and proprietary models. Additionally Interbank’s investments in technology and improvements in its ability to process and apply data have enriched our risk models and enhanced their accuracy and predictiveness. These models, along with the risk management skills of its experienced risk management team, provide Interbank with a competitive advantage. Interbank’s credit risk policies are approved by its risk committee and board of directors. Despite Interbank’s concentration in retail loans, which tend to have higher levels of delinquency, Interbank’s past-due loans as a percentage of total gross loans ratio as of March 31, 2019 was 2.6%, lower than the 3.1% average of the three largest banks in Peru. As of March 31, 2019, Interbank’s past-due loans coverage ratio was 177.0%, which compares favorably with the average for the Peruvian banking system of 153.0%, according to the SBS.

Interbank’s capitalization ratio, which is calculated as Interbank’s regulatory capital divided by its risk-weighted assets, was the highest compared to the other three largest banks. Additionally as of March 31, 2019,

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Interbank’s capitalization ratio stood at 16.4% as compared to 15.3% for the Peruvian banking system, according to the SBS. The minimum capitalization ratio required by Peruvian banking regulations is 10.0% plus an additional capital requirement which depends on certain levels of loan concentration in each institution. For Interbank, this additional capital requirement amounts to 1.7% as of March 31, 2019, compared to 2.3% for the Peruvian banking system. Interbank’s core equity tier 1 ratio was 10.2% as of March 31, 2019.

Interseguro’s investment team and its investment management approach have achieved a 6.9% investment return for the three months ended March 31, 2019, compared to the Peruvian insurance industry’s 7.3%, according to the SBS, while maintaining prudent levels of risk and following the SBS risk guidelines.

Inteligo’s lending services are offered through Inteligo Bank to complement its wealth management business. The decision to make loans to wealth management customers only results in Inteligo’s loan portfolio being fully collateralized by its customers’ assets and which to date have had no delinquencies. Regarding the management of capital, Inteligo Bank’s capitalization ratio, which is calculated as Inteligo Bank’s regulatory capital divided by its risk-weighted assets, was 26.9% as of March 31, 2019, above the minimum capitalization ratio required by the Central Bank of Bahamas of 8.0%.

Increasingly integrated business platform with synergy potential supported by a strong parent group

Since the introduction of our insurance and wealth management operations alongside our banking operations, we have strived to share and leverage key resources and capabilities across all three segments, which has resulted in enhanced revenues.

Our banking operations remain our core competency that binds together all our operations, while our insurance and wealth management operations are expected to continue supporting our growth. We believe that our continuous efforts to better integrate our three segments, combined with our focus on digital transformation, our existing distribution channels, experience and knowledge of our customer base and the Peruvian market, is a significant competitive advantage.

Furthermore, our parent company, Intercorp Peru, is one of Peru’s largest economic conglomerates, with activities spanning financial services, retail, education and real estate, among others. In 2018, Intercorp Peru’s businesses represented approximately 3.4% of Peru’s GDP, while generating U.S.$7,529.7 million in revenues. We believe that being part of this group gives us a competitive edge, because of the group’s deep knowledge of the Peruvian consumer, extensive focus and know-how in the Peruvian retail market, highly visible in-country presence and rapid decision-making capabilities. Intercorp provides significant synergy and cross-selling opportunities for IFS. For example, starting in 2018, we, jointly with Intercorp Peru, launched an effort to strengthen our presence and commercial efforts in seven of Peru’s main regions: Arequipa, Cusco, Trujillo, Chiclayo, Ica, Huancayo and Piura, by leveraging on Intercorp’s already established network.

Diversified funding base with strength in retail deposits

IFS has a competitive funding structure. We have access to diverse sources of funding, including deposits and debt securities placed in local and international capital markets. The majority of our funding comes from low cost customer deposits, which demonstrate our customers’ trust in our franchise and enables us to achieve attractive lending spreads. At Interbank, as of March 31, 2019, 78% of our total funding base was comprised of deposits. Interbank’s deposit base is broad and fragmented, such that we are not dependent on a certain type of customer, which provides Interbank with an average cost of funding of 3.0% for the three months ended March 31, 2019 and 2.5% for the corresponding period of 2018.

Interbank has been a significant player in the Peruvian banking industry with a market share of demand, savings, and term deposits of 12.8%, 15.0%, and 11.1%, respectively, as of March 31, 2019, according to SBS. Moreover, our strategic focus on retail has allowed Interbank to gain market share in retail deposits over the years reaching 13.2% as of March 31, 2019 compared to 12.1% as of December 31, 2014, providing us with a healthy funding base.

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Interbank’s strong asset quality and capital and liquidity position have resulted in two of the highest local ratings levels possible, which have allowed it to secure local funding through local short-term and long-term debt market issuances.

Experienced management team with proven ability to foster a merit-based culture and a highly motivated work force

We believe that the strength of our senior and middle management team has enhanced and will continue to be a key driver of our successful business model. We benefit from an experienced, diverse and talented management team. Most of the members of our senior management have held management positions with other major financial institutions in the United States, Latin America and Europe.

We are focused on attracting, developing and retaining highly qualified personnel and believe that a merit-based culture that emphasizes teamwork enables us to maintain a motivated workforce that delivers high-quality service. Interbank is the only Peruvian company that has been chosen by the Peruvian Great Place to Work Institute as one of the 20 best places to work in Peru for the past 17 consecutive years and one of the top 20 places to work in Latin America in the past nine years. In the most recent rankings, Interbank was selected number two best company to work for in Peru in the large size category (2018) and number three in Latin America (2019). Similarly, Interseguro is the only Peruvian insurance company that has been chosen as one of the top ten best places to work in Peru (medium-size category) by the Peruvian Great Place to Work Institute for the past eight consecutive years. Additionally, Inteligo SAB has been ranked among the top 15 companies in its category (companies with 30 to 250 employees) in Peru since it started participating in the Great Place to Work Institute survey in 2011, and is currently the only Peruvian brokerage house included in the ranking. Inteligo Bank’s branch in Panama began participating in the Great Place to Work Institute survey in 2014 and since 2015 has been ranked among the top 10 companies in its category (companies with 30 to 250 employees) in Panama.

Strategy

Our purpose is to empower all Peruvians to achieve financial well-being. Our aim is to become the top-of-mind partner for Peruvians, individuals and enterprises, when they think about both day-to-day financial needs and medium-term goals and dreams. To achieve this goal and to continue being a fast growing and profitable company, we have defined our key strategic priorities as follows:

Become the foremost financial services company in the heart and mind of Peruvians by putting them at the center of our ecosystem

We aim to become the preferred option for our individual and commercial customers helping them to achieve financial well-being and growth by deeply knowing and anticipating their needs, by building trust and providing transparency in our relationship with them, and by delivering a superior experience which is simple, mobile, agile and suited to that particular customer. We have highly recognized and trusted brands in each of our segments, Interbank in banking, Interseguro in insurance and Inteligo in wealth management.

We help our individual customers throughout their journeys with a personalized approach based on customer segment, which includes Joven, Preferente, Emprendedor, Premium and Select within Interbank and Certia and Private within Inteligo. The customer journey begins with new client acquisition and on-boarding, continues with customer development and loyalty, and finally, we focus on maintaining our customer base through retention and our win-back efforts. We have been implementing a number of initiatives aimed at improving the complete customer relationship. As of March 31, 2019, in retail banking, NPS increased to 33, compared to 11 as of March 31, 2018. In commercial banking, as of March 31, 2019, NPS remained stable at 32 compared to March 31, 2018.

We are continuously improving our value proposition for different customer segments including improvements to basic products such as accounts, payments and financing; introducing new special digital

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features, such as the loyalty program Interbank Benefit, the budget tool Smart, the digital savings account Piggybank, and the customer relationship program Interbank Cares. We are also developing additional ecosystems such as a financial health platform for customers and other tailored experiences. Towards this end, we use design thinking methodologies, learned through the consulting firm IDEO, that have been deployed in a number of projects.

Additionally, we are creating a payment ecosystem that seeks to create a strong bond with our customers, by focusing on four pillars: (i) increasing current person to business (“P2B”) offline business by extending merchant coverage, improving customer experience and banking the unbanked, (ii) increasing current P2B online business by optimizing adoption and fostering usage, (iii) improving the convenience of person to person (“P2P”) payments for customers by developing a better experience, and (iv) eliminating cash by banking the unbanked through pre-paid cards and through our open APIs that allow partners to access our account opening and basic financial-transaction services. Our goal is to develop an ecosystem which creates loyalty from customers and allows us to fulfill their financial needs digitally.

Within commercial banking our priority is also growth with a strong focus on profitability. We aim to provide the best self-service credit experience for commercial clients, by digitally providing them with the information and features necessary to manage their financial needs, and by offering the easiest and most transparent means of managing their cash flow and payments. For this purpose, we are in the process of implementing a new internet banking platform that will deliver most of these features.

For commercial banking we have three client groups based on volume of sales and employ different strategies accordingly. For large corporates we focus our efforts on generation of fees from cash management and corporate finance; for medium-sized companies we focus on growth, productivity and cash management; and for small companies we focus on sustainable growth and productivity with a strong support from analytics and collections. For small businesses, we now can open a Cuenta Negocios account within 30 minutes and have seen the number of new clients opening this account digitally, increasing from no accounts for 2017 to more than 9,700 accounts as of March 2019 since its introduction in August 2018. Moreover, we are testing an application which provides an alternative way of financing based on digital tools and information.

Be the company with the deepest knowledge of Peruvians providing personalized and real-time solutions

Our advanced analytics and CRM capabilities are being enriched with new sources of data and new tools that technology offers, such as cloud, real-time decision, machine learning and artificial intelligence. We aim to have the deepest understanding of Peruvians, both individuals and companies, as we believe that a deep knowledge of our current and potential customers’ characteristics and adapting to their behavior is important to better serve them, and to offer them the best solutions for their needs and risk profile.

Investments in technology represent the pillar of this strategic initiative, and we are working on a variety of areas to achieve this goal, including data and infrastructure, advanced analytics for marketing, and risk profiling and pricing models, as well as improving our CRM capabilities, including contextual marketing. With the support of our team of data scientists, we centrally design and distribute most of our sales campaigns, and have substantially improved our campaign effectiveness and are currently employing real-time decision making on certain campaigns. This combination of investments has helped make us more dynamic, and to be able to approach customers in real time.

These efforts also include different actions undertaken to have a better understanding of the self-employed segment of the population, which constitute a significant opportunity for financial services given the current low penetration levels. We are working on alternative risk profile models for new customer acquisition using new sources and non-traditional sources of data.

Our analytics vision is to have a fully deployed online customer management system which relies on real-time data, cloud processing, automated and reusable variables, real-time decision and actions, and an integrated infrastructure to support these new processes.

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Attract and retain customers with a superior experience, which seamlessly integrates our physical and digital platform

We want to deliver a seamless and superior experience to our customers that integrates our physical and digital platforms. We believe this combination will allow us to more effectively serve our customers, enabling them to get what they want, when they want it, and how they want it.

At Interbank, we have developed the digital capabilities to perform more than 95% of all the functionalities a customer needs within Interbank as of March 31, 2019. These include transactions, sale of new products, and self-service features. The percentage of transactions performed off branches has continued to increase, reaching 95% as of March 31, 2019. Digital sales and other self-service interactions have significantly increased during the last 12 months reaching 31% in March 2019, from 21% in March 2018. This represents a growth of 72% in the volume of digital sales and self-service interactions.

Through our physical channels we continue to focus on providing a superior customer experience and are improving productivity and efficiency through new paperless and digital processes, tools and more advanced analytics. Additionally, we continue to invest in educating our customers to encourage the use of digital and other channels. Deposits, withdrawals, payments of bills and credit cards are being redirected to other more cost-efficient channels.

Furthermore, we are currently redesigning our physical distribution platform to better suit the new digitally-influenced customer needs. Our idea is to focus more on high value-added activities, which include advisory and complex product sales, and less on transactions and simple product sales. For this purpose, we are in the process of redesigning our branch formats and distribution presence, including branches, correspondent agents, contact center and ATMs.

In digital, we are focusing our efforts on expanding the products and self-service interactions, continuing to foster the adoption of digital channels by our customers, adding new features, such as chat robots for employees and customers, and ensuring that interactions with our customers are safe and secure.

At Interseguro, we are expanding our product offering through our digital platform, which started with the launch of the online sale of SOAT in 2016, and continued with the sale of new digital products, such as travel insurance and car insurance. In 2018, premiums sold through digital channels accounted for 1.5% of gross premiums and for the three months ended March 31, 2019 accounted for 2.7% of gross premiums. At Inteligo, we introduced Certia, which focuses on onshore wealth management, and launched a digital platform that allows on-boarding, financial planning, advisory and execution services to our customers.

Create and scale-up new businesses by targeting new customers, segments and businesses

We seek to accelerate growth in the underpenetrated Peruvian market. For this purpose, we carry out thorough research through our lab LaBentana, alongside consumers, to identify areas for improvement and develop a variety of new initiatives to address pain points and make our offering more seamless. This allows us to target new customer segments, aiming to develop new revenue sources and accelerate our digital transformation.

Examples of these initiatives include the piloting of a digital payments solution for users and merchants. It targets cash payments at points of sale and cash peer-to-peer transfers, which account for the majority of total transactions. It offers in store payments through QR codes, online mobile top-ups and peer-to-peer transfers using only the mobile phone number.

Another initiative aims at finding alternative methods to provide access to loans to small and micro enterprises. Through a fully digital experience, which makes it cost-efficient and scalable, it allows small

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entrepreneurs to request and, if approved, get a loan disbursed in maximum of four hours. Once these initiatives have scaled up, we integrate them into our operations and digital platform, as have been the cases for the Piggybank and the expedited opening of accounts for small businesses through Cuenta Negocios.

Focus on efficiency and productivity

We will continue to focus on our digital transformation to enhance efficiency through the automation of internal processes and use of technology. Our goal is to be more efficient while utilizing fewer resources in our customer interactions by focusing our efforts on four main areas: (i) becoming paperless, (ii) implementing more independent robot usage which includes artificial intelligence features, (iii) digitalizing end-to-end customer processes and (iv) eliminating low value-added activities.

During 2017 and 2018, we focused on reducing paper-based processes mainly targeting intensive back-office processes and branch processes. During 2018, we implemented our first 38 robotic process automations at Interbank with the aim of improving customer and operational processing times (in particular for low value-added processes) and reducing operational errors. Our target is to implement more than 100 robotic process automations during 2019 at Interbank.

Our focus on profitability has helped us to improve our efficiency ratio from 38.0% in 2016 to 35.6% in 2018, and 33.7% in the three months ended March 31, 2019 with initiatives spanning from branch and ATM rationalization to increases of sales productivity. We will continue to pursue such initiatives which are bolstered by new digital features and processes.

Provide a scalable platform that our customers can trust with world-class technology

A scalable, flexible, stable and secure technological platform is key to achieve our purpose. We believe that we have deployed the key initial investments necessary to scale our platform and are committed to continue improving by maintaining our current levels of investment.

The first phase of investments from 2015 to 2017 consisted of (i) new mobile and internet banking platforms for retail customers, (ii) a new internet banking platform for commercial customers, (iii) investment in data, (iv) significant investment in our core infrastructure and applications to guarantee the stability and operational efficiency needed to support increasing transactional volumes coming from our digital strategy, including the outsourcing of our data centers, and (v) cybersecurity to safeguard our operations and our customers. See “Business—Information Technology Unit” for further information.

Beginning in 2018, in the second phase we have been increasing our efforts on advanced analytics development, including big data, machine-learning, cloud and real time decisions, by working together with world-class partners to build capabilities to serve our customers throughout the life cycle digitally and to explore new business opportunities. We have bolstered our investments in cybersecurity as we believe it is fundamental to provide a secure platform to be able to continue with our digital transformation.

We have moved from working with 17 agile teams in 2017 to more than 80 in 2018, allowing us to substantially decrease time-to-market and to develop more innovative ideas. We also have an internal innovation lab working with design thinking methodologies implemented together with the consulting firm IDEO to further accelerate the development of new ideas using new technologies.

Our ongoing focus is based on four main areas of work: (i) development of a new digital platform based on open technologies and APIs, (ii) focus on the high performance and stability of our technological platforms, including cloud services, (iii) new processes for continuous delivery of new developments, and (iv) focus on cybersecurity.

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Be a great place to work with a unique culture and strong sense of achievement for new talent

We believe that a motivated workforce leads to high-quality customer service, which leads to satisfied customers and better results. Our commitment to fostering a motivated workforce and performance-based culture is demonstrated by being ranked among the top Peruvian and Latin American companies in all our core segments by the Great Place to Work Institute and recently also in the specific ranking for women.

In the past years, we have been focusing on changing the way we work to agile methodologies, developing digital and analytical capabilities and changing the mindset of our talent. For this purpose, we have introduced a series of initiatives such as Demo Days, Expo Analytics, Interbank Hackathon, Innovaton, Interbank Datathon, as well as our Innovation Day at the Intercorp Peru level. We have also created training programs including the Agile Academy, Tribk, and the Interbank Tek program.

Interbank, Interseguro and Inteligo will continue their efforts to attract, develop and retain highly qualified personnel and to maintain a performance-based culture that emphasizes teamwork to keep a motivated workforce that delivers high-quality service and strong results.

Corporate Structure

The following chart presents our corporate structure, indicating our principal subsidiaries and respective ownership interests.

History

IFS is a corporation (sociedad anónima) organized under the laws of Panama in 2006. We are the majority owner and controlling shareholder of our subsidiaries, Interbank, Interseguro and Inteligo, which comprise our banking, insurance and wealth management segments, respectively. We are responsible for coordinating, supervising and establishing their strategy and management policies. In 2007, we conducted an initial public offering of our common shares publicly in Peru and privately outside of Peru. Our parent company is Intercorp Peru, a holding company for a group of companies operating mainly in Peru under the name “Intercorp”. Intercorp Peru’s main subsidiaries include our company and Intercorp Retail. Intercorp Retail acts as a holding company for the retail and real estate operations of Intercorp Peru in Peru. As of March 31, 2019, Intercorp Peru owns directly and indirectly 76.46% of IFS’ capital stock.

Interbank is an open-stock corporation (sociedad anónima abierta). Interbank was incorporated in Lima, Peru in 1897 and formerly conducted business under the names “Banco Internacional del Perú S.A.” and “Interbank”. In August 1994, as part of the government’s privatization efforts, 91% of Interbank’s share capital was acquired by Corporación Interbank, which subsequently transferred its holdings in Interbank to the

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Rodríguez-Pastor family through Intercorp Peru, a limited liability company organized under the laws of the Commonwealth of The Bahamas that is listed on the Lima Stock Exchange. After Interbank’s acquisition by Intercorp Peru in 1994, Interbank began conducting business under the name “Interbank” as part of a rebranding and modernization effort, and has become a leading universal bank in Peru. As of March 31, 2019, IFS holds 99.30% of the capital stock of Interbank.

Interseguro is a corporation (sociedad anónima) that was incorporated in 1998 by Intercorp Peru, pursuant to an agreement between Intercorp Peru and The Bankers Trust Company (“Bankers Trust”) (at the time the controlling shareholder of Consorcio Nacional de Seguros S.A.A., the largest insurer in Chile) to benefit from the expansion of the insurance business in Peru. In connection with the sale of Bankers Trust to Deutsche Bank AG in 1999, Bankers Trust’s interest in Interseguro was sold to a group of Chilean investors, and in 2000 Intercorp Peru acquired the portion of Interseguro that it did not own.

Inteligo was incorporated under the laws of the Republic of Panama in 2006. Inteligo Bank is a corporation that was incorporated in 1995 in The Bahamas and formerly conducted business under the names of Interbank Overseas Ltd. and Blubank Ltd. Inteligo SAB is a corporation (sociedad anónima) that started operations in 1993. It is organized under the laws of Peru, and is licensed by the SMV to operate in Peru and conduct brokerage, custody, portfolio management and advisory services. Interfondos S.A., Sociedad Administradora de Fondos (“Interfondos”) is a corporation (sociedad anónima) that started operations in 1994. It is organized under the laws of Peru, and is licensed by the SMV to operate in Peru and conduct mutual funds and investment funds management services.

On July 18, 2014, the board of directors of IFS approved the acquisition of Inteligo, effective on August 1, 2014. This reorganization entailed the acquisition of 100% of Intercorp Peru’s shares in Inteligo by IFS in exchange for 19.5 million IFS common shares.

On May 31, 2017, we entered into a share purchase agreement with Sura Asset Management Company (“SUAM”) and “Grupo Wiese” to acquire 100% of the capital stock of Seguros Sura S.A. (“Seguros Sura”) and Hipotecaria Sura Empresa Administradora Hipotecaria S.A. (“Hipotecaria Sura”) (the “Sura Acquisition”) for an initial base price of U.S.$268 million. The transaction became effective on November 2, 2017 and the approval by SBS was granted on September 28, 2017. This merger consolidated Interseguro’s leadership in the annuities market, as well as strengthened its position in credit life insurance.

Finally, in January 2019, we announced the consolidation of our wealth management activities at Inteligo by transferring Interbank’s mutual funds subsidiary, Interfondos, to Inteligo Group, where asset management is the core business.

Banking Segment

Overview

Interbank provides retail and commercial banking services to approximately three million total customers as of March 31, 2019. It is the fourth largest bank in Peru in terms of total assets, total loans and total deposits, with market shares of 12.5%, 12.4% and 12.8%, respectively, as of March 31, 2019 according to the SBS. It is the fourth largest bank in Peru in terms of total assets, total loans and total deposits, with market shares of 12.3%, 12.0% and 12.6%, respectively, as of December 31, 2018 according to the SBS. Interbank is focused on fast-growing and highly profitable retail banking businesses, such as credit card financing, payroll deduction loans to public employees and mortgages, as well as Peruvian corporates and medium-size companies within commercial banking.

Given this focus, 54.0% of Interbank’s gross loans as of March 31, 2019 correspond to retail banking, compared to 35.7% for the Peruvian banking system, according to the SBS. Interbank is the second largest

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provider of consumer loans, the leading player among private banks in payroll deduction loans to public sector employees, the largest provider of credit card financing and the third largest bank in retail deposits in Peru. As part of its strategy to serve retail banking customers, Interbank has one of the most convenient and extensive retail banking distribution networks in Peru and is currently present in 23 of Peru’s 25 regions. Interbank serves its customers through 264 financial stores, more than 1,900 ATMs throughout Peru, which is the third largest ATM network nationwide and the largest out of branch ATM network, and more than 2,500 correspondent agents, and a digital platform including a mobile app with 55% digital users and 22% of 100%-digital customers as of March 31, 2019.

In the commercial banking line of business, which represents 46.0% of Interbank’s gross loans as of March 31, 2019 according to the SBS, Interbank focuses on high margin and fee generating products such as leasing, structured finance, cash management, trade finance and factoring in its commercial lending business. These products and services are attractive not only for the financial margins they offer, but also for the fee income they generate. In addition, these products and services enhance customer loyalty and provide significant cross-selling opportunities.

For the three months ended March 31, 2019 Interbank’s net profit was S/299.7 million (U.S.$90.3 million). For the years ended December 31, 2018, 2017 and 2016, Interbank’s net profit was S/1,010.9 million (U.S.$304.7 million), S/893.5 million and S/839.1 million, respectively. As of March 31, 2019, Interbank had shareholders’ equity of S/5.4 billion (U.S.$1.6 billion). As of December 31, 2018, 2017 and 2016, Interbank had shareholders’ equity of S/5.5 billion (U.S.$1.6 billion), S/4.9 billion and S/4.3 billion, respectively. Interbank’s annualized ROE was 22.1% for the three months ended March 31, 2019, while its annualized ROA for the corresponding period was 2.5% principally due to the gain on sale of Interfondos. However, adjusted ROE and adjusted ROA were 19.8% and 2.2%, respectively. Interbank’s ROE for the years ended December 31, 2018, 2017 and 2016 was 20.2%, 20.1% and 21.5%, respectively, and its ROA for the years ended December 31, 2018, 2017 and 2016 was 2.2%, 2.1% and 2.0%, respectively.

History

Interbank is an open-stock corporation (sociedad anónima abierta). Interbank was incorporated in Lima, Peru in 1897 and formerly conducted business under the names “Banco Internacional del Perú S.A.” and “Interbanc”. In August 1994, as part of the government’s privatization efforts, 91% of Interbank’s share capital was acquired by Corporación Interbank, which subsequently transferred its holdings in Interbank to the Rodríguez-Pastor family through Intercorp Peru, a limited liability company organized under the laws of the Commonwealth of The Bahamas that is listed on the BVL. After Interbank’s acquisition by Intercorp Peru in 1994, it began conducting business under the name “Interbank” as part of a rebranding and modernization effort, and has become a leading universal bank in Peru. As of March 31, 2019, IFS holds 99.3% of the capital stock of Interbank.

Business Lines

Interbank has three business lines: (1) retail banking, (2) commercial banking and (3) treasury and institutional.

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Retail Banking

Interbank’s retail banking business line provides a variety of financial products and services to individuals including retail loans and retail deposits. Interbank’s retail banking strategy consists of providing the best customer experience through convenient, agile and friendly service. Interbank’s key objectives include increasing its market share in its core products through increasing its share of wallet and cross-selling products to its existing customers. Interbank seeks to meet the financial service needs of Peru’s growing middle class who only recently have had sufficient disposable income to become integrated into the financial system. Interbank believes the retail banking sector presents significant opportunities to continue to grow and sustain high margins, while assuming reasonable risk.

As of March 31, 2019, retail loans represented 54.0% of Interbank’s total loan portfolio outstanding as compared to 35.7% for the Peruvian banking system under SBS GAAP. Furthermore, Interbank’s strategy also seeks to continue capturing low-cost funding through a stable and diversified deposit base. The following charts show Interbank’s and the Peruvian banking system’s retail gross loans breakdown according to the SBS as of March 31, 2019.

Interbank	Banking system

Source: SBS.

Retail Loans

Retail loans consist of consumer and mortgage loans. Interbank classifies its consumer loans into two categories: (i) credit cards; and (ii) payroll deduction and other consumer loans.

Consumer Loans

Credit cards. Credit cards represent the second largest portion of Interbank’s consumer loan portfolio in terms of outstanding loans. Interbank offers its retail customers all three major credit cards: VISA, MasterCard and American Express. Interbank has an exclusivity agreement with American Express for its Centurion line of credit cards. Interbank also offers credit cards with different value propositions catering to each customer segment.

Interbank’s credit card loans had a CAGR of 11.3% between December 31, 2014 and December 31, 2018 and represented a market share of 26.3% as of March 31, 2019. For the three months ended March 31, 2019, credit card loans increased by 26.0% compared to the corresponding period in 2018. For the year ended December 31, 2018, credit card loans increased by 24.2% compared to the corresponding period in 2017. As of March 31, 2019, credit cards represented 30.3% of Interbank’s retail loan portfolio as compared to 21.5% for the Peruvian banking system, and its past-due loan ratio in credit cards stood at 3.8%. As of December 31, 2018, credit cards represented 30.0% of Interbank’s retail loan portfolio as compared to 22.2% for the Peruvian

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banking system, and its past-due loan ratio in credit cards stood at 4.1%. Interbank’s past-due loan ratio results from its strategy of targeting customers through enhanced and proprietary credit scores and offering differentiated pricing based on each customer’s risk profile through improved credit scoring and origination models.

Payroll deduction loans. Payroll deduction loans to public sector employees such as police officers, teachers and army employees, represent the second largest portion of Interbank’s consumer loans, after credit cards. Interbank ranks first among private banks in Peru in terms of payroll deduction loans to public sector employees, with a market share of 23.5% as of March 31, 2019 and 23.1% as of December 31, 2018.

The risk of default under payroll deduction loans is lower, particularly because the employer deducts the loan payments from the employee’s salary and makes payments directly to Interbank. Additionally, these payroll deduction loans are legally required to be insured by an insurance company against the death and disability of the borrower. Interseguro provides substantially all of the insurance policies for these loans although customers are free to purchase insurance from other providers. In addition to payroll deduction loans, Interbank offers other loans to individuals, including auto loans and unsecured personal loans.

Mortgage Loans

Interbank offers fixed rate mortgage loans with a typical term of 20 years and a typical down payment of 20% denominated in either U.S. dollars or soles.

Interbank’s mortgage loans outstanding grew at a CAGR of 11.5% between December 31, 2014 and December 31, 2018 compared to a CAGR of 8.3% for the Peruvian banking system in the same period. Between March 31, 2018 and March 31, 2019, Interbank’s growth in mortgage loans outstanding was 12.8%, compared to 9.6% for the Peruvian banking system over the same period. For 2018, Interbank’s growth in mortgage loans outstanding was 11.3% with respect to the corresponding period in 2017, compared to 9.7% for the Peruvian banking system over the same period. For the three months ended on March 31, 2019, Interbank’s mortgage loan disbursements amounted to approximately S/6,601.3 million, of which 86.7% were denominated in soles and the remaining 13.3% in U.S. dollars. For 2018, Interbank’s mortgage loan disbursements amounted to approximately S/6,421.9 million, of which 85.9% were denominated in soles and the remaining 14.1% in U.S. dollars.

Interbank also provides residential construction loans to real estate developers. Although these loans are reported within the commercial banking portfolio, they are managed together with retail banking mortgages because of the synergies between the businesses. Financing real estate projects provides Interbank with an opportunity to market mortgage loans to home buyers.

In 2001, the Peruvian government launched the Nuevo Crédito Mivivienda program, a social initiative to promote the construction of low-income housing, of which Interbank is an active participant. As of December 2018, the Mivivienda program had successfully disbursed approximately 136,692 loans, mainly to develop multi-family buildings. The Nuevo Crédito Mivivienda program provides direct funding to match each loan underwritten by banks, as well as credit risk coverage for one-third of any realized loss. Furthermore, the program subsidizes interest rates by rewarding the end customer with direct financial incentives if payments are kept current.

Retail Deposits

Interbank offers a wide range of sol and U.S. dollar denominated transactional, savings and investment accounts through one of the largest distribution networks, as measured by total financial stores, ATMs and correspondent agents. These products satisfy key consumer needs and position Interbank as an attractive financial institution for retail customers.

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Transactional accounts

Within retail deposits, Interbank offers transactional accounts with different interest rates, maintenance fees and options for accessing funds, such as checkbooks, debit cards and Internet access.

Cuenta Sueldo is a payroll account into which an employer may deposit an accountholder’s salary on a regular basis. These payroll accounts provide debit cards for employees, as well as monthly interest on account balances and discounts at restaurants and retailers, among other benefits. Interbank offers these payroll account services to employers in conjunction with other commercial banking products, and also markets directly to employees.

Cuenta Ahorro Emprendedor is a transactional account specially designed for Peruvian entrepreneurs that does not charge a fee for inter-bank transfers through digital channels.

Cuenta Simple is used by customers for their everyday banking needs and does not have a maintenance fee. Transactions are free of charge for up to a certain number of monthly transactions through physical channels. In addition, all transactions performed through online banking and other electronic devices are free of charge. This transactional account is of low cost for Interbank as most of the transactions are conducted through electronic channels. Customers are also able to receive incoming wire transfers in this account.

Órdenes de Pago are instructions to transfer funds at the request of a retail account holder in favor of a third party, which could be either client or non-client.

Cuenta Corriente is a checking account used primarily by small business owners and independent professionals to pay for expenses.

Savings accounts

Interbank offers savings accounts with a variety of interest rates, maintenance charges and options for alternative access channels, such as ATM cards, Internet access and mobile access.

Cuenta Millonaria is Interbank’s fastest growing savings accounts, which may be denominated in soles or U.S. dollars. The Cuenta Millonaria account allows accountholders to participate in sweepstakes to win apartments and cars.

Cuenta Ahorro Tasa are savings accounts that permit unlimited transactions in electronic channels, carry no monthly maintenance fee and provide additional benefits tailored to the needs of different customer types.

Ahorro Casa allows customers to make monthly deposits to finance home purchases. Once an accountholder reaches a pre-established balance in the account and demonstrates savings and payment capacity, the accountholder may apply for a mortgage loan with Interbank’s mortgage division.

Investment accounts

Interbank offers time deposits, certificates of deposit (CDs) and compensation for service time accounts (“CTS”, by its Spanish acronym) accounts denominated in soles and U.S. dollars, to customers who may or may not have a checking or savings account with Interbank.

Interbank offers time deposits and CDs, with maturities ranging from 31 days to ten years. Time deposits with maturities of 31 days or more may be opened with a minimum initial balance of S/2,000 or U.S.$1,000. Time deposits with maturities ranging from one year to ten years are only offered in soles and can be opened with a minimum initial balance of S/50,000.

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CTS accounts are severance accounts that employers must open for the benefit of their employees pursuant to Peruvian law. Employers must deposit into these accounts twice a year (in May and November) an amount equal to one half of an employee’s month salary. Employees may withdraw from their CTS account any amount exceeding the sum of such employee’s four months’ salary calculated based on the most recent monthly salary.

Commercial Banking

Interbank’s commercial banking business line primarily target Peruvian corporations and medium-size companies. The commercial banking unit has three business units: (1) corporate; (2) medium-size business and (3) small business.

Interbank markets its cash management services, including payroll services, collection and account payments, to commercial clients that provide it with opportunities to cross-sell retail products. As of March 31, 2019, Interbank was the fourth largest bank in terms of commercial loans outstanding, with a total commercial loan portfolio amounting to S/15.3 billion, representing a 8.8% market share, while its past-due loan ratio stood at 1.8%, the lowest among the largest four banks in Peru. As of December 31, 2018, Interbank was the fourth largest bank in terms of commercial loans outstanding, with a total commercial loan portfolio amounting to S/15.2 billion, representing a 8.7% market share, while its past-due loan ratio stood at 1.7%, the lowest among the largest four banks in Peru. Other traditional products offered to Interbank’s commercial clients include working capital loans and letters of credit.

The following charts show Interbank’s and the Peruvian banking system’s commercial gross loans breakdown according to the SBS as of March 31, 2019:

Interbank	Banking System

Source: SBS.

According to the SBS, in general terms, corporate loans are loans offered to companies with annual sales exceeding S/200.0 million in the previous two years; large loans are offered to companies with annual sales between S/20.0 million and S/200.0 million in the previous two years, medium loans are offered to companies with a total debt in the Peruvian financial system above S/300,000 in the last six months that cannot be classified as corporate or large companies; small size loans are offered to companies with a total debt in the Peruvian financial system above S/20,000 and S/300,000 in the last six months; micro-company loans are offered to companies with total debt in the Peruvian financial system no higher than S/20,000 in the last six months.

Corporate Banking

Interbank’s corporate banking unit is primarily responsible for providing services to companies with annual sales exceeding S/100.0 million or are part of a large economic group. Interbank’s corporate banking unit provides investment banking, structured finance and other sophisticated banking products to meet the needs of its

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target clients. Furthermore, Interbank focuses on developing a relationship with each client and promoting fee-related and low-risk products, such as letters of credit, collections, transfers and foreign exchange services, tailored to meet the particular requirements of each client.

Medium-Size Business Banking

Interbank’s medium-size business banking unit offers many of the same products as those of the corporate banking unit mainly to medium-size enterprises with annual sales between S/3.0 million and S/100.0 million. The unit primarily provides Interbank’s clients with working capital loans secured by accounts receivable and other products, including financing for medium and long-term investment programs. Medium-size businesses also constitute an important source of deposits.

Medium-size enterprises in Peru generally do not have access to financing through local or international capital markets or to term loans from foreign banks. Interbank expects to capitalize on the significant growth opportunities in this sector and to profit from the margins that it offers when taking into account the reasonable degree of risk involved. We believe that this sector will continue to grow along with the Peruvian economy. In this sector, financial entities are the main competitors of banks.

Small Business Banking

Interbank’s small business banking unit serves companies with annual sales between S/150,000 and S/3.0 million. Interbank offers working capital loans, fixed asset financing, revolving lines of credit and transactional accounts to small businesses. Interbank has invested in building an experienced team and developing a strong IT platform, with online and automated processes to better serve these customers.

Main Commercial Banking Products

Leasing. Interbank provides financial leasing including commercial real estate, vehicles, machinery and other goods. At the end of the term of a leasing agreement, the customer has the option to purchase the leased assets. As of March 31, 2019, Interbank’s market share was 9.1% by gross loans according to the SBS. As of December 31, 2018, Interbank’s market share was 9.1% by gross loans according to the SBS. Leasing products generate high margins and present lower credit risk compared to other financial products.

In recent years, the growth in Interbank’s leasing business has been driven by economic growth and related private sector investments. We expect this trend to continue in the future. Furthermore, Interbank is actively pursuing leasing and financing opportunities for machinery and equipment to grow its leasing business.

Cash management. Interbank offers products and services that strengthen its relationship with clients, build loyalty and reduce costs by using electronic channels and by increasing fee income. Services managed by this unit include collection services (automated trade bill collection), automated payments (payroll and payments to suppliers) and digital banking and cash management. Interbank earns fees from cash management services by charging its clients a fixed fee and a variable fee based on the volume and frequency of the transactions.

Trade finance. Interbank provides short-term loans for trade, funded with internal resources or with credit lines from foreign banks. In addition, the trade finance unit offers medium-term credit lines using funds granted by international commercial banks and foreign governmental institutions. The trade finance unit also earns fees by providing customers with letters of credit, international collection and foreign exchange services. As of March 31, 2019, Interbank had a market share of 9.7% in the trade finance business according to the SBS. As of December 31, 2018, Interbank had a market share of 9.8% in the trade finance business according to the SBS.

Interbank intends to take advantage of the growing importance of China in Peru’s foreign trade by facilitating trade and investment with both countries. In 2007, Interbank established a Commercial

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Representative Office in China in order to provide financial services to Peruvian and Chinese companies wishing to trade in either markets.

Factoring. Through its electronic factoring product, customers are able to send their invoices to Interbank on a continuous basis up to a certain credit limit and borrow against these invoices. Once the customer reaches this limit and no additional receivables are generated, the customer stops receiving advances from Interbank.

Treasury and Institutional

The main activities of Interbank’s treasury and institutional business line include treasury and institutional banking, as well as securitization services through Internacional de Titulos Sociedad Titulizadora S.A. (“Intertítulos”).

Treasury

Interbank is an active participant in the money and foreign exchange trading markets in Peru. Its money market desk plays an active role in the sol and foreign currency short-term money markets. In addition, the money market desk participates in the auction of certificates of deposit issued by the Central Reserve Bank of Peru. Interbank’s proprietary trading activities focus on foreign exchange trading and short-term investments in securities, which primarily include certificates of deposit of the Central Reserve Bank of Peru, Peruvian global bonds and sovereign debt instruments.

Institutional Banking

Interbank’s institutional banking unit serves primarily non-profit public and private organizations, international entities, educational institutions and nongovernmental organizations. As of March 31, 2019, the institutional banking unit had more than 670 clients and S/7.3 billion in deposits, accounting for 22.5% of Interbank’s total deposits.

The institutional banking unit is strategically important to Interbank as it provides Interbank with a stable and low cost deposit base, as well as opportunities for fee income generation. The clients for the institutional banking unit require mainly transactional products, such as remote office banking, collection services, automated payroll payment services and investment management. Interbank’s strategy is focused on building customer loyalty with these clients by offering customized services at competitive rates and by providing high-quality customer service.

Securitization Services

In addition, Interbank provides securitization services through its wholly-owned subsidiary, Intertítulos, which is regulated by the SMV. Intertítulos, acting as a trustee, enables its clients to issue securities in order to obtain funds directly from financial markets.

Distribution Channels

Interbank has built and developed one of the best omni-channel platforms that combine physical and digital presence, serving over three million customers as well as non-customers across Peru.

In terms of physical presence, Interbank has developed a highly convenient network. As of March 31, 2019, Interbank had 264 financial stores and operated over 1,900 ATMs, the third-largest ATM network in Peru. Interbank has the largest number of financial stores within retail locations in Peru, with formats that open Monday to Sunday from 9 a.m. to 9 p.m. and it holds the largest out-of-branch ATM network, under our Global

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Net brand. Moreover, with the intention of offering greater convenience as well as providing underserved customers with more convenient services, Interbank operates a network of over 2,500 correspondent agents as of March 31, 2019, known as Interbank Agente.

In terms of online channels, Interbank provides any customer or non-customer with the option to have a completely digital experience with the bank; from acquisition to onboarding and use of its financial products. Its public website, www.interbank.com.pe, has a strong commercial focus and manages the bank’s digital acquisition of new customers. Its online banking and mobile application give customers immediate access to its day-to-day transactions and after-sales services and uses those interactions to capture cross-sell opportunities. Furthermore, Interbank has developed other channels that serve specific segments or customer needs. For example, a separate website, www.interbankbenefit.pe, serves customers under the Interbank Benefit loyalty program, and “Cuenta Sueldo” is a mobile application for payroll account customers that give access to discounts and benefits.

The following table shows the number of monetary transactions of each distribution channel:

	Number of transactions as of December, in millions
	2014		2015		2016		2017		2018		CAGR 2014-2018			In March, 2019
Financial stores		3.0		3.1		3.0		2.7		2.6		(3.9	%)		2.5
Off-branch		8.2		8.5		9.3		10.1		11.4		8.6	%		10.7
ATMs		5.7		6.2		6.4		6.4		6.8		4.5	%		5.9
Correspondent agents		2.0		1.6		1.9		2.0		2.0		0.4	%		2.2
Mobile banking		0.4		0.5		0.9		1.6		2.4		62.1	%		2.5
Other		0.2		0.2		0.2		0.2		0.1		(2.4	%)		0.1
Total		11.2		11.6		12.3		12.8		14.0		5.6	%		13.3

The following table shows the percentage of use of each distribution channel, reflecting a transition from the use of traditional channels (branches, ATMs and correspondent agents) to mobile banking:

	As of December, Percentage of total
	2014			2015			2016			2017			2018			In March, 2019
Financial stores		27.1	%		26.4	%		24.3	%		21.2	%		18.6	%		19.2	%
Off-branch		72.9	%		73.6	%		75.7	%		78.8	%		81.4	%		80.8	%
ATMs		50.7	%		53.8	%		51.8	%		49.8	%		48.6	%		44.4	%
Correspondent agents		17.6	%		14.1	%		15.1	%		15.5	%		14.4	%		16.3	%
Mobile banking		3.1	%		4.2	%		7.6	%		12.3	%		17.4	%		19.0	%
Other		1.4	%		1.5	%		1.2	%		1.2	%		1.0	%		1.1	%
Total general		100	%		100	%		100	%		100	%		100	%		100	%

Financial Stores

As of March 31, 2019, Interbank had 264 financial stores, of which 156 were located throughout Lima, 107 in the rest of Peru and one branch abroad located in Panama. After peaking at 290 financial stores in 2016, the number of financial stores decreased mainly due to the success in transferring basic transactions from the stores to more efficient channels, the education of customers in the use of online banking and mobile applications, and process improvements. However, Interbank maintains the fourth largest network of financial stores among Peruvian banks, covering 23 of Peru’s 25 regions. A large number of the financial stores are located in convenient, high traffic areas, such as supermarkets and shopping malls, to maximize client coverage. Interbank has 68 financial stores that are open every day from 9:00 am to 9:00 pm.

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In May 2013, Interbank introduced “Imagine” financial stores, a concept jointly developed with IDEO, a design and innovation consulting firm. “Imagine” fosters a more pleasant and inviting environment to Interbank’s customers and is designed to educate customers on the use of electronic channels in order to migrate low value transactions to more efficient channels, while continuing to capture new customers and exploit cross-selling opportunities. Imagine has set new service standards in the industry and many of its elements have been adopted by Interbank’s main competitors. Furthermore, Interbank has a full-time financial store functioning as an innovation lab “Explora”, allowing it to constantly test new ideas and concepts.

To further strengthen the “Imagine” model, since 2016 Interbank introduced the role of digital education in its stores, offering new and existing customers an assisted onboarding process onto its digital channels. In 2018, 20.0% of new digital users utilized the onboarding process offered at its stores.

The following chart shows Interbank’s financial stores evolution according to the SBS.

Financial Stores (Units)

Source: SBS.

ATMs

Interbank’s strategy is to offer its customers increased convenience and as of March 31, 2019, had the third largest ATM network in Peru with more than 1900 ATMs located across Peru. Although this number represents a reduction from the 2,324 ATMs in 2014, the streamlining of the network has allowed Interbank to relocate ATMs to higher convenience locations as well as invest in renewing and upgrading its equipment, while monetary transactions kept growing year-over-year in this channel. Approximately 60% of Interbank’s ATMs are located away from its financial stores in high foot traffic areas like shopping malls, supermarket and airports. These 1,163 ATMs make up the largest out-of-branch network in Peru, with our closest competitor operating 827 ATMs, as reported by ASBANC. The ATM channel is the largest channel in terms of monetary transactions, with a 44% share and have advanced features, including cardless withdrawals, the ability to receive cash and check deposits, bill and credit card payments in cash, as well as disburse payroll advances, pre-approved cash loans or sell insurance products. To offer this increased convenience in an efficient way, Interbank operates under the Global Net brand which is also a business line that provides ATM services to 42% of the financial institutions in Peru and acquires ATM transactions for all major global brands, including Visa, MasterCard, American Express, JCB, Union Pay, Diners and Discovery, and in 2018 generated S/63.5 million in fees.

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The following chart shows Interbank’s ATMs evolution according to ASBANC.

ATMs (Units)

Source: ASBANC.

Correspondent Agents

This channel operates under the Interbank Agente brand and consists of providing traditional merchants, for example bodegas and internet cafés with low-cost electronic terminals that allow customers to perform basic cash-based transactions, such as withdrawals, deposits and payment of utility bills. In March 31, 2019, Interbank had over 2,500 correspondent agents channeling over 2 million transactions.

The following chart shows Interbank’s Correspondent Agents evolution according to ASBANC and Interbank’s information.

Correspondent Agents (Units)

Source: ASBANC and company information.

Mobile Banking

Interbank has developed a robust digital ecosystem that allows its customers to have a complete digital experience with the bank for all their financial needs. Its aim is to provide a journey which does not require

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physical contact, whether visiting a branch or contacting by telephone, with the bank unless the customer chooses to contact Interbank. Interbank offers digital banking to its new and existing customers through its website, www.interbank.com.pe, and its mobile applications. In March 2019, Interbank had more than 975,000 monthly active users and a monthly average of 2.2 million monetary transactions and 46.1 million non-monetary transactions, as of March 31, 2019. Its mobile application was the highest rated in the Google Play Store among the largest banks in Peru. Apart from the public website and mobile banking channels, Interbank has also developed digital solutions that address specific customer segments or needs such as, Interbank Benefit loyalty program, Cuenta Sueldo discounts and benefit mobile application for payroll account customers.

Interbank’s public website provides general information about the bank and its products and services, and also has a commercial orientation program that allows non-customers to acquire credit cards or open a savings or transactional account. Interbank’s mobile banking is available to existing customers and its services include: (i) transactions: account balance and transaction inquiries, transfers between accounts, credit card, bills and loan payments, mutual funds investments and ATM withdrawal requests; (ii) after-sales services: lock your card, enable or disable card usage online or abroad and divide card transactions into installments; and (iii) product cross-sell: credit cards, credit card line extension, pre-approved loans, savings accounts and insurance products. In March 2019, 78% of Interbank’s transactions, 59% of the after-sales services and 62% of Interbank’s products were available online. Furthermore, as part of its strategy to enhance the digital experience and incentivize its customers to migrate to digital channels, Interbank has services that are exclusively offered in digital channels, such as access to the loyalty program “Interbank Benefit”, the digital savings account “Piggy Bank” and the budget tool “Smart”.

Increased usage of digital solutions among customers is key to Interbank’s strategy as mobile banking customers interact more than four times the amount that branch customers do, have lower transactional costs and have a better net promoter score and churn indicators as of March 31, 2019. Furthermore, in March 2019, 56% of our retail customers that interacted with the bank through any channel were digital customers, that is, customers that also access Interbank’s services though internet and mobile banking, while 95% of total transactions were off-branch transactions, which were performed outside branches.

Other Channels

Inbound Call Center

Interbank offers its customers telephone banking services 24 hours a day, seven days a week. Through telephone banking, Interbank’s customers can obtain balance information, make credit card payments, transfer money between accounts and pay their utilities, insurance, tuition and cellular phone bills.

Interbank has a state-of-the-art call center, which managed an average of 450,609 calls per month in 2018, answering inquiries from clients, offering assistance and information, and selling new products to customers.

Outbound Call Center

Interbank has a dedicated telephone sales force of 336 employees as of March 31, 2019, which primarily sells credit cards and some other retail products. The dedicated sales force is a key resource for customer acquisition and for our cross-selling campaigns.

Information Technology Unit

Interbank continuously invests in new technology and the maintenance of its existing equipment and infrastructure in order to improve its value proposition to its customers, increase its efficiency and support business growth. The Information Technology Unit focuses on assuring 24-hour channel availability, enhancing

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the timeliness of data processing, guaranteeing data protection and anti-fraud security, updating and maintaining hardware platforms and software systems, developing contingency plans and implementing technology projects. Interbank’s IT system also processes credit card, personal and commercial loans, and electronic transactions.

In order to comply with business and regulatory requirements, Interbank has strengthened its IT governance model incorporating best practices for IT quality assurance, risk evaluation, projects management and focused responsibilities for teams operating the technology and teams developing new solutions. It has also fortified its business continuity program through increased redundancy programs and upgraded hardware and software components. This model includes establishing operating partnerships with various leading word-class IT vendors.

Interbank has also made significant investments to upgrade its data centers and central technology platforms. These platforms provide a stable and secure environment for Interbank’s operations, a better understanding of cost drivers, and improve its processes.

As part of Interbank’s cybersecurity strategy, Interbank has redefined its framework to satisfy the National Institute of Standard and Technology requirement. This approach was validated by the consulting firm Mandiant. As a result of this framework definition, Interbank has designed a roadmap which execution started in 2016 and will be completed in 2019. Currently, Interbank has implemented 14 new top-tier security solutions in different layers of technology, which is applied to its entire IT infrastructure starting with networking and covering all layers until the application presented at the endpoint. A predictive approach was also implemented with the go-live of the CyberSOC, in partnership with a premier provider from Europe. Finally, Interbank is also focusing on establishing a security awareness program for all employees as well as an in-depth knowledge of business partners and vendors.

Interbank’s IT strategy is focused on dedicating more resources to projects that add more value to the customer. Interbank invests in core applications with the aim of keeping applications current while more effort and resources are invested in the digitalization and transformation of processes and channels in order to provide a 100% digital experience to internal and external customers.

A high percentage of IT investment is aimed at deepening the understanding of the customer to achieve service that exceed their expectations, providing solutions to their problems and enabling a selling platform with contextual and real time offerings. To provide this, Interbank IT Unit fully utilizes the new technologies that allow the flexibility, scalability and availability required to fulfill customer demands. APIs, micro services and multicloud environments have been implemented since 2018 to reach these objectives. A close relationship with fintechs also helps Interbank to leverage some capabilities and creates opportunities to learn about the way to approach different solutions. An important fact to consider is the transformation of the working model from a waterfall scheme to an agile framework, based on new processes, tools and cultural changes. Today, almost all IT teams work following this framework.

Employees

As of March 31, 2019, Interbank had 6,759 employees, 3,165 work in financial stores and 3,594 work at the headquarters and in operational centers of Interbank. Of the total employees, 3,787 are dedicated to sales force. We have been optimizing our distributional channels and have reduced full time employees at financial stores. Interbank’s employees are not unionized, are not a party to any collective bargaining agreement and since Interbank’s privatization in 1994, have never been involved in a strike or work stoppage.

Interbank is the only Peruvian company that has been chosen by the Peruvian Great Place to Work Institute as one of the 20 best places to work in Peru for the past 17 consecutive years and one of the top 20 places to work in Latin America in the past nine years. In the most recent rankings, Interbank was selected number two best company to work for in Peru (2018), and number three in Latin America (2019).

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Facilities

Interbank owns its headquarters, the Interbank Tower, located at Av. Carlos Villarán 140, Urbanización, Santa Catalina, La Victoria, Lima 13, Peru. Although most of its financial store facilities are leased, Interbank owned 50 financial store facilities as of March 31, 2019.

Insurance Segment

Overview

Interseguro is an insurance company that caters to Peru’s growing middle class. Interseguro is focused on annuities, the fastest growing insurance market segment in Peru, which is driven by the sale of annuities to individuals reaching retirement age in the Peruvian private pension system. Interseguro has been the leader in the Peruvian annuities (excluding private annuities) segment since 2010, with market shares of 32.3% and 30.2% market share by premiums for the three months ended in March 31, 2019 and for the year ended December 31, 2018, respectively. For the four-year period ended December 31, 2018, Interseguro’s ROE averaged 30.0% compared to 15.8% for the Peruvian insurance industry. In terms of premiums sold, Interseguro grew at a CAGR of 8.3% compared to the insurance industry’s CAGR of 6.1% between December 31, 2014 and December 31, 2018. For the three months ended March 31, 2019, Interseguro’s premiums increased 16.3% compared to the corresponding period in 2018, compared to the industry’s 12.7% growth, according to the SBS. For the year ended December 31, 2018, Interseguro’s premiums increased 50.6% compared to 2017 (mainly driven by the acquisition of Seguros Sura), compared to the industry’s 13.6% increase, according to the SBS. Interseguro intends to leverage its leading position in annuities, as well as Intercorp Peru’s and Interbank’s retail distribution capacity, to continue capturing growth opportunities in the insurance industry. In addition, Interseguro expects to continue developing new products to satisfy increasing demand for insurance products by middle class families in Peru.

The growth of annuities is expected to accelerate as the number of Peruvian private pension system affiliates and the Peruvian salaries average increases. From 2008 to 2018, the growth of Peruvian private pension system affiliates was 63.4%, according to the SBS, and the annual average growth of Peruvian salaries from 2008 and 2017 was 5.0%, according to INEI. In Peru, employees may choose to accumulate their mandatory retirement contribution in the public or the private pension system. Under the mandatory private pension system, a retiree has the option of converting the capital accumulated in a personal account maintained with an AFP into an annuity offered by a life insurance company, such as Interseguro. In addition to retirement annuities, Interseguro also offers disability annuities to members of the Peruvian private pension system who have been declared permanently or partially disabled. Moreover, Interseguro offers survivorship annuities to beneficiaries of deceased members of the system. Once an annuity client chooses an insurance company, the decision is irrevocable. Besides private pension system annuities, Interseguro offers private annuities, a product that was launched in 2016 and that is sold to any owner of private funds and is not restricted to members of the system and their accumulated capital. This product is aimed at retirees that choose to withdraw the 95.5% of their pension funds and are looking for an option to capitalize such funds. Private annuities are the fastest growing product in the system with 87.1% annual growth in the last year.

Interseguro also offers traditional life insurance products, as well as low-cost premium retail insurance products, including credit life, mandatory traffic accident insurance (“SOAT”), credit card protection insurance, among others, mainly sold through Interbank and Intercorp Peru’s complementary channels, such as Intercorp Retail’s points of sale (Plaza Vea and Oechsle), and Interseguro’s own network of 19 specialized insurance agents located throughout Peru. Interseguro’s life and retail insurance business lines have grown significantly over the last five years. As of March 31, 2019, Interseguro was the fifth largest consolidated insurance company and the third largest life insurance company in Peru in terms of premiums. In addition, in terms of the size of its portfolio, Interseguro was the largest life insurance company in Peru as of March 31, 2019.

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For 2018, Interseguro’s net profit under SBS GAAP was S/361.1 million. The increase in our insurance segment’s net profit for the year ended December 31, 2018 as compared to 2017 was primarily a result of a S/468.1 million increase in the investment income for the period, mainly due to the acquisition of Seguros Sura. As of March 31, 2019, Interseguro had shareholders’ equity of S/1,273.2 million according to the SBS. Interseguro’s annualized ROE for the three months ended March 31, 2019 was 22.1%, also under SBS GAAP. As of December 31, 2018, Interseguro had shareholders’ equity of S/1,158 million according to the SBS. Interseguro’s ROE for the year ended December 31, 2018 was 32.4%. According to the SBS, for the year ended December 31, 2018, Interseguro was the most profitable insurance company by net profit, when compared to the five other largest insurance companies in Peru.

History

Interseguro, a corporation (sociedad anónima), was incorporated in 1998 pursuant to an agreement between Intercorp Peru (formerly IFH Peru) and Bankers Trust (at the time the controlling shareholder of Consorcio Nacional de Seguros S.A.A., the largest insurer in Chile). In connection with the sale of Bankers Trust to Deutsche Bank AG in 1999, Bankers Trust’s interest in Interseguro was sold to a group of Chilean investors. In 2000, Intercorp Peru acquired the portion of Interseguro it did not own from these investors. In 2001, International Financial Corporation (“IFC”) acquired a 15% equity interest in Interseguro. Prior to our corporate reorganization in 2007, IFC held 14.3% of Interseguro’s total capital. Currently, we own all of Interseguro’s outstanding equity interests, other than one share held by Intercorp Peru pursuant to Peruvian regulations.

On May 31, 2017, we entered into a share purchase agreement with SUAM and Grupo Wiese to acquire 100% of the capital stock of Seguros Sura and Hipotecaria Sura for an initial base price of U.S.$268 million which consolidated Interseguro’s leadership in the life insurance business. The transaction became effective on November, 2, 2017 and the approval of the merger by the SBS was granted on March 27, 2018.

Seguros Sura’s Overview

Seguros Sura, previously called Invita Seguros de Vida, was established in May 2000 and belonged to Grupo de Inversiones Suramericana S.A., an organization with significant experience in strategic investments in banking, insurance, pension, savings and investments sectors.

It was one of the leading insurance companies in Peru focused on annuities and individual life business. According to the SBS, for the period ended December 31, 2016, Seguros Sura was the fourth largest company by assets, when compared to the other five largest insurance companies in Peru, including Sura.

For 2016, Sura was the third largest company in the annuities and individual life segment in Peru with a 17.4% and a 10.4% market share by premiums, respectively.

Interseguro’s Business Lines

Interseguro has three business lines: (1) annuities, (2) retail insurance and (3) individual life.

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The following chart shows Interseguro’s breakdown by insurance premiums plus collection according to the SBS, for the three months ended March 31, 2019:

Breakdown by Insurance Premiums Plus Collections

Source: SBS.

Annuities

An annuity is a type of insurance policy that, in exchange for an initial lump sum payment, provides regular monthly payments. Interseguro offers three types of annuities: Soles, U.S. dollars and soles indexed to CPI, adjusted by 2% per year.

There are two groups of annuities: (i) Regular Retirement Annuities are the annuities sold under the Peruvian private pension system, and (ii) Private Annuities which include the Renta Privada product. In Peru, employees may choose to deposit their cumulative contributions in the public or the private pension system. Under the private pension system, upon retirement, a retiree has the option of converting the capital accumulated into a personal account maintained with an AFP, collecting 95.5% of their accumulated capital or converting the capital into an annuity offered by an insurance company, such as Interseguro.

In 2016, following the enactment of law No. 30425, retirees are allowed to withdraw up to 95.5% of their accumulated capital in cash upon retirement. As a result, there was a significant reduction of annuities sold by Peruvian insurance companies, including Interseguro. In order to maintain the leadership in annuities, Interseguro launched Private Annuities. This product allows retirees to receive a fixed income either for life or temporarily. Interseguro was the first insurance company to introduce this type of product to the market in response to the new law. As of the date of this prospectus, most of the clients of Private Annuities and their funds originate from retirees that choose to withdraw the 95.5% of their pension funds.

In addition to Regular Retirement Annuities and Private Annuities, Interseguro also offers disability annuities to members of the Peruvian private pension system who have been declared permanently or partially disabled before reaching retirement age and thus unable to access a sufficient pension and survivorship annuities for beneficiaries of deceased members of the system.

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The following table shows Interseguro’s Annuity Gross Premiums by type from 2014-2018:

Annuities Gross Premiums

Source: Company information.

Interseguro’s annuities products include:

Regular Retirement Annuities

Retirement. The retirement annuity product is directed to members of the Peruvian private pension system who are 65 years of age or older and retiring. This product represented 0.2% of annuities sold by Interseguro for the three month period ended March 31, 2019 and represented 0.9% and 4.2% of annuities sold by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.

Early Retirement. The early retirement product was offered to members of the Peruvian private pension system who are not yet 65 years of age, but who are permitted to have access to their Peruvian private pension system accounts if the savings in such accounts allow for a pension of at least 40% of the average last 120 months’ compensation. The early retirement annuity products represented 0.1% of annuities sold by Interseguro for the three month period ended March 31, 2019 and represented 0.1% and 0.2% of annuities sold by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively. Peruvian law was modified and since May, 2019, in order to access this product, men must be at least 55 years old and women 50 years old. This change is intended to fill a loophole in the law that allowed affiliates to deliberately increase their funds with additional deposits, in order to access early retirement and withdraw 95.5% of their total pension funds, regardless of age. This modification closed the loophole should positively impact the annuities market slightly, as it helps in retaining affiliates in the private pension system for longer.

Special Early Retirement. The special early retirement product was offered until December 2018 to members of the Peruvian private pension system who are 55 years of age or older and male, or 50 years of age or older and female, and are retiring and have not been contributing to the Peruvian private pension system for at least 12 months. Since May, 2019, the Peruvian law established that this regime is permanent and in order to access this product, if a retiree receives income during the period in which they have not been contributing, total income must be less than or equal to 7 UIT (Unidad Impositiva Tributaria).

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This product is more flexible than the standard early retirement annuity product. The special early retirement annuity products accounted for 0.4% of annuities sold by Interseguro for the three month period ended March 31, 2019 and accounted for 0.7% and 2.0% of annuities sold by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.

Private Annuities

Private Annuities. The Private Annuities product was launched in 2016 allowing the recovery of Interseguro’s premiums and collections from the effects of the law No. 30425, enacted in 2016. This product can be sold to any owner of private funds and is not restricted to members of the system and their accumulated capital. The annuity can have any duration and the lump sum invested can be partially or totally repaid at the end of the annuity, if it has one. As of the date of this prospectus, most of the clients and their funds come from retirees that chose to withdraw 95.5% of their accumulated capital. Private Annuities represented 38.4% of annuities sold by Interseguro for the three month period ended March 31, 2019 and represented 29.1% and 33.1% of annuities sold by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.

Disability and Survivorship Annuities

Disability and Survivorship. Under Peruvian law there is a mandatory insurance coverage for all members of the pension system paid monthly in addition to their contribution. In case a member has been declared permanently or partially disabled, or deceased while having legal beneficiaries, this insurance completes the accumulated capital as if the individual had worked until retirement age, allowing a better pension when applying for the retirement. While this insurance is not an annuity, it is closely related to the one we describe next. Disability and survivorship represented 3.7% of annuities sold by Interseguro for the three month period ended March 31, 2019 and represented 26.8% and 9.4% of annuities sold by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively. The growth is explained in part by the acquisition of Seguros Sura.

The SBS conducts a Dutch auction every two years inviting insurance companies to bid to determine which insurance company will be the provider for this insurance in a two year period. Interseguro was successful in the 2015 auction, and as a result of the merger with Seguros Sura, they were also a provider for 2017. Interseguro participated in the 2019-2020 year auction but were not successful; they expect to bid again at the next auction. Although this will represent a decrease in gross premiums in the following years, Interseguro ceded almost 100% of disability and survivorship gross premiums; therefore the effect on net profit is minimal.

Disability and Survivorship Annuities. The disability and survivorship product is offered to members of the Peruvian private pension system who have been declared permanently or partially disabled and to beneficiaries of deceased members of the Peruvian private pension system. This annuity is offered in conjunction with the disability and survivorship mandatory insurance. Disability and survivorship annuity products accounted for 57.4% annuities sold by Interseguro for the three month period ended March 31, 2019 and accounted for 42.4% and 51.1% of annuities sold by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.

All retirement annuities sold under the Peruvian private pension system offer monthly payments for the life of the policyholder and thus the initial lump sum is never recovered. A retiree’s joint choice of an insurance company, currency denomination and retirement modality is irrevocable.

Product differentiation is limited in the Peruvian annuities sector, as product features are regulated by the SBS. The market position of each insurance company is driven instead by its sales strategy and quality of service. Interseguro’s sales strategy, consisting of providing ongoing sales force training, and implementing innovative control and management mechanisms, has permitted Interseguro to be the market leader in the annuities sector over the past four years, with an increasing advantage over the second largest market participant.

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For the three months ended March 31, 2019, Interseguro’s market share by annuity premiums (including Private Annuities and excluding Previsional Insurance) was 26.4%, nearly 330 basis points higher than its next competitor’s market share.

Retail Insurance

Interseguro offers simple, low-cost premium products targeted to middle class families and sold mainly through Interbank financial stores, as well as channels owned by Intercorp Peru, including Intercorp Retail points of sale (Plaza Vea and Oechsle) and digital channels. In 2016, Interseguro expanded its retail insurance portfolio with an online sale for the launch of the digital SOAT and in 2018, with travel insurance and vehicle insurance.

Interseguro offers the following retail insurance products:

Credit Life Insurance. The credit life insurance product protects against death or disability of the insured and is designed to pay the debt owed by a customer to the financial institution. This product is available for mortgages, credit cards and personal loans. Credit life insurance represented 56.0% of total retail insurance premiums assumed by Interseguro for the three months ended March 31, 2019 and represented 52.4% and 61.2% of total retail insurance premiums assumed by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.

Debit and Credit Card Protection Insurance. The debit and credit card protection insurance product protects the insured against financial loss, medical expenses for hospitalization or accidental death as a result of theft, assault and abduction. Debit and credit card protection insurance represented 9.6% of total retail insurance premiums assumed by Interseguro for the three month period ended March 31, 2019 and represented 15.7% and 12.7% of total retail insurance premiums assumed by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017.

SOAT (Seguro Obligatorio de Accidentes de Tránsito). The SOAT product protects against the risk of death or injury to occupants and third parties involved in an automobile accident. The SOAT product is mandatory and coverage is limited to cover personal injury, excluding any physical damage to the vehicle. The SOAT product accounted for 16.6% of total retail insurance premiums assumed by Interseguro for three month period ended March 31, 2019 and accounted for 16.2% and 15.0% of total retail insurance premiums assumed by Interseguro for year ended December 31, 2018 and the year ended December 31, 2017, respectively.

Vehicle Insurance. The vehicle insurance coverage includes damage to vehicles due to traffic accidents, total loss, theft, fire, nature risks, strikes or vandalism and civil liability for occupants and third parties. Occupants’ damages such as permanent disability, healing expenses, funeral expenses and death are also covered. In addition, this insurance includes replacement drivers, cranes and mechanical assistance, among others. Vehicle Insurance represented 1.0% and 0.1% of total retail insurance premiums assumed by Interseguro for the three month period ended March 31, 2019 and the year ended December 31, 2018, respectively.

Loan Protection Insurance. The loan protection insurance covers a specific number of payments of a loan in case the insured loses his job. Loan protection insurance accounted for 13.8% of total retail insurance premiums assumed by Interseguro for the three month period ended March 31, 2019 and accounted for 12.2% and 7.5% of total retail insurance premiums assumed by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.

Extended Warranty. The extended warranty product extends the product’s original warranty period by about 12–24 months. Extended warranty product accounted for 0.6% of total retail insurance premiums assumed by Interseguro for the three month period ended March 31, 2019 and accounted for 0.7% and 0.8% of total retail insurance premiums assumed by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.

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Others. The other products category protects against personal accidents. Other products accounted for 2.4% of total retail insurance premiums assumed by Interseguro for the three months ended March 31, 2019 and accounted for 2.7% and 2.8% of total retail insurance premiums assumed by Interseguro for the year ended December 31, 2018 and the year ended December 31, 2017, respectively.

Individual Life

Although the individual life insurance market remains relatively small in Peru, the market has grown at a CAGR of 17.4% between December 31, 2014 and December 31, 2018. For the three months ended March 31, 2019, the growth of the individual life insurance market was 15.1% compared to the corresponding period in 2018. Peru’s economic expansion of the middle class is expected to continue driving growth of individual life products.

Interseguro offers a variety of individual life insurance products, providing a wide range of coverage for the length of a policyholder’s life. Most of Interseguro’s products also provide savings features.

Interseguro’s strategy in individual life insurance consists in adapting its products to the emerging Peruvian middle class, developing a highly trained sales force and achieving high standards of sales efficiency. For the three months ended March 31, 2019, Interseguro positioned itself as the third largest participant in the individual life insurance market, with an 11.1% market share by premiums.

Sales Force

Interseguro markets its annuities and individual life insurance products through its own dedicated sales force both in Lima and across Peru’s provinces, without a third-party intermediary.

In annuities, Interseguro employed 117 agents, 72 in Lima and 45 outside of Lima as of March 31, 2019. Each salesperson receives continuous training through a multiple-level program, which includes training in macroeconomic background, financial statement analysis, investment policy, marketing techniques and time management. In addition, Interseguro’s annuity sales agents specialize in the sale of different types of annuity products. As a result, Interseguro’s sales force is trained to satisfy each customer’s needs.

In life insurance, Interseguro employed 245 agents, 183 in Lima and 62 outside of Lima, as of March 31, 2019. In addition, Interseguro employs servicing agents with the aim of servicing existing life insurance policies. We believe that constant training develops effective sales techniques and the skills to assess customer needs, which we believe is one of Interseguro’s critical competitive advantages. Interseguro has a specialized team focused on setting a training curriculum for each sales person in the first three years with the company as well as in assigning a mentor to each new recruit.

As of March 31, 2019, Interseguro employed 20 SOAT sales agents in Lima. Interseguro also works with three brokers nationwide to offer SOAT. Interseguro also works with insurance brokers to sell SOAT to increase coverage in Peru with limited capital investment. As of March 31, 2019, the brokerage channel accounts for approximately 26.0% of Interseguro’s total SOAT sales.

Strategic Partners

Interseguro offers its retail insurance, such as credit life insurance, debit and credit card protection insurance, loan protection insurance, SOAT and extended warranty through non-traditional channels, including partnerships with Interbank and Intercorp Retail.

Through its partner companies, Interseguro reaches a large number of customers, offering a convenient and reliable payment mechanism. This distribution network represents one of Interseguro’s strongest competitive advantages, as it allows for a broad insurance product offering through several points of sales.

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Interseguro’s retail insurance division used the following distribution channels to sell its products as of March 31, 2019:

Strategic Partners	Points of Sale
Interbank	Financial Stores: 263
Intercorp Retail	Plaza Vea: 65 stores
	Oechsle: 23 stores

Interseguro’s retail insurance premiums breakdown by distribution channel as of March 31, 2019 is the following:

Strategic Partners	Retail insurance premiums breakdown
Interbank	81%
Intercorp Retail (Plaza Vea and Oeschle)	19%

Investments and Investment Management

Investment Portfolio

Interseguro invests the insurance premiums yet to be paid out in claims in its investment portfolio, based on a policy of capital conservation and adequate diversification.

The main objective of Interseguro’s investment portfolio is to cover its future payment obligations, associated mainly with its annuities business. Interseguro maintains a conservative asset liability management approach, matching its obligations by currency and maturity. Interseguro’s portfolio focuses on investment grade fixed-income instruments in U.S. dollars, soles and inflation linked notes, mitigating interest rate, inflation, and currency risks. Interseguro’s obligations consist of technical obligations related to annuities that are sold at a fixed interest rate, thus Interseguro prioritizes the investments on fixed income securities that hedge such obligations.

Given that the Peruvian market offers a limited range of long-term investment instruments, Interseguro has sought to increase its investments outside of Peru and explore alternative investments in the local market, such as sovereign bonds and real estate projects.

Interseguro is required to follow the following investment management principles according to the SBS:

• Security Principle. Based on the protection and preservation of the economic value of assets over time.

• Liquidity Principle. Consist of the possibility of an asset to be converted into cash at the required time and without significantly affecting its value.

• Diversification Principle. Based on the set of assets that contribute to the diversification of the risk factors of the portfolio and reduction of the potential impact of adverse effects.

• Parity Principle. Parity between the characteristics of the asset and the obligations that it supports. These features include the term or horizon, the degree of liquidity or enforceability, currency, volatility in valuation, predictability and timing of flows, among others.

• Profitability Principle. Based on generation of returns that would cover at least the commitments offered to policyholders.

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Additionally, as established by the investment regulation of insurance companies, Interseguro must meet its technical obligations. As part of the coverage of the technical obligations proceeds, Interseguro must follow the investment management principles established in the regulation and comply with the eligibility requirements of its investments by type of assets.

Regarding the investment eligibility, to consider an asset as eligible, it must not be affected or be subject to any precautionary measure. The custody agreements of the eligible investment must not contain any clause that allows use of such assets as collateral to back other company obligations and that there are no other measures that limit the free transfer of the assets. Furthermore, eligible investments must comply with certain investment limits, by issuer, economic group, asset and foreign issuers. In addition, assets rated in categories below the investment grade cannot be considered as an eligible investment.

Interseguro’s investment management follows the limits and requirements indicated in the regulation in order to minimize non-eligible investments and comply with the coverage of its technical reserves, minimum solvency capital required and guaranty fund.

As of March 31, 2019, Interseguro’s investments amounted to S/11,681.4 million, of which S/9,779.6 million and S/912.3 million were fixed income securities, and equity securities and fund investments, respectively. As of December 31, 2018, Interseguro’s investments amounted to S/11,236.3 million, of which S/9,389.7 million and S/860.1 million were fixed income securities, and equity securities and fund investments, respectively. As of March 31, 2019, investments in real estate projects were S/989.6 million (approximately U.S.$298.3 million). As of December 31, 2018, investments in real estate projects were S/986.5 million (approximately U.S.$297.3 million).

The following tables present a breakdown of Interseguro’s investment portfolio by type of investment as of the dates indicated.

Investments by Type

	Investments by Type
	As of March 31, 2019
	2019					2018
	S/ in millions		%			S/ in millions		%
Fixed Income		9,779.6		83.7	%		9,633.3		85.5	%
Corporate Bonds		5,093.9		43.6	%		5,126.7		45.5	%
Peruvian Sovereign Bonds		2,234.8		19.1	%		2,311.7		20.5	%
Foreign Bonds		2,450.8		21.0	%		2,195.0		19.5	%
Equity and Funds		912.3		7.8	%		693.7		6.2	%
Equity		700.5		6.0	%		532.8		4.7	%
Funds		211.8		1.8	%		161.0		1.4	%
Real Estate		989.6		8.5	%		943.5		8.4	%
Total		11,681.4		100.0	%		11,270.6		100.	%

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	Book Value					Book Value
	As of December 31, 2018					As of December 31, 2017
	S/ in millions		%			S/ in millions		%
Fixed Income		9,389.7		83.6	%		9,409.0		83.5	%
Corporate Bonds		4,944.4		44.0	%		5,346.6		47.4	%
Peruvian Sovereign Bonds		2,165.3		19.3	%		1,930.7		17.1	%
Foreign Bonds		2,280.0		20.3	%		2,131.6		18.9	%
Equity and Funds		860.1		7.7	%		742.7		6.6	%
Equity		666.5		5.9	%		401.8		3.6	%
Funds		193.5		1.7	%		340.9		3.0	%
Real Estate		986.5		8.8	%		1,118.6		9.9	%
Total		11,236.3		100.0	%		11,270.3		100.0	%

The following tables present a breakdown of Interseguro’s investment portfolio by currency as of the dates indicated.

Investments by Currency

	Investments by Currency
Portfolio	As of March 31,
	2019					2018
	S/ in millions		%			S/ in millions		%
Sol (1)		7,377.6		63.2	%		7,131.4		63.3	%
U.S. dollar		4,303.8		36.8	%		4,139.2		36.7	%
Total		11,681.4		100.0	%		11,270.6		100.0	%

(1) Real estate investments are measured in soles

Portfolio	As of December 31, 2018					As of December 31, 2017
	S/ in millions		%			S/ in millions		%
Sol (1)		7,025.5		62.5	%		6,937.9		61.6	%
U.S. dollar		4,210.8		37.5	%		4,332.5		38.4	%
Total		11,236.3		100.0	%		11,270.3		100.0	%

(1) Real estate investments are measured in soles

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The following tables present a breakdown of Interseguro’s investment portfolio by rating as of the dates indicated.

Investments by Rating (1)

	As of March 31,
	2019					2018
	(S/ in millions)		%			(S/ in millions)		%
AAA		1,001.4		26.7	%		1,071.2		30.3	%
AA+ to AA-		2,420.3		64.5	%		2,142.2		60.7	%
A+ to A-		329.6		8.8	%		316.9		9.0	%
Total Local Ratings		3,751.3		100.0	%		3,530.2		100.0	%
AAA		0.0		0.0	%		1.0		0.0	%
AA+ to AA-		31.1		0.5	%		73.3		1.2	%
A+ to A-		2,485.3		41.2	%		2,533.6		41.5	%
BBB+		691.8		11.5	%		858.3		14.1	%
BBB		1,343.0		22.3	%		1,277.8		20.9	%
BBB-		1,428.8		23.7	%		1,084.6		17.8	%
BB+		0.0		0.0	%		122.5		2.0	%
BB		48.1		0.8	%		152.2		2.5	%
BB-		0.0		0.0	%		0.0		0.0	%
B		0.0		0.0	%		0.0		0.0	%
Total Foreign Rating		6,028.3		100.0	%		6,103.1		100.0	%

	As of December 31,
	2018					2017
	(S/ in millions)		%			(S/ in millions)		%
AAA		861.5		24.2	%		1,114.3		31.6	%
AA+ to AA-		2,371.9		66.8	%		2,082.9		59.0	%
A+ to A-		319.6		9.0	%		332.8		9.4	%
Total Local Ratings		3,553.0		100.0	%		3,530.0		100.0	%
AAA		0.0		0.0	%		74.8		1.3	%
AA+ to AA-		31.8		0.5	%		101.5		1.7	%
A+ to A-		2,424.3		41.5	%		2,185.7		37.2	%
BBB+		778.0		13.3	%		1,035.0		17.6	%
BBB		1,323.9		22.7	%		1,386.4		23.6	%
BBB-		1,229.6		21.1	%		896.0		15.2	%
BB+		0.0		0.0	%		125.5		2.1	%
BB		49.1		0.8	%		65.3		1.1	%
BB-		0.0		0.0	%		8.7		0.1	%
B		0.0		0.0	%		0.0		0.0	%
Total Foreign Rating		5,836.7		100.0	%		5,879.0		100.0	%

(1) Includes only credit rated fixed-income investments.

In regards to fixed income, Interseguro prioritizes the investment in local bonds and foreign bonds with a higher risk rating of AA- and BBB-, respectively.

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The following table presents a breakdown of Interseguro’s investment portfolio by maturity as of the dates indicated.

Investments by Maturity

	Book Value		Book Value
	As of March 31, 2019		As of March 31, 2018
	S/ in millions		S/ in millions
Maturity
0-5 years		247.5		146.8
6-10 years		1,035.1		946.9
11-20 years		3,877.4		3,969.9
21+years		4,619.5		4,569.7
No maturity*		1,901.9		1,637.3
Total		11,681.4		11,270.6

	Book Value		Book Value
	As of December 31, 2018		As of December 31, 2017
	S/ in millions		S/ in millions
Maturity
0-5 years		246.3		302.4
6-10 years		1,003.1		1,078.6
11-20 years		3,761.1		3,865.5
21+ years		4,379.1		4,162.6
No maturity (1)		1,846.6		1,861.3
Total		11,236.3		11,270.3

(1) Real-estate and equity investments.

Fixed-Income

The fixed-income securities portfolio is mainly composed of long-term fixed rate debt that are eligible instruments to cover reserves, in compliance with the requirements established by the SBS.

As of March 31, 2019 Interseguro’s fixed-income securities portfolio represented 83.7% of its total portfolio, of which 52.1% were corporate bonds, 22.1% were Peruvian sovereign bonds, 25.1% were foreign bonds. As of December 31, 2018 and December 31, 2017, Interseguro’s fixed-income securities portfolio represented 83.6% and 83.5%, respectively, of its total portfolio, of which 52.7% and 56.8%, respectively, were corporate bonds, 23.1% and 20.5%, respectively, were Peruvian sovereign bonds, 24.3% and 22.7%, respectively, were foreign bonds.

As of March 31, 2019 and December 31, 2018, 100% of bonds with local ratings and 99.2% of bonds with international ratings had investment grade status.

Equity and Funds

Substantially all of Interseguro’s equity and funds portfolio is invested in companies with low beta and relatively stable and predictable cash flows. Interseguro’s equity and funds portfolio is invested across Latin America and the United States. As of March 31, 2019 Interseguro’s equity and funds portfolio represented 7.8%

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and of its total portfolio, of which 77.4% was invested in foreign securities and 22.6% in local securities. As of December 31, 2018 and December 31, 2017, Interseguro’s equity and funds portfolio represented 7.7% and 6.6%, respectively, of its total portfolio, of which 79.5% and 64.9%, respectively, was invested in foreign securities and 20.5% and 35.1%, respectively, in local securities.

Real Estate

Interseguro’s investments in real estate are made across the different types of properties: office, industrial, retail and land for development. Interseguro leverages advice from its affiliates, InRetail Shopping Malls and Real Plaza, in order to maximize its real estate portfolio. InRetail Properties Management is specialized in securing new locations and developing shopping malls based on its proprietary consumer demand analytics and projected yield targets. Real Plaza is focused on operating shopping malls in Peru.

Real estate income derives from the appreciation of real estate property and from rental income from its tenants. Interseguro’s rental income comes primarily from Orquĺdeas and Tabacalera (industrial asset). Tabacalera, located in the district of Ate in the city of Lima, is an industrial property leased to Teleatento Perú S.A.C, which is a company dedicated to call centers. As of March 31, 2019 Interseguro’s investments in real estate projects represented 8.5% of its total portfolio and as of December 31, 2018 and December 31, 2017, Interseguro’s investments in real estate projects represented 8.8% and 9.9%, respectively, of its total portfolio.

Investment Policy and Regulatory Framework

Regulations applicable to insurance companies established by the SBS define which types of investments are considered to be appropriate for the coverage of reserves and set minimum diversification requirements for their investment portfolios. In addition, regulations require, among others, a minimum rating for investment instruments that may be acquired by insurance companies.

Interseguro invests the amount of money collected in insurance premiums not yet paid out in claims (float), based on a policy of capital conservation and adequate diversification by continuously seeking new investment opportunities. In order to meet these objectives, Interseguro implements an annual investment plan, which sets specific targets for each type of investment. This annual plan is approved by the board of directors and presented to the local regulator at the beginning of each year. Quarterly reviews are also submitted to the regulator.

In addition, Interseguro has an investment committee that reviews its current portfolio and approves new issuers and projects. The investment committee meets monthly and is composed of four members of Interseguro’s board of directors, Interseguro’s chief executive officer and chief investment officer, and one external member. The risk management unit ensures that the investment plan is being followed.

Reinsurance

Interseguro transfers risks to reinsurers in order to limit its maximum aggregate potential loss and minimize exposures on large particular individual risks. Reinsurance is placed with reinsurance companies based on its reinsurance policy, which is annually approved by Interseguro’s board of directors and its risk committee. Interseguro’s main reinsurers are six international reinsurance companies: Scor Global Life, Munich Re, Gen Re, Hannover, Navigators Insurance Company and Swiss Re.

Premiums ceded to reinsurers represented 1.5%, 1.6% and 1.6% of Interseguro’s premiums assumed for the three months ended March 31, 2019 and the years ended December 31, 2018 and 2017, respectively (these percentages do not include the reinsurance for the pension-related insurance (disability and survivorship)).

Interseguro also has catastrophe reinsurance that covers individual and group life insurance products, except annuities. These contracts are intended to limit Interseguro’s risk exposure in the event of low-probability but high-cost events, such as natural or man-made disasters.

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Information Technology Unit

Interseguro’s IT unit is responsible for managing its technology infrastructure, telecommunications network and computer systems. The unit is also responsible for designing and implementing in-house solutions or third-party technological developments to support Interseguro’s operation.

Interseguro has undertaken investments in technology with the aim of providing a stable and secure platform to support its rapidly expanding business. In 2012, Interseguro’s insurance company decided to invest in the implementation of an operations system in order to support Interseguro’s planned growth in life and retail insurance, a CRM platform, and business intelligence capabilities, among others. Interseguro has invested approximately S/0.8 million in licenses for the three months ended March 31, 2019 and has invested approximately S/1.3 million and S/4.6 million, in projects for the year ended December 31, 2018 and the year ended December 31, 2017, respectively. Interseguro plans to invest approximately S/15.5 million over the next three years in technology.

Employees

As of March 31, 2019, Interseguro had a total of 664 employees, which included officers and administrative staff, as well as sales agents and representatives. Interseguro’s employees are not unionized, are not a party to any collective bargaining agreement and have never been involved in a strike or work stoppage.

Interseguro’s employees are one of its most important assets. Interseguro aims to attract the best talent and actively encourages employees to develop their careers within the company. It provides employees with better benefits than those required by labor laws, including school allowance, specialized training programs, paid leave due to death of a family member and life insurance coverage after the third month of employment. Interseguro also provides well-being and care programs for its employees, as well as a full portfolio of development, family inclusion, and social programs.

Interseguro is the only Peruvian insurance company that has been chosen as one of the top ten best places to work in Peru (medium-size category) by the Great Place to Work Institute for the past eight consecutive years, including first place in 2012 and second place in 2013 and 2014.

Facilities

Interseguro owns its administrative office, located at Av. Javier Prado 492, San Isidro, Lima, Peru as well as its main commercial office, located at Av. Paseo de la República 3071, San Isidro, Lima 27, Peru. Additionally, Interseguro leases one facility in the district of Los Olivos, Lima and 20 facilities in different provinces of Peru. Most of Interseguro’s facilities outside of Lima are subleased to Interbank.

Wealth Management Segment

Overview

Inteligo is a provider of wealth management services through Inteligo Bank, brokerage services through Inteligo SAB and mutual funds management services through Interfondos. Inteligo Bank primarily focuses on individuals with investable assets in the range of U.S.$500,000 and U.S.$10 million, where Inteligo believes there is higher growth potential. Inteligo SAB and Interfondos focus on providing brokerage, mutual funds and financial planning services to individuals with investable assets under U.S.$500,000. As of March 31, 2019, Inteligo had assets under management of S/17,769.0 million (U.S.$5,355.3 million). As of December 31, 2018, Inteligo had assets under management of S/17,592.7 million (U.S.$5,302.2 million). Inteligo’s assets under management grew at a CAGR of 11.8% between December 31, 2014 and December 31, 2018. Increased wealth generation in Peru is expected to continue to create a market for wealth management services for Peruvian clients. Inteligo conducts various types of banking, trust, financing, brokerage and investing activities for high net worth individuals.

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Inteligo SAB also provides sales and trading operations for individual and institutional customers primarily in the Peruvian capital markets. As of March 31, 2019, Inteligo SAB was the eighth largest broker by market share in equities trading, according to the SMV. Interfondos is the fourth largest mutual fund manager in Peru with a 14.7% market share based on assets under management, according to the SMV.

Inteligo’s net profit for the three months ended March 31, 2019 was S/78.3 million, and for the year ended December 31, 2018 was S/197.5 million. As of March 31, 2019, Inteligo had shareholders’ equity of S/830.3 million and as of December 31, 2018, had shareholders’ equity of S/812.8 million. Inteligo’s annualized ROE for the three months ended March 31, 2019 was 38.1% and for the year ended December 31, 2018 was 25.7%.

History

Inteligo was incorporated under the laws of Panama in 2006. Inteligo Bank is a corporation that was incorporated in 1995 in The Bahamas and formerly conducted business under the names of Interbanc Overseas Ltd., Interbank Overseas Ltd. and Blubank Ltd. It is licensed by the Central Bank of The Bahamas. Inteligo SAB is a corporation (sociedad anónima) that started operations in 1993. It is organized under the laws of Peru, and is licensed by the SMV to operate in Peru and conduct brokerage, custody, portfolio management and advisory services. Interfondos is a corporation (sociedad anónima) that started operations in 1995. It is organized under the laws of Peru, and is licensed by the SMV to operate in Peru and conduct mutual funds and investment funds management services. Until 2018, Interfondos was a wholly-owned subsidiary of Interbank. On January 8, 2019, Inteligo Group through its wholly-owned subsidiary Inteligo Perú Holdings S.A.C. acquired 100% shares of Interfondos to complement its wealth management business.

Business Lines

Inteligo has three business lines: (1) financial advisory; (2) lending; and (3) portfolio investments.

Financial Advisory

Inteligo provides financial advisory services to high net worth individuals regarding investments, including equities, fixed income, structured products, alternative investments and managed accounts. Through its team of investment analysts, Inteligo designs financial strategies to satisfy the investment objectives of each client in the Peruvian and international financial markets. Furthermore, Inteligo provides regular updates to its clients on market conditions through reports from its in-house research team.

In 2018, Inteligo, through its subsidiary Inteligo SAB, launched a new brand, CERTIA. The main aim of CERTIA is to offer financial advisory and planning services to clients with investable assets between U.S.$100,000 and U.S.$500,000. To that end, CERTIA is constantly upgrading its digital channels to provide its customers with an efficient and self-servicing experience. Inteligo expects that CERTIA will increase cross-selling opportunities with Interbank and Interseguro as CERTIA will include not only investment products, but also retirement planning and banking services in its product portfolio.

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Additionally, through Interfondos, Inteligo expects to benefit from the growth in the mutual fund industry. Mutual fund penetration in Peru is relatively low compared to other countries in the region. Mutual fund assets under management in Peru represented only 4.1% of GDP as of December 31, 2018 as compared to approximately 18.3% in Chile, according to the SMV and the Financial Market Commission of Chile (Comisión para el Mercado Financiero de Chile).

The strength of Inteligo’s financial advisory services has contributed to the growth of its fee income as a percentage of its revenues. Inteligo’s fee income from financial services, net has increased from S/152.0 million for 2017 to S/164.2 million for 2018, representing an increase of 8.0% and 53.3% of Inteligo’s total sources of revenue.

Lending

Inteligo offers lending services through Inteligo Bank to complement its wealth management business only to its existing clients. Most of the loans are categorized as consumer financing.

Inteligo Bank’s loan portfolio had no delinquencies and was fully collateralized by its clients’ assets as of March 31, 2019. Inteligo’s net loan portfolio totaled S/1,463.7 million as of March 31, 2019, increasing 12.8%, from S/1,298.1 million as of March 31, 2018. Inteligo’s net loan portfolio represented 39.0% of its total assets as of March 31, 2019. Inteligo’s net loan portfolio totaled S/1,576.3 million as of December 31, 2018, increasing 18.1%, from S/1,334.6 million, as of December 31, 2017. Inteligo’s net loan portfolio represented 41.4% of its total assets as of December 31, 2018.

Portfolio Investments

Inteligo manages a proprietary portfolio primarily composed of medium-term investments in fixed-income securities. Inteligo’s investment team uses third-party funds as well as individual fixed income and equity securities. For 2018, revenues from Inteligo’s proprietary portfolio represented 10.8% of total revenue compared to 23.3% for 2017.

Inteligo’s investment portfolio as of March 31, 2019 totaled S/1,664.0 million, an increase of 16.8%, from S/1,424.5 million as of March 31, 2018. In addition, Inteligo’s investment portfolio represented 44.3% of total assets as March 31, 2019. Inteligo’s investment portfolio as of December 31, 2018 totaled S/1,620.3 million, an increase of 31.4%, from S/1,232.8 million as of December 31, 2017. In addition, Inteligo’s investment portfolio represented 42.5% of total assets as December 31, 2018.

The following tables show the composition of Inteligo’s portfolio by asset class as of the dates indicated.

Investments by Asset Class

	As of March 31,
	2019		2018
	(S/ in millions)
Asset Class
Fixed income		479.9		292.1
Equity		159.4		187.6
Managed accounts (Fixed income)		268.2		397.2
Mutual funds & investment funds		756.4		547.7
Total		1,664.0		1,424.5

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	As of December 31,
	2018		2017
	(S/ in millions)
Asset Class
Fixed income		427.4		250.6
Equity		169.6		136.7
Managed accounts (Fixed income)		301.5		398.0
Mutual funds & investment funds		721.8		447.5
Total		1,620.3		1,232.8

The following tables present a breakdown of Inteligo’s investment portfolio by maturity as of the dates indicated.

Investments by Maturity

	As of March 31,
	2019		2018
	(S/ in millions)
Maturity
0-5 years		399.6		466.0
6-10 years		252.1		86.6
11+ years		83.1		94.9
No maturity (1)		929.2		777.1
Total		1,664.0		1,424.5

(1) Mutual Funds, equity and private equity investments.

	As of December 31,
	2018		2017
	(S/ in millions)
Maturity
0-5 years		381.0		405.7
6-10 years		223.9		119.3
11+ years		87.7		105.9
No maturity (1)		927.7		602.0
Total		1,620.3		1,232.8

(1) Mutual Funds, equity and private equity investments.

Inteligo’s successful strategy is reflected by the strong growth of its assets under management which had a CAGR of 11.8% between December 31, 2014 and December 31, 2018, surpassing Peru’s GDP growth. For the three months ended March 31, 2019, Inteligo’s growth in assets under management was 10.2% compared to the corresponding period in 2018. For the year ended December 31, 2018, Inteligo’s growth in assets under management was 8.4% compared to 2017.

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The following table shows the composition of Inteligo’s assets under management by asset class as of the dates indicated.

Assets under Management by Asset Class

	As of March 31,
	2019		2018
	(S/ in millions)
Asset Class
Fixed income		8,357		7,930
Equity		8,050		6,994
Alternative investments		1,362		1,286
Total		17,769		16,210

Assets under Management by Asset Class

	As of December 31,
	2018		2017
	(S/ in millions)
Asset Class
Fixed income		8,319		7,944
Equity		7,822		6,913
Alternative investments		1,451		1,373
Total		17,593		16,230

Furthermore, the following chart shows Inteligo’s assets under management, deposits and the GDP growth multiplier for the periods indicated:

AuM + Deposits and GDP Growth Multiplier

(S/ million)

Source: Inteligo’s financial statements and Inteligo’s information.

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Inteligo’s net profit grew at a CAGR of 7.4% between December 31, 2014 and December 31, 2018, supported by strong fees on assets under management, which stood at 0.97% in 2018. For the three months ended March 31, 2019, Inteligo’s net profit increased 78.1% compared to the corresponding period in 2018. For the year ended December 31, 2018, Inteligo’s net profit decreased 0.8% compared to the corresponding period in 2017.

The following chart shows Inteligo’s net profit for the periods indicated.

Net Profit 2014 - March 2019

(S/ million)

The following chart shows Inteligo’s CAGR in revenues contribution from net interest margin and fee income between December 31, 2014 and December 31, 2018.

Net Interest Income and Fee Income 2014 - March 2019

(S/ million)

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Market Segmentation

Inteligo Bank primarily focuses on individuals with investable assets in the range of U.S.$500,000 and U.S.$10 million, where Inteligo believes there is higher growth potential. Inteligo SAB and Interfondos focus on providing brokerage, mutual funds and financial planning services to individuals with investable assets under U.S.$500,000. Through the recently launched CERTIA, Inteligo expects to offer financial solutions to individuals with investable assets between U.S.$100,000 and U.S.$500,000 through an advisory platform leveraged by technology and self-servicing, while creating cross-selling opportunities with Interbank and Interseguro. As of March 31, 2019, Inteligo Bank, Inteligo SAB and Interfondos had approximately 2,100, 3,700 and 86,000 clients, respectively. As of December 31, 2018, Inteligo Bank, Inteligo SAB and Interfondos had approximately 2,100, 3,700 and 85,000 clients, respectively.

Inteligo’s strategy consists of establishing long-term relationships with its broad and profitable client base, segmenting its customers effectively and proactively providing financial advisory services. Inteligo’s committed advisory service, supported by a local investment team that possess extensive knowledge of its Peruvian clients’ preferences for financial products, and delivered through an experienced group of relationship managers is a key pillar of Inteligo’s success. Inteligo’s position further benefits from its leading brokerage operation in Peru through Inteligo SAB, an important mutual fund manager in Peru, Interfondos, and from being a part of one of Peru’s leading economic groups.

Financial Advisory Team

Inteligo serves its customers through its advisory team of approximately 64 people. Through its relationship managers, Inteligo establishes strong client relationships which result in a loyal and growing customer base. Inteligo’s experienced relationship managers team has acquired specialized product knowledge and deep understanding of its customers’ needs.

Information Technology Unit

Inteligo’s IT unit is responsible for managing its network infrastructure, telecommunications and computer systems. The unit is also responsible for developing and evaluating in-house technologies and third-party software solutions.

Inteligo Bank has implemented a new core system to support its rapidly expanding operations. As of March 31, 2019, December 31, 2018 and December 31, 2017, Inteligo Bank has invested S/1.0 million, S/7.4 million and S/2.6 million, respectively, in the development of its technology platform, which will allow it to leverage its existing CRM platform and develop stronger business intelligence capabilities. Neither Inteligo SAB nor Interfondos has made significant investment in IT during 2018.

Employees

As of March 31, 2019, Inteligo and its subsidiaries had 284 employees, which included officers and administrative staff, as well as commercial representatives. Inteligo’s senior management is located in Peru. Inteligo’s and its subsidiaries’ employees are not unionized, are not a party to any collective bargaining agreement and have never been involved in a strike or work stoppage.

Inteligo is committed to maintaining low employee turnover and a high level of employee satisfaction. Inteligo SAB first participated in the Great Place to Work Institute survey in 2011, and has since then been ranked among the top ten companies in its category (companies with 30 to 250 employees) in Peru, except for 2016 when it ranked 11. Inteligo Bank’s branch in Panama first participated in the Great Place to Work Institute survey in 2014 and since 2015 has been ranked among the top ten companies in its category (companies with 30 to 250 employees) in Panama.

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Facilities

Inteligo had six offices as of March 31, 2019. Inteligo owns its branch in Panama and leases the rest of the facilities where it operates. Inteligo Bank’s registered headquarters are located at Inteligo Bank — Seventeen Shop Building, First Floor, Collins Avenue & Fourth Terrace, Centreville, Nassau, The Bahamas. Inteligo SAB’s registered headquarters are located at Inteligo SAB — Av. Rivera Navarrete 501, San Isidro, Lima, Peru. Interfondos’ registered headquarters are located at Interfondos — Av. Carlos Villaran 140, Sixth Floor, La Victoria, Lima, Peru.

Legal Proceedings

We are not involved in any legal or arbitration proceedings which could have a material adverse effect on our financial position.

Interbank is involved in a number of legal proceedings in the ordinary course of its banking activities. Interbank is also a party to a number of legal proceedings related to labor disputes with former employees and tax disputes with the tax authority.

Interseguro is routinely involved in legal or arbitration proceedings with respect to liabilities that are the subject of policy claims. These liabilities are taken into account in setting Interseguro’s technical reserves.

Inteligo Bank is involved in legal proceedings in the ordinary course of its banking operations. Inteligo Bank has been named as a defendant in the following litigation matters:

• A lawsuit filed on September 2, 2010 by the liquidators of Fairfield Sentry Limited (“Fairfield”).

• A lawsuit filed on October 6, 2011 by Irving Picard, the Trustee for Bernard L. Madoff Investment Securities LLC (“BLMIS”).

These lawsuits seek the return of approximately U.S.$11 million in redemption payments received by Inteligo Bank in connection with investments in Fairfield, a BLMIS feeder fund.

On February 25, 2019 the Court ruled against Inteligo Bank in the Picard lawsuit. Inteligo Bank, together with other defendants, are working on a joint petition for certiorari, which will seek U.S. Supreme Court review of such ruling. On May 2, 2019, the U.S. Court of Appeals for the Second Circuit granted the motion filed by defendants, including Inteligo Bank Ltd. to stay issuance of its mandate in the appeal pending the U.S. Supreme Court’s decision on defendants’ forthcoming petition for certiorari.

A motion to dismiss the Fairfield liquidators’ lawsuit was filed on January 13, 2017 and supporting documents were submitted to the Court in February 2018 as well. On December 6, 2018, the Court granted the motion to dismiss with some specific exceptions. Inteligo Bank filed a motion to dismiss the pending petitions and on April 2, 2019, the bankruptcy court issued an order that established a briefing schedule for the motion to address whether the liquidators’ remaining claims should also be dismissed. On May 2, 2019, the liquidators filed a notice of appeal with the Bankruptcy Court, reflecting their intention to appeal the Bankruptcy Court’s dismissal of certain claims against Inteligo Bank Ltd.

Ethics and Corporate Compliance

IFS is firmly committed to promoting and ensuring a compliance culture within its subsidiaries, with the purpose of reaching the highest standards of integrity and ethical behavior throughout its organizations. As a result, IFS has developed a Corporate Compliance Policy based on international best practices.

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The aim of the compliance program is to have effective internal controls to prevent, detect and report inappropriate behaviors, comply with laws and regulations and maintain a sustainable business. In addition, this program complements corrective actions for inappropriate conducts and reinforces the compliance policies through e-learning and ad hoc training including international best practices adopted by the group.

The Compliance Program has a risk-based approach, which focuses on reducing the level of exposure to economic sanctions or other penalties that could negatively impact our reputation. This program includes the following policies:

Anti-Money Laundering / Counter Financing of Terrorism (AML/CFT)

IFS’ subsidiaries have implemented a risk-based AML/CFT Program.

The following are the principal laws and regulations regarding AML/CTF.

Peru:

• Law 26702, General Law of the Financial and Insurance System.

• Law 27693 (April 2002), Law Establishing Law Establishing the Financial Intelligence Unit (Unidad de Inteligencia Financiera or “UIF”).

• Law 29038 (April 2007), Law incorporating the UIF into the SBS.

• Res. SBS N° 3862-2016, Mechanisms and proceedings in order for UIF to freeze funds and assets of persons or entities related with terrorism and terrorist financing, among others.

• Res. SBS No. 2660-2015, Risk Management Regulation related to Anti-Money Laundering and Terrorist Financing.

Bahamas:

• Central Bank of The Bahamas, Guidelines for Licensees on the Prevention of Money Laundering, Countering the Financing of Terrorism and Proliferation Financing (August 2018).

Panama:

• Superintendencia de Bancos de Panamá, Agreement 10-2015 and modifications 1-2017 and 13-2018.

The subsidiaries have implemented their procedures in line with IFS policy and its local regulation, approved by the Board and review on an annual basis at minimum, which includes:

• Anti-Money Laundering policy and procedures.

• Client Identification Program (CIP), Know Your Customer (KYC) and due diligence procedures.

• Know your employee policy.

• Monitoring based on the client’s risk assessment. AML transaction monitoring system identifies unusual transactions and suspicious activities of our clients. This process may result in reporting to regulators and/or local authorities.

• Compliance Officer reporting directly to the board of directors to ensure independence.

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The KYC risk-based program includes:

• CIP program including ultimate beneficial owner information.

• Customer due diligence.

• Enhanced due diligence for high risk clients.

• Ongoing visits and call logs.

• OFAC and Sanctions program.

AML controls includes:

• High risk customers are subject to annual review by our front office, top management and compliance team. This annual review includes but is not limited to transaction monitoring, adverse media, sanctions screening, supporting documents, and on-site visits.

• Monitoring automated system based on AML risk assessment.

• All employees are required to partake in AML training on an annual basis; our front office must have a customized and/or face to face training and mandatory technical AML training for all compliance team members.

• Sanctions program.

• Quarterly reports to board of directors.

Anti-Bribery and Anti-Corruption Program

IFS is committed to conducting its business in accordance with applicable laws, rules and regulations and with the highest ethical standards.

Our anti-bribery and anti-corruption program contains policies and procedures that comply with the anticorruption laws and regulations including policies regarding government officials and other stakeholders. This program includes roles and responsibilities, guidelines, gift policy, violations reports and sanctions.

In line with this policy, we comply with the following anticorruption Peruvian laws:

• Law 30424 and Supreme Decree 002-2019-JUS: regulates the sanctions imposed on entities relating to the corruption of foreign officials.

• DL 1352: regulates corruption of national officials, money laundering and counter terrorism financing.

• Law 30835: establishes collusion and influence peddling.

• DL 1385: includes administrative and economic sanctions imposed on the private sector for failure to comply with anticorruption laws.

Additionally, this policy takes into consideration the following:

• Foreign Corrupt Practices Act (FCPA).

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• UK Bribery Act.

• ISO 37001 Anti-bribery management systems.

Insider Trading

Stock market rules and regulations applicable to publicly listed companies generally seek to ensure that all investors in a company have timely and equal access to information concerning the company when making a decision to buy, hold or sell its securities.

The policy includes regulation SMV No. 005-2012, which regulates market abuse, inadequate use of privilege information and market manipulation.

The purpose of the policy and procedures on insider trading is to define the restrictions and procedures applicable to the purchase and/or sale of securities of the group by persons having access to privileged information. The Insider Trading Policy has been developed to guide IFS and its employees in avoiding any risk of violating securities laws or any applicable exchange regulations.

Consumer Data Privacy Program

IFS is committed to the protection of personal data. Accordingly, we implemented a consumer data privacy policy to:

• ensure that the processing of personal data is carried out in accordance with the purpose for which it has been provided, with the expressed consent of the clients and in accordance with the local laws and regulations.

• protect the security and confidentiality of personal data provided to IFS subsidiaries, maintaining confidentiality and information security.

The legal framework includes Law No. 29733 Consumer Data Privacy Program and DS No. 003-2013.

FATCA and Dodd Frank

FATCA

IFS and its subsidiaries are FATCA compliant and their classification is Reporting Model 1. Intercorp is the lead of the Expanded Affiliated Group (EAG).

Dodd Frank

Being a counterpart of U.S. banks for operations with derivatives, IFS must adhere to the Dodd Frank Protocol. Such requirements include the settlement of certain operations through a clearing house and adherence to the International Swaps and Derivatives Association (ISDA) standards in order to comply, where applicable, with Dodd Frank regulations.

Whistleblower Hotline

Interbank implemented a whistleblower hotline where unethical behavior may be reported. In addition, any stakeholder is able to report violations to legislation, regulation and/or violation of internal policies. These behaviors can be reported through the web portal, e-mail, phone call and/or anonymously.

Training

Compliance training is mandatory for all employees. In addition, the first line of defense in each subsidiary and members of the compliance team are required to take additional customized training.

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RISK MANAGEMENT

Our goal is to attain sustainable long term growth, through a balance between risk policies and profitability. As a result, our senior management places great emphasis on risk management.

In order to manage the risks described below, we have a specialized risk management structure, measurement systems and mitigation and remediation processes in place for each of our business segments. We incorporate analytics into our decision-making process and make use of tools and methodologies that allow us to identify and manage risk efficiently.

Organizational Management Structure

Board of Directors

Our board of directors and the board of directors at each of our subsidiaries (Interbank, Interseguro and Inteligo) is responsible for establishing an appropriate and integrated risk management system and for promoting an internal environment that facilitates the board of directors’ supervision and risk management control. The board of directors is continuously informed about the degree of exposure of the diverse risks managed by each subsidiary and inherent to their businesses.

The boards of directors of Interbank, Interseguro and Inteligo Bank have created several specialized committees to which they have delegated specific tasks in order to enhance risk management and internal control. We list below the main committees established by the boards of directors of our subsidiaries.

Comprehensive Risk Management Committee and Risk Committee

At Interbank, the Integral Risk Management Committee is a corporate body created by resolution of the board of directors. It is responsible for approving the policies and organization of the comprehensive risk management system, as well as any amendments to said policies. The Integral Risk Management Committee defines the risk appetite and level of tolerance that each subsidiary is willing to take in its business and the actions needed to implement the required corrective measures necessary to maintain adequate levels of risk tolerance. The Integral Risk Management Committee is comprised of two members of the board of directors, the Chief Executive Officer and the Vice-Presidents. The committee reports monthly to the board of directors the main issues it has discussed and the agreements adopted in the previous meeting.

In the case of Inteligo Bank, the Integral Risk Management Committee is comprised of at least two members of the board of directors, one of which must be independent (as defined pursuant to the Bahamian regulation), the Chief Executive Officer and the Risk Officer. The Committee reports quarterly to the board of directors the main issues it has discussed and the agreements adopted in the previous meeting.

Instead of an Integral Risk Management Committee, Interseguro has a Risk Committee, which is a corporate body created by board of directors resolution responsible for defining risk limits for Interseguro’s business, approving risk policies and approving required corrective measures necessary to maintain adequate levels of risk tolerance. The Risk Committee is comprised of three board members and the Chief Executive Officer.

Audit Committee

We are in the process of establishing our audit committee. Once formed, we expect our audit committee to comply with the criteria set forth under our “Audit Committee Charter,” the rules of the NYSE and Rule 10A-3(b)(1) of the Exchange Act, each as applicable to foreign private issues.

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Assets and Liabilities Committee

The Assets and Liabilities Committee (“ALCO”) is a corporate body created by resolution of the board of directors of Interbank and Inteligo.

At Interbank, ALCO’s main purpose is to manage the structure of Interbank’s financial position considering its profitability and risk targets. ALCO is also responsible for the proposition of new products or operations that contain components of market risk. Additionally, it is the communication channel with the units that generate market risks. ALCO meets monthly and is comprised of the Chief Executive Officer, the Vice Presidents of Risks, Channel of Distribution, Retail, Operations, Commercial, Finance and Capital Markets and the Manager of Treasury/Position Desk.

Inteligo Bank holds positions that are not actively traded, but are part of its assets and liabilities. These positions include a loan portfolio, customer deposits and bank loans. These positions are also exposed to interest rate risk, exchange rate risk and liquidity risk. The main purpose of ALCO at Inteligo Bank is to manage its financial position, considering its profitability and risk targets. ALCO meets quarterly and is comprised of at least two board members, one of which must be independent (as defined pursuant to Bahamian regulations), the Chief Executive Officer and the Risk Officer.

At Interseguro, the functions of the ALCO committee are assumed by the Investment Committee.

Investment Committee

The Investment Committee is responsible for approving the limits of each security or real estate which could be included in Interseguro’s investment portfolio. This Committee is comprised of several members of the board, the Chief Executive Officer and the Vice President of Investments. The risk management unit manager also participates as an advisor.

Inteligo Bank created an Investment Committee in 2017. The Investment Committee is responsible for reviewing and approving the strategy of Inteligo Bank’s investment portfolio and approving new investment products. The Investment Committee meets quarterly and is comprised of one board member, the Chief Executive Officer, the Chief Financial Officer and the Risk Officer.

Internal Audit

At our segments level, the Internal Audit Division reports to the board of directors at each subsidiary. It supports the Company in meeting its objectives through the application of a systemic and disciplined approach to assess and enhance the efficiency of its governance processes, risk management and control processes.

Banking Segment

Main Types of Risks

The main types of risk inherent in Interbank’s businesses are credit, market, foreign exchange, liquidity and operational risk.

• Credit risk: probability of loss due to inability or lack of willingness to pay by debtors, counterparts or third parties bound by contractual obligations.

• Market risk: probability of loss in positions on and off-balance sheets derived from variations in market conditions. It generally includes the following risk types: exchange rate, fair value by interest rate type and price, among others.

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• Foreign exchange risk: probability of loss due to exchange rate fluctuations.

• Liquidity risk: potential inability to meet contractual and contingent obligations, both on- or off-balance sheet, as they come due.

• Operational risk: probability of loss due to inadequate processes, personnel and information technology failures, or external events.

In order to manage the above risks, Interbank has a specialized risk management structure, measurement systems and mitigation and remediation processes. It uses different models and rating tools at the client or product level to manage risks. These tools measure and value the risk with a prospective vision, thus allowing the organization to make better risk decisions in the different stages or life cycle of each loan.

These tools are continuously monitored and periodically validated to ensure that appropriate levels of prediction and performance are being maintained and to take corrective action or make adjustments to the models when needed.

The risk management indicators are continuously reviewed and assessed to identify possible deviations in risk profile with respect to the established risk appetite and apply timely corrective actions as needed. This information is submitted to the Risk Management Committee monthly and to the board of directors periodically.

Credit Risk

The main risk Interbank must manage is credit risk. In order to mitigate exposure to credit risk and provide adequate risk coverage, Interbank has established the following measures, among others:

• policies, procedures, methodologies, models and parameters to identify, measure, control and report credit risk;

• review and assessment of credit risk through specialized units of risk screening, which are independent from Interbank’s Commercial Division, and which assess credit risk prior to loan approvals or prior to the acquisition of specific investments;

• timely monitoring and tracking of credit risk and maintenance of pre-defined tolerance levels;

• compliance with regulatory limits and establishment of internal limits to minimize exposure to debtors and counterparties, such as those related to sector concentration (for loans), by issuer, credit rating and liquidity;

• procedures for the management of loan guarantees.

Additionally, as part of the risk management system, in certain circumstances Interbank uses derivative financial instruments to mitigate the risk exposure which arises from the variations in interest rates and exchange rates.

Interbank also uses different models and rating tools for each type of client and/or product. Interbank constantly monitors and reviews these tools to ensure that adequate levels of prediction and performance are maintained and if necessary, to make adjustments or take corrective measures.

Through its policies and procedures, Interbank establishes the patterns and mechanisms needed to prevent excessive risk concentration and maintain a diversified portfolio.

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Interbank manages its credit risk by means of three main processes: underwriting, monitoring and recovery. These processes are applied accordingly in different business lines.

The underwriting process is fundamentally based on comprehensive knowledge of the client and their economic activity and evaluating their repayment capacity, solvency and credit history. This process uses risk management methodologies and tools, which measures and assesses the quality of the risk to be granted, based on models and automatic rating systems for the admission of credits.

The monitoring process is used for early detection of credit risk to identify clients with potential risks that would affect their ability to pay which can possibly impact the debtor’s credit development. This process uses an integrated system of alerts, which is used to determine whether immediate actions need to be taken. Actions include preventative, corrective or follow-up measures. This process utilizes systems, models and guidelines to assess the evolution of the debtor’s detected risks and determine their management for standardization or collection.

The recovery process is carried out through a set of coordinated actions for the appropriate and timely recovery of the loans, which aim to minimize losses in exposures with a high credit risk.

Commercial Banking

The following table presents the approval levels required for commercial loan applications at Interbank.

Approval requirement	Amount	Executive required to be present at committee meeting	Minimum quorum
Interbank related companies credit committee	Any transaction with related companies	Director	3
Director credit committee	According to business segment and statistical rating situation Corporate Banking -With updated statistical rating AAA-greater than U.S.$50,000,000 BBB-greater than U.S.$40,000,000 CCC-greater than U.S.$30,000,000 -Without statistical rating updated Greater than U.S.$30,000,000 Medium-sized Banking, Institutional Banking and Real Estate Business Greater than U.S.$30,000,000	Two Directors and CEO	3
Central credit committee	According to business segment and statistical rating situation Corporate Banking -With statistical rating updated AAA-up to U.S.$50,000,000 BBB-up to U.S.$40,000,000 CCC – up to U.S.$30,000,000 -Without statistical rating updated Up to U.S.$30,000,000 Medium-sized Banking, Institutional Banking and Real Estate Business Greater than U.S.$30,000,000	CEO and VP of Risk Management	3

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Approval requirement	Amount	Executive required to be present at committee meeting	Minimum quorum
Executive credit committee	According to business segment and statistical rating situation Corporate Banking AAA-up to U.S.$25,000,000 BBB-up to U.S.$20,000,000 CCC-up to U.S.$15,000,000 -Without statistical rating updated Up to U.S.$15,000,000 Medium-sized Banking, Institutional Banking and Real Estate Business Up to U.S.$15,000,000	VP of Risk Management, VP Business and Other VP	3

Credit approval is determined by the applicant’s repayment ability, which is defined primarily by their cash flow and credit history. The decision whether or not to approve an extension of credit takes into account the applicant’s economic environment, its ability to meet its obligations, collateral, management and the credit ratings assigned to the applicant by other companies of the financial system.

In order to rate credit risk within the commercial portfolio, Interbank uses a credit risk management system, the Statistical Rating System. This system measures credit risk by classifying companies based on their expected default probability, without taking into account the facility’s amount, loan conditions or collateral. The Statistical Rating System is supported by a statistical model that predicts default probability from historical default data, based on the company’s qualitative information, financial performance and internal and external credit behavior. Currently, the system is designed to rate companies from our commercial banking business line with at least S/5.0 million in annual sales.

For listed companies, real estate developers, financial institutions, insurance companies or government entities, Interbank uses the Weighted Rating System. This methodology considers six different areas: (1) product, demand and industry; (2) shareholders and management; (3) access to credit; (4) profitability; (5) generation of resources; and (6) solvency. The final rating is the weighted sum of these areas.

The Watchlist System monitors clients that have risk potential that needs to be addressed. Based on internal and external alerts, historical financial data and client behavior and market conditions, clients are classified into one of four categories: (1) surveillance; (2) guarantee (increase collateral), (3) reduce exposure and (4) exit or collect.

The Non-Performing Assets Monitoring System monitors the status of non-performing loans and defines categories and related strategies. This system allows Interbank to focus recovery efforts on those loans which do not have a well-defined recovery strategy and also permits periodic evaluations of outstanding loans that already have a recovery plan in order to take timely corrective action. The recovery portfolio is divided into refinanced credit, judicial recoveries and restructured credit.

Credit risk management includes strategies related to proper recovery of defaulted loans. Depending on whether the recovery strategy is based upon the client’s cash flow or collateral foreclosure, loans are assigned to the recovery division. This division has two units, special credit and judicial recovery. Judicial recovery may include the sale of recovered or foreclosed assets, which are managed by the asset sales unit that is in charge of selling these assets.

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Small Business Banking

The following table presents the approval levels required for small business banking loan applications by principal amount in U.S. dollars.

Approval levels	Amount
Vice President of Risk Management	Over U.S.$308,000
Risk Manager	Up to U.S.$308,000
Risk Assistant manager	Up to U.S.$180,000
Zonal Risk Officer	Up to U.S.$105,000
Master Risk Analyst	Up to U.S.$60,300
Senior Risk Analyst	Up to U.S.$45,000
Risk Analyst	Up to U.S.$14,500

In small business banking, credit approval is determined by the applicant’s repayment ability, which is in turn determined primarily by the applicant’s cash flow and credit history. Approvals of loans depend on the applicant’s economic conditions, its ability to meet its obligations, collateral, management and the credit ratings assigned by a scoring system applied to new and current clients.

An independent unit is responsible for ensuring proper compliance with risk policies, the methodologies applied in the evaluation of creditors and the performance of scoring models and ensuring that the quality of the portfolio does not exceed risk limits. These functions are based on the analysis of development trends and evolutions in the portfolio through monitoring and controlling risk and early detection of any situation that may increase the risk of the customer base of small size-companies.

Interbank has developed specific risk management tools to respond efficiently to new schemes and constraints that arise in the market for small business banking. Interbank refers to these tools as the Small Business Banking Management and Monitoring Process, which consist of:

• Scoring Small Banking Enterprises: is an analysis tool in the credit evaluation process aimed at reducing risk rates and process times and assigning a score to the credit proposal evaluated.

• Indebted Customers Methodology Small Business Banking: identifies customers who have high leverage exposure.

• Special Surveillance Portfolio: monitors the customer’s credit historical behavior using a series of variables that identify, measure and separate the portfolio, determining the customer’s level of risk, while suggesting actions to take, preventive measures and/or commercial incentives.

• Field Audit and Monitoring: is used to assess quality by selecting samples of credit loans granted and poor performing portfolios and reviewing supporting documentation, with a final risk report presentation.

During collection of early stage (1-90 days) due loans in small banking, Interbank uses collection scores that allow Interbank to define the collection strategy: phone collection, text message collection, mail or personal collection.

Recovery in small business banking occurs in two phases. Early collection is based on and supported by commercial account officers for the first 90 days. During this time, a customer in default is contacted and recovery efforts are made in the form of letters, telephone calls and direct negotiations. The recovery process is also supported by admission risk officers. After the first 90 days, the defaulted loan is transferred to the Recovery Unit.

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Retail Banking

The following table presents the approval levels required for retail loan applications by principal amount in U.S. dollars. Approval levels also vary according to product.

	Products
	Credit Card		Personal Loans								Automobile		Mortgage
			Cash Credit		Pay-roll Loans		Pay-roll Loans for Diplomats		With collateral
Approval Levels	Amount
Vice President Risk Management		Greater than 39,180		Greater than 54,250		Greater than 54,250		Greater than 45,208		Greater than 120,555		Greater than 70,000		Greater than 800,000
Central Manager		39,180		54,250		54,250		—		—		70,000		800,000
Risk Manager		30,139		45,208		45,208		45,208		120,555		60,000		600,000
Risk Assistant Manager		22,604		30,139		36,166		27,125		72,333		50,000		450,000
Risk Officer		18,083		24,111		30,139		27,125		54,250		40,000		300,000
Senior Risk Analyst		13,562		18,083		21,097		18,083		36,166		30,000		200,000
Risk Analyst		7,836		13,562		15,069		9,042		18,083		25,000		100,000
Junior Risk Analyst		3,617		7,535		10,549		6,028		12,055		16,000		50,000
Risk Evaluator		1,808		4,521		7,535		4,521		9,042		12,000

The approval process in retail banking is supported by world class tools, a workflow that includes a parameterized decision making system, including risk policies and limits, as well as statistical models for all main retail banking products: credit cards, payroll deduction loans, mortgages and consumer loans.

In retail banking, credit approval is determined by the applicant’s repayment ability and credit history based on the applicant’s monthly net profit and risk profile. An independent unit is responsible for monitoring the performance of the customer’s portfolio, identifying and controlling risk across the customer’s life cycle, keeping track of the performance of credit policies at originations and behavior in customer management and collections. For this purpose, Interbank uses data mining and cluster analysis, stress testing for likelihood of defaults, vintage and roll rate analysis and credit risk scoring.

During collection of early stage (1-90 days) due loans in retail banking, Interbank uses collection scores that allow it to choose the appropriate collection strategy: phone collection, text message collection, mail or personal collection.

Unpaid debts with a 90 day stay are deemed defaulted loans. Depending on whether the recovery strategy is based on the client’s cash flow or collateral foreclosure, loans are assigned to Interbank’s recovery division. The recovery division has two units, pre-judicial and judicial stage of recovery. During the judicial stage of recovery, accounts are assigned to recovery attorneys. Recovery may include the sale of foreclosed assets.

Defaulted loans that are 100% accounted for under loan loss reserves are written-off and managed through external judicial recovery.

Collections and recoveries are undertaken through advanced collection systems from world class suppliers and predictive dialers. The recovery portfolio is segmented into various groups that are divided according to the specific phase of the recovery process. Collections and recovery efforts are made by letters, SMS text messages, IVR (Interactive Voice Response), telephone and personal contact with the customer.

Market Risk

Market risk is the probability of loss due to variations in financial market conditions. The main variations to which Interbank is exposed are: exchange rates, interest rates and prices. Said variations can affect the value of financial assets and liabilities.

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Interbank separates exposures to market risk into two blocks: (i) trading book, which comprises positions in liquid investments, and (ii) banking book, which comprises banking assets and liabilities inherent to the intermediation business whose market risk exposure stems from the changes in the portfolio’s structural positions.

Trading Book

In order to control and monitor the risks arising from the volatility of risk factors, Interbank has established maximum exposure limits by currency, investment type, Value-at-Risk (VaR) and tolerance to expected maximum loss (Stop Loss), which are monitored on a daily basis. Likewise, reports from the Integral Risk Management Committee and ALCO are submitted regularly to Interbank’s board of directors.

The validity of VaR calculation is proven through a back-testing proof, which uses historical data to ensure that the model adequately estimates potential losses. Additionally, it calculates risk factor sensitivity, which shows potential portfolio losses resulting from interest rate shocks, exchange rate shocks and price shocks, among others.

As of March 31, 2019, December 31, 2018 and December 2017, Interbank’s VaR calculated for its trading book, classified by type of risk, was as follows:

	March 31, 2019			December 31, 2018			December 31, 2017			Change
Type of risk	(S/ in millions)									Mar 19 / Dec 18			Dec 18 / Dec 17
Exchange rate		6.2			5.6			4.6			0.6			0.9
Interest rate		2.1			2.4			0.6			(0.2	)		1.7
Price		—			—			—			—			—
Diversification effect		(1.3	)		(1.7	)		(0.7	)		0.4			(1.0	)
Total		7.0			6.2			4.5			0.8			1.7

Interbank´s VaR slightly increased from S/6.2 million to S/7.0 million, mainly due to larger net exposure in derivatives which increased from S/1,424.5 million in 2018 to S/1,672.2 million on March 31, 2019.

Interbank´s VaR increased S/1.7 million during 2018, from S/4.5 million to S/6.2 million, as a consequence of a larger net exposure in derivatives, from S/814.6 million to S/1,424.5 million, mainly in foreign exchange related products.

For the periods presented Interbank did not have back-testing exceptions.

Banking Book

Interbank also holds positions that are not actively traded. These positions include all loan placements and funds raised through Interbank’s intermediation business, as well as certain investments that are not deemed trading.

Interest Rate Risk

Interest rates continuously fluctuate on the market. These fluctuations affect Interbank in two ways: first, through the change in the valuation of assets and liabilities; and second, though cash flows at repricing. The variation in the valuation of assets and liabilities is increasingly sensitive as the term at which the asset or liability repricing increases. This process consists of the assessment of the repricing periods. On the other side, cash flows are affected when the instruments reach maturity, given that they are invested or placed at the new market interest rates.

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The interest rate risk tracking is reported to the Integral Risk Management Committee, as well as the ALCO. The Integral Risk Management Committee approves the various limits applicable to the management of financial instruments. The tracking process is performed by the Division of Market Risk.

Repricing Gap

An analysis of repricing gaps is performed in order to determine the impact of interest rate movements on the valuation of assets and liabilities into different time gaps.

The following tables summarize Interbank’s exposure to interest rate risks. Financial instruments are presented at book value, classified by the period of the contract’s interest rate repricing or maturity date, whichever occurs first:

	Repricing Gap at March 31, 2019
	1 - Month			1-3 Months			3 Months - 1 Years			1 Year - 3 Years		3 Year - 5 Years		Over 5 years		Past-due loans / Equities			Banking
	(S/ in millions)
Assets
Cash due from banks (1)		6,367.6			358.2			412.8			—		—		—		2,079.3			9,217.9
Instruments measured at fair value through other comprehensive income		311.2			167.6			1,383.2			500.5		396.0		580.5		301.6			3,640.6
Investments at amortized cost		—			—			11.2			—		658.5		1,179.1		—			1,848.7
Loans, net of unearned income		3,965.0			4,087.7			6,084.4			8,827.8		5,083.8		4,664.5		842,7			33,555.9
Total		10,643.9			4,613.5			7,891.6			9,328.3		6,138.3		6,424.0		3,223.6			48,263.1
Liabilities
Deposits and obligations (1)		20,408.9			1,381.3			3,807.5			663.6		49.7		120.3		6,237.0			32,668.2
Due to banks and correspondents		316.9			654.6			946.1			446.1		221.5		820.8		—			3,406.1
Bonds, notes and other obligations		361.0			6.3			219.8			1,948.6		3,075.2		—		—			5,610.9
Total		21,086.9			2,042.2			4,973.4			3,058.3		3,346.4		941.1		6,237.0			41,685.3
Marginal gap		(10,443.0	)		2,571.3			2,918.2			6,270.0		2,791.8		5,482.9		(3,013.4	)		6,577.8
Accumulated gap		(10,443.0	)		(7,871.7	)		(4,953.5	)		1,316.5		4,108.4		9,591.2		6,577.8			—

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	Repricing Gap at December 31, 2018
	1 - Month			1-3 Months			3 Months - 1 Years			1 Year - 3 Years			3 Year - 5 Years		Over 5 years		Past-due loans / Equities		Banking
	(S/ in millions)
Assets
Cash due from banks (1)		4,259.3			825.3			375.1			—			—		—		—		5,459.7
Instruments measured at fair value through other comprehensive income		361.4			511.3			931.3			552.6			523.2		723.5		283.2		3,886.6
Investments at amortized cost		—			40.1			—			190.5			471.0		1,182.5		—		1,884.1
Loans, net of unearned income		4,009.7			3,532.1			6,359.3			8,521.2			4,963.4		4,549.8		813.9		32,749.5
Total		8,630.5			4,908.8			7,665.8			9,264.2			5,957.6		6,455.9		1,097.1		43,979.9
Liabilities
Deposits and obligations (1)		21,123.0			1,746.2			3,356.0			506.8			47.7		114.8		—		26,894.4
Due to banks and correspondents		386.7			1,194.2			894.3			461.1			224.1		808.3		—		3,968.8
Bonds, notes and other obligations		177.6			20.6			84.7			1,981.3			2,115.9		1,006.9		—		5,386.9
Total		21,687.3			2,961.0			4,335.0			2,949.2			2,387.7		1,930.0		0.0		36,250.1
Marginal gap		(13,056.9	)		1,947.9			3,330.8			6,315.1			3,570.0		4,525.9		1,097.1		7,729.8
Accumulated gap		(13,056.9	)		(11,109.0	)		(7,778.2	)		(1,463.2	)		2,106.8		6,632.7		7,729.8		—

(1) Includes inter-bank funds.

Foreign Exchange Risk

Foreign exchange rate risk is the risk due to exchange rates movements. Management sets limits on exposure levels by currency, and monitors them on a daily basis. Transactions in foreign currency are accounted for by using exchange rates prevailing on the market.

Interbank manages exchange rate risk by matching its assets and liabilities, overseeing the global exchange position on a daily basis. Interbank’s global foreign exchange position is equivalent to the result of long positions minus short positions in currencies different from the sol. The global foreign exchange position includes spot positions and derivative positions.

Liquidity Risk

Interbank’s liquidity risk arises from the potential inability to comply with financial obligations. This risk may arise as a result of diverse events such as the unexpected loss of funding sources or the inability to rapidly settle assets, among others.

Interbank takes short-term deposits and transforms them into longer-term loans, which also increases its exposure to liquidity risk. Interbank keeps a set of deposits that historically represent a stable funding source.

Interbank’s liquidity is managed by the Vice President of Capital Markets, which leads ALCO. Liquidity risk is overseen by the Integral Risk Management Committee, which defines the risk level that Interbank is willing to take and reviews the corresponding indicators, limits and controls.

Interbank has a set of indicators that establish minimum short-term liquidity and reflect several risk aspects, such as concentration, stability, position by currency, main depositors, etc. The Market Risk Division is responsible for tracking such indicators.

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Interbank also assesses medium-term and long-term liquidity through a structural analysis of its funds inflows and outflows on diverse maturity terms. This process allows it to identify, for each currency, the funding sources, how liquidity needs increase and which terms are mismatched. For both assets and liabilities, Interbank makes assumptions for operations without specific maturity dates, including revolving loans and savings. These assumptions also include the estimated obligations arising from contingent liabilities such as guarantee letters or non-used credit lines. On the basis of this information, necessary actions are taken to maintain the target liquidity levels.

Operational Risk

Interbank has launched several initiatives to strengthen its risk culture, adopt international best practices in risk management, and lay the groundwork for adapting the New Capital Accord (Basel II) standard.

Interbank manages operational risk through a specialized unit that is guided by banking best-practices, including Basel II policies. The objectives of the operational risk unit are to:

• reduce operational losses by identifying potential process risks;

• identify operational risk in the development of new products;

• manage control risk and self-assess critical processes; and

• monitor and measure operational risk.

Interbank’s methodology is based on three tools for identifying and measuring risks that calculate the exposure level to risk and facilitate the decision-making process to mitigate exposures within certain limits of risk tolerance: (i) risks and controls self-assessment; (ii) collection of loss event; and (iii) risk indicators.

Insurance Segment

Interseguro has the following risk management objectives:

• protect shareholder value by monitoring that exposure to probable losses does not exceed approved limits;

• protect policyholders so that their rights will not be affected by losses that exceed the value of Interseguro’s equity;

• support the decision making processes in Interseguro, by providing consistent, reliable and timely risk information; and

• promote a successful company culture of risk awareness and informed risk-taking.

To this end, Interseguro uses tools and methodologies to identify and manage risk efficiently, incorporating analytics into its decision-making process.

Main Types of Risks

The main risks faced by Interseguro are actuarial risk, credit risk, market risk, interest rate risk, foreign exchange risk, liquidity risk, inflation risk and operational risk.

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Actuarial Risk

As an insurance company, Interseguro is exposed to the risk that the assumptions it employs to price a particular insurance policy, such as the frequency of losses or the severity of losses may be incorrect. Flaws in these assumptions may lead to premium mispricing and the miscalculation of the amount of funds necessary to cover such insurance policy. Particularly, upon the sale of an annuity, Interseguro records a reserve that is calculated on the basis of an updated discount rate obtained by a matching adjustment methodology and mortality data.

Credit Risk

Interseguro holds a large portfolio of debt investments and fixed income securities and is therefore exposed to the risk that the issuer may default on its interest or principal payments. This risk is mitigated through a three step process. Initially, regulations established by the SBS (1) limit the types of investments Interseguro can make, (2) set minimum credit ratings that securities must have, and (3) limit Interseguro’s investments with respect to a single issuer. Secondly, Interseguro performs a careful analysis on the securities it purchases. Finally, Interseguro’s investment committee, which is comprised of both internal and independent members of its board of directors, is responsible for approving any new investment and periodically reviews Interseguro’s investment portfolio.

Market Risk

Interseguro is exposed to the risk that the value of its investments decreases due to changing market conditions. Market risk drivers include equity prices, interest rates and real estate prices. Interseguro manages this risk by setting limits on individual issuer concentration, on type and liquidity of assets and on deviations from the terms of the technical liabilities they should cover. The risk management unit regularly assesses market risk to verify its alignment to Interseguro’s risk appetite. This assessment includes VaR analysis, contribution and sensitivity analysis of each risk driver and stress tests in different extreme scenarios.

The VaR analysis is a statistical measurement that quantifies the maximum loss expected for the investment portfolio for a period of time and a determined significance level under normal market conditions. For VaR calculation Interseguro uses a historical simulation model, with a ten day period of time and a 99% significance level. The VaR is calculated for the entire market portfolio, and for market risk factors, such as interest rate, equity price and foreign exchange.

The validity of the VaR calculation is proven through back-testing, which uses historical data to ensure that the model adequately estimates the potential losses. Additionally, Interseguro employs sensitivity analysis to show potential portfolio losses derived from price, foreign currency and interest rate fluctuations.

As of March 31, 2019, December 31, 2018 and December 2017 Interseguro’s VaR calculated for its investment portfolio, classified by type of risk, was as follows:

	March 31, 2019			December 31, 2018			December 31, 2017			Change
Type of risk	(S/ in millions)									Mar 19 / Dec 18			Dec 18 / Dec 17
Exchange rate		(6.6	)		(3.3	)		2.1			(3.3	)		(5.3	)
Interest rate		185.2			172.0			497.4			13.1			(325.4	)
Price		32.2			28.6			(1.5	)		3.7			30.0
Diversification effect		2.9			2.6			1.8			0.2			0.8
Total		213.7			200.0			499.8			13.7			(299.9	)

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Between December 31, 2018 and March 31, 2019, the value of Interseguro’s investment portfolio in financial instruments increased by more than S/400 million, which also led to an increase in exposure to market risk represented by the VaR, principally in interest rate risk and price risk.

Due to the acquisition of Seguros Sura in November 2017 Interseguro’s portfolio increased considerably as of December 31, 2017; however the risk profile of debt investments was modified throughout 2018, causing a reduction in the VaR as of December 31, 2018, principally in interest rate risk and in minor effect price risk.

For the periods presented Interseguro did not have back-testing exceptions.

Interest Rate Risk

The following tables set forth all the assets and liabilities that are sensitive to interest rate movements. In addition to fixed income investments, Interseguro has almost no interest-bearing assets or liabilities. Consequently, the interest rate risk of Interseguro is already incorporated into the market risk of the portfolio.

	Repricing Gap at March 31, 2019
	1 - Month		1-3 Months		3 Months - 1 Year			1 Year - 3 Years			3 Years – 5 Years			Over 5 Years		Past-due loans / Equities		Insurance
	S/ in millions
Interest earning assets
Cash and due from banks		110.4		—		—			—			—			—		—		110.4
Instruments measured at fair value through other comprehensive income		63.1		113.0		798.1			1,936.6			2.027.0			4,840.5		625.2		10,403.5
Total interest earning assets		173.5		113.0		798.1			1,936.6			2.027.0			4,840.5		625.2		10,513.8
Interest bearing liabilities
Due to banks and correspondents		—		—		1.4			—			—			—		—		1.4
Bonds, notes and other obligations		—		20.9		8,459.5			—			—			1,161.3		—		9,641.7
Total interest bearing liabilities		—		20.9		8,460.9			—			—			1,161.3		—		9,643.1
Marginal gap		173.5		92.1		(7,662.8	)		1,936.6			2,027.0			3,679.1		625.2		870.7
Accumulated gap		173.5		265.6		(7,397.2	)		(5,460.6	)		(3,433.6	)		245.6		870.7		—

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	Repricing Gap at December 31, 2018
	1 - Month		1-3 Months			3 Months - 1 Year			1 Year - 3 Years		3 Years – 5 Years		Over 5 Years		Past-due loans / Equities		Insurance
	S/ in millions
Interest earning assets
Cash and due from banks		86.2		—			—			—		—		—		—		86.2
Instruments measured at fair value through other comprehensive income		89.6		169.2			695.7			1,888.3		2,011.1		4,869.1		262.7		9,985.7
Total interest earning assets		175.8		169.2			695.7			1,888.3		2,011.1		4,869.1		262.7		10,071.9
Interest bearing liabilities
Bonds, notes and other obligations		—		172.1			851.2			—		—		—		—		1,023.2
Total interest bearing liabilities		—		172.1			851.2			—		—		—		—		1,023.2
Marginal gap		175.8		(2.9	)		(155.4	)		1,888.3		2,011.1		4,869.1		262.7		9,048.7
Accumulated gap		175.8		172.9			17.5			1,905.8		3,916.9		8,786.0		9,048.7		—

Foreign Exchange Risk

Interseguro has mainly assets and liabilities denominated in U.S. dollars. Interseguro manages its foreign exchange rate exposure by matching assets and liabilities by currency.

Liquidity Risk

Interseguro controls its liquidity needs in the short, medium and long term with the application of Asset Adequacy Tests. In simple terms, these are exercises in which the projected flows of the contracted annuities and insurance policies, are compared with the cash flows of the assets allocated for their coverage, and the present value of the surpluses, dynamically calculated, represents the level of liquidity adequacy of Interseguro.

Inflation Risk

Payments related to certain of Interseguro’s liabilities are adjusted for Peruvian inflation. Interseguro holds inflation-adjusted securities in its portfolio to offset this risk. Additionally, Interseguro holds a real estate investment portfolio that is naturally adjusted for inflation.

Operational Risk

Operational risk is defined as the possibility of losses due to inadequate processes, faulty personnel, information technology, or external events. To manage these risks, Interseguro uses tools for identification, evaluation and treatment of risks similar to the tools used by banks to comply with Basel II. The goals of these risk management tools may be summarized as follows:

• reduce operational losses by identifying potential process risks;

• identify operational risk in the development of new products;

• manage control risk and self-assessment of critical processes; and

• monitor and measure operational risk.

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Wealth Management Segment

Inteligo’s risk management policies are guided by an emphasis on maintaining growth that is both sustainable, profitable and aligned to adequate levels of risk. In order to accomplish this, Inteligo has developed analytic tools and methodologies aiming to identify and manage risk efficiently. Inteligo monitors and reviews these tools to ensure that adequate levels of prediction and performance are maintained and, if necessary, to make adjustments or take corrective measures.

In order to manage the above risks, Inteligo has a specialized risk management structure, measurement systems and mitigation and coverage processes.

Inteligo uses different key risk indicators (“KRI”) to measure its exposure to risk factors. These KRI are continuously monitored and reviewed monthly by senior management and quarterly by the Integral Risk Management Committee and the board of directors to identify possible deviations from the stipulated risk appetite and apply timely corrective actions if needed.

Both credit and market risk are the main risks to be managed by Inteligo and, in order to mitigate its exposure and provide adequate risk coverage, it has established the following measures, among others:

• policies, procedures, methodologies, and parameters aimed to identify, measure, control and report market and credit risk;

• review and assessment of credit risk through a specialized risk department which is independent from the commercial unit and which assesses all credit risks prior to loan approvals;

• compliance with regulatory limits and establishment of internal limits for concentration exposure to counterparties and financial instruments, such as concentration to industry, issuer, credit rating and type of investment; and

• procedures for the management of loan guarantees.

Through these measures, Inteligo establishes the patterns and mechanisms needed to maintain a diversified portfolio and prevent excessive risk concentration.

Main Types of Risks

The main risks faced by Inteligo are credit risk, market risk, interest rate risk, foreign exchange risk, liquidity risk and operational risk.

Credit Risk

In our wealth management segment, only Inteligo Bank is exposed to credit risk. The substantial majority of loans we make are fully collateralized by time deposits or investment securities. Nevertheless, we have implemented strict credit risk management policies, which have contributed to the fact that in our entire history there has not been a non performing loan.

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The following table presents the approval levels required for loan applications by total exposure amount in U.S. dollars.

Approval levels	Amount
Board of Directors	Over U.S.$20,000,000
Executive Committee	Up to U.S.$20,000,000
Credit Committee	Up to U.S.$10,000,000
Chief Executive Officer	Up to U.S.$3,000,000
Chief Operating Officer	Up to U.S.$1,000,000
Operations Manager	Up to U.S.$300,000

Credit approval is determined by the applicant’s repayment ability, which is determined primarily by the applicant’s credit history and cash flow generation for commercial loans or monthly net profit for retail loans. The decision whether or not to approve an extension of credit takes into account the applicant’s economic environment, its ability to meet its obligations, collateral, management and character. We developed a credit risk scorecard system in 2013, which classifies applicants based on several variables such as leverage ratio, debt service as a percentage of monthly income and collateral quality, among others.

The Risk Unit is responsible for periodical monitoring of our credit portfolio and early detection of possible deviations in the credit performance and financial condition of clients in order to maintain a healthy loan portfolio and take timely and necessary actions to reduce or avoid losses. To this end, the Risk Unit reviews Inteligo Bank’s loan portfolio on a monthly basis and calculates an expected credit loss according to internal models. Additionally, it is responsible for the regulatory classification of all bank customers and appropriate allocation of reserves.

Although Inteligo Bank has a recovery process for the collection of unpaid loans, there has not been a non-performing or defaulted loan.

Market Risk

Market risk is the probability of loss due to variations in financial market conditions. The main variations to which Inteligo is exposed to are: interest rates and market pricing of financial instruments. Said variations can affect the value of Inteligo’s financial assets and liabilities. Exchange rate risk is minimal because of the small exposure to other currencies.

Inteligo Investment Portfolio

In order to monitor the risks within each instrument of its investment portfolio, Inteligo has established maximum exposure limits by individual issuer, investment type and currency that are calculated on a monthly basis.

The main technique used to measure and control market risk is VaR, which is a statistical measurement that quantifies the maximum loss expected for the investment portfolio for a period of time and a determined significance level under normal market conditions. Inteligo uses the historic VaR model for a period of one month with a 99% confidence level. The VaR is calculated for each risk factor (price, interest rate and exchange rate) and investment type (fixed income, equity and alternative investments).

Additionally, Inteligo calculates the marginal contribution to VaR of each instrument in the portfolio. The validity of the VaR calculation is verified through a back-testing methodology, which uses historical data to ensure that the model adequately estimates potential losses. Inteligo has also developed a sensitivity analysis to show potential portfolio losses from price variations in its investment portfolio or interest rates fluctuations.

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The primary source of Inteligo’s market risk is Inteligo Bank’s investment portfolio, as it represents over 95% of Inteligo’s VaR results. As of March 31, 2019, December 31, 2018 and December 31, 2017 Inteligo’s VaR, classified by type of risk was as follows:

	March 31, 2019			December 31, 2018			December 31, 2017			Change
Type of risk	(S/ in millions)									Mar 19 / Dec 18			Dec 18 / Dec 17
Exchange rate		(0.1	)		0.1			0.4			(0.1	)		(0.3	)
Interest rate		(5.6	)		(4.5	)		(3.2	)		(1.1	)		(1.3	)
Price		48.8			46.5			42.1			2.3			4.4
Diversification effect		(0.1	)		(0.1	)		(0.0	)		0.0			(0.0	)
Total		43.1			42.0			39.3			1.1			2.7

Inteligo’s VaR increased S/1.1 million as of March 31, 2019, mainly as a result of a larger exposure to equity investments, when compared to December 31, 2018.

Inteligo’s VaR increased S/2.7 million as of the year ended December 31, 2018, mainly as a result of an increase of the investment portfolio, when compared to December 31, 2017.

For the periods presented Inteligo did not have back-testing exceptions.

Assets and Liabilities Management

Inteligo holds positions that are not actively traded, including its loan portfolio, customer deposits, and bank loans. These positions are also exposed to interest rate risk, exchange rate risk and liquidity risk.

Interest Rate Risk

Interest rates continuously fluctuate on the market. These fluctuations affect Inteligo in two ways: firstly, through the change in the valuation of assets and liabilities; and secondly, affecting the cash flows at repricing dates. The variation in the valuation of assets and liabilities is increasingly sensitive as the term at which the asset or liability repricing increases.

An analysis of the repricing gaps is performed in order to determine the impact of interest rates movements. Said analysis consists of classifying all the interest earning assets and interest bearing liabilities in several time ranges according of their repricing date. The impact of the variation in the valuation of assets and liabilities on each range (the repricing gap) is calculated in function of this analysis.

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The following tables summarize Inteligo’s exposure to interest rate risks. Inteligo’s financial instruments are presented at book value, classified by the period of the contract’s interest rate repricing or maturity date, whichever occurs first:

	As of March 31, 2019
	Up to 1 month			From 1 to 3 months			From 3 to 12 months			From 1 to 3 years			From 3 to 5 years		More than 5 years		Past-due loans / Equities		Wealth Management
	S/ in millions
Interest earning assets
Cash and due from banks		31.4			—			134.0			35.7			—		—		—		201.2
Instruments measured at fair value through other comprehensive income		—			0.4			0.9			117.2			105.2		232.1		18.0		473.8
Loans, net of unearned interest		12.3			170.3			1,065.1			195.1			18.7		2.3		0.2		1,463.9
Total interest earning assets		43.7			170.6			1,200.0			348.0			123.9		234.4		18.2		2,138.8
Interest bearing liabilities
Deposits and obligations and deposits from financial entities		293.9			170.9			758.3			244.7			0.3		—		—		1,468.1
Due to banks and correspondents		318.6			—			—			—			—		—		—		318.6
Total interest bearing liabilities		612.5			170.9			758.3			244.7			0.3		—		—		1,786.7
Marginal gap		(568.8	)		(0.3	)		441.6			103.4			123.6		234.4		18.2		352.1
Accumulated gap		(568.8	)		(569.1	)		(127.5	)		(24.2	)		99.5		333.9		352.1		—

	As of December 31, 2018
	Up to 1 month			From 1 to 3 months			From 3 to 12 months			From 1 to 3 years		From 3 to 5 years			More than 5 years		Past-due loans / Equities			Wealth Management
	S/ in millions
Interest earning assets
Cash and due from banks		48.5			—			135.4			36.1		—			—		—			220.0
Instruments measured at fair value through other comprehensive income		4.3			0.6			2.3			87.6		111.6			193.0		18.0			417.4
Loans, net of unearned interest		59.0			179.7			353.2			888.9		93.1			2.7		(0.2	)		1,576.4
Total interest earning assets		111.7			180.3			491.0			1,012.5		204.7			195.7		17.8			2,213.7
Interest bearing liabilities
Deposits and obligations and deposits from financial entities		225.3			119.4			356.6			711.1		230.0			—		—			1,642.4
Due to banks and correspondents		323.8			—			—			—		—			—		—			323.8
Total interest bearing liabilities		549.2			119.4			356.6			711.1		230.0			—		—			1,966.2
Marginal gap		(437.5	)		60.9			134.4			301.5		(25.3	)		195.7		17.8			247.5
Accumulated gap		(437.5	)		(376.5	)		(242.1	)		59.3		34.0			229.7		247.5			—

Foreign Exchange Risk

Exchange rate risk is related to the variation of the positions both on- and off-balance sheet that may be negatively affected by exchange rates movements. Inteligo Bank’s main business is performed in U.S. dollars, its functional currency. Management sets a limit to exposure levels in other currencies and monitors it monthly. Inteligo SAB uses both soles and U.S. dollars in its trading operations and maintains positions in both currencies. Interfondos manages mutual funds in both soles and U.S. dollars.

Liquidity Risk

Liquidity risk consists of Inteligo’s inability to comply with the maturity of its obligations, thus incurring losses that affect its equity position. This risk may arise as result of diverse events such as the unexpected decrease of funding sources or the inability to rapidly settle assets, among others.

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Although Inteligo takes short-term deposits, most of the deposits have historically been renewed or maintained, and consequently they represent a stable funding source. Additionally, the average loan term is less than a year and more than a half of the investment portfolio can be easily liquidated, so liquidity risk is low.

Nevertheless, Inteligo assesses medium-term and long-term liquidity through a structural analysis of its funds inflows and outflows on diverse maturity terms. This process allows it to know the diverse funding sources, how liquidity needs to be increased, and which terms are mismatched. On the basis of this information, the necessary decisions to maintain adequate liquidity levels are taken.

Operational Risk

Inteligo manages operational risk through its risk unit, guided by banking best-practices, including Basel II policies. The objectives of the operational risk management are to:

• reduce operational losses by identifying potential process risks;

• identify operational risk in the development of new products; and

• manage control risk and self-assess critical processes;

• monitor and measure operational risk.

Inteligo’s methodology is based on two tools for identifying and measuring risks that calculate the exposure level and facilitates decision-making to mitigate exposures within certain limits of risk tolerance. These tools are risks and controls self-assessment, and collection of loss event.

Inteligo Bank uses the Basic Indicator Approach for operational risk management under Basel II, according to the Central Bank of The Bahamas’ regulation. In recent years, Inteligo launched several initiatives to strengthen the risk culture among the employees.

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REGULATION AND SUPERVISION OF THE BANKING AND INSURANCE SECTOR

IN PERU AND THE BAHAMIAN FINANCIAL REGULATORY FRAMEWORK

The Peruvian Financial and Insurance Systems

A substantial part of our activities are conducted through Interbank and Interseguro, our banking and insurance subsidiaries, respectively, operating in Peru. A summary of the Peruvian financial and insurance regulatory framework is set forth below.

General Overview of the Peruvian Financial Regulatory Framework

Peruvian banking regulation follows the standards set by the Basel Committee on Banking Supervision. Peruvian banks and other Peruvian financial institutions are primarily governed by two banking regulatory authorities: the SBS and the Central Reserve Bank of Peru. The Peruvian Constitution establishes that the SBS’s main function and responsibility is to protect depositors of the Peruvian financial system, while the main function of the Central Reserve Bank of Peru is to preserve monetary stability.

The regulatory framework for the operation of the Peruvian financial and insurance sector is set in the Peruvian Banking and Insurance Law (Ley General del Sistema Financiero y del Sistema de Seguros y Orgánica de la Superintendencia de Banca y Seguros), which was enacted in December 1996. The Peruvian Banking and Insurance Law regulates Peruvian financial and insurance companies and private pension funds administrators. In accordance with the Peruvian Banking and Insurance Law, the SBS is responsible for issuing banking regulations and for monitoring the Peruvian banking financial and insurance sector. The SBS supervises and regulates financial institutions such as commercial banks, financial companies, financial leasing companies, small business financial companies, savings and loan corporations, financial services companies such as trust companies and investment banks, insurance companies and private pension fund administrators (other financial institutions such as stock brokerage houses and mutual fund managers are subject to different legal frameworks and to the supervision of the SMV). The SBS became operational in 1931.

Financial and insurance institutions must seek the authorization of the SBS before initiating operations. The SBS has administrative and financial autonomy, and its head office is located in Lima. The current chairman of the SBS was appointed by President Kuczynski in August 2016.

In June 2008, as a way to facilitate the adoption process to the Basel II standards, the Peruvian Banking and Insurance Law was amended by Legislative Decree No. 1028 and Legislative Decree No. 1052, to comply with the international standards. The changes introduced have been designed to be implemented progressively. The SBS, by use of its regulatory attributes, has issued several regulations that seek to adapt the Peruvian Financial System to the new Basel Capital Accord.

As noted, Peruvian banks, financial institutions and insurance companies are mainly regulated and supervised by the following administrative institutions:

The SBS

The SBS is the regulatory authority charged with the implementation and enforcement of the requirements contained in the Peruvian Banking and Insurance Law approved by Law No. 26702, and, more generally, with the regulation and supervision of all financial and insurance companies in Peru and, since July 2005, the private pension funds administrators.

Its objectives include: (i) protecting the public interest; (ii) safeguarding the financial stability of the institutions over which it has authority; and (iii) punishing violators of its regulations.

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Its main responsibilities include: (i) reviewing and approving, with the assistance of the Central Reserve Bank of Peru, the establishment, organization and operations of the institutions it regulates and their subsidiaries; (ii) overseeing mergers, dissolutions and reorganizations of banks, financial institutions and insurance companies; (iii) supervising financial, insurance and related companies from which information on an individual or consolidated basis is required, through changes in ownership and management control (this supervision also applies to non-bank holding companies, such as us and Intercorp Peru); (iv) reviewing the by-laws and amendments thereto of these companies; (v) setting forth criteria governing the transfer of bank shares, when permitted by law, for valuation of assets and liabilities and for minimum capital requirements; (vi) controlling the Central de Riesgos (Bank Risk Assessment Center), to which all banks are legally required to provide information regarding all businesses and individuals with whom they deal without regard to the amount of credit risk (the information provided is made available to all banks to allow them to monitor individual borrowers’ overall exposure to Peru’s financial system); and (vii) supervising the anti-money laundering system through the financial intelligence unit.

The SBS enforces the Peruvian Banking and Insurance Law on an ongoing basis through periodic resolutions. The Peruvian Banking and Insurance Law provides for stringent loan loss reserve standards, brings asset risk weighing in line with the Basel Committee on Banking Supervision guidelines and includes the supervision of holding companies of financial institutions by the SBS.

For the foregoing purpose, the SBS requires banks, financial and insurance companies to report, on a periodic basis, all relevant information necessary for off-site evaluation of its financial performance. The relevant information for off-site evaluation includes audited financial statements on a consolidated basis, board of directors’ reports, auditor’s reports and any other reports which reflect the operation of a bank’s business. Under current practice, such reporting is required on a daily, weekly, monthly, quarterly and semi-annual basis, depending on the nature of the reported information.

The SBS is also responsible for conducting on-site examinations of banks on an annual basis, implementing the provisions of the Peruvian Banking and Insurance Law and other related legislation, examining all banking and insurance operations, and analyzing the relationship between assets, liabilities, net worth, profit and loss accounts and all other factors affecting a bank’s financial structure.

The SBS has the power to impose administrative sanctions on financial institutions and their directors and employees as a result of any violation of the Peruvian financial and insurance system rules. Sanctions vary from monetary fines to license cancellation. The SBS may also sanction directors and other officers of financial institutions for breach of regulations under the supervision of the SBS.

The Central Reserve Bank of Peru

The Central Reserve Bank of Peru was incorporated in 1922 and performs the functions common to a central or reserve bank, such as issuing bank notes, implementing governmental monetary policies, regulating the money supply, managing official gold and foreign exchange reserves and managing the interbank cash clearance system. The Central Reserve Bank of Peru exercises its power and authority independently and is responsible for its affairs in accordance with the government’s policies. The Central Reserve Bank of Peru is empowered to determine the inflation target and to adopt a monetary policy in accordance thereof and is also responsible for establishing mandatory minimum liquidity reserves. The Central Reserve Bank of Peru manages Peruvian international reserves and gathers and publishes data on its finances and is also the sole issuer of Peruvian currency.

Banking Regulation and Supervision

Banking regulations and capital adequacy in Peru take into account the recommendations of the Basel Committee. The SBS has adopted the principles and guidelines of Basel II and Basel III. So far, in adopting

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certain Basel III recommendations approved in September 2010, the SBS has increased the minimum regulatory capital required for Peruvian banks. However, Basel III has not yet been totally implemented, and we cannot provide any assurances whether or as to the extent to which the SBS may adopt it.

Implementation of Basel II Principles

To carry out the implementation of Basel II, the SBS has approved a schedule of two (2) phases: a first mandatory phase and a second voluntary phase. During the first phase, which started in 2008 and ended in June 2009, the SBS performed quantitative impact studies and drafted the most important regulations. On June 22, 2008, Legislative Decree No. 1028 was issued, which contains certain amendments to the current Peruvian Banking and Insurance Law, most of which were aimed to adapt it to Basel II standards.

In order to conform to Basel II standards, the methodology for measuring credit, market and operational risks has been amended to allow both standardized and internal model-based methods for measuring market and credit risks. All Peruvian financial institutions and insurance companies were to have implemented the standardized approach methodology by June 2009. Financial institutions and insurance companies will have the opportunity to request the validation and approval to implement the internal rating-based (“IRB”) methodology. Only those financial institutions and insurance companies that apply to use the IRB methodology will follow the second phase of implementation of Basel II standards.

The second phase consists of a validation process of the IRB methodology by the SBS and its subsequent approval. Once the IRB methodology has been validated and approved by the SBS, the pertinent financial institution will use regulatory capital floors to calculate their capital requirements. The amount of required capital may not be less than the percentage of capital requirements obtained under the previous methodology.

	First Year			Second Year			Third Year
Basic IRB and Internal Models of Credit Risk		95	%		90	%		80	%
Advanced Models of Credit Risk and/or Operational Risk		90	%		90	%(1)		—

(1) 80% for operational risk.

Capital Adequacy Requirements—Basel II

Under the amended provisions of Article 199 of the Peruvian Banking and Insurance Law, and on an unconsolidated basis, the regulatory capital (patrimonio efectivo) may not be lower than 10% of its total weighted assets, the latter being defined as the sum of: (i) ten times the regulatory capital allocated to cover market risks; (ii) ten times the regulatory capital allocated to cover operational risks; and (iii) the total amount of credit risk-weighted assets.

According to the amended provisions of Articles 184 and 185 of the Peruvian Banking and Insurance Law, regulatory capital is defined as the sum of: (i) Tier I Regulatory Capital or Basic Capital; and (ii) Supplementary Capital.

Basic Capital or Tier I Regulatory Capital is comprised of paid-in capital (which includes common stock and non-cumulative perpetual preferred shares), legal reserves, supplementary capital premiums, voluntary reserves distributable only with prior SBS approval and retained earnings of past years and of the current year, which are committed for capitalization. It also includes instruments having the characteristics of permanence and loss absorption issued in compliance with regulations recently enacted by the SBS. Basic Capital is subject to the following deductions: losses of prior years and of the current year, any deficit due to allowances, and goodwill

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resulting from corporate reorganizations and acquisitions. Basic Capital is also subject to certain additional deductions (e.g., 50% of the investments in shares and subordinated debt issued by other local or foreign financial institutions or financial insurance companies, etc.).

Supplementary Capital is constituted by the sum of Tier II and Tier III Regulatory Capital. Tier II Regulatory Capital consists of voluntary reserves (which may be reduced without prior consent from the SBS), the eligible portion of redeemable subordinated debt instruments that have mixed debt and equity features, and the generic loan loss provision (up to certain limits). Tier II Regulatory Capital is subject to certain deductions under the law (e.g., 50% of the investments in shares and subordinated debt issued by other local or foreign financial institutions or financial insurance companies, etc.). Tier III Regulatory Capital consists of redeemable subordinated debt that is incurred for the exclusive purpose of covering market risk.

Banks are required to prepare and submit to the SBS, within the first 15 days of each month, a report analyzing the bank’s assets for the previous month and the total amount of the bank’s regulatory capital. Foreign currency denominated assets are valued in soles at an average exchange rate published by the SBS in effect as of the date of such report.

In February 2016, the SBS issued SBS Resolution No. 975-2016, which changed the conditions that subordinated debt must meet in order to be considered in the calculation of additional capital and the calculation methodology applicable to risk-weighted assets. This resolution is applicable to subordinated debt incurred or created from the date of its approval. However, as established in this regulation, subordinated debt incurred or created prior to its approval (and which does not meet the requirements of this new regulation) will still be considered in the calculation of regulatory capital, subject to certain rules specified therein.

Implementation of Basel III Principles

In order to implement the Basel III principles, in July 2011 the SBS approved SBS Resolution No. 8425-2011, which requires additional regulatory capital based on the risk profile of each financial institution in accordance with the guidelines approved by the SBS, to cover risks not contemplated in Pillar I of Basel II. The new resolution also includes capital requirements based on the Basel III principles related to capital conservation in order to mitigate the following risks: (a) economic cycle risk, (b) business concentration risk (by individual Section and/or region), (c) market concentration risk, (d) interest risk on the banking book and (e) other risks. The regime is being gradually implemented in phases over a period of five years, starting in July 2012. Nevertheless, the SBS has not fully adopted Basel III. These additional requirements were fully implemented in July 2016.

As of the date of this prospectus, Interbank is in compliance with the additional regulatory capital requirement approved by the SBS.

Liquidity Requirement of Basel III Principles

In December 2012, the SBS approved SBS Resolution No. 9075-2012, requiring a new calculation of the liquidity ratio coverage. The liquidity ratio coverage is a ratio for financial institutions to ensure the maintenance of adequate levels of high-quality liquidity assets that could easily be converted into cash to meet liquidity needs, for a 30 calendar day period, under a stress liquidity scenario. High-quality liquidity assets are defined as assets that are easily and immediately converted into cash.

To date, Interbank is in full compliance with all regulatory limits. In addition, Interbank’s alert system monitors any deviations so Interbank may take any preventive measures.

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For the implementation of this ratio, pursuant to SBS Resolution No. 6694-2015, the SBS has defined an adequation plan, as detailed below:

	Period Jan, 2014-Dec. 2017			Period Jan. 2018-Dec. 2018			Period Jan. 2019-forward
Liquidity Ratio Coverage Ratio		80	%		90	%		100	%

Classification of the Loan Portfolio

According to SBS regulations, the provision for loan losses is calculated and recorded following SBS Resolution No. 11356-2008, which sets parameters to determine the calculation of provisions which is based on formulas and the use of specific percentages over the balances of loans and collateral received. For example, banks must consider certain criteria with respect to the borrower, including securities; credit category; borrower’s liquidity, borrower’s equity and outstanding debt, among others. Also, it requires constitution of generic provisions based on total loan portfolio, including generic provisions on not-impaired loans. The loan portfolio provisions which result from such classification differ materially from the loan portfolio provisions which result from our application of IFRS. For a discussion of our loan portfolio classification policies and the resulting allowances, see “Selected Statistical Information—Classification of our Loan Portfolio and—Impairment Allowance for Loans” and “Note 31.1 Credit Risk” to our audited annual consolidated financial statements.

Risk of Over-Indebtedness by Consumer Banking Customers

According to SBS Resolution No. 6941-2008, as amended, banks and other financial entities must adopt a system to manage the risk of over-indebtedness that (a) allows the mitigation of such risk before and after making the loan, (b) permits the performance of a permanent monitoring of the portfolio to identify over-indebted borrowers and (c) includes the periodic evaluation of the control mechanisms being used and of the corrective actions or required improvements, as the case may be. The board of directors of such banks and other financial entities are responsible for (i) establishing and reviewing the policies and proceedings for the identification, measuring, treatment, control, reporting and monitoring of the risk from the level of indebtedness of its consumer banking customers and (ii) causing the management to adopt the necessary measures to monitor and control such risks. In addition, the board of directors must cause the bank and/or financial entity to have an organizational structure that guarantees total independence between the risk and the commercial divisions and that the incentive schemes for employees’ performance does not cause a conflict of interest with risk management policies.

Banks and financial entities that are not able to monitor, control and identify the risk of over-indebtedness are obliged to maintain a special loan loss reserve. Banks and financial entities that comply with the requirements described above are not required to maintain any such specific allowance.

Legal Reserve Requirements

Pursuant to Article 67 of the Peruvian Banking and Insurance Law, all banks must create a legal reserve. Each year a bank must allocate 10% of its net profit to its legal reserve until its legal reserve is equal to 35% of its paid-in capital. Any subsequent increases in paid-in capital will imply a corresponding increase in the required level of the legal reserves to be funded as described above.

Lending Limits

Under Article 206 of the Peruvian Banking and Insurance Law, the total amount of direct and indirect credits and financings granted in favor of a person shall not exceed 10% of the bank’s regulatory capital. A person is defined for the purposes therein as a person or group of persons or entities representing a common or single risk.

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The SBS has issued special regulations establishing the guidelines that must be followed by banks when determining legal reserves for legal proceedings for past-due loans and foreclosures.

For purposes of Peruvian Banking and Insurance Law, a single borrower includes an individual or an economic group. An economic group constituting a single or common risk, according to Peruvian Banking and Insurance Law, includes a person, such person’s close relatives and companies in which such person or close relatives have significant share ownership or decision-making capability. According to current regulations, shareholders who own or control directly or indirectly at least four percent of a company’s shares are considered significant shareholders. Significant decision-making capability is deemed to be present when, among others, a person or group can exercise material and continuous influence upon the decisions of a company, when a person or company holds seats on the board of directors or has principal officers in another company, or when it can be assumed that one company or person is the beneficial recipient of credit facilities granted to another company.

The 10% limit indicated above may be raised to 15%, 20% and 30%, depending on the type of collateral securing the excess over each limit. For instance, the limit can be extended to 15% when the excess is secured by a mortgage; it may be raised to 20% when the excess is collateralized with securities listed in the Selective Index of the BVL (ISBVL); and it may be raised to 30% when the excess is secured with deposits that are maintained and pledged with the bank.

Other special lending limits must also be taken into account, such as lending to related parties or affiliates (30% of regulatory capital), to local banks (30%), and to foreign banks (from 5% for non-regulated banks to 30% for first category international banks, which may also be raised to 50% when backed by letters of credit). There are other limits that require banks to diversify their portfolio through different types of assets, benefiting liquid and low-risk assets.

Lending to Related Parties

The Peruvian Banking and Insurance Law regulates and limits transactions with related parties and affiliates of financial institutions, on an unconsolidated basis. In 2015, the SBS and the SMV enacted new regulations containing definitions of indirect ownership, related parties and economic groups, which serve as the basis for determining limits on transactions with related parties and affiliates. These regulations also provide the basis for the subsequent development of specific supervision standards of financial institutions and conglomerates formed by financial institutions.

Additionally, pursuant to Article 202 of the Peruvian Banking and Insurance Law, the aggregate amount of loans to related party borrowers may not exceed 30% of a bank’s regulatory capital (exceptionally, according to Circular B-2148-2005, as amended, the amount of loans to related parties may not exceed 50% of a bank’s regulatory capital if the excess of 30% is secured by credit letters from foreign financial institutions). For purposes of this test, related party borrower includes any person or an affiliate of that person holding, directly or indirectly, 4% or more of a bank’s capital stock, directors, certain of the bank’s principal executive officers or other persons in more junior positions affiliated with the bank’s management.

All loans to related parties must be made on an arm’s-length basis with terms no more favorable than the best terms that Interbank would offer to the public.

In addition, under Article 201 of the Peruvian Banking and Insurance Law, the total amount of loans extended to directors, officers, employees or close relatives of any such persons may not exceed 7% of a bank’s regulatory capital. All loans made to any single such related party borrower may not exceed 0.35% of a bank’s regulatory capital (i.e., 5% of the overall 7% limit) per each person, including such person’s spouse and relatives. In addition, the Peruvian Banking and Insurance Law generally provides that banks may not extend credit to or guarantee the obligations of employees or members of the board of directors, except for home mortgage loans to employees and directors.

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Country Risk Reserve Requirements

SBS Resolution No. 7932-2015, enacted in December 2015, requires the funding of reserves to cover exposure to country risk, which is defined to include sovereign risk, transfer risk and expropriation or nationalization risk, all of which may affect operations with companies or individuals in foreign countries. The SBS has also established guidelines indicating the procedures and responsibilities necessary for coping with country risk.

Integral Risk Management

Integral risk management is a process intended to identify potential events that can affect banks and to manage those events according to their nature and risk level. In January 2017, the SBS enacted the SBS Resolution No. 272-2017, which replaced SBS Resolution No. 037-2008. SBS Resolution No. 272-2017 contains guidelines for integral risk management of financial institutions and covers all kinds of risks that could affect a banking operation, such as operational, market, credit, AML, liquidity and reputational risks. Furthermore, it introduced various changes, focusing on corporate governance practices including the following: (i) two or more independent directors must be appointed when boards are integrated by six or more members, (ii) a remunerations committee must be formed and (iii) concepts such as ‘risk appetite’, ‘risk capacity’ and ‘risk limits’ have been modeled after the Principles for an Effective Risk Appetite Framework of the Financial Stability Board.

Credit Risk

According to the Peruvian Banking and Insurance Law, as of July 1, 2009, financial institutions would have been allowed to use the IRB methodology instead of the standardized methodology for calculating their regulatory capital requirement for credit risk, after receiving prior approval from the SBS. However, regulations required for the full implementation of both standardized and IRB methodologies by Peruvian financial institutions were not enacted until November 4, 2009, with SBS Resolution No. 14354-2009.

Under SBS Resolution No. 14354-2009, enacted in November 2009, financial institutions are allowed to use the standardized methodology and, with the prior approval of the SBS, IRB methodologies for calculating their regulatory capital requirement for credit risk. Interbank has not decided if it will request approval from the SBS to adopt the IRB methodology.

In addition, according to SBS Resolution No. 3780-2011, financial institutions are required to implement an organizational structure and certain procedures in connection with control on interests management and strategic needs procedures in order to adequately manage credit risk.

Market Risk

Regulations for the supervision of market risks, enacted in May 1998, require banks to establish internal policies and procedures to monitor these risks, as well as market risk exposure limits. Regulations define market risk as the probability of loss derived from exposure to various classes of commodities, securities, foreign exchange, derivative operations or commercial assets that banks may hold in their portfolio, which may, or may not, be accounted for in their statements of financial position. In June 2009, the SBS enacted SBS Resolution No. 6328 2009, which defines the methodology to be applied, and the requirements to be satisfied, to calculate the regulatory capital requirement for market risks under the standard methodology and the IRB methodology.

Since July 1, 2009, financial institutions have been allowed to use IRB methodology (subject to prior approval by the SBS) in substitution of the standardized methodology.

Operational Risk

SBS Resolution No. 2115-2009, enacted in April 2009, defines the methodology to be applied, and the requirements to be satisfied, by financial institutions in calculating their regulatory capital requirement for

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operational risk under the IRB methodology, the alternative standardized methodology and the advanced methodologies. The IRB methodology uses a bank’s gross operational margin as an “exposure indicator,” and its application does not require the prior approval by the SBS. Application of the alternative standardized methodology or the advanced methodologies requires compliance with certain provisions included in SBS Resolution No. 2115- 2009 and prior approval from the SBS.

SBS Resolution No. 2116-2009, enacted in April 2009, which approves the guidelines for managing operational risk, defines “operational risk” as the possibility of suffering losses due to inadequate procedures, failures of personnel, IT or external events, including, without limitation, legal risks (but excluding strategic and reputational risk). It also establishes that a bank’s board of directors is responsible for designing the general policies to manage operational risk and that a bank’s management is in charge of implementing such policies. Finally, it provides that each bank is obligated to create a database of all of such bank’s losses due to operational risk, classifying such losses by event.

Investments in Financial Instruments

Investment in financial instruments by Peruvian banks is restricted to those financial instruments listed in the Peruvian Banking and Insurance Law, such as equity instruments traded on a stock exchange, debt instruments (to the extent that certain requirements are satisfied), sovereign debt instruments and quotas in mutual and investment funds, among others.

Pursuant to SBS Resolution No. 7033-2012, investments in financial instruments by Peruvian banks shall be classified into any of the following categories: (a) investments at fair value with changes in results (short-term), (b) investments available-for-sale, (c) investments until maturity (long-term) and (d) investments in subsidiaries and affiliates.

Reserve Requirements from the Central Reserve Bank of Peru

Under the Peruvian Banking and Insurance Law, all financial institutions regulated by the SBS (except for small-business development non-bank institutions) are required to maintain a legal reserve (encaje) for certain obligations. The Central Reserve Bank of Peru may require additional marginal reserves. The exact level and method of calculation of these reserve requirements is set by the Central Reserve Bank of Peru, which has issued different sets of regulations for foreign and local currency-denominated obligations of banks. The following liabilities are subject to the reserve requirement: demand and time deposits, savings accounts, certain obligations, securities, certain bonds and funds administered by the bank. Subject to certain requirements, the regulation excludes mid-term and long-term funding (i.e., more than two years) from foreign financial institutions, other central banks, governments or multilateral lending agencies.

In April 2004, the Central Reserve Bank of Peru began requiring reserves on amounts due to foreign banks and other foreign financial institutions, which were not previously considered obligations.

Currently, the minimum legal reserve requirement for local and foreign currency deposits is 5.0% and 9.0%, respectively. Foreign currency deposits collected from the general public are subject to a marginal rate of 35% for funds that exceed a certain level set by the Central Reserve Bank of Peru. Local and foreign currency borrowings from certain foreign sources with an original maturity of two years or less are subject to a 50% special rate. Financial institutions may satisfy the minimum reserve requirements with funds that they hold in vaults or that they have deposited in their accounts at the Central Reserve Bank of Peru.

Subject to certain requirements, the regulation excludes from the reserve requirement mid-term and long-term funding (i.e., liabilities with a minimum average maturity of more than two years, subject to other conditions) through the issuance of securities.

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They must also keep at least 1.0% and 3.0% of their local and foreign currency deposited in the Central Reserve Bank of Peru, respectively. The Central Reserve Bank of Peru oversees compliance with the reserve requirements.

The Central Reserve Bank of Peru also establishes the interest rate payable on reserves that exceed the minimum legal reserve requirement applicable to both local and foreign currency deposits. The current applicable interest rate: (a) for local currency reserves, different from those described below, is the overnight deposits interest rate, minus 195 basis points; and, (b) for foreign currency deposits, is a 25% of the one-month LIBOR interest rate. Currently, no interest rate is payable in respect of local currency deposits to certain foreign sources, such as financial institutions, hedge funds, brokerage firms, pension funds and others with a foreign parent company, except for those authorized by the SBS to collect deposits from the general public in Peru. The applicable interest rate is expected to be periodically revised by the Central Reserve Bank of Peru in accordance with monetary policy objectives.

In the past, the Central Reserve Bank of Peru has on numerous occasions changed the deposit reserve requirements applicable to Peruvian commercial banks and both the rate of interest paid on deposit reserves and the amount of deposit reserves on which no interest is payable by the Central Reserve Bank of Peru.

Deposit Insurance Fund

Bank deposits are protected by the Fondo de Seguros de Depósito (Deposit Insurance Fund), against bank failure. Specifically, savings deposit by natural persons, savings deposit accounts maintained by non-profit entities and checking accounts are covered in full up to an amount that is revised quarterly by the SBS. For the period between June and August 2019, the maximum coverage amount is S/100,432 per person per bank.

The Deposit Insurance Fund was established in 1991 and was organized as a private corporation in 1996. The Deposit Insurance Fund’s governing body is led by a representative of the SBS. The additional members are appointed by the Central Reserve Bank of Peru (one member), the MEF (one member) and by the banks (three members). SBS provides the necessary administrative members and operational resources for the Deposit Insurance Fund.

The financial resources available to the Deposit Insurance Fund pursuant to the Peruvian Banking and Insurance Law include, among others, the original contribution from the Central Reserve Bank of Peru, insurance premiums paid by banks, unclaimed bank deposits (after ten years) and fines imposed by the SBS for violations of the Peruvian Banking and Insurance Law.

In addition, the Deposit Insurance Fund may, in extraordinary situations, borrow funds with authorization from the Peruvian treasury, or it may borrow long-term government securities from the Peruvian treasury.

Anti-Money Laundering Rules

Money laundering is considered a criminal act in Peru. A special legal framework was established in April 2002, which follows the 40 recommendations of the Financial Action Task Force on Money Laundering, or “FATF,” established by the G-7. Since then, this legal framework has been amended in order to improve and increase the efficiency of the Peruvian anti-money laundering system.

Money laundering includes a wide range of serious offenses such as tax evasion, terrorism, drug trafficking, corruption and other criminal activities. A special set of anti-money laundering rules applies specifically to banks, which includes specific rules for customer and employee due diligence and recordkeeping. In March 2008, the SBS enacted additional anti-money laundering provisions, pursuant to which, among other things, banks must establish a set of policies and procedures specifically aimed to prevent asset laundering and

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the financing of terrorist activities. In November 2008, the SBS modified the anti-money laundering provisions to include, among other changes, the obligations of Peruvian banks to verify that their branches and foreign subsidiaries comply with the anti-money laundering and terrorism financing provisions enacted by the SBS and with the recommendations of the FATF.

On February 17, 2011, the SBS modified current anti-money laundering provisions through SBS Resolution No. 2108-2011, as amended, in order to adapt these provisions to international standards established by the Financial Action Task Force of South America (Grupo de Acción Financiera de Sudamerica, or “GAFISUD”), in relation to due diligence in the identification of clients according to their risk and profile level, among other considerations. On May 14, 2015 and December 6, 2017, the SBS further amended and supplemented the aforementioned provisions through SBS Resolution No. 2660-2015 and SBS Resolution No. 4705-2017. SBS Resolution No. 2018-2011 was replaced by SBS Resolution No. 2891-2018, which came into force on October 1, 2018.

The government agency responsible for supervising the anti-money laundering system is the UIF, which was made part of the SBS in July 2007. The chairman of this agency is appointed by the chairman of the SBS.

Disclosure of Material Information

All banks that are organized as corporations (the only exception being the Peruvian branches of foreign banks) are listed on the BVL. As a result, they are subject to the disclosure and reporting rules contained in the Peruvian Securities Market Law and the internal regulations of the SMV and the BVL.

Under these rules, listed companies such as banks are required to disclose to the market in a timely manner (on the same day when the event occurs) all information that investors are reasonably likely to consider material. Specific regulations provide for specific parameters to determine what is considered material information. Banks are also subject to full disclosure and reporting obligations under the banking regulatory framework.

In March 2014, regulations related to disclosure of material information were amended. By virtue of such regulations, issuers under supervision of the SMV are required to disclose all material information in connection with the issuer of registered securities (such as our common shares) and its activities or securities issued or secured by such issuer which may influence the liquidity or price of such securities.

Also, issuers whose securities are also traded in foreign markets must file before with the SMV all information that is required to be disclosed to investors on such foreign market at least as soon as such information is delivered pursuant to the applicable foreign regulations.

Intervention by the SBS and Liquidation

Pursuant to the Peruvian Banking and Insurance Law, the SBS has the power to interrupt the operations of a bank in order to prevent, or to control and reduce the effects of, a bank failure. Accordingly, the SBS may intervene in a bank’s business by adopting either a temporary surveillance regime or a definitive intervention regime (“Intervention”) depending on how critical the situation is deemed to be by the SBS. Intervention will be taken upon the occurrence of certain events, including (a) suspension of payments, (b) failure to comply with the restructuring plan during the surveillance regime, (c) regulatory capital is less than 50% of the minimum regulatory capital required or (d) deficit or reduction of more than 50% of its regulatory capital in a 12-month period. Less drastic measures, such as (1) placing additional requirements, (2) ordering a capital increase or an asset divesture or (3) imposing a financial restructuring plan, may be also adopted by the SBS when the situation allows for them.

An Intervention may halt a bank’s operations for up to 45 days, and may be extended for a second period of up to 45 additional days, during which time the SBS may institute measures such as: (a) canceling

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losses by reducing reserves, capital and subordinated debt, (b) segregating certain assets and liabilities for transfer to another financial institution and (c) merging the intervened bank with another acquiring institution. After an Intervention, the SBS will proceed to dissolve and liquidate the bank unless the preceding option (c) was applied.

Beginning on the date on which a resolution of the SBS subjecting a bank to an Intervention regime is issued, and continuing until such Intervention is concluded (which period ends when the liquidation process begins), the Peruvian Banking and Insurance Law prevents any creditor of the bank from (a) initiating any judicial or administrative procedure for the collection of any amount owed by the bank, (b) enforcing any judicial decision rendered against the bank to secure payment of any of its obligations, (c) constituting a lien or attachment over any of the assets of the bank to secure payment of any of its obligations or (d) making any payment, advance or compensation or assuming any obligation on behalf of the bank, with the funds or assets that may belong to it and are held by third parties, except for (i) set-off compensation payments that are made between regulated entities of the Peruvian banking and financial sector and insurance industry and (ii) set-off of reciprocal obligations arising from repurchase agreements and operations with financial derivatives entered into with local or foreign financial and insurance institutions.

During liquidation, claims of bank creditors rank as follows:

First order—Labor claims:

• 1^st Employee remunerations.

• 2^nd Social benefits, contributions to the private and public pension system and other labor claims against the bank accrued until the date when the dissolution is declared, retirement pensions or the capital required to redeem those pensions or to secure them by purchasing annuities.

Second order—Claims for bank deposits and other types of saving instruments provided under the Peruvian Banking and Insurance Law, in the portion not covered by the Deposit Insurance Fund and the contributions and resources used by such Deposit Insurance Fund to cover the above described claims for bank deposits and other types of saving instruments.

Third order—Taxes:

• 1^st Claims by the Peruvian social security administration (Seguro Social de Salud del Perú EsSalud) related to health care benefits for which the bank is responsible as employer.

• 2^nd Taxes.

Fourth order—Unsecured and non-privileged credits:

• 1^st All unsecured and non-privileged credits against the bank, ranked on the basis of (i) the date they were assumed or incurred by the bank whereby obligations assumed or incurred on an earlier date shall rank senior in right of payment to obligations assumed or incurred by the bank at a later date, and (ii) obligations assumed or incurred by the bank on a date that cannot be determined shall rank junior in right of payment to all the obligations comprised in (i) above and pari passu among themselves.

• 2^nd The legal interest on the bank’s obligations that may accrue during the liquidation.

• 3^rd Subordinated debt.

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Except for the first and second categories under unsecured and non-privileged credits, all claims within an order will be ranked pari passu among themselves. Each category of creditors will collect in the order indicated above, whereby distributions in one order will be subject to completing full distribution in the prior order. Any security interest created before the issuance of the resolution declaring the bank’s dissolution and the initiation of the liquidation process shall survive in order to guarantee the obligation it secures. The secured creditors shall retain the right to collect from the proceeds of the sale of the collateral, on a preferred basis (except with respect to labor claims, savings and deposits, which are privileged claims), subject to certain rules established under Article 119 of the Peruvian Banking and Insurance Law.

Peruvian banks are not subject to the regime of insolvency and bankruptcy otherwise applicable to corporations in general.

Insurance Regulation and Supervision

Solvency Requirements and Regulatory Capital

Pursuant to the Peruvian Banking and Insurance Law, the SBS regulates the solvency margin of Peruvian insurance companies. The solvency margin is based upon calculations that take into account the amount of premiums and the medium burden of claims during a specified period prior to the date on which calculation is made.

Insurance companies must also maintain a “solvency equity,” which must be equal to the highest of (a) the solvency margin, (b) the minimum capital requirements, as established by law, or (c) the company’s overall indebtedness, calculated in accordance with provisions of the Peruvian Banking and Insurance Law. The required amount of solvency equity is recalculated at least monthly and is adjusted for inflation. If the insurance company has operations subject to credit risk, part of the solvency equity should be segregated for their coverage.

The Peruvian Banking and Insurance Law provides that insurance companies should have at all times a regulatory capital that should not be lower than the solvency equity, which must be the higher than (a) the solvency margin or (b) the minimum capital required by law, or S/6,822,086 in accordance with Circular G-201-2019 for the period between April and June 2019.

The regulatory capital of Peruvian insurance companies used to cover its operations may be conformed by: (a) the insurance company’s paid-in-capital, voluntary and legal reserves and premium for the issue of shares; and (b) the computable portion of the subordinate debt meeting SBS requirements that such entity establishes for such purpose. The Peruvian Banking and Insurance Law provides the following procedure for the determination of the regulatory capital eligible to cover insurance risks: (a) sum of the paid-in-capital, supplementary capital premium and the legal and voluntary reserves, as applicable; (b) sum of the profit of previous fiscal years and of the fiscal year in course; (c) subtraction of the amount of all the investment in subordinate bonds and shares of diverse nature made by insurance companies in other insurance companies engaged in different lines of business; and (d) subtraction of the losses of the previous fiscal years and the fiscal year in course.

Furthermore, insurance companies shall maintain a guarantee reserve equivalent to thirty-five percent (35%) of its solvency equity as a guarantee fund. According to the Peruvian Banking and Insurance Law, such guarantee fund is different and complementary to the portions of capital respectively directed to (a) constitute the solvency margin of the insurance risks; and, (b) as applicable, to cover credit risks.

Reserves

The Peruvian Banking and Insurance Law provides that insurance companies shall constitute, on a monthly basis, the following technical reserves: (a) for claims, including those that took place and were not reported, past-due capital and income or benefits of the insured parties, with pending liquidation or payment; (b) mathematical, over life or income insurance; (c) for risks in course or non-accrued premiums; and (d) for catastrophes and uncertain casualty risks.

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Article 67 of the Peruvian Banking and Insurance Law also requires that all insurance companies establish a legal reserve by setting aside 10% of adjusted income before taxes, until the reserve reaches at least 35% of their capital stock.

Under SBS GAAP following the adoption of new mortality tables in 2018 the SBS allowed the adjustment of technical reserves to be spread over 10 years. Accordingly, under SBS GAAP we are adjusting our technical reserves over 10 years. In contrast, under IFRS we had a negative impact of S/144.8 million due to the aggregate effect recorded in technical reserves on insurance policies issued prior to the date of adoption of the new mortality tables. See “Presentation of Financial and Other Information—Non-GAAP Financial Measures.”

Limit of Indebtedness

Insurance companies may only take credits, in the country or abroad, for a sum not exceeding an amount equivalent to its regulatory capital. In case such limit of indebtedness is surpassed, the insurance company shall submit to the SBS a program approved by its board of directors establishing the measures adopted to eliminate the excess within a term not exceeding three (3) months.

Investment Requirements

Pursuant to the Peruvian Banking and Insurance Law, the total amount of investments of a Peruvian insurance company shall cover the total amount of technical obligations at all times. For such purposes, technical obligations are defined as the sum of all obligations that an insurance company has vis-à-vis its insured clients plus the solvency equity, the guarantee fund and the regulatory capital for the economic cycle. The assets covering the technical obligations cannot be subject to any pledge, encumbrance or precautionary measure, which limits its free availability.

Peruvian insurance companies are allowed to invest in certain eligible assets such as instruments issued by the Peruvian Central Government, classified corporate bonds and shares, among others. However, in order to balance levels of risk, applicable regulations have imposed a number of limitations to insurance companies with respect to their investments (by issuer, economic group, type of instrument and nationality, among others). In general terms, no more than 15% of the total amount of an insurance company’s technical obligations may be invested in certain instruments (including, among others, stocks and bonds) issued by the same economic group. The investment regulations further specify that investment policies of Peruvian insurance companies shall consider maximum limits by issuer (calculated over the regulatory capital of each company) depending on the type of investment and the insurance industry in which the company operates.

Pursuant to the Investment of Insurance Companies Regulation approved by SBS Resolution No. 1041-2016 (as amended by SBS Resolution No. 2972- 2018), Interseguro has implemented a plan to reduce its exposure to related parties and comply with the limits established by Article 13 of the Reglamento de Supervisión Consolidada, approved by Resolution No. 11823-2010 (as amended).

Disclosure of Relevant Information

All insurance companies that are organized as corporations (the only exception being the Peruvian branches of foreign insurance companies) have their shares listed on the BVL. As a result, they are subject to the disclosure and reporting rules contained in the Peruvian Securities Market Law and the internal regulations of the BVL.

Under these rules, listed companies such as insurance companies are required to disclose to the market on a timely manner (on the same day when the fact occurs) all information that investors are reasonably likely to consider material. Special regulation provides for specific parameters to determine what is considered relevant information. Insurance companies are also subject to full disclosure and reporting obligations under the insurance regulatory framework.

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On March 2014, regulations related to disclosure of material information have been amended. By virtue of such regulations, issuers under supervision of the SMV are required to disclose all material information in connection with the issuer of registered securities (such as our common shares), its activities or securities issued or secured by such issuer which may influence the liquidity or price of such securities must be disclosed.

Also, issuers whose securities are also traded in foreign markets must file before the SMV all information that is required to be disclosed to investors on such foreign market at least in the same opportunity as such information is delivered pursuant to the applicable foreign regulations.

As explained above, insurance companies are also subject to full disclosure and reporting obligations under the insurance regulatory framework.

Ownership Restrictions

The Peruvian Banking and Insurance Law establishes certain restrictions on the ownership of a bank and insurance company’s capital stock. Banks must have at least two unrelated shareholders at all times. Restrictions are placed on the ownership of shares of any bank or insurance company by persons that have committed certain crimes, as well as by public officials who have supervisory powers over banks or who are majority shareholders of an enterprise of a similar nature. All transfers of shares in a bank or insurance company must be reported to the SBS by the bank or insurance company.

Transfers involving the acquisition by any individual or corporation, whether directly or indirectly, of more than 10% of a bank or insurance company’s capital stock must receive prior authorization from the SBS. The SBS may deny authorization to such transfer of shares if the purchasers (or their shareholders in the case of legal persons) are legally disabled, have engaged in illegal activity in the areas of banking, finance, insurance or reinsurance, or if objections are raised on the basis of the purchaser’s moral fitness or financial solvency. The decision of the SBS on this matter is final and cannot be overturned in the courts. If a transfer is made without obtaining the prior approval of the SBS, the purchaser may be fined an amount equivalent to the value of the securities transferred. In addition, the purchaser will be required to sell the securities within 30 days, or the fine will double, and the purchaser is disqualified from exercising its voting rights at any shareholders’ meetings and to participate in the distribution of dividends. Foreign investors receive the same treatment as Peruvian nationals and are subject to the same limitations described above.

Risk Rating

The Peruvian Banking and Insurance Law and SBS Resolution No. 18400-2010, enacted in December 2010, require that all financial and insurance institutions be rated by at least two rating agencies (registered with the SBS) on a semiannual basis (updated in March and September), in addition to the SBS’s own assessment. Criteria to be considered in the rating include risk management and control procedures, loan quality, financial strength, profitability, liquidity and financial efficiency. Five risk categories are assigned, from “A,” lowest risk, to “E,” highest risk, allowing for subcategories within each letter.

Intervention by the SBS

Pursuant to the Peruvian Banking and Insurance Law, the SBS has the power to interrupt the operations of an insurance company to prevent, or to control and reduce, the effects of its failure. Accordingly, SBS intervention may be of two levels, depending on how critical the situation is: a temporary supervision regime or a definitive intervention regime prior to liquidating the bank or insurance company. Intervention will be taken upon the occurrence of certain events including: (1) payment interruption; (2) failure to comply with the restructuring plan during the surveillance regime; (3) deficit or reduction of more than 50% of its regulatory capital in a 12-month period; or (4) deficit or reduction of its regulatory capital in excess of 50% of its solvency capital.

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The intervention regime and the liquidation is the same as the one described above for banking entities. See “Regulation and Supervision—The Peruvian Financial and Insurance System—Intervention by the SBS and Liquidation”. See “—Investment Requirements” for a discussion of investment requirements and technical obligations.

General Overview of the Bahamian Financial Regulatory Framework

The regulatory framework for the operation of the Bahamian financial sector is set forth in the Central Bank of The Bahamas Act, 2000, as amended, and the Banks and Trust Companies Regulation Act, 2000, as amended. The Central Bank of The Bahamas licenses and supervises all of the banks and trust companies in The Bahamas. Its objectives include promoting and maintaining monetary stability and ensuring a sound financial system through the effective application of international regulatory and supervisory standards. All banks must adhere to the Central Bank of The Bahamas’ licensing and prudential requirements, ongoing supervisory programs and regulatory reporting requirements, and are subject to periodic onsite inspections.

Licensing

Inteligo Bank has been granted a banking license by the Central Bank of The Bahamas and an International Banking License by the Superintendency of Banks of Panama. Under the BTCRA, the Central Bank of The Bahamas may revoke the license of a licensee if: in the opinion of the Central Bank of The Bahamas, the licensee (i) is carrying on its business in a manner detrimental to the public interest or the interests of its depositors or other creditors or (ii) contravening the provisions of Bahamian banking law or any other law, order or regulations made thereunder, or any term or condition subject to which the license was issued, either in The Bahamas or elsewhere; (iii) if Inteligo Bank has ceased to carry on its banking business; or (iv) if Inteligo Bank becomes bankrupt or goes into liquidation or is wound up or otherwise dissolved.

Inteligo Bank’s asset management activities are subject to supervision by the Securities Commission of The Bahamas. Inteligo Bank has begun the process of making application to the Securities Commission to obtain the license in the near future.

Banking Regulation and Supervision

Banking regulations on capital adequacy and regulatory framework in The Bahamas take into account the recommendations of the Basel Committee. The Central Bank of The Bahamas has adopted a Basel Implementation Program (the “Program”) and has effectively implemented Pillar I, Pillar II and Pillar III of the Basel II framework. The Pillar I framework focuses on the capital adequacy ratio requirements. Pillar II focuses on the ICAAP (the guidelines in relation to the ICAAP were released in August of 2016), and Pillar III relates to Minimum Disclosures. The Central Bank of The Bahamas has rolled out the capital component of the Basel III framework and in 2017, will focus on implementing other elements namely, the Capital Buffers, the Leverage Ratio, the Net Stable Funding Ratio and the Liquidity Coverage Ratio. It should be noted that the Basel implementation timeline with respect to these ratios extends to 2020.

Corporate Governance

The Guidelines for the Corporate Governance of Banks and Trust Companies Licensed to Do Business Within and From Within The Bahamas, issued by the Central Bank of The Bahamas, list the minimum standards that banks must adopt in respect of their corporate governance framework. Generally, the guidelines require the board of directors to develop and implement policies and procedures to ensure (i) the competence and independence of board members, (ii) proper management of strategic, business and process-level risks, (iii) compliance with applicable laws, regulations and guidelines, and (iv) ongoing reporting to the Central Bank of The Bahamas.

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Limits on Large Exposures

Pursuant to the Banks and Trust Companies (Large Exposures) (Amendment) Regulations, 2012, no bank shall (i) incur exposures to any individual counterparty or group of connected parties which in the aggregate exceed twenty-five percent of the bank’s capital base, (ii) hold non-capital investments in securities of a single issuer which exceed ten percent of the bank’s capital base, (iii) incur exposures to its related parties which in the aggregate exceed fifteen percent of the bank’s capital base, (iv) incur exposures to related parties unless approved by the bank’s board of directors and negotiated on an arm’s length basis, or, (v) incur non-exempt large exposures which in the aggregate exceed eight hundred percent of its capital base. There are certain exemptions listed in the regulations, and the Central Bank of The Bahamas may also exempt a bank from the exposure limits outlined in the regulations in certain circumstances.

Classification of Impaired Assets

The Guidelines for the Measurement, Monitoring and Control of Impaired Assets, issued by the Central Bank of The Bahamas, provide the Central Bank of The Bahamas’ minimum requirements for the recognition, measurement and classification of impaired assets. An impaired asset is defined as an asset where there is no longer a reasonable assurance of timely collection of the full amount of principal and interest due to a deterioration of credit quality of the counterparty. Banks are required to follow the requirements of the International Financial Reporting Standards relating to impaired assets, in particular International Accounting Standards 18, 36 and 39.

Credit Risk

The Guidelines for the Management of Credit Risk, issued by the Central Bank of The Bahamas, require banks to have a written statement of their credit risk strategy and policies and procedures to implement the strategy. The strategy and policies should be approved by the board of directors and should be consistent with the bank’s degree of risk tolerance, the level of capital available for credit activities and credit management expertise. The Central Bank of The Bahamas endorses the Basel Committee’s Principles for the Management of Credit Risk (September 2000).

Market Risk

The Guidelines on the Management of Market Risk, issued by the Central Bank of The Bahamas, require banks that meet the stated threshold tests to establish sound policies and procedures for the management of market risk, to be supervised and controlled by the board of directors and senior management. Market risk is defined as the risk of losses in on and off-balance sheet positions arising from movements in market prices.

Operational Risk

The Guidelines for the Management of Operational Risk, issued by the Central Bank of The Bahamas, require senior management of a bank, under the approval of the board of directors, to develop and implement an operational risk management framework that explicitly recognizes operational risk as a distinct risk to the institution and aims to effectively manage it. Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems from external events. The guidelines are based upon the Principles for the Sound Management of Operational Risk, issued by the Basel Committee on Banking Supervision in 2011.

Country Risk

The Guidelines for the Management of Country Risk, issued by the Central Bank of The Bahamas, require banks to have a risk management process that focuses on the broadly defined concept of country risk and addresses certain minimum requirements listed therein. The guidelines reference the Basel Committee’s Core Principles for Effective Banking Supervision.

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Anti-Money Laundering Laws and Regulations

Money laundering is a criminal act in The Bahamas. The laws of The Bahamas concerning money laundering and combatting the financing of terrorism are contained in the following legislation, as amended: (i) the Proceeds of Crime Act, 2018; (ii) the Anti-Terrorism Act, 2004; (iii) the Financial Transactions Reporting Act, 2018; (iv) the Financial Transaction Reporting Regulations, 2018; (v) the Financial Transactions Reporting (Wire Transfers) Regulations, 2018; (vi) the Financial Intelligence Unit Act, 2000; and (vii) the Financial Intelligence (Transactions Reporting) Regulations, 2001. The Guidelines for Licensees on the Prevention of Money Laundering & Countering the Financing of Terrorism, issued by the Central Bank of The Bahamas, apply specifically to banks and other licensees of the Central Bank of The Bahamas. The guidelines require banks to establish clear responsibilities and accountabilities to ensure that policies, procedures and controls which deter criminals from using their facilities for money laundering or the financing of terrorism, are implemented and maintained, thus ensuring that they comply with their obligations under the law. Banks must have in place sufficient controls and monitoring systems for timely detection and reporting of suspicious activities, proper verification of their customers’ identities, record keeping in accordance with applicable laws, and ongoing education and training for its employees.

The Bahamas has enacted the Commercial Entities (Substance Requirements) Act, 2018 which requires substantial economic presence in The Bahamas for certain Bahamian entities that conduct relevant activities. A relevant activity includes the business of banking as conducted by Inteligo Bank. However Inteligo Bank intends to seek exemption from this legislation as it considers itself to be tax resident in another jurisdiction, Panama, despite being a licensed bank in The Bahamas. As a tax resident in Panama, Inteligo Bank would be exempt from the requirements of the Commercial Entities (Substance Requirements) Act, 2018 if it fulfills certain disclosure and governance requirements of the applicable legislation. If Inteligo Bank is not considered to be tax resident in Panama, or does not fulfill the requirements of the applicable legislation,, it will have to enhance its economic and business presence in The Bahamas in order to comply with the Commercial Entities (Substance Requirements) Act, 2018.

External Auditors

The Guidelines on the Relationship between External Auditors of Licensees and the Central Bank of The Bahamas, issued by the Central Bank of The Bahamas, require banks to inform the Central Bank of The Bahamas of the appointment of their external auditors. In addition to listing certain criteria to be used when appointing external auditors, the guidelines also provide examples of facts and matters of material significance that must be reported by an external auditor to the Central Bank of The Bahamas, such as material misstatements in financial statements or evidence of fraudulent activities. The guidelines take into account the aspects of the Basel Committee’s paper, The Relationship Between Banking Supervisors and Banks’ External Auditors (2002).

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MANAGEMENT

General

Our business and affairs are managed by our board of directors in accordance with our articles of incorporation and Panamanian corporate law. Our articles of incorporation provide for a board of directors of no less than three members. Our current board of directors is comprised of seven directors and no alternates. The two-year term of our current board of directors will expire in April 2021.

We may increase the size of our board of directors prior to the effective date of our registration statement. If a director resigns or otherwise becomes unable to continue with its duties, a majority of our directors may appoint any other person to serve as director for the remaining term of the board.

The board of directors may establish one or more committees, to which it may delegate any or all of its responsibilities. Each committee shall be composed by two or more directors.

The board of directors typically meets in regularly scheduled quarterly meetings and when called by any dignitary (dignatario) or our Chief Executive Officer. Resolutions must be adopted by a majority of the directors present at the meeting.

Board of Directors

Upon consummation of this offering, our board of directors will consist of seven members. The business address of our board of directors is Av. Carlos Villarán 140, 5th floor Urbanización Santa Catalina, La Victoria, Lima 13, Peru. The following table sets forth certain information about our current directors.

Name	Position		Year of Birth		Year Appointed
Carlos Tomás Rodríguez Pastor Persivale		Chairman		1959		2019
Fernando Martín Zavala Lombardi		Secretary		1971		2019
Felipe Federico Roy Morris Guerinoni		Treasurer		1953		2019
José Alfonso Bustamante y Bustamante		Director		1941		2019
Lucía Cayetana Aljovín Gazzani		Director		1966		2019
Hugo Antonio Santa María Guzmán		Director		1963		2019
Guillermo Martinez Barros		Director		1958		2019

The following sets forth selected biographical information for each of the members of IFS’ board of directors.

Carlos Tomás Rodríguez-Pastor Persivale, has served as IFS’ chairman since 2007. He also serves as Interbank’s chairman since 1995 and was Interbank’s interim Chief Executive Officer during 2010. In addition, Mr. Rodríguez-Pastor serves as director of Intercorp Peru, Inteligo Bank, Inteligo Group Corp., Interseguro, Supermercados Peruanos, Tiendas Peruanas, Homecenters Peruanos, Colegios Peruanos, InRetail Peru Corp., InRetail Pharma and Financiera OH! S.A. Mr. Rodríguez-Pastor received a bachelor’s degree in social science from the University of California at Berkeley and a master’s degree in business administration from the Amos Tuck School of Business at Dartmouth College.

Fernando Martin Zavala Lombardi, has served as an IFS director since his appointment on April 2019, and has been serving Interbank as director since March 2019. Mr. Zavala also serves as CEO and director of Intercorp Peru Ltd. and director of InRetail Peru Corp., Universidad Tecnológica del Perú, Colegios Peruanos, Interfondos, Interseguro, and Inteligo Bank. He previously served as CEO in Peru and Panama of the multinational company SABmiller, as General Manager of Indecopi and has been director of several companies in Peru, and several business guilds and NGOs as well. In the public sector, he has been Prime Minister and

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Minister of Economy and Finance, the latest twice. Mr. Zavala received a bachelor’s degree in economics from Universidad del Pacífico in Lima, a master’s degree in business management from Universidad de Piura, and a master’s in business administration from University of Birmingham in England.

Felipe Federico Roy Morris Guerinoni, has served as one of IFS’ directors since 2007. Mr. Morris also serves as Chairman of Interseguro and Financiera OH!, as Vice-Chairman of Interbank and as Director of Intercorp Peru and Inteligo Bank. Mr. Morris received a bachelor’s degree in economics from the Universidad del Pacífico in Lima, a master’s degree in economics from the University of Pittsburgh and a master’s degree in finance from American University.

José Alfonso Bustamante y Bustamante, has served as one of IFS’ and Interbank’s directors since March 2007. Mr. Bustamante is the President of the Board of Corporación Financiera de Inversiones S.A. and also serves as a director of Agrícola Cerro Prieto S.A.C. and San Miguel Industrias Pet S.A. Mr. Bustamante was President of the Board of Telefónica del Perú and Banco Santander Central Hispano, formerly known as Bancosur, and of the Asociación de Bancos del Peru – ASBANC. In the public sector, Mr. Bustamante was the Prime Minister of Peru and Minister of Industry, Tourism, Integration and International Trade Negotiations (1993-1994) and was president of COPRI and Prom Perú during the same period. Mr. Bustamante received a bachelor’s degree in agricultural engineering from the Universidad Nacional Agraria La Molina in Lima and pursued his graduate studies at the University of Michigan, Ann Arbor.

Lucía Cayetana Aljovin Gazzani, has served as one of IFS’ directors since her appointment in April 2019 and has been serving as Interbank’s director since July 2018. She has also served as Foreign Affairs Minister, Minister of Energy and Mines and Minister of Social Inclusion, and is the President of the National Fishing Society. Previously, she was a partner at Miranda & Amado law firm, a member of the board of directors of the Lima Stock Exchange and served as director of other Peruvian companies and nonprofit organizations. Mrs. Aljovin received a degree in Law from the Pontificia Universidad Católica del Perú and a master’s degree in business administration from Universidad Adolfo Ibanez of Chile. She has also been a journalist and a professor at several Peruvian universities.

Hugo Antonio Santa María Guzmán, has served as one of IFS’ directors since his appointment in April 2019, and has been serving as Interbank director since November 2016. Mr. Santa María is partner, manager of economic studies, and chief economist of APOYO Consultoría, where he runs the Business Advisory Service (SAE, for its acronym in Spanish). SAE is the leading economic and business (analysis) service in Peru. He is currently a member of the board of directors of Virú S.A. and Colegios Peruanos and serves as an alternate director of InRetail Perú Corp. Previously, he was a member of the boards of Banco Santander Peru, Grupo ACP, Companía Minera Atacocha and the Consolidated Reserve Fund (investment fund of the Peruvian public pension system) and independent director and President of the board of Mibanco. Mr. Santa María has been a professor in graduate programs at Universidad del Pacífico, Universidad Peruana de Ciencias Aplicadas and Universidad de Piura and has been invited as speaker at academic institutions, public organizations and private companies in several countries. He has published more than a hundred articles in newspapers such as Gestión, El Comercio and Perú 21, as well as magazines such as Semana Económica, Perú Económico, Poder and other publications. Mr. Santa María holds a bachelor’s degree in economics from Universidad del Pacífico and Ph.D. from Washington University in St. Louis.

Guillermo Martínez Barros, has served as one of IFS’s directors since 2019. He has also served as a director of Interseguro since 2008. Mr. Martínez serves as director of Financiera OH! S.A., Isapre Consalud in Chile, PrimAmérica Consultores S.A. in Chile and PrimAmérica Capacitación S.A. in Chile and is a member of the Direction Committee of Centros de Salud Peruanos S.A.C. Mr. Martínez is also the chairman and owner of Inmobiliaria e Inversiones Siete Mares S.A. and the chairman of Scan S.A., Ebench S.A. and Redlegal S.A. in Chile. Mr. Martínez received a bachelor’s degree in economics from the Universidad Católica de Chile, a master’s degree in business administration from the University of Chicago and a master’s degree in economics from the London School of Economics.

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Executive Officers

The business address of our executive officers is Av. Carlos Villarán 140, Urbanización Santa Catalina, La Victoria, Lima 13, Peru. The following table sets forth certain information about our executive officers. Each member of our management team serves for open-ended terms.

Name	Position	Year of Birth		Year Appointed
Luis Felipe Castellanos Lopez Torres	Chief Executive Officer		1970		2013
Gonzalo José Basadre Brazzini	Deputy Chief Executive Officer		1970		2013
Michela Casassa Ramat	Chief Financial Officer		1973		2012
Liliana Elcira Vera Villacorta	Chief Accounting Officer		1974		2006
Juan Antonio Castro Molina	General Counsel		1971		2006
Ernesto Giancarlo Ferrero Merino	Investor Relations Officer		1973		2014
Katia Mercedes Lung Won	Chief Compliance Officer		1968		2016

Luis Felipe Castellanos López Torres, Mr. Castellanos has served as IFS’ Chief Executive Officer since April 2013 and as Interbank’s Chief Executive Officer since January 2011. Mr. Castellanos is also one of Interseguro’s directors since his appointment in April 2019. Mr. Castellanos joined Interbank in 2006 as the Chief Executive Officer of Interfondos. He has served as Interbank’s Vice President for Retail Banking and Manager of the Mortgage and Real Estate Division. Previously, he was a Director in the investment banking division at Citigroup Global Markets in New York. Before joining Citigroup, Mr. Castellanos was responsible for the treasury department at Minera Yanacocha S.A. Mr. Castellanos received a bachelor’s degree in business administration from the Universidad del Pacífico and a master’s degree in business administration from the Amos Tuck School of Business at Dartmouth College.

Gonzalo José Basadre Brazznini, has served as IFS’ Deputy Chief Executive Officer since April 2013. Mr. Basadre is also the General Manager/Chief Executive Officer of Interseguro since 2012. Previously, he was the Vice President of Investments (Chief Investment Officer) of Interseguro. He received a bachelor’s degree in business administration from the Universidad del Pacífico in Lima and a master’s degree of business administration from Harvard University.

Michela Casassa Ramat, has served as IFS’ Chief Financial Officer and as Interbank’s Chief Financial Officer since September 2012. Mrs. Casassa joined Interbank in September 2011 as Head of Strategic Planning. Prior to joining Interbank, she served as Head of Strategy for Corporate and Investment Banking at Banco de Crédito del Perú in Lima and Unicredit in Munich, and Head of Strategy for the International Division of Unicredit in Milan and Istanbul. She has also worked at The Boston Consulting Group in Milan and Citibank in Lima. Mrs. Casassa holds a bachelor’s degree in business administration from the Universidad de Lima and a master’s in business administration with a specialization in finance from the SDA Bocconi in Milan.

Liliana Elcira Vera Villacorta, has served as IFS’ Chief Accounting Officer since our formation. Ms. Vera served as Accounting Manager of Interbank from 2003 to 2011. From 1998 to 2002, Ms. Vera was a senior analyst at Paredes, Burga & Asociados Sociedad Civil de Responsabilidad Limitada, a member firm of Ernst & Young Global. Ms. Vera received a degree in accounting from the Pontificia Universidad Católica del Perú and a master’s degree in business administration from INCAE Business School.

Juan Antonio Castro Molina. Mr. Castro is Legal Director for Intercorp Group, a financial, retail and education conglomerate with more than 80,000 employees that operate mostly in Peru, and general Counsel for IFS since its incorporation. Mr. Castro also serves as member of the board of Universidad Tecnológica del Peru and other companies part of the Intercorp Group. Mr. Castro was previously employed at Wilmer, Cutler, Pickering, Hale and Dorr in Washington D.C. and was chief of staff to the Prime Minister of Peru from 2001 to 2002. Mr. Castro received a degree in law from the Pontificia Universidad Católica del Perú, a master’s of laws degree from the University of Virginia where he attended as a Fulbright scholar, a master’s of business

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administration degree from Universidad Adolfo Ibañez, and he has attended senior management programs at Harvard Business School and the Wharton School of Business at the University of Pennsylvania. Mr. Castro is a member of Endevour Peru and in 2019 was named Deal Maker of the Year (2018) by the Latin American Corporate Counsel Association and included in the Legal 500 GC Powerlist. Mr. Castro has been a professor at the Pontificia Universidad Católica del Perú and in the Master of Laws Program at the Universidad de Lima.

Ernesto Giancarlo Ferrero Merino, was appointed IFS’ Investor Relations Officer in July 2014. Previously he served as Interbank’s Head of Financial Management since February 2012. Mr. Ferrero joined Interbank in November 2010 as Deputy Head of Corporate Finance. Prior to joining Interbank, he served as Corporate and Investment Banking Vice President at BBVA Banco Continental and General Manager at BBVA Continental Bolsa. Mr. Ferrero holds a bachelor’s degree in economics from the Universidad del Pacifico, as well as a master’s degree in business administration from the Rotterdam School of Management at Erasmus University, The Netherlands.

Katia Mercedes Lung Won was appointed as IFS’ Chief Compliance Officer in March 2016. She also serves as Chief Compliance Officer of Interbank since 2012. Prior to joining Interbank, Ms. Lung served as Vice President Project Manager for Suntrust Bank in Miami, Florida in the International Wealth Management Division and as Vice President BSA/AML Compliance Officer for BNP Paribas Agency and the General Security Principal (Broker Dealer) for BNP Paribas Investment Services. Ms. Lung holds a bachelor’s degree in business administration from Florida International University (Cum Laude), and a master in business administration from Nova Southeastern University, as well as, a CP/AML FIBA and a Six Sigma Certification—Green Belt.

Interbank

Board of Directors

Interbank’s board of directors consists of ten members, seven of whom are independent. The business address of Interbank’s board of directors is Av. Carlos Villarán, Urbanización Santa Catalina, La Victoria, Lima 13, Peru. The following table sets forth certain information about our directors as of the date of this prospectus.

Name	Position	Year of Birth		Year Appointed
Carlos Tomás Rodríguez Pastor Persivale	Chairman		1959		2019
Ramón José Vicente Barúa Alzamora	Director		1946		2019
José Alfonso Bustamante y Bustamante (1)	Director		1941		2019
David Fischman Kalincausky (1)	Director		1958		2019
Carmen Rosa Graham Ayllon de Espinoza (1)	Director		1958		2019
Carlos Miguel Heeren Ramos (1)	Director		1968		2019
Felipe Federico Roy Morris Guerinoni	Director		1953		2019
Lucía Cayetana Aljoín Gazzani (1)	Director		1966		2019
Hugo Antonio Santa María Guzmán (1)	Director		1963		2019
Fernando Martín Zavala Lombardi	Director		1971		2019

(1) Independent director pursuant to Peruvian regulations.

The following sets forth selected biographical information for each of the members of Interbank’s board of directors.

Carlos Rodríguez-Pastor Persivale, See “–General–Board of Directors”.

Ramón José Vicente Barúa Alzamora, has served as one of IFS’ directors since 2006 and as one of Interbank’s directors since 1994. In addition, Mr. Barúa serves as a director of InRetail Pharma, Supermercados Peruanos, Tiendas Peruanas, Homecenters Peruanos, Real Plaza, Universidad Tecnologica del Perú, Inteligo

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Bank and Interseguro. Mr. Barúa received a bachelor’s degree in industrial engineering from the Universidad Nacional de Ingeniería in Lima and a degree in economics from the Université Catholique de Louvain in Belgium.

José Alfonso Bustamante y Bustamante, See “–General–Board of Directors”.

David Fischman Kalincausky, has served as one of Interbank’s directors since 2003. Mr. Fischman also serves as a director of Supermercados Peruanos. Mr. Fischman received a degree in civil engineering from Georgia Tech University and a master’s degree in business administration from Boston University.

Carmen Rosa Graham Ayllón, has served as one of Interbank’s directors since March 2007. Ms. Graham is a business consultant and a member of the board of directors of Ferreycorp S.A., Patronato Pro Universidad del Pacífico and Fundación Empresarios por la Educación. Ms. Graham also serves as President of Fundación Backus. Ms. Graham was President of Universidad del Pacífico from 2007 to 2009. From 1981 to 2005, Ms. Graham was employed at IBM, where she was CEO of IBM Colombia from 1999 to 2001, CEO of IBM Perú and Bolivia from 2001 to 2003 and Regional Director of Strategy from 2004 to 2005. Ms. Graham received a bachelor’s degree in business administration from the Universidad del Pacífico in Lima and a master’s degree in business administration from Adolfo Ibañez School of Business in Miami. Ms. Graham has completed management trainings at IBM Corporation and advanced programs at Georgetown University, Harvard University, Universidad Monterrey and Universidad de Piura.

Carlos Heeren Ramos has served as one of Interbank’s directors since 2015 and is CEO of UTEC (Universidad de Ingenieria y Tecnologia) and Tecsup (Instituto Superior de Tecnologia). He currently serves on the board of a number of companies as well as non-profit organizations. Prior to his current role, he was a partner in the largest consulting firm in Peru, Apoyo Consultoria, where he served as the head of management consulting. Additionally, he spent twelve years as a faculty member in the Graduate School of the Universidad del Pacifico, and has published in various local media. He obtained his bachelor’s degree in Economics at the Universidad del Pacifico, and obtained his master’s degree in Economics at the University of Texas at Austin.

Felipe Morris Guerinoni, See “–General–Board of Directors”.

Lucía Cayetana Aljovin Gazzani, See “–General–Board of Directors”.

Hugo Antonio Santa María Guzmán, See “–General–Board of Directors”.

Fernando Martin Zavala Lombardi, See “–General–Board of Directors”.

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Executive Officers

The business address of Interbank’s executive officers is Av. Carlos Villarán 140, Urbanización Santa Catalina, La Victoria, Lima 13, Peru. The following table sets forth certain information about Interbank’s executive officers as of the date of this prospectus.

Name	Position	Year of Birth		Year Appointed
Luis Felipe Castellanos López Torres	Chief Executive Officer		1970		2011
Michela Casassa Ramat	Chief Financial Officer		1973		2012
Carlos Tori Grande	Vice President of Retail Business		1976		2017
Gabriela Prado Bustamante	Vice President of Risk Management		1970		2008
Víctor Cárcamo Palacios	Vice President of Commercial Banking		1972		2016
Cesar Augusto Andrade Nicoli	Vice President of Operations		1971		2015
Giorgio Bernasconi Carozzi	Vice President of Capital Markets		1961		2009
Alfonso Díaz Tordoya	Vice President of Distribution Channels		1979		2017
Zelma Acosta-Rubio Rodríguez	Vice President of Corporate and Legal Affairs		1965		2007
Julio Del Valle Montero	Manager of Human Resources		1977		2019

Luis Felipe Castellanos López Torres, See “–General–Executive Officers.”

Michela Casassa Ramat, See “–General–Executive Officers.”

Carlos Tori Grande, has served as Interbank’s Vice President of Retail Banking since January 2017, after serving as Vice President for Distribution Channels since February 2014. Mr. Tori joined Interbank in 2009 as Head of the Corporate Finance team. Prior to 2009, he served as an Investment Banking Associate at Merrill Lynch’s Financial Institutions Group. Mr. Tori currently serves as a director in several companies related to Interbank, including Interfondos, and Compañia de Servicios Conexos Expressnet S.A.C. Prior to joining Interbank, Mr. Tori also worked for Citigroup and BankBoston. Mr. Tori received a bachelor’s degree in business administration from Texas A&M University and a master’s degree in business administration from the Amos Tuck School of Business at Dartmouth College.

Gabriela Prado Bustamante, has served as Interbank’s Vice President of Risk Management since July 2008. Previously, Ms. Prado was responsible for Interbank’s Special Asset Management Division. From 2000 to 2004, Ms. Prado served as Manager of Interbank’s Risk Management Division, which is responsible for monitoring customer performance. Ms. Prado received a bachelor’s degree in business administration from the Universidad de Lima, and a graduate degree in business administration from the INCAE Business School.

Víctor Cárcamo Palacios, has served as Interbank’s Executive Vice President for Commercial Banking since January 2016. Previously, he served as Head of Corporate Finance and Head of Medium Enterprises Banking at Interbank. Before joining Interbank, Mr. Cárcamo was the Executive Director of Capital Markets at Banco Santander in Mexico. Mr. Cárcamo holds a bachelor’s degree in economics from the Universidad de Lima and a master’s degree in business administration from the Universidad Adolfo Ibañez in Chile. Mr. Cárcamo also completed the General Management Program at Harvard Business School.

Cesar Augusto Andrade Nicoli, has served as Interbank’s Executive Vice President of Operations since May 2015. Before joining Interbank, he served as Director of Sales Strategy at LanChile, and was previously Commercial Vice President at Telefonica Peru. Mr. Andrade holds a bachelor’s degree in economics from the Universidad del Pacífico in Lima, and has a master’s in business administration from the Kellogg School of Management.

Giorgio Bernasconi Carozzi, has served as Interbank’s Vice President for Capital Markets since March 2009. Prior to joining Interbank, Mr. Bernasconi served as Director in Strategy and Marketing, Global Markets

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and Distribution for Latin America and was responsible for Latin American capital markets at BBVA Bancomer in México. From 1997 to 2006, he was the Deputy General Manager for BBVA Banco Continental. He previously served as Treasury Vice President for Citibank Lima. Mr. Bernasconi has a bachelor’s degree in administration from the Pontificia Universidad Católica del Perú.

Alfonso Díaz Tordoya, has served as Interbank’s Vice President of Distribution Channels since January 2017, after serving as Manager for the Digital Channels Division since May 2013, when he joined Interbank. Mr. Diaz also serves as a director of Interfondos, a subsidiary of Interbank. Prior to joining Interbank, Mr. Diaz worked in management consulting at A.T. Kearney and in commercial banking at Citigroup Peru. Mr. Diaz is a Licensed Industrial Engineer from Universidad de Lima and a holds a master’s degree in business administration from Harvard Business School.

Zelma Acosta-Rubio Rodríguez, has served as Interbank’s Vice President of Corporate and Legal Affairs and Secretary of the board of directors since April 2007. Mrs. Acosta-Rubio also serves as a director of several related companies of Interbank, including, La Fiduciaria S.A. (related under SBS rules) and Intertitulos S.A. Before joining Interbank, Mrs. Acosta-Rubio worked at Clifford Chance in London and Milbank, Tweed, Hadley & McCloy in New York. Mrs. Acosta-Rubio received a law degree from the Universidad Catolica Andres Bello in Caracas, a master’s degree in comparative jurisprudence from New York University; a master’s degree in international banking law from Morin Center for Banking and Financial Law at Boston University and a master’s degree in business administration from the Management School at Universidad de Piura. Mrs. Acosta-Rubio is admitted to the New York State Bar.

Julio Del Valle Montero, has served as Interbank’s Human Resources Manager since January 2019. Mr. Del Valle joined Interbank in 2007 and since then has led teams related to Process Transformation, Procurement and Facility Management. Previously, he worked as Senior Manager at BNSF Railway in Texas, United States. Mr. Del Valle holds a bachelor’s degree in industrial engineering from St. Mary’s University and a master’s degree in business administration from SMU Cox School of Business.

Interseguro

Board of Directors

Interseguro’s board of directors for 2019 consists of eight principal members and one alternate member, four of whom are independent. The business address of Interseguro’s board of directors is Avenida Javier Prado Este No. 492, San Isidro, Lima 27, Peru. The following table sets forth certain information about Interseguro’s directors as of the date of this prospectus.

Name	Position	Year of Birth		Year Appointed
Felipe Morris Guerinoni	Chairman		1953		1998
Juan Carlos Vallejo Blanco	Director		1964		2012
Carlos Tomás Rodríguez Pastor Persivale	Director		1959		1998
Ramón José Vicente Barúa Alzamora	Director		1946		2000
Rauĺ Musso Vento (1)	Director		1954		2000
Fernando Martín Zavala Lombardi	Director		1971		2019
Luis Felipe Castellanos López Torres	Director		1970		2019
Guillermo Martínez Barros (1)	Director		1958		2008
Carlos Saco Vértiz Tudela(1)(2)	Alternate Director for Mr. Guillermo Martínez Barros		1961		2013

(1) Independent director pursuant to Peruvian regulations.

(2) Carlos Saco Vértiz is an alternate director.

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The following sets forth selected biographical information for each of the members of Interseguro’s board of directors.

Felipe Morris Guerinoni, See “–General–Board of Directors”.

Juan Carlos Vallejo Blanco, has served as one of Interseguro’s directors since 2012. In addition, Mr. Vallejo is the General Manager and director of Supermercados Peruanos, and serves as a director of InRetail Pharma, Tiendas Peruanas, Homecenters Peruanos, Real Plaza, Quicorp, Mifarma S.A.C., Financiera OH! S.A. and Inmobiliaria Milenia S.A. Mr. Vallejo received a bachelor’s degree in industrial engineering from the Universidad de Chile and a master’s degree in business administration from INCAE Business School in Costa Rica.

Carlos Tomás Rodríguez Pastor Persivale, See “–General–Board of Directors.”

Ramón José Vicente Barúa Alzamora, See “–Interbank–Board of Directors.”

Raul Musso Vento, has served as one of Interseguro’s directors since 2000 and is currently the Chief Executive Officer of Industrias Electro Químicas S.A. Mr. Musso served as a director of Urbi Mercados S.A. from 1999 to 2000, as the General Manager of LP Holding S.A. from 1998-1999 and as the Vice-President of Bankers Trust Company. Mr. Musso received a bachelor’s degree in Economics from the Universidad del Pacífico and a master’s degree in Economics from the University of Pittsburgh.

Fernando Martín Zavala Lombardi, See “–General–Board of Directors”.

Luis Felipe Castellanos López Torres, See “–General–Executive Officers”

Guillermo Martínez Barros, See “–General–Board of Directors”.

Carlos Saco Vértiz Tudela, has served as an alternate director of Interseguro’s since 2004. Mr. Saco-Vértiz has also served as a director of Financiera OH! S.A., Tiendas Peruanas S.A., Supermercados Peruanos S.A. and Homecenters Peruanos S.A. Mr. Saco-Vértiz received a law degree from the Pontificia Universidad Católica del Perú and graduated from the Senior Management Program (PAD) of the Universidad de Piura.

Executive Officers

The business address of Interseguro’s executive officers is Avenida Pardo y Aliaga No. 634, San Isidro, Lima 27, Peru. The following table sets forth certain information about Interseguro’s executive officers.

Name	Position	Year of Birth		Year Appointed
Gonzalo José Basadre Brazzini	Chief Executive Officer		1970		2012
Juan Carlos Motta Flores	Vice President, Operations		1963		2011
Christian Stockholm Barrios	Chief Financial and Administration Officer		1970		2017
Martin Hurtado Castillo	Chief Investment Officer		1974		2016
Francisco Vásques León	Vice President, Commercial Division		1977		2019
Patricia Conterno Martinelli	Vice President, Digital Development and Analytics		1980		2018

Gonzalo José Basadre Brazzini, See “–General–Executive Officers”.

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Juan Carlos Motta Flores, serves as Interseguro’s Vice President of Operations and Actuarial Studies since 2011. Before joining Interseguro, was the Chief Executive Officer at Penta Seguros de Vida-Penta Hipotecario in Chile for ten years, and previously as Technical Manager at Consorcio Nacional de Seguro, also in Chile. Mr. Motta holds a bachelor’s degree in economics and a master’s degree in Economics from Universidad Catolica de Chile.

Christian Stockholm Barrios, serves as Interseguro’s Chief Financial and Administration Officer since 2017. Mr. Stockholm holds a degree in economics from Universidad del Pacifico, a master’s degree in Finance from Universidad del Pacifico and a master’s degree in information technology from Pontificia Universidad Catolica Del Peru. Before joining Interseguro, Mr. Stockholm served as Chief Financial Officer at Sura Asset Management Peru, and previously as Chief Financial Officer at AFP Integra. Mr. Stockholm has also served as board member of Invita Seguros.

Martin Hurtado Castillo, serves as Interseguro’s Chief Investment Officer since 2016. Prior to joining Interseguro, Mr. Hurtado was a Partner at Capia Servicios Financieros, a local M&A Boutique. He also worked as a Manager – Real Estate Strategy at Urbanova Inmobiliaria (Grupo Breca). He has also served as a Partner in Banco Brasil Plural (Sao Paolo, Brasil) and as a Securities Analyst at Invesco’s Global Real Estate Securities Division (Dallas, Texas). Mr. Hurtado holds a bachelor’s degree in economics from Universidad de Lima and a master’s degree in business administration from University of Texas at Austin.

Francisco Vásques León, serves as Interseguro’s Commercial Vice President since 2016. Previously, Mr. Vásquez served as Commercial Division Manager of Life Annuities. Before joining Interseguro, Mr. Vásquez worked as Corporate Sales Manager at Invita Seguros. Mr. Vásquez holds a bachelor’s degree in economics from Universidad Ricardo Palma and a Master in Business Administration from Universidad de Piura. Mr. Vásquez recently completed a Global Leadership Program at the Kellogg School of Management at Northwestern University.

Patricia Conterno Martinelli, serves as Vice President of Digital Development and Analytics since 2018. Previously, Mrs. Conterno served as Strategy and Digital Development Manager, Bancassurance Sales Manager, and Marketing and Commercial Development Manager. Before joining Interseguro, Mrs. Conterno served as Project Manager at Expedia and as Strategy Consultant at Bain & Company in London. She holds a bachelor’s degree in economics from the Universidad del Pacífico, and a master’s degree in business administration from the Wharton School of Business at the University of Pennsylvania.

Inteligo

Board of Directors

Inteligo’s board of directors consists of three members, none of whom are independent. The business address of Inteligo’s board of directors is Calle 50 con Elvira Méndez, Piso 48 (P.H. Tower Financial Center), Panama City, Panama. The following table sets forth certain information about Inteligo’s directors as of the date of this prospectus.

Name	Position	Year of Birth		Year Appointed
Roberto Hoyle McCallum	Chairman		1949		2014
Carlos Rodríguez Pastor Persivale	Vice President		1959		2007
Ramón José Vicente Barúa Alzamora	Director—Secretary—Treasurer		1946		2006

The following sets forth selected biographical information for each of the members of Inteligo’s board of directors.

Roberto Hoyle McCallum, served as Chairman of Inteligo Group since February 2014. He also serves as Chairman of Inteligo Bank Ltd., Chairman of Instituto Cultural Peruano Norteamericano (ICPNA), Chairman of Corporacion Infinito, Director of Inteligo Sociedad Agente de Bolsa S.A., Director of Bolsa de Valores de Lima, Director of inPeru, Director of Vida Peru, Director of Yatch Club Peruano, former director and member of the

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executive committee of Camara de Comercio de Lima, former Chairman of the Bolsa de Valores de Lima, former Chairman of inPeru and former member of the Executive Committee of FIAB (Federación Iberoamericana de Bolsas). Mr. Hoyle has over 45 years of experience in international banking. He received a bachelor’s degree in business administration and completed the Management Executive Program and the executive master’s degree in business administration of the Universidad de Piura.

Carlos Rodríguez Pastor Persivale, See “–General–Board of Directors”.

Ramón José Vicente Barúa Alzamora, See “–Interbank–Board of Directors”.

Executive Officers

The business address of Inteligo’s executive officers is Calle 50 con Elvira Méndez, Piso 48 (P.H. Tower Financial Center), Panama City, Panama. The following table sets forth certain information about Inteligo’s executive officers.

Name	Position	Date of Birth		Year Appointed
Reynaldo Roisenvit Grancelli	Chief Executive Officer		1969		2014
Bruno Ferreccio Del Río	Deputy CEO		1976		2017
Mario Caballero Rosazza	Chief Financial Officer		1979		2017
Victor Vinatea Cámere	Chief Operations Officer		1962		2017
Gianina Gutuzzo Oliva	General Counsel		1975		2016

Reynaldo Roisenvit Grancelli, has served as Inteligo Group’s Chief Executive Officer since February 2014. He also serves as Inteligo SAB’s Chief Executive Officer and Director of Inteligo Bank since 2003. Mr. Roisenvit is also director of the Lima Stock Exchange, member of the Investment Committee of Interseguro, member of Corporate Governance Committees of Inteligo Bank and Director of CAVALI. He previously served as Deputy CEO of Inteligo SAB, Chief of Research of Interfip Bolsa, CEO of Interfip Bolsa, Products Manager of Private Banking at Interbank and Portfolio Manager of Global Investment Advisory Group at the Compass Group, in New York. Mr. Roisenvit received a bachelor’s degree in economics from the Universidad de Lima and a master’s degree in business administration from Columbia Business School.

Bruno Ferreccio Del Río, has served as Inteligo’s Deputy CEO since April 2017. He also serves as Inteligo Bank’s Chief Executive Officer since May 2019. Previously, he served as Chief Commercial Officer since December 2015. In addition, he served as Inteligo’s Chief Financial Officer and as Inteligo SAB’s Financial Vice President since April 2014. Before joining Inteligo in June 2010 as Inteligo SAB’s Financial Manager and Chief of Products, Mr. Ferreccio was the Vice President of Futures and Derivates in Commodities at AAKOP LLC in New York, and Resident Engineer of HV S.A. CONTRATISTAS in Peru. He received a bachelor’s degree in civil engineering from the University of Texas, Austin, a master’s degree in business administration from the University of Michigan and completed the General Management Program at Harvard Business School.

Mario Caballero Rosazza, has served as Inteligo’s Chief Financial Officer since September 2017. Before joining Inteligo, he served as Finance Director at Cilag Gmbh International in Switzerland and EMEA Controller at Biosense Webster in Belgium, both companies are part of Johnson & Johnson. He received a bachelor’s degree in economics from Universidad del Pacifico and a master’s degree in business administration from Oxford University.

Victor Vinatea Cámere, has served as Inteligo’s Chief Operations Officer since 2017. Mr. Vinatea has more than 30 years of banking experience. Before joining Inteligo, Mr. Vinatea held management positions in commercial and retail banking as well as in operations at different banking institutions in Peru. He has been director of La Fiduciaria and Intertítulos. Mr. Vinatea received a degree in business administration from ESAN and holds a Master in Business and Administration in Direction from INCAE and Universidad Adolfo Ibañez and has participated in international seminars related to banking at Harvard Business School.

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Gianina Gottuzo Oliva, has served as Inteligo’s General Counsel since 2016. She has also served as General Counsel of InRetail Perú Corp. and Legal Counsel of Intercorp Peru from 2010 to 2016. Mrs. Gotuzzo was previously a Senior Associate of Hernández & Cía. Mrs. Gotuzzo was a professor of corporate law at Pontificia Universidad Católica del Peru for seven years, where she received her law degree in 1999. Mrs. Gotuzzo holds an LL.M. from Cornell University and was admitted to the New York Bar in 2002.

Compensation

IFS

Our articles of incorporation provide that our shareholders are responsible for determining the compensation to be paid to members of our board. In 2018, annual compensation to board members of IFS and subsidiaries totaled S/1,925,000. In 2018, the executive officers of IFS and subsidiaries received compensation from us and our subsidiaries of S/22,295,000.

None of our directors or any of the directors of our subsidiaries have entered into any service contracts with our company or our subsidiaries providing for benefits upon termination of their employment.

Share Ownership by Directors and Senior Management

Except as described under “Principal Shareholders”, none of our directors or senior management beneficially owns our common shares other than three directors and three senior executives of IFS, who own a        % interest in IFS.

Executive Long-Term Incentive Plan

We have not adopted a definitive executive long-term incentive plan. Following the consummation of the offering, however, we anticipate that our board of directors will consider alternatives for the implementation of an executive long-term incentive plan with a view toward adopting a plan or plans suitable for IFS, subject to necessary approvals.

Neither we nor our subsidiaries set aside any amounts to provide pension, retirement or similar benefits to our directors or members of our administrative, supervisory or management bodies.

Corporate Governance

As a foreign private issuer, we are subject to different corporate governance requirements than those followed by a U.S. company with shares listed on the NYSE that follow NYSE listing standards. With certain exceptions, foreign private issuers are permitted to follow their home country corporate governance standards.

We are registered with the SMV and although there is no legal obligation to comply with Peruvian corporate governance practices, we are required to report our degree of compliance with Peruvian corporate governance practices for Peruvian publicly-held companies to the SMV. Because we are not subject to Panamanian securities laws as we have not offered any securities in Panama and because general corporate law in Panama does not impose any meaningful restrictions on our corporate governance, a comparison to Panamanian corporate governance practices is not applicable. Additionally, we have adopted a set of additional corporate governance guidelines as contemplated by the U.S. Sarbanes-Oxley Act of 2002 and our articles of incorporation, which include the establishment of:

• principles and duties relating to the conduct of our management, including as with respect to confidentiality and conflicts of interest;

• internal accounting controls systems;

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• an audit committee; and

• a code of business conduct and ethics.

The following is a comparison between our corporate governance policies under Peruvian law and those of the NYSE listing standards.

NYSE Standards	Our Corporate Governance Practices
Director Independence. A majority of the board of directors must be independent, except in the case of a “controlled” issuer. §303A.01 of the NYSE Listed Company Manual	Our articles of incorporation provide for a minimum of three members for our board of directors. Currently, our board of directors is composed of seven members.
	The criteria for determining independence under our corporate governance standards has been defined in accordance with Rule 10A-3 under the Exchange Act.
Executive Sessions. Non-management directors must meet regularly in executive sessions without management. Independent directors should meet alone in an executive session at least once a year. §303A.03 of the NYSE Listed Company Manual	Under our articles of incorporation and applicable laws non-management directors are not required to meet in executive sessions without management.
NYSE Standards	Our Corporate Governance Practices
Audit committee. An audit committee satisfying the requirements of Rule 10A-3 under the Exchange Act. §303A.06 of the NYSE Listed Company Manual	We are in the process of establishing our audit committee. Once formed our audit committee will comply with the criteria set forth under our “Audit Committee Charter”, the rules of the NYSE and Rule 10A-3(b)(1) of the Exchange Act, each as applicable to foreign private issuers.
Audit committee additional requirements. §303A.07 of the NYSE Listed Company Manual requires that an audit committee must consist of at least three members, each of whom are financially literate and at least one of whom is a financial expert, and that the audit committee have a written charter outlining the committee’s responsibilities.	We are in the process of forming our audit committee. Once formed we expect our audit committee to comply with the criteria set forth under our “Audit Committee Charter”, the rules of the NYSE and Rule 10A-3(b)(1) of the Exchange Act, each as applicable to foreign private issuers.
Nominating/corporate governance committee. A nominating/corporate governance committee of independent directors is required. The committee must have a charter specifying the purpose, duties and evaluation procedures of the committee. §303A.04 of the NYSE Listed Company Manual	We do not have a nominating/corporate governance committee. Our board of directors has the power to establish such a committee in the future on the terms that it deems fit.
Compensation committee. A compensation committee of independent directors is required. The committee must approve executive officer compensation and must have a charter specifying the purpose, duties and evaluation procedures of the committee. §303A.05 of the NYSE Listed Company Manual	We do not have a compensation committee. Our Board of Directors may establish a compensation committee in the future on the terms it deems appropriate.
Code of Ethics. A code of business conduct and ethics are required, as is disclosure of any waiver for directors or executive officers. §303A.10 of the NYSE Listed Company Manual	We have adopted a code of business conduct and ethics, as contemplated by the NYSE. Our board of directors has the obligation to verify compliance with the provisions of such code.

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Board Committees

Audit Committee

We are in the process of establishing our audit committee. Once formed our audit committee will comply with the criteria set forth under our “Audit Committee Charter”, the rules of the NYSE and Rule 10A-3(b)(1) of the Exchange Act, each as applicable to foreign private issuers. Some or all of the members of our audit committee will be independent under Rule 10A-3 under the Exchange Act upon listing on the NYSE and one we expect to be a financial expert in accordance with NYSE rules. Our audit committee oversees our corporate accounting and financial reporting process. Immediately prior to the closing of this offering, the audit committee will be responsible for:

• reviewing our financial statements;

• evaluating our internal controls and procedures, and identifying deficiencies;

• recommending to our annual shareholders’ meeting the appointment of our external auditors, determining their compensation, retention and oversight, and resolving any disagreement that may arise between management and our external auditors;

• evaluating the Company’s compliance with the Board of Director’s internal regulation, as well as with general principles of corporate governance;

• informing our board of directors regarding any issues that arise with respect to the quality or integrity of our financial statements, our compliance with legal or regulatory requirements, the performance and independence of the external auditors, or the performance of the internal audit function;

• establishing procedures for the reception, retention and treatment of complaints regarding accounting, internal controls or other auditing matters, including the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;

• independently engaging its own counsel and any other advisers it deems necessary to fulfill its functions; and

• establishing policies and procedures to pre-approve audit and permissible non-audit services.

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PRINCIPAL SHAREHOLDERS

Our only outstanding equity securities are our common shares. As of March 31, 2019, IFS had issued 113,110,864 common shares, of which 84,519,971 were registered in CAVALI. As of March 31, 2019 (the most recent practicable date), 556,783 common shares registered in CAVALI were held by 28 U.S. citizens and/or residents in the United States.

The following table sets forth the record and beneficial ownership of our common shares before the offering and after the offering, with respect to each seller in this offering or other shareholders known to us to own 5% or more of our outstanding common shares, as of                , 2019, assuming no exercise of the underwriters’ option to purchase additional common shares and assuming exercise of the underwriters’ option to purchase additional common shares in full.

	Common Shares Owned Before the Offering					Common Shares Owned After the Offering (Assuming no Exercise of the Option)				Common Shares Owned After the Offering (Assuming Exercise of the Option in full)
Shareholders	Number of Shares		Percentage owned			Number of Shares	Percentage owned			Number of Shares	Percentage owned
Intercorp Perú Ltd. (1)(2)		84,063,793		74.3	%				%				%
Shares owned by Interbank and IFS (3)		2,418,754		2.1	%				%				%
Other Directors and Officers (4)		155,410		0.1	%				%				%
Float		26,472,907		23.4	%				%				%
Total		113,110,864		100.0	%			100.0	%			100.0	%

(1) International Financial Group Holdings, Inc. (“IFH”), representing 77.3% of the voting rights of Intercorp Peru and the right to appoint four of the five directors of Intercorp Peru, has entered into an irrevocable proxy agreement (the “Irrevocable Proxy Agreement”) appointing Carlos Rodriguez Pastor Persivale, George Pastor and Anne Marie See (the “Agents”) as its agents, acting by majority vote, with respect to any matters relating to IFH’s ownership interest in Intercorp Peru, including, among other matters, any Intercorp Peru’s shareholder votes and decisions pertaining to the purchase or sale of shares in Intercorp Peru (and through Intercorp Peru, Intercorp Peru’s interest in IFS). The three Agents are siblings. The initial period of the Irrevocable Proxy Agreement will be two years, automatically renewable for six month periods unless otherwise terminated upon 90 days’ notice. As a result, the three Agents are deemed to beneficially own all of Intercorp Peru’s beneficial ownership in us.

(2) IFH Capital Corp. and Intercorp Capital Investments Inc. are the record holders of 9,747,706 and 9,747,707 respectively of our common shares, or 8.6% each, and are both wholly-owned subsidiaries of Intercorp Peru and therefore Intercorp Peru beneficially owns their shares.

(3) When calculating our earnings per share, these shares are not accounted for as they are deemed treasury shares for accounting purposes.

(4) Excluding Carlos Rodriguez Pastor Persivale.

Selling Shareholders

Intercorp Peru is a selling shareholder in the offering. Interbank is also a seller. Our subsidiary Interbank’s shares being offered correspond to the current balance of IFS’ shares that Interbank has been acquiring since 2009.

The address of Interbank is Av. Carlos Villarán 140, 5^th Floor, La Victoria, Lima 13, Peru, and Intercorp Peru’s address is Av. Carlos Villarán 140, 17^th Floor, La Victoria, Lima 13, Peru.

Voting Rights

All of our shareholders have the same voting rights per common share. See “Description of Common Shares.”

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RELATED PARTY TRANSACTIONS

In the ordinary course of business, we and our subsidiaries, Interbank, Interseguro and Inteligo, engage in a variety of transactions among ourselves and with certain of our affiliates and related parties. All material transactions between us or our subsidiaries and our other affiliates or related parties are evaluated by our senior management and our board in accordance with specific regulations and internal rules applicable to all third-party transactions. These transactions are subject to prevailing market conditions and transfer pricing regulations.

Interbank extends loans to related parties, including its executive officers and directors and executive officers and directors of our affiliates, in accordance with Peruvian law and regulations established by the SBS. According to the SBS, loans to related parties cannot be made on more favorable terms than those offered to the public, with the exception of mortgage loans granted to workers for housing purposes. As a result, all related-party loans have been made in the ordinary course of business, on an arm’s-length basis and on substantially the same terms, including with respect to interest rates and collateral, as those prevailing at the time for comparable transactions offered to the public. In addition, related-party loans do not involve greater collection risk nor present other features unfavorable to Interbank as compared to loans offered to the public. Peruvian law and SBS regulations also set forth limitations on the amount of credit loans that may be extended to related parties based on Article 201 and Article 202 of the Peruvian Banking and Insurance Law. The law establishes that the total amount of loans to be extended to directors, employees and close relatives of any such persons may not exceed 7.0% of the bank’s regulatory capital. All loans extended to any director or employee of the company (including close relatives of such person) may not exceed 0.35% of the regulatory capital (i.e., 5.0% of the overall 7.0% limit discussed above).

In addition, under Article 202 of the Peruvian Banking and Insurance Law, no loans extended to related parties or affiliates may exceed 30.0% of a bank’s regulatory capital. Under these laws, related-party borrowers include any corporation holding, directly or indirectly, 4.0% or more of a bank’s shares, such bank’s directors, certain of its principal executive officers or other persons affiliated with such bank’s management or any individual or entity that is deemed to have a significant influence in its operations.

Peruvian regulations also set forth limits on the investments of insurance companies. Pursuant to SBS regulations, the aggregate amount of investments that Interseguro may have with any member of its economic group cannot exceed 7.0% of its technical obligations, being that any excess will be considered as non-eligible investment.

Furthermore, under Peruvian law, board members and executive officers of Interbank and Interseguro, may not (i) receive loans (in money or goods) from the company unless approved by the board of directors, (ii) use for their own benefit, the company’s assets, services or credits unless approved by the board of directors, (iii) disclose or use, inappropriately, for their own benefit, privileged information, and (iv) participate in any corporate decision that presents a conflict of interest with the company. In all cases, the execution of agreements that involve at least 5.0% of the assets of the company with persons or entities related to directors, managers or shareholders that own, directly or indirectly, more than 10.0% of the share capital requires the prior authorization of the board of directors (with no participation of the director(s) involved in the transaction, if any). In addition, the execution of agreements with a party controlled by the company’s controlling shareholder requires the prior authorization of the board of directors and an evaluation of the terms of the transaction by an external independent company (audit companies or other evaluator to be determined by the SMV).

According to the regulations of the Central Bank of The Bahamas, Inteligo Bank related party transactions are subject to a prudential norm of 25% its capital.

For additional information about loans, including tabular disclosure, to, and certain other transactions with, related parties and affiliates including directors and officers, see Note 28 to our audited annual consolidated financial statements.

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In the normal course of our operations, related party transactions are evaluated in accordance with Peruvian banking and securities regulations, as described in this section. These transactions are subject to prevailing market conditions and transfer pricing regulations. We and our subsidiaries have a number of such transactions with our parent company, subsidiaries of our parent company, affiliates pursuant to the criteria of the SBS and other related parties. See “Presentation of financial and other information—Certain definitions” for a brief description of a number of these parties. For additional information including tabular disclosure, about loans, to, and certain other transactions with, related parties and affiliates including directors and officers, see Note 28 to our audited annual consolidated financial statements.

IFS

Investment in InRetail Perú Corp.

Since 2012, IFS held 2,396,920 shares from InRetail Perú Corp. a subsidiary of Intercorp, valued at U.S.$37.00 per share, as of March 31, 2019, which had an aggregate value of U.S.$85.57 million.

Interbank

Lease Agreements between Interbank and Supermercados Peruanos

In December 2003, Interbank and Supermercados Peruanos, a subsidiary of Intercorp, entered into a master area assignment agreement, as amended, pursuant to which Supermercados Peruanos agreed to grant a lease for 1,000 square meters of floor space in favor of Interbank, at U.S.$80.00 plus taxes per square meter per month for the first five years (2004-2009); U.S.$ 92.00 plus taxes for the following five years (2009-2014); and U.S.$113.3 plus taxes, for the last five years (2014-2019) of the term of the agreement. The agreement expires on October 1, 2019. Under the terms of the agreement, the Supermercados Peruanos granted to Interbank, for a term of 15 years, the right to use an area in its supermarkets for the operation of its stores. Interbank made an advanced payment of U.S.$8 million to be applied to the monthly rental payments, and a security deposit of U.S.$2 million also to be applied, among others, as warranty of the payment of the monthly consideration.

In September 2009, Interbank and Supermercados Peruanos entered into a second amendment to the agreement, pursuant to which Supermercados Peruanos agreed to grant a lease 1,038 square meters of additional floor space, corresponding to areas in new supermarkets, at U.S.$80 per square meter per month in favor of Interbank, plus taxes. Interbank made an advanced payment of U.S.$6.0 million, to be applied to the first 80 monthly rental payments.

Loan Agreement between Interbank and GTP Inversionistas S.A.C.

In May 2017, Interbank and GTP Inversionistas S.A.C. an affiliate, pursuant to the criteria of the SBS, entered into a loan agreement under which Interbank disbursed to the latter U.S.$32.6 million for the indirect acquisition of 24.95% of the capital stock of Universidad Tecnológica del Perú S.A.C. (“UTP”). The loan was granted for a term of five years to be repaid in five annual payments with an effective annual interest rate of 7.875%. The collateral granted consisted on a pledge agreement of 24.95% of the capital stock of UTP. The total outstanding debt for such loan amounts to U.S.$30.2 million, as of March 31, 2019.

Leasing Agreements with Supermercados Peruanos

Interbank and Supermercados Peruanos, a subsidiary of Intercorp, have entered into several leasing agreements whereby Interbank leased real estate property, machinery and equipment to Supermercados Peruanos. The total outstanding debt for such leasing agreements amounts to S/ 115.6 million, as of March 31, 2019.

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Loan Agreement with Supermercados Peruanos

On September 27, 2018, Interbank and Supermercados Peruanos entered into a medium-term loan agreement under which Interbank granted a loan for up to S/95 million to be paid in 28 installments at a monthly interest rate of 5.85%. The total outstanding debt for such loan amounts to S/92.5 million as of March 31, 2019.

Leasing Agreements with Homecenters Peruanos

Interbank and Homecenters Peruanos S.A. (“HPSA”), a subsidiary of Intercorp, have entered into several leasing agreements whereby Interbank leased machinery and equipment to HPSA. The total outstanding debt for such leasing agreements amounts to S/61 million, as of March 31, 2019.

Loan Agreements with Nessus Hoteles Perú

Interbank and Nessus Hoteles Perú S.A. an affiliate, pursuant to the criteria of the SBS, have entered into two secured term loans for up to U.S.$33.4 million. The total outstanding debt for such loans amounts to U.S.$29.4 million consisting of U.S.$17.3 million at an interest rate of 4.8% and U.S.$12.1 million at Libor + 2.86%, as of March 31, 2019. The collateral granted consisted on mortgage over real estate properties and a trust agreement over cash flows.

Loan Agreement with InRetail Pharma

Interbank and InRetail Pharma, a subsidiary of Intercorp, have entered into a syndicated secured loan agreement for up to S/161.9 million due on April 2025. The total outstanding debt for such loan amounts to S/144.6 million at an interest rate of 4.7%, as of March 31, 2019. The collateral granted consisted on mortgage over real estate properties and personal guarantees (fianzas solidarias) granted by several of its subsidiaries.

Credit facilities with San Miguel Industrias PET S.A.

Interbank and San Miguel Industrias Pet S.A. an affiliate, pursuant to the criteria of the SBS, have entered into several credit facilities, including as of March 31, 2019 (i) a secured term loan for up to S/9.9 million at an interest rate of 5.44% due in September 2021 and (ii) a trade loan for up to U.S.$5 million at an interest rate of 5.44% due in May 2019. As of March 31, 2019, no payments had been made by San Miguel Industrias Pet S.A. The collateral granted for the secured term loan consisted on a mortgage over real estate properties.

As of May 30, 2019, the terms and conditions of the trade loan noted in (ii) above were amended so that the interest rate is 4.25% and the loan is due in September 2019.

Loan Agreement with UTP

In September 2018, Interbank and UTP, a subsidiary of Intercorp, entered into a loan agreement under which Interbank disbursed to the latter S/80 million at an interest rate of 6.9%. The loan was granted for a term of seven years, which included two years of grace period. The collateral granted consisted on mortgage over real estate properties and assignment of surface rights.

Loan Agreement with Colegios Peruanos

In September 2016, Interbank and Colegios Peruanos S.A. (“CPSA”), a subsidiary of Intercorp, entered into a loan agreement under which Interbank disbursed to the latter S/50 million, S/25 million at an interest rate of 10.35% and S/25 million was disbursed by COFIDE through a participation agreement at an interest rate of 10.5%. The entire amount remains outstanding as of March 31, 2019. The loan was divided into two tranches,

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one having a term of eight years and six months including a three-year grace period, and the other having a term of fifteen years with a four-year grace period. The collateral granted consisted on mortgages over real estate properties and trusts agreements over assets and cash flows.

Credit Facility with Intercorp Peru Ltd.

As of March 31, 2019, Interbank granted several loans to Intercorp Peru Ltd., our parent company, for S/130.0 million and U.S.$11.8 million at an interest rate of 7.0%, due in May 2019.

As of December 31, 2018, Interbank granted several loans to Intercorp Peru. Ltd., our parent company, for a total of S/65.0 million, all due in May 2019.

As of May 30, 2019, all loans have been repaid.

Interseguro

Agreements with Colegios Peruanos S.A.

In September 2016, Interseguro and CPSA, a subsidiary of Intercorp, signed a usufruct agreement for a period of 20 years, according to which Interseguro granted in usufruct the property located in Trujillo, Peru in favor of CPSA, in order for CPSA to operate a school under the commercial name of “Innova School”. Interseguro will construct the building in four stages; each stage will be carried out of a period of one year. The first stage was completed in April 2017. Currently, CPSA pays Interseguro a monthly rent which amounts to S/57,983 before taxes, adjusted annually by 3% plus 9.1% on the total investment accumulated on the date incurred by Interseguro on the property.

In October 2017, Interseguro and CPSA signed a usufruct agreement for a period of 25 years, according to which Interseguro leased the property located in Cusco, Peru, in order to operate a school under the commercial name of “Innova School”. Interseguro constructed the building, which was completed in January 2018. In April 2018, CPSA began paying Interseguro a monthly rent. The rent amounts to S/116,038 before taxes, adjusted annually by 3% plus 9.3% on the total investment accumulated on the date incurred by Interseguro on the property.

Agreements with Homecenters Peruanos

In November 2012, HPSA, a subsidiary of Intercorp, and Hebraica Asociación Cultural Deportiva y Social (“Hebraica”) signed a surface right agreement according to which Hebraica granted a surface right in favor of HPSA over the commercial space located in Ate, Lima. In October 2015, HPSA assigned its contractual position to Interseguro. In April 2016, Interseguro and HPSA entered into a 30-year usufruct agreement, according to which HPSA was granted in usufruct the property, in order to operate a home improvement store under the commercial name of “Promart”. The monthly lease payment under agreement since January 2017, is comprised of a payment of S/164,744 before taxes, adjusted annually by 3%, and the payment made by Interseguro to Hebraica for the surface right agreement that both parties signed in October 2015.

In July 2017, Interseguro and HPSA signed a usufruct agreement for a period of 30 years, according to which Interseguro granted in usufruct the property located in Ica, Perú, in order to operate a home improvement store under the commercial name of “Promart”. Interseguro constructed the building, and works finished in December 2018. Currently, Homecenters Peruanos pays Interseguro a monthly rent equivalent to (i) 9.4% of the total investment accumulated on the date incurred by Interseguro on the property before taxes which is adjusted annually by 3%, and (ii) S/98,889 plus corresponding VAT, adjusted annually by 3%.

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Agreements with UTP

In April 2016, Seguros Sura (company absorbed by Interseguro) and UTP, a subsidiary of Intercorp, signed a usufruct agreement for a period of 30 years, according to which Seguros Sura granted in usufruct the property located in San Juan de Lurigancho, Lima, Peru, in order for UTP to operate a campus under the commercial name of “UTP”. Seguros Sura constructed the building, and works finished in May, 2017. As of that date, UTP pays Seguros Sura a monthly rent ascending to S/268,221 before taxes, adjusted quarterly according to CPI variation. On March 28, 2018, the merger agreement between Interseguro and Seguros Sura became effective, and as of that date, Interseguro receives the payment of the monthly rent.

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DESCRIPTION OF COMMON SHARES

The following summary provides material information concerning our common shares and briefly describes significant provisions of our pacto social (articles of incorporation) and Panama corporate law.

General

As of the date of this prospectus, our authorized capital consists of U.S.$150,000,000 common shares, and our issued capital consists of 113,110,864 outstanding common shares, with no par value, issued at U.S.$9.72 per common share. All of our common shares are fully paid and non-assessable. Non-residents of Panama may hold and vote shares.

Dividend and Liquidation Rights

Payment of dividends is proposed by our board of directors and authorized by our shareholders at a general meeting of the shareholders. According to Panama’s Corporation Law (Law 32 of 1927), dividends may be paid to our shareholders from the net earnings or profits of the company or from the surplus of its assets over its liabilities, but not otherwise. In accordance with Article 37 of Panama’s Corporation Law, we may declare and may pay out dividends on the basis of the amount actually paid on partially paid shares of stock. Since we are not subject to payment of Panamanian income tax, dividends payable by us are not subject to a Panamanian income or dividend tax nor to any Panamanian withholding tax. See “Taxation—Panamanian Taxation”.

Upon our liquidation, our shareholders would be entitled to receive proportionately any assets remaining after payment of our debt, taxes and liquidation expenses.

Shareholders’ Meetings and Voting Rights

Pursuant to Panamanian corporate law, general meetings of shareholders, whether ordinary or extraordinary, shall be held in the Republic of Panama, unless the articles of incorporation or bylaws of the corporation shall provide for such meetings to be held elsewhere.

Our articles of incorporation provide that general meetings of shareholders, whether ordinary or extraordinary, may be held in any place or country. Meetings of shareholders shall be held at such dates and in such places as our board of directors shall determine. However, the general shareholders’ meeting must be held on an annual basis during the four months following the closing of the Company’s fiscal year. Extraordinary meetings may be called by the board of directors or by the president, whenever they deem convenient. Furthermore, an extraordinary general meeting of shareholders must be called by the board of directors or the president whenever so requested in writing by one or more shareholders representing at least 20% of all our shares issued and outstanding. Pursuant to Article 420 of the Commercial Code (Código de Comercio) of Panama, one or more shareholders whose shares represent at least one twentieth of the share capital, if the Articles of Incorporation or the Statutes (Estatutos) do not grant this right to shareholders with less representation, can request a judicial call for a shareholders’ meeting.

Only such matters that have been included in the notice of meeting may be dealt with at the extraordinary general meeting of shareholders.

Notice of any general meeting of shareholders, whether ordinary or extraordinary, shall be given at least five days and not more than 60 days prior to the date of the meeting by publishing the notice once in a newspaper of general circulation in the city of Panama, Republic of Panama.

Action is taken at ordinary meetings on the following matters: the approval of the management carried out by our directors, the approval of the annual accounts from the previous fiscal year, the application of the

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previous fiscal year’s income or loss, the election of the members of our board of directors and the determination of their remuneration, the election of the president of the Company, the designation of our external auditors or their appointment by our board of directors, when necessary, and any other matter within the powers of the shareholders as set forth in our articles of incorporation as included in the agenda approved by the board of directors for each shareholders meeting.

Action is taken at extraordinary meetings on the following matters: the removal of members of the Board of Directors and the appointment of their replacements, the amendment of the by-laws, the increase or reduction of share capital, the issuance of obligations, the agreement on the disposal, in a single act, of assets which accounting value exceeds 50% of the registered share capital of the company, the arrangement of investigations and special audits, the agreement on the transformation, merger, division, reorganization or dissolution of the company, as well as its liquidation, or any other matter within the powers of the shareholders specified in the agenda.

Our articles of incorporation further provide that shares have the same rights and privileges and, except for the provisions regarding the election of directors, in which the articles of incorporation provides for cumulative voting, each shall have one vote. Only holders of common shares are entitled to attend general meetings of shareholders.

The shareholders may be counted as present and may vote at any meeting either by way of their legal representatives or by way of proxies appointed by public or private document, with or without the power of substitution.

Our articles of incorporation provide that, on the first call of any ordinary or extraordinary general shareholders’ meeting, the presence in person or by proxy of shareholders representing at least one-half plus one of the shares issued and outstanding will constitute a quorum. If on the first call a quorum is not present, the meeting can be reconvened through a second call, at which meeting a quorum shall be obtained with the number of shareholders present or represented therein.

All resolutions of a general meeting of shareholders shall be adopted by the affirmative vote of a shareholder or shareholders representing one-half plus one of the shares present, except those enumerated hereunder, for which the affirmative vote of one-half plus one of the shares issued and outstanding shall be necessary: (a) to amend the articles of incorporation; (b) to issue obligations for more than 50% of the registered capital of the Company; (c) to encumber or pledge the property of the Company to secure obligations of others for an amount exceeding 50% of the registered capital of the Company as the same has been determined by the external auditors of the company; (d) to approve mergers with other corporations; (e) to dissolve or liquidate the company or spin-off assets; and (f) to remove the directors of the Company from office.

In the election of members of the board of directors, each shareholder shall be entitled to cast a number of votes equal to the number of shares held by or for him, multiplied by the number of directors to be elected, it being understood that such shareholder may cast all his/her votes for a single candidate, or distribute them among the total number of directors to be elected or among two or more thereof, as he/she may deem appropriate.

According to provisions of Panama corporate law, a resolution passed in a shareholders’ meeting is binding on all shareholders, but in no case can a vote of the majority deprive the shareholders of vested rights or impose upon them a resolution of any kind inconsistent with the corporation’s constitutive documents, except as provided by law. Any shareholder shall be entitled to protest against resolutions passed in a general meeting of shareholders in violation of the law, the articles of incorporation or the bylaws, and may sue in a competent court to have the same annulled. Within a peremptory 30 days, if requested by the plaintiff, and should the court deem the matter urgent, a judge may stay the execution of the resolution until the petition has been adjudged. Such a stay of execution shall not be ordered if the shareholder upon suing does so by ordinary proceedings.

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Shareholder Suits

Under Panama corporate law, directors shall not be personally liable for the obligations of the company, but they shall be individually or severally liable, as the case may be, to the company and to third parties for the effectiveness of payments, which appear as having been made by the shareholders, the existence of the dividends declared, the sound management of the company’s accounting and, in general, for the wrongful execution or poor performance of their mandate or the violation of laws, the articles of incorporation, the by-laws or resolutions of the general shareholders’ meeting. Such directors as may have protested within proper time against the resolutions of the majority, or those who have not been present at the meeting with justifiable cause, shall be exempt from liability.

Our articles of incorporation state that we shall indemnify and hold our directors and officers harmless with respect to any action, judicial expense, loss, damage or cost which they may incur or suffer as a consequence of acts or omissions in the performance of their duties, and neither of them will be liable for any acts, omissions, or negligence of the other directors and/or officers, except in the case of the gross negligence or inexcusable wrongdoing by the director or officer.

Registration and Transfers

Our shares are indivisible. Joint holders of one share must designate a single person to exercise their shareholders’ rights, but they are jointly and severally liable to us for all the obligations flowing from their status as shareholders, such as the payment of any pending capital calls.

Shares represented shall be transferable on the books of the corporation but in no case shall the transfer of stock be binding on the corporation unless it shall have been registered in the corporation’s books.

If a shareholder is indebted to the Company, its right to transfer his shares may be limited until such indebtedness is paid. But in all cases the transferor and the transferee shall be jointly liable for the payment of the amounts owed to the company by virtue of the shares so transferred.

Restrictions on Foreign Investment

Panama does not restrict foreign currency movements and foreign investments. Foreign investors may freely invest in shares of Panamanian companies as well as transfer invested capital, capital gains and dividends out of Panama without limitation (subject to applicable taxes).

Preemptive Rights and Increase of Share Capital

Our articles of incorporation state that our shareholders do not have a preferential right to subscribe shares issued pursuant to a capital increase, nor do they have a first option or preferential right to purchase or acquire shares that any of our other shareholders may wish to sell or otherwise dispose of.

Reporting Requirements

Since our shares are not registered with the Panamanian SMV or listed on the Panamanian stock exchange, agreements adopted with respect to the acquisition or disposition of our shares do not need to be reported to any Panamanian regulatory agency, provided that such transfers are not made in violation of Panama’s securities laws and regulations.

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MARKET INFORMATION

Market Price of Our Common Shares

Our Shares

Our common shares are registered in the Public Registry of Securities held with the SMV and are listed on the Lima Stock Exchange under the symbol “IFS”. Computershare Investor Services will act as our transfer agent for the offering of our common shares.

On April 30, 2019, the closing price of IFS on the Lima Stock Exchange was U.S.$44.10 per common share. As of April 30, 2019 our shares represented approximately 3.21% of the General Index of the Lima Stock Exchange (IGBVL) 2019 portfolio. As of December 31, 2018, the most recent practicable date, Intercorp Peru Ltd. held 57.08% of our common shares directly, and 17.24% indirectly through subsidiaries Intercorp Capital Investments Inc. and IFH Capital Corp.

The following table sets forth for the five most recent full years the high and low closing prices of our common shares on the Lima Stock Exchange.

	High		Low
	(in U.S.$)
2014		33.1		28.2
2015		30.4		22.5
2016		32.5		20.0
2017		39.7		31.4
2018		43.5		37.0

Source: FactSet.

The following table sets forth for each quarter of the two most recent years the high and low closing prices of our common shares on the Lima Stock Exchange.

	High		Low
	(in U.S.$)
2017:
First quarter		33.4		31.4
Second quarter		34.6		31.5
Third quarter		37.0		33.8
Fourth quarter		39.7		34.9
2018:
First quarter		42.8		38.4
Second quarter		43.5		39.0
Third quarter		42.4		38.6
Fourth quarter		42.0		37.0
2019:
First quarter		47.2		44.1

Source: FactSet.

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The following table sets forth for each of the months in 2019 the high and low closing prices in U.S. dollars of our common shares on the Lima Stock Exchange.

	High		Low
	(in U.S.$)
2019:
January		46.0		41.5
February		46.2		43.7
March		47.2		44.0
April		47.2		44.1
May		46.5		44.0

Source: FactSet.

Trading in the Peruvian Securities Market

Lima Stock Exchange

As of December 31, 2018, there were 273 companies listed on the Lima Stock Exchange. Established in 1970, the Lima Stock Exchange is Peru’s only securities exchange.

Trading on the Lima Stock Exchange is primarily done on an electronic trading system that became operational in August 1995. From the first Sunday of November through the second Sunday of March of each year, trading hours are Monday through Friday (except holidays) as follows: 9:00 a.m.–9:30 a.m. (pre-market ordering); 9:30 a.m.–3:52 p.m. (trading); 3:52 p.m.–4:00 p.m. (after-market sales); and 4:02 p.m.–4:10 p.m. (after-market trading). At all other times, trading hours are from Monday to Friday (except holidays) as follows: 8:20 a.m.-8:30 a.m. (pre-market ordering); 8:30 a.m.–2:52 p.m. (trading); 2:52 p.m.–3:00 p.m. (after-market sales); and 3:02 p.m.–3:10 p.m. (after-market trading).

Substantially all of the transactions on the Lima Stock Exchange are traded on the electronic system. Transactions during the electronic sessions are executed through brokerage firms and stock brokers on behalf of their clients. Brokers submit orders in the order in which they are received. The orders must specify the type of security as well as the amount and price of the proposed sale or purchase. In order to control price volatility, the Lima Stock Exchange imposes a 15 minute suspension on trading when the price of a security varies on a single day by more than 15% for Peruvian companies and 30% for non-Peruvian companies.

Certain information regarding trading on the Lima Stock Exchange is set forth in the table below:

	(S/ in millions)
	2014		2015		2016		2017		2018
Market capitalization (1)		360,840		309,004		416,167		526,354		479,301
Volume		16,395		11,063		15,307		29,123		20,208
Average daily trading volume		65		45		62		117		81

Source: Bolsa de Valores de Lima Annual Reports.

(1) End-of-period figures for trading on the Lima Stock Exchange.

The stock market capitalization of companies listed on the Lima Stock Exchange was U.S.$142.4 billion at the end of 2018, compared to U.S.$162.4 billion, U.S.$124.0 billion and U.S.$90.7 billion at the end of 2017, 2016 and 2015, respectively.

Total market volume in 2018 was U.S.$6.2 billion, reflecting a 30.8% decrease compared to 2017. Equity market volume, which represented 55.1% of total market volume, ended the year at U.S.$3.4 billion,

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46.1% less than the previous year. The fixed income market, which represented 33.7% of total market volume, reported volume of U.S.$2.1 billion, reflecting an increase of 8.2%. The repo market, which represented 11.3% of total market volume, reported volume of U.S.$694 million for the year ended December 31, 2018, reflecting a decrease of 0.6% compared to the corresponding period in 2017.

The total number of operations in the market in 2018 decreased by 28.3%, closing the year at 113,828 operations. The number of operations in the equity market in 2018 declined by 30.6% amounting to 102,503 operations.

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DIVIDENDS AND DIVIDEND POLICY

We are a holding company and, as such, our ability to pay dividends is subject to the ability of our subsidiaries to pay dividends to us.

Our annual dividend is proposed by our board of directors and approved at our annual ordinary meeting of shareholders, in accordance with our dividend policy which for year 2019 consists of distributing to shareholders at least twenty per cent (20%) of any profit earned for the relevant year. Dividends are paid to shareholders who held common shares as of the record date preceding the date set for payment of the dividend. The shares go ex-dividend two business days prior to the record date. Dividends are declared and paid in U.S. dollars.

IFS’ dividends for the fiscal years ended December 31, 2018, 2017 and 2016 were U.S.$197.2 million (S/ 654.5 million), U.S.$157.7 million (S/ 510.7 million) and U.S.$146.5 million (S/475.8 million) and will be paid in May of 2019, 2018, and 2017 respectively. Dividend per share amounted to U.S.$1.75, U.S.$1.40 and U.S.$1.30 for fiscal years 2018, 2017 and 2016, respectively.

Interbank

Interbank’s dividends are proposed annually by its board of directors and are subject to approval by the general shareholders’ meeting of Interbank. Current dividend policy establishes that Interbank will pay dividends of at least 20% of its net profits in 2019, 2020 and 2021. Dividend distributions depend on several factors, including (1) approval by Interbank’s shareholders of the proposal to distribute dividends, (2) Interbank’s earnings, (3) Interbank’s capital expenditure program, (4) capital and legal reserve requirements, and (5) prevailing market conditions. For the fiscal years ended 2018, 2017, 2016, Interbank declared and distributed as dividends approximately 50% of its distributable income (net income minus the required legal reserves which may be up to 10% of net profit).

Dividends are declared based on Interbank’s financial statements prepared under SBS GAAP. The following table shows Interbank’s distribution of net profit for the three fiscal years ended December 31, 2018, 2017 and 2016 under SBS GAAP.

	For the fiscal years ended December 31,
	2018		2017		2016
	(S/ in millions)
Net profit		1,040.1		902.0		875.1
Reserves		103.8		90.2		87.5
Capitalized earnings		467.0		405.9		393.7
Dividends		467.0		405.9		393.7

Interseguro

Interseguro’s dividends are proposed annually by its board of directors and are subject to approval by the general shareholders’ meeting. Current dividend policy establishes that Interseguro will pay as dividends at least 30% of its net profits attained in any given year. Dividend distributions depend on several factors, including (1) approval by Interseguro’s shareholders of the proposal to distribute dividends, (2) Interseguro’s earnings, (3) Interseguro’s capital expenditure program, (4) capital and legal reserve requirements, and (5) prevailing market conditions.

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The following table shows Interseguro’s distribution of net profit for the three fiscal years ended December 31, 2018, 2017 and 2016 under SBS GAAP.

	For the fiscal years ended December 31,
	2018		2017		2016
	(S/ in millions)
Net profit		361.1		103.7		85.8
Reserves		100.0		16.3		25.9
Capitalized earnings(1)		—		63.5		74.1
Dividends		138.0		100.0		42.5

(1) Includes capitalization of earnings net of accumulated losses.

Inteligo

Inteligo Bank’s dividends are proposed annually by its board of directors and are subject to approval by the general shareholders’ meeting. Dividend distributions depend on several factors, including (1) approval by Inteligo’s shareholders of the proposal to distribute dividends, (2) Inteligo Bank’s earnings, (3) Inteligo Bank’s capital expenditure program, and (4) prevailing market conditions.

The following table shows Inteligo Bank’s distribution of net profit and dividends for the three fiscal years ended December 31, 2018, 2017 and 2016 under IFRS.

	For the fiscal years ended December 31,
	2018		2017		2016
	(S/ in millions)
Net profit		184.7		189.6		172.1
Dividends		134.9		150.7		135.9

For additional information regarding risks that could materially adversely affect our ability to pay dividends, see “Risk Factors—Risks Relating to Our Business—We are a holding company, and all of our operations are conducted by our subsidiaries. Our ability to pay dividends to you will depend on the ability of our subsidiaries to pay dividends to us”.

For additional information regarding taxation of dividends, see “Taxation—Peruvian Tax Considerations” and “Taxation—United States Federal Income Tax Considerations—Distributions”.

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TAXATION

The following discussion summarizes the material Peruvian, U.S. federal and Panamanian income tax consequences of acquiring, holding and disposing of our shares.

This discussion is not a comprehensive discussion of all the tax considerations that may be relevant to a decision to purchase our shares and is not applicable to all categories of investors, some of which may be subject to special rules, and does not specifically address all of the Peruvian, U.S. federal and Panamanian income tax considerations applicable to any particular holder. It is based upon the tax laws of Peru, the United States and Panama as in effect on the date of this prospectus, which are subject to change, possibly with retroactive effect, and to differing interpretations. Each prospective purchaser is urged to consult its independent tax advisor about the particular Peruvian, U.S. federal and Panamanian income tax consequences to it of an investment in our shares.

Peruvian Tax Considerations

The following summary of certain Peruvian tax matters as in force on the date of this prospectus describes the principal tax consequences of an investment in our common shares or the beneficial interest therein by non-Peruvian shareholders. This summary is not intended to be a comprehensive description of all of the tax considerations that may be relevant to a decision to make an investment in our common shares or the beneficial interest therein. In addition, it does not describe any tax consequences: (a) arising under the laws of any taxing jurisdiction other than Peru or (b) applicable to anyone different from a non-Peruvian shareholder.

For purposes of this section, “non-Peruvian shareholder” means either: (i) a legal entity which has neither been incorporated nor established in Peru, provided that it does not conduct any trade or business through a permanent establishment in Peru or holds our shares or the beneficial interest therein through a Peruvian branch or (ii) an individual who is not a Peruvian tax resident. For Peruvian tax purposes, an individual is deemed to be a Peruvian tax resident if such individual is (a) a Peruvian citizen who has a regular residence in Peru, or (b) a non-Peruvian citizen who has resided or remained in Peru for more than 183 calendar days during any 12-month period. The change on the condition of residence will be effective as of January 1 of the following calendar year in which such conditions are met.

The discussion in this summary is not intended or written to be used, and cannot be used or relied upon by any person, for the purpose of avoiding Peruvian taxation, and was written to support the promotion or marketing of this offering. Prospective investors should consult an independent tax advisor with respect to the Peruvian tax consequences of participating.

Peruvian Income Tax

Payment of Dividends

Dividends paid by legal entities incorporated in Peru are subject to a Peruvian withholding tax at a 5% rate. Our Peruvian subsidiaries are required to act as withholding agent for any income tax due with respect to dividends on their shares. We have not agreed to assume the withholding payments nor pay additional amounts so that the non-Peruvian shareholder of our common shares or the beneficial interest therein receives an amount equal to the sum it would have received had no such deductions or withholdings been made.

Dividends paid on our common shares will not be subject to a Peruvian withholding.

Sale of our common shares

As a general rule, under the current Peruvian income tax laws and regulations, proceeds received by a non-Peruvian shareholder on the sale, exchange or disposition of our common shares will not be subject to any

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Peruvian withholding or capital gains tax, since our common shares are deemed to be issued by a legal entity not incorporated in Peru.

However, capital gains accrued and received by a non-Peruvian shareholder on the sale, exchange or disposition of our common shares will be subject to Peruvian income tax at a 30% rate if such transaction consists of an indirect transfer of shares issued by a Peruvian entity (“Peruvian shares”). An indirect transfer of Peruvian shares takes place in the transfer of the shares of a non-Peruvian entity that owns, directly or indirectly, shares of a Peruvian company provided that the following conditions are met:

(i) the fair market value of the Peruvian shares, whether owned directly or indirectly by the foreign parent company, is equal to 50% or more of the fair market value of the capital stock issued by the foreign parent entity at any time during the 12-month period prior to the transfer; and,

(ii) in any 12-month period, 10% or more of the shares issued by the foreign parent company are transferred.

Applicable regulations provide specific rules to determine the fair market value and cost of the stock issued by the foreign parent entity.

There is a rebuttable presumption that both conditions are met if the foreign parent company whose shares are transferred resides in a low-tax, zero-tax or un-cooperative jurisdiction pursuant to Peruvian legislation.

An indirect transfer of Peruvian shares also takes place in the transfer of the shares of a non-Peruvian entity that owns, directly or indirectly, shares of a Peruvian company provided the aggregate amount of the Peruvian shares being indirectly transferred by the transferor and its related parties in any 12-month period reaches or exceeds 40,000 Tax Units (the applicable Tax Unit for fiscal year 2019 is equal to S/4,200). This new rule is effective as from January 1, 2019 and applies irrespective if conditions (i) and (ii) abovementioned are not met.

A 5% preferential rate would be applicable if (i) such shares are registered with the SMV; and (ii) such sale is performed through trading sessions (rueda de bolsa) of the Lima Stock Exchange.

A further tax exemption would be applicable provided (i) such shares are registered with the SMV; (ii) such sale is performed through trading sessions (rueda de bolsa) of the Lima Stock Exchange, (iii) such shares have a stock market presence as of the transfer date (ensuring share liquidity and continuous price quotations); and (iv) the transferor and its related parties have not transferred 10% or more of the aggregate shares issued by the foreign parent company in any 12-month period. This tax exemption is set to expire in its entirety on December 31, 2019.

Value added tax

Dividends resulting from the shares issued by our Peruvian subsidiaries are not subject to Peruvian Value Added Tax (Impuesto General a las Ventas, or “VAT”).

The sale, exchange or disposition of shares issued by our Peruvian subsidiaries is not subject to VAT.

Financial Transaction Tax

Deposits in and withdrawals from accounts held in Peruvian banks or other financial institutions, whether in soles or foreign currency, are levied with a financial transactions tax (“FTT”) at a 0.005% rate. Therefore, FTT will be levied on the price paid for and the dividends resulting from the shares issued by our Peruvian subsidiaries if deposited in or withdrawn from a Peruvian bank or other financial institution, as the case may be.

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United States Federal Income Tax Considerations

The following discussion is a summary of certain material U.S. federal income tax consequences of acquiring, owning and disposing of our common shares. Except where otherwise noted, this discussion applies only to U.S. Holders (as defined below) of our common shares that hold such shares as “capital assets” (generally, property held for investment). This discussion is based on the Internal Revenue Code of 1986, as amended (the “U.S. Code”), its legislative history, existing final, temporary and proposed U.S. Treasury regulations, administrative pronouncements by the Internal Revenue Service (the “IRS”) and judicial decisions, all as of the date hereof and all of which are subject to change (possibly on a retroactive basis) and to different interpretations.

This discussion does not purport to address all U.S. federal income tax consequences that may be relevant to a particular holder and holders are urged to consult their own tax advisors regarding their specific tax situations. The discussion does not address the tax consequences that may be relevant to holders subject to special tax rules, including, for example:

• insurance companies;

• tax-exempt organizations;

• dealers in securities or currencies;

• traders in securities that elect the mark to market method of accounting with respect to their securities holdings;

• banks or other financial institutions;

• partnerships or other pass-through entities or arrangements for U.S. federal income tax purposes;

• U.S. Holders whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

• real estate investment trusts or regulated investment companies;

• persons that, directly or indirectly, hold 10% or more of our stock by vote or value;

• U.S. expatriates; or

• persons for whom the common shares may form part of a hedge, straddle, conversion or other integrated transaction.

Further, this discussion does not address the U.S. federal estate and gift tax, or alternative minimum tax consequences, or the Medicare tax on net investment income, or any state, local and non-U.S. tax consequences of acquiring, owning and disposing of the common shares.

As used herein, the term “U.S. Holder” means a beneficial owner of the common shares that is, for U.S. federal income tax purposes:

• an individual who is a citizen or resident of the United States;

• a corporation, or any other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

• an estate the income of which is subject to U.S. federal income tax regardless of its source; or

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• a trust if (i) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect under current U.S. Treasury regulations to be treated as a U.S. person.

If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the common shares, the tax treatment of the partnership and a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Such partner or partnership should consult its own tax advisor as to its consequences of acquiring, owning and disposing of the common shares.

Except where specifically described below, this discussion assumes that we are not a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. Please see the discussion under “—Passive Foreign Investment Companies” below.

Distributions

Subject to the discussion below under “—Passive Foreign Investment Companies,” distributions of cash or property (other than our common shares, if any, distributed pro rata to all of our shareholders) paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) with respect to our common shares, including the net amount of any tax withheld on the distribution, will be includible in gross income as ordinary dividend income on the date on which the U.S. Holder receives the distributions. To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits as determined for U.S. federal income tax purposes, such excess amounts will be treated first as a nontaxable return of capital to the extent of such U.S. Holder’s tax basis in our common shares and, thereafter, as capital gain. We do not intend to maintain calculations of our earnings and profits under U.S. federal income tax principles. Unless and until these calculations are made, distributions should be presumed to be taxable dividends for U.S. federal income tax purposes. As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes.

A dividend paid in a non-U.S. currency will be includible in the gross income of a U.S. Holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day the dividend is received by the U.S. Holder, regardless of whether the payment is in fact converted to U.S. dollars. If a dividend paid in a non-U.S. currency is converted into U.S. dollars on the day the dividend is received by the U.S. Holder, the U.S. Holder generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is included in the gross income of a U.S. Holder through the date such non-U.S. currency is converted into U.S. dollars (or otherwise disposed of) generally will be treated as U.S. source ordinary income or loss. U.S. Holders should consult their own tax advisors regarding the treatment of foreign currency exchange gain or loss, if any, with respect to non-U.S. currency received by the U.S. Holder which is not converted into U.S. dollars on the date of receipt.

Dividends paid to corporate U.S. Holders with respect to our common shares will not be eligible for the dividends received deduction allowed to corporations under the U.S. Code. Dividends received by certain non-corporate U.S. Holders with respect to the common shares will be subject to U.S. federal income tax at preferential rates if the dividends constitute “qualified dividend income” for U.S. federal income tax purposes. Dividends paid on the common shares will be treated as qualified dividend income if (i) the common shares are readily tradable on an established securities market in the United States, (ii) the U.S. Holder satisfies certain holding period and other requirements and (iii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a PFIC.

We have applied to have the common shares listed on the NYSE, and we expect that the common shares will qualify as readily tradable on an established securities market in the United States if they are so listed.

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Moreover, as discussed below under “—Passive Foreign Investment Companies,” we believe that we will not be treated as a PFIC for U.S. federal income tax purposes with respect to our 2018 and current taxable year, and we do not anticipate becoming a PFIC in the future. However, there can be no assurance in this regard because the PFIC determination is made annually and is based on the portion of our assets (including goodwill) and income that is characterized as passive under the PFIC rules and our continued qualification for an exception to the PFIC rules for certain foreign banks and insurance companies.

Subject to generally applicable limitations and conditions under the U.S. Code (including a minimum holding period requirement), any non-U.S. income tax withheld from dividends may be treated as a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability. Dividends paid on our common shares generally will constitute foreign source income, and for purposes of calculating the foreign tax credit, as “passive category income,” for most U.S. Holders. Alternatively, a U.S. Holder may be able to deduct foreign income taxes paid with respect to dividends on our common shares against its taxable income, assuming such U.S. Holder does not take a credit for any foreign income taxes paid or accrued during the taxable year and certain other conditions are met. U.S. Holders should consult their own advisors concerning the implications of these rules in light of their particular circumstances.

Sale, Exchange or Other Taxable Disposition of our Common Shares

Subject to the discussion below under “—Passive Foreign Investment Companies,” gain or loss realized by a U.S. Holder on the sale, exchange or other taxable disposition of our common shares generally will be capital gain or loss and generally will be long-term capital gain or loss if our common shares have been held for more than one year. The amount of gain or loss realized will be the difference between (i) the amount realized on the sale, exchange or other taxable disposition of our common shares over (ii) the U.S. Holder’s adjusted tax basis in such common shares, in each case determined in U.S. dollars. A U.S. Holder’s adjusted tax basis in a common share generally will equal the cost of the common share to the U.S. Holder. Long-term capital gain realized by certain U.S. Holders (including individuals) generally is eligible for favorable rates of U.S. federal income tax. The deductibility of capital losses is subject to significant limitations under the U.S. Code.

Any gain or loss realized by a U.S. Holder on such a sale, exchange or other taxable disposition of our common shares generally will be treated as U.S. source income or loss for U.S. foreign tax credit purposes. If any non-U.S. income tax is withheld on such sale, exchange or other taxable disposition, a U.S. Holder generally would not be able to utilize foreign tax credits in respect of such non-U.S. income tax unless the U.S. Holder has other income from foreign sources, for purposes of the foreign tax credit limitation rules. Alternatively, a U.S. Holder may be able to deduct non-U.S. income tax paid with respect to a disposition of our common shares against its taxable income, assuming such U.S. Holder does not take a credit for any foreign income taxes paid or accrued during the taxable year and certain other conditions are met. U.S. Holders should consult their own tax advisors regarding the application of the foreign tax credit limitation rules to their investment in, and disposition of, our common shares.

Passive Foreign Investment Companies

U.S. Holders should carefully consider the discussion below regarding our potential treatment as a PFIC for U.S. federal income tax purposes.

In general, if, during any taxable year of a non-U.S. corporation, 75% or more of the corporation’s gross income consists of certain types of “passive income,” or the average value during the taxable year of the “passive assets” of the corporation (generally, assets that produce or are held for the production of passive income) is 50% or more of the average value of all of its assets, the corporation will be classified as a PFIC under U.S. federal income tax law. Passive income for this purpose generally, among other things, includes interest, dividends, royalties, rents and gains from commodities and securities transactions. Certain exceptions are provided, however, for passive income derived in the conduct of an active business.

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The PFIC provisions also contain a look-through rule under which a non-U.S. corporation shall be treated as if it received directly its proportionate share of the income and as if it held its proportionate share of the assets of any other corporation in which it owns at least 25% of the value of the stock. Under the look-through rule, we should be deemed to own a proportionate share of the assets and to have received a proportionate share of the income of our principal subsidiaries, including Interbank, Interseguro and Inteligo Bank, for purposes of the PFIC determination. As noted below, the assets and income of Interbank, Interseguro and Inteligo Bank are subject to special rules under the PFIC regime. Further, the PFIC test is performed on an annual basis and it is therefore possible that our PFIC status may change from year to year due to changes in income or asset composition.

Assets and Income of Interbank and Inteligo Bank under the PFIC Rules

The application of the PFIC rules to banks is unclear under present U.S. federal income tax law. Banks generally derive a substantial part of their income from assets that are interest-bearing or that otherwise could be considered passive assets under the PFIC rules. The IRS has issued a notice and has proposed U.S. Treasury regulations that exclude from passive income any income derived in the active conduct of a banking business by a qualifying foreign bank (the “active bank exception”). The IRS notice and proposed U.S. Treasury regulations have different requirements for qualifying as a foreign bank, and for determining the banking income that may be excluded from passive income under the active bank exception. Moreover, the proposed U.S. Treasury regulations have been outstanding since 1995 and may not be finalized in their current form. Our PFIC status may be impacted if and when these U.S. Treasury regulations are finalized.

Because final U.S. Treasury regulations have not been issued and because the notice and the proposed U.S. Treasury regulations are inconsistent in certain respects, Interbank’s, Inteligo Bank’s and (as a result) our status under the PFIC rules is subject to uncertainty. While Interbank and Inteligo Bank conduct, and intend to continue to conduct, a significant banking business, there can be no assurance that they will satisfy the specific requirements for the active bank exception under either the IRS notice or the proposed U.S. Treasury regulations. It is therefore possible that a significant portion of the assets and income of Interbank or Inteligo Bank may be treated as passive.

Assets and Income of Interseguro under the PFIC Rules

While passive income generally includes interest, dividends, annuities and other investment income, the PFIC rules provide that income “derived in the active conduct of an insurance business by a qualifying insurance corporation” is not treated as passive income. A qualifying insurance corporation is a foreign corporation (i) which would be taxable as an insurance company if it were a U.S. corporation and (ii) the applicable insurance liabilities of which constitute more than 25% of its total assets, as determined for financial reporting purposes. Additionally, if a corporation meets the first prong of this test, but not the second, a U.S. Holder can still elect to treat the corporation as a qualifying insurance company if at least 10% of its assets are applicable insurance liabilities and it meets certain alternative facts and circumstances tests. Under these tests, the corporation must be predominantly engaged in an insurance business and the failure to meet the 25% test described above must be due solely to run-off related or rating-related circumstances involving such insurance business. Proposed U.S. Treasury regulations were issued in 2015 that provide guidance about the definitions of “active conduct” and “insurance business.” However, they will not become effective until finalized, and they were not finalized in 2017, when the active insurance income exception was changed to its current form. We expect, for purposes of the PFIC rules, that Interseguro will meet the requirements to be considered a qualifying insurance corporation. No assurance can be provided, however, that changes in Interseguro’s business operations or in the application of U.S. federal income tax law, including the finalization of the proposed U.S. Treasury regulations, will not affect the ability of Interseguro to qualify for the active insurance income exception.

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Consequences of PFIC Status

Although the matter is not free from doubt, based on our current expectations regarding our subsidiaries meeting the PFIC exceptions discussed above, the value and nature of the assets of our subsidiaries, the sources and nature of the income of our subsidiaries, relevant market and shareholder data and our current business plans, we believe that we will not be treated as a PFIC for U.S. federal income tax purposes with respect to our 2018 and current taxable year and we do not anticipate becoming a PFIC in the future. If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our common shares, such a U.S. Holder would be subject to special rules (and may be subject to increased tax liability) with respect to (a) any gain realized on the sale or other disposition of our common shares, and (b) any “excess distribution” made by us to the U.S. Holder (generally, any distribution during a taxable year in which distributions to the U.S. Holder on our common shares exceed 125% of the average annual distributions the U.S. Holder received on the shares during the preceding three taxable years or, if shorter, the U.S. Holder’s holding period for the shares). Under those rules, (a) the gain or excess distribution would be allocated ratably over the U.S. Holder’s holding period for our common shares, (b) the amount allocated to the taxable year in which the gain or excess distribution is realized and to taxable years before the first year in which we became a PFIC would be taxable as ordinary income, (c) the amount allocated to each prior year in which we were a PFIC would be subject to U.S. federal income tax at the highest tax rate in effect for that year and (d) the interest charge generally applicable to underpayments of U.S. federal income tax would be imposed in respect of the tax attributable to each prior year in which we were a PFIC. In addition, in the event that we are classified as a PFIC, similar rules would apply to “excess distributions” or gains with respect to subsidiary PFICs held directly or indirectly by us (“Lower-tier PFICs”), even if the proceeds are not distributed to our shareholders. A U.S. Holder generally will be required to file IRS Form 8621 if it holds our common shares in any year in which we are classified as a PFIC.

A U.S. Holder may be able to mitigate these tax consequences by electing mark to market treatment for its common shares, provided the relevant shares constitute “marketable stock” as defined in U.S. Treasury regulations. Our shares will be “marketable stock” if they are “regularly traded” on a “qualified exchange or other market” within the meaning of the U.S. Treasury regulations. We have applied to have our common shares listed on the NYSE, and we expect that our common shares will qualify as regularly traded on a qualified exchange or other market if they are so listed. No assurance can be given, however, that our common shares will be considered regularly traded on a qualified exchange or other market. A U.S. Holder electing the mark to market regime generally would, during any year in which we are treated as a PFIC, compute gain or loss at the end of such year as if the shares had been sold at fair value. Any gain recognized by the U.S. Holder under the mark to market election, including on an actual sale, would be treated as ordinary income, and the U.S. Holder would be allowed an ordinary deduction for any decrease in the value of shares as of the end of any taxable year and for any loss recognized on an actual sale, but only to the extent, in each case, of previously included mark to market income not offset by previously deducted decreases in value. Any loss on an actual sale of shares would be a capital loss to the extent in excess of previously included mark to market income not offset by previously deducted decreases in value. A U.S. Holder’s tax basis in shares would increase or decrease by gain or loss taken into account under the mark to market regime.

A mark to market election under the PFIC rules applies to all future years of an electing U.S. Holder during which the shares are regularly traded on a qualifying exchange or other market, unless revoked with the IRS’s consent. A mark to market election under the PFIC rules with respect to shares would not apply to a Lower-tier PFIC, and a U.S. Holder would not be able to make such a mark to market election in respect of its indirect ownership interest in that Lower-tier PFIC. Consequently, U.S. Holders of shares could be subject to the PFIC rules with respect to income of the Lower-Tier PFIC the value of which already had been taken into account indirectly via mark to market adjustments.

A U.S. Holder may in certain circumstances mitigate the adverse tax consequences of the PFIC rules by filing an election to treat the PFIC as a qualified electing fund (“QEF”). However, in the event that we are or become a PFIC, we do not intend to comply with the reporting requirements necessary to permit U.S. Holders to elect to treat us as a QEF.

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Backup Withholding and Information Reporting

Dividends paid on, and proceeds from the sale or other disposition of, our common shares that are paid to a U.S. Holder generally will be subject to the information reporting requirements of the U.S. Code and may be subject to backup withholding unless the U.S. Holder provides an accurate taxpayer identification number and makes any other required certification or otherwise establishes an exemption. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that certain required information is timely furnished to the IRS.

In addition, U.S. Holders may be required to comply with certain reporting requirements, including filing an IRS Form 8938, Statement of Specified Foreign Financial Assets, with respect to the holding of certain foreign financial assets, including stock of foreign issuers, either directly or through certain foreign financial institutions, if the aggregate value of all such assets exceeds U.S.$50,000. U.S. Holders should consult their own tax advisors regarding the application of the information reporting rules to our common shares and the application of these reporting requirements to their particular situations.

FATCA Withholding Taxes

Pursuant to sections 1471 through 1474 of the U.S. Code (provisions commonly known as “FATCA”), a “foreign financial institution” may be required to withhold U.S. tax on certain “passthru payments” made on or after the date that is two years after the date of publication in the Federal Register of applicable final regulations defining foreign passthru payments to the extent such payments are treated as attributable to certain U.S. source payments. Holders should consult their own tax advisors on how these rules may apply to their investment in the common shares. In the event any withholding under FATCA is imposed with respect to any payments on the common shares, there will be no additional amounts payable to compensate for the withheld amount.

HOLDERS OF OUR COMMON SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE U.S. FEDERAL INCOME AND OTHER TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY NON-U.S. STATE OR LOCAL TAX LAWS.

Panamanian Taxation

The following is a summary of the principal Panamanian income tax consequences resulting from the beneficial ownership and disposition of our common shares by certain persons. This summary is based on the Panamanian Tax Code of 1956, as amended, other applicable tax laws, decrees and regulations issued thereunder, and judicial and administrative interpretations thereof, all as in effect on the date hereof, and is subject to any changes in these or other laws, decrees, regulations and interpretations occurring after such date, possibly with retroactive effect. This summary is intended as a descriptive summary only and is not a complete analysis or listing of all potential Panamanian income tax consequences to purchasers of our common shares. The summary does not address the tax treatment of potential purchasers that may be subject to special income tax and withholding rules. The summary is not intended as tax advice to any particular person, nor does it purport to furnish information on the level of detail or with attention to a purchaser’s specific tax circumstances that would be provided by a purchaser’s own tax advisor. Prospective purchasers are urged to consult their own tax advisors as to the precise Panamanian and other tax consequences of acquiring, owning and disposing of our common shares.

Panamanian Income Tax Structure

Panama’s income tax regime is essentially territorial. Consequently, income tax is levied only upon income or gains derived from income deemed to arise from Panamanian sources, while income not deemed to be Panamanian source income is not subject to Panamanian income taxes.

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Taxation of Dividends

In light of the above, dividend income is not subject to income tax in Panama if the profits to which the dividends relate are not Panamanian source income. Moreover, further distributions of dividend income received by the direct shareholders of a Panamanian company to such direct shareholders’ own shareholders are not subject to income tax in Panama. Accordingly, because we are a holding company that does not perform income generating activities in Panama and our income is generated exclusively from activities outside of Panama, dividend payments made with respect to our common shares would not be subject to income tax or withholding requirements in Panama.

The offering and sale of our common shares and the use of proceeds therefrom herein described will all take place outside of Panama, and we do not intend to place, invest or economically utilize in Panama the proceeds that we will receive upon the issuance and sale of our common shares, or to conduct business activities in Panama.

Taxation of Capital Gains

Under the tax principles set forth above, because we generate income only from foreign or non-Panamanian sources, any capital gains realized by a holder of our common shares on the sale or other disposition thereof will be exempt from income or capital gains tax in Panama.

Stamp and Other Taxes

Because we are a holding company that does not perform income generating activities in Panama and our income is generated exclusively from activities outside of Panama, our common shares, and any document containing an agreement providing for the sale or disposition thereof, are not subject to stamp, registration or similar taxes, unless the respective documents shall be used before the courts or administrative authorities of Panama, in which case the stamp tax shall be paid at that time at a rate of U.S.$0.10 for each U.S.$100.00 or fraction of U.S.$100.00 of the face value of the obligations stated therein.

In light of the above, there are no sales, transfer or inheritance taxes in Panama applicable to the sale or disposition of our common shares.

Foreign Investors

Because the gains realized on the sale and disposition of our common shares are not subject to income tax in Panama as indicated above, a person domiciled outside of Panama is not required to file an income tax return in Panama solely by reason of his or her purchase or ownership of our common shares.

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UNDERWRITING

BofA Securities, Inc. and J.P. Morgan Securities LLC are acting as global coordinators and joint bookrunners for this offering, as representatives of each of the underwriters named below. Subject to the terms and conditions set forth in an underwriting agreement among us, our subsidiary Interbank the selling shareholders and the underwriters, we, Interbank and the selling shareholders have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from the selling shareholders, the number of common shares set forth opposite its name below.

Underwriter	Number of Shares
BofA Securities, Inc.
J.P. Morgan Securities LLC
Total

Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

We, Interbank and the selling shareholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers’ certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Underwriting Discounts and Commissions

The representatives have advised us, Interbank and the selling shareholders that the underwriters propose initially to offer the shares to the public at the public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of U.S.$                     per share. After the initial offering, the public offering price, concession or any other term of the offering may be changed.

The following table shows the public offering price, underwriting discount and proceeds before expenses to the selling shareholders. The information assumes either no exercise or full exercise by the underwriters of their option to purchase additional shares.

	Per Share	Without Option	With Option
Public offering price	U.S.$	U.S.$	U.S.$
Underwriting discount	U.S.$	U.S.$	U.S.$
Proceeds, before expenses, to the selling shareholders	U.S.$	U.S.$	U.S.$
Proceeds, before expenses to us (1)	U.S.$	U.S.$	U.S.$

(1) Includes proceeds to us and our subsidiary Interbank.

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The expenses of the offering, not including the underwriting discounts and commissions, are estimated at U.S.$                     and are payable by us.

Option to Purchase Additional Shares

We, Interbank and the selling shareholders have each granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to purchase additional common shares at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. We have granted the underwriters an option to purchase              additional shares, Interbank has granted the underwriters an option to purchase              additional shares and the selling shareholders have granted the underwriters an option to purchase              additional shares. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional shares proportionate to that underwriter’s initial amount reflected in the above table.

No Sales of Similar Securities

We, Interbank, the selling shareholders, our controlling shareholder and our executive officers and directors have agreed not to sell or transfer any common shares or securities convertible into, exchangeable for, exercisable for, or repayable with common shares, for 180 days after the date of this prospectus without first obtaining the written consent of BofA Securities, Inc. and J.P Morgan Securities LLC. Specifically, we and these other persons have agreed not to directly or indirectly:

• offer, sell, contract to sell, pledge or otherwise dispose of, any common shares;

• offer, sell, issue, contract to sell, contract to purchase or grant any option, right or warrant to purchase any common share;

• enter into any swap, hedge or other arrangement that, transfers in whole or in part, any of the economic consequences of ownership of any common shares;

• establish or increase a put equivalent position or liquidate or decrease a call equivalent position in any common shares within the meaning of Section 16 of the Exchange Act;

• lend or otherwise transfer any common shares; and

• publicly disclose the intention to take any such action, without, in each case, the prior consent of the representatives.

These agreements are subject to the following exceptions:

• transfers of any common shares as a bona fide gift or gifts;

• transfers or distributions of any common shares to family members, shareholders of the person or entity entering into such agreement, or a trust for the direct or indirect benefit of the person or entity entering into such agreement and/or his or her family;

• upon the death of the person entering into such agreement, transfers by the estate of such person; and

• transfer of any common shares to any business entity, investment fund or other entity that controls, is controlled by, or is under common control of the entity entering into such agreement.

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This lock-up provision applies to common shares and to securities convertible into or exchangeable or exercisable for or repayable with common shares. It also applies to common shares owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition.

BofA Securities, Inc. and J.P. Morgan Securities LLC, on behalf of the underwriters, have no current intent or arrangement to release any of the common shares or securities convertible into or exchangeable or exercisable for or repayable with common shares subject to the lock-up agreements prior to the expiration of the 180-day lock-up period. There is no contractually specified condition for the waiver of lock-up restrictions, and any waiver is at the discretion of the representatives, on behalf of the underwriters.

There are no specific criteria for the waiver of lock-up restrictions, and BofA Securities, Inc. and J.P. Morgan Securities LLC, on behalf of the underwriters, may not in advance determine the circumstances under which a waiver might be granted. Any waiver will depend on the relevant facts and circumstances existing at the time. Among the factors that BofA Securities, Inc. and J.P. Morgan Securities LLC, on behalf of the underwriters, may consider in deciding whether to release common shares or securities convertible into or exchangeable or exercisable for or repayable with common shares are the length of time before the lock-up expires, the number of common shares or securities involved, the reason for the requested release, market conditions, the trading price of our common shares, historical trading volumes of our common shares, and whether the person seeking the release is an officer, director or affiliate of our company. BofA Securities, Inc. and J.P. Morgan Securities LLC, on behalf of the underwriters, will not consider their own positions, or those of any underwriter, in our securities, if any, in determining whether or not to consent to a waiver of a lock-up agreement.

New York Stock Exchange Listing

We will apply to list our common shares on the New York Stock Exchange under the symbol “IFS”. In order to meet the requirements for listing on that exchange, the underwriters have undertaken to sell a minimum number of shares to a minimum number of beneficial owners as required by that exchange. Our common shares are also listed on the Lima Stock Exchange under the symbol “IFS”.

Before this offering, there has been no public market for our common shares in the United States. An active trading market for the shares may not develop in the United States. It is also possible that after the offering the common shares will not trade in the public market in the United States at or above the public offering price.

The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.

Price Stabilization, Short Positions and Penalty Bids

Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our common shares. However, the representatives may engage in transactions that stabilize the price of the common shares, such as bids or purchases to peg, fix or maintain that price.

In connection with the offering, the underwriters may purchase and sell our common shares in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares described above. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters

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will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the option granted to them. “Naked” short sales are sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common shares in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common shares made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common shares or preventing or retarding a decline in the market price of our common shares. As a result, the price of our common shares may be higher than the price that might otherwise exist in the open market. The underwriters may conduct these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common shares. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Electronic Distribution

In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail.

Other Relationships

Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.

In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling Restrictions

The common shares offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common shares offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

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Notice to Prospective Investors in Panama

The shares have not been, and will not be, registered for public offering in Panama with the Panamanian Superintendency of the Securities Market (Superintendencia del Mercado de Valores, previously the National Securities Commission of Panama) under Decree-Law 1 of July 8, 1999, as reformed by Law 67 of 2011 (the “Panamanian Securities Act”). Accordingly, the shares may not be offered or sold in Panama or to persons domiciled in Panama, except in certain limited transactions exempted from the registration requirements of the Panamanian Securities Act. The shares do not benefit from tax incentives accorded by the Panamanian Securities Act, and are not subject to regulation or supervision by the Panamanian Superintendency of the Securities Market as long as the shares are privately offered to no more than 25 persons domiciled in Panama and result in the sale to no more than 10 of such persons.

Notice to Prospective Investors in Peru

The information contained in this prospectus have not been and will not be registered with or approved by the SMV or the Lima Stock Exchange. Accordingly, the shares cannot be offered or sold in Peru, except in compliance with securities laws and regulations of Peru.

European Economic Area

In relation to each member state of the European Economic Area, no offer of shares which are the subject of the offering has been, or will be made to the public in that Member State, other than under the following exemptions under the Prospectus Directive:

(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(b) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the representatives for any such offer; or

(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of shares referred to in (a) to (c) above shall result in a requirement for the Company or any representative to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person located in a Member State to whom any offer of shares is made or who receives any communication in respect of an offer of shares, or who initially acquires any shares will be deemed to have represented, warranted, acknowledged and agreed to and with each representative and the Company that (1) it is a “qualified investor” within the meaning of the law in that Member State implementing Article 2(1)(e) of the Prospectus Directive; and (2) in the case of any shares acquired by it as a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, the shares acquired by it in the offer have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which the prior consent of the representatives has been given to the offer or resale; or where shares have been acquired by it on behalf of persons in any Member State other than qualified investors, the offer of those shares to it is not treated under the Prospectus Directive as having been made to such persons.

The Company, the representatives and their respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgments and agreements.

This prospectus has been prepared on the basis that any offer of shares in any Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for

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offers of shares. Accordingly any person making or intending to make an offer in that Member State of shares which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for the Company or any of the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither the Company nor the representatives have authorized, nor do they authorize, the making of any offer of shares in circumstances in which an obligation arises for the Company or the representatives to publish a prospectus for such offer.

For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (as amended) and includes any relevant implementing measure in each Member State.

Notice to Prospective Investors in the United Kingdom

In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.

Notice to Prospective Investors in Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the Company, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

Notice to Prospective Investors in the Dubai International Financial Centre

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due

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diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

United Arab Emirates

Neither the Class B ordinary shares nor the ADSs have been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of securities. Further, this prospectus does not constitute a public offer of securities in the United Arab Emirates (including foe Dubai International Financial Centre) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the Dubai Financial Services Authority.

Notice to Prospective Investors in Australia

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

Any offer in Australia of the shares may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.

The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.

This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

Notice to Prospective Investors in Hong Kong

The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

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Notice to Prospective Investors in Japan

The shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.

Notice to Prospective Investors in Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, the Non-CIS Securities were not offered or sold or caused to be made the subject of an invitation for subscription or purchase and will not be offered or sold or caused to be made the subject of an invitation for subscription or purchase, and this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Non-CIS Securities, has not been circulated or distributed, nor will it be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the Non-CIS Securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Non-CIS Securities pursuant to an offer made under Section 275 of the SFA except:

(a) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(b) where no consideration is or will be given for the transfer;

(c) where the transfer is by operation of law; or

(d) as specified in Section 276(7) of the SFA.

Brazil

The offer and sale of the ordinary shares ADSs will not be carried out by any means that would constitute a public offering in Brazil under Law 6,385, of December 7, 1976, as amended, and under CVM Rule

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(Instruccio) No. 400, of December 29, 2003, as amended. The offer and sale of the Class B ordinary shares or ADSs has not been and will not be registered with the Comisstio de Valores Mobilidrios in Brazil. Any representation to the contrary is untruthful and unlawful. Any public offering or distribution, as defined under Brazilian laws and regulations, in Brazil is not legal without such prior registration. Documents relating to the offering of the Class B ordinary shares or ADSs, as well as information contained therein, may not be supplied to the public in Brazil, as the offering of Class B ordinary shares or ADSs is not a public offering of securities in Brazil, nor may they be used in connection with any offer for sale of the Class B ordinary shares or ADSs to the public in Brazil.

Any offer of the Class B ordinary shares or ADSs is addressed to the addressee personally, upon such addressee’s request and for its sole benefit, and is not to be transmitted to anyone else, to be relied upon by anyone else or for any other purpose either quoted or referred to in any other public or private document or to be filed with anyone without the international underwriters’ prior, express and written consent.

Chile

The Class B ordinary sharers or ADSs are not registered in the Securities Registry (Registro de Valores) or subject to the control of the Chilean Securities and Exchange Commission (Superintendencia de Valores y Seguros de Chile). This prospectus and other offering materials relating to the offer of the Class B ordinary shares or ADSs do not constitute a public offer of, or an invitation to subscribe for or purchase, the Class B ordinary shares or ADSs in the Republic of Chile, other than to individually identified purchasers pursuant to a private offering within the meaning of Article 4 of the Chilean Securities Market Act (Ley de Mercado de Valores) (an offer that is not “addressed to the public at large or to a certain sector or specific group of the public”).

Notice to Prospective Investors in Colombia

The shares have not been and will not be offered in Colombia through a public offering of securities pursuant to Colombian laws and regulations, nor will they be registered in the Colombian National Registry of Securities and Issuers or listed on a regulated securities trading system such as the Colombian Stock Exchange.

Mexico

The Class B ordinary shares ¢r ADSs have not been registered with the National Securities’ Registry (Begird° Nacional de Valores)-maintained by the National Banking and Securities Commission (Comision Nacional Bancaria y de Valores or CNBV), and may not be offered or sold publicly in Mexico.

This prospectus is not intended to be publicly distributed to an undetermined person through mass media, nor to serve as an application for the registration of the Class B ordinary shares or ADSs in Mexico, nor as a prospectus for their public offering in said jurisdiction.

This prospectus is addressed to you under a private offering exception contained in article 8 of the Securities Market Law (Ley del Mercado de Valores or LMV), for which you must comply with any of the following requirements:

(i) you are either an institutional or qualified investor for purposes of Mexican law;

(ii) you are a member of a group of less than 100 individually identified people to whom the Class B ordinary shares or ADSs are being offered directly and personally; or

(iii) you are an employee of the issuer and a beneficiary of an employees’ benefit plan of said issuer.

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The LMV and CNBV regulations (along with other laws applicable in Mexico) define institutional investors as Mexican and foreign banks, broker dealers, insurance and bond companies, bonded warehouses, financial leasing companies, factoring companies and investment funds, private pension and annuities funds and foreign pension and investment funds. Such regulations also define qualified investors as individuals and corporations which maintain during the previous year investments in securities for an amount equal or similar to 1.5 million Mexican Unidades de Inversion or UDIS (approximately U.S.$330,000) or that have obtained during the previous two years a gross income of at least 500,000 UDIS (approximately U.S.$110,000) per year.

Global Coordinators and Joint Bookrunners

The addresses of the global coordinators and joint bookrunners are as follows:

BofA Securities, Inc.

One Bryant Park

New York, NY 10036

United States of America

J.P. Morgan Securities LLC

383 Madison Avenue, 6th Floor

New York, NY, 10179

United States of America

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EXPENSES OF THE GLOBAL OFFERING

We estimate that our expenses in connection with the offering, other than underwriting discounts and commissions, will be as follows:

Expenses	Amount (in U.S. dollars)	Percentage of Net Proceeds of the Offering (%)
Securities and Exchange Commission registration fee	U.S.$
New York Stock Exchange listing fee	U.S.$
Financial Industry Regulatory Authority filing fee	U.S.$
Printing expenses	U.S.$
Legal fees and expenses	U.S.$
Accountant fees and expenses	U.S.$
Miscellaneous costs	U.S.$
Total	U.S.$

The total underwriting discounts and commissions that we, Interbank and the selling shareholders are required to pay will be U.S.$                , or     % of the gross proceeds of the offering. All amounts in the table are estimated except the Securities and Exchange Commission registration fee, The New York Stock Exchange listing fee and the Financial Industry Regulatory Authority (FINRA) filing fee.

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VALIDITY OF SECURITIES

The validity of the common shares and other matters governed by Panamanian law will be passed upon for us by Arias, Aleman & Mora and for the underwriters by Arias, Fabrega & Fabrega. Certain matters governed by U.S. law will be passed upon for us by Shearman & Sterling LLP, New York, New York, and for the underwriters by Simpson Thacher & Bartlett LLP, New York, New York. Certain matters governed by Peruvian law will be passed upon for us by J&A Garrigues Perú S. Civil de R.L and for the underwriters by Miranda & Amado Abogados.

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EXPERTS

The consolidated financial statements as of December 31, 2018, 2017 and January 1, 2017, and for each of the three years ended December 31, 2018, 2017 and 2016 appearing in this prospectus have been audited by Paredes, Burga & Asociados Sociedad Civil de Responsabilidad Limitada (“EY-Peru”), a member firm of Ernst & Young Global Limited, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in auditing and accounting.

Prior to the engagement of EY-Peru, as the independent registered public accounting firm for IFS under the standards of the Public Company Accounting Oversight Board (“PCAOB”), EY-Peru provided non-audit services related to the ethics lines for a subsidiary and common control (“sister”) affiliates of IFS. These services involved EY-Peru receiving information when an employee or other party seeks to report potential unethical situations, illegal acts or policy violations, and passing all the information received (with EY-Peru applying no filter or sanitization to the information) to the respective Ethics Committees for the subsidiary or sister affiliates, which are composed solely of members of management. EY-Peru’s role was limited to receiving and transmitting anonymously information to the Ethics Committees to maintain confidentiality of the reporter. EY-Peru had no involvement with, or made management decisions in regard to, a reported matter after transmitting such information. None of the potential matters reported to the ethics lines administered by EY-Peru related to IFS’ internal control over financial reporting or individuals in a financial reporting oversight or accounting role, or impacted IFS’ financial statements. These services were permissible under home country independence standards; however, such administrative services are prohibited under the U.S. Securities and Exchange Commission (“SEC”) and PCAOB independence rules as they are treated as non-allowed management function services. These services have been terminated. The total fees collected for the services were not material to EY-Peru or IFS.

After careful consideration of the facts and circumstances and the applicable independence rules, EY-Peru has concluded that (i) the aforementioned matters do not impair its ability to exercise objective and impartial judgment in connection with its audit of the consolidated financial statements of IFS; and (ii) a reasonable investor with knowledge of all relevant facts and circumstances would conclude that EY-Peru has been and is capable of exercising objective and impartial judgment on all issues encompassed within its audit of the consolidated financial statements of IFS. Management and its Board of Directors concurred with EY-Peru’s conclusion.

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WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement (including amendments and exhibits to the registration statement) on Form F-1 under the Securities Act. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit. Each statement regarding a contract, agreement or other document is qualified in its entirety by reference to the actual document.

Upon completion of this offering we will be subject to the informational requirements of the Exchange Act, that are applicable to foreign private issuers. Accordingly, we will be required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. You may inspect and copy the reports and other information to be filed with the SEC at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington D.C. 20549. Copies of the materials may be obtained from the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. In addition, the SEC maintains an Internet website at http://www.sec.gov, from which you can electronically access the registration statement and its materials.

As a foreign private issuer, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act. For example, we are not required to prepare and issue quarterly reports. However, we will be required to file annual reports on Form 20-F within the time period required by the SEC, which is currently four months from December 31, the end of our fiscal year. In addition, as a foreign private issuer, we are not subject to the proxy rules under Section 14 of the Exchange Act and our officers and directors will not be subject to Section 16 of the Exchange Act relating to insider short-swing profit disclosure and recovery regime.

We will file financial statements and other periodic reports with the SMV in Peru. Issuers of securities registered with the SMV are required to disclose material information relating to the issuer. Pursuant to the Securities Market Law and relevant regulations enacted thereunder, all material information in connection with the issuer of registered securities, its activities or securities issued or secured by such issuer which may influence the liquidity or price of such securities must be disclosed. Accordingly, issuers must file with the SMV mainly two types of information: (a) financial information, including unaudited interim financial statements on a quarterly basis (which are not required to be subject to limited review), and audited annual consolidated financial statements on an annual basis, and (b) material information relating to the issuer and its activities that may significantly affect the price, offering or negotiation of the issued securities, and in general, all the information that may be relevant for investors to be able to make investment decisions.

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ENFORCEABILITY OF CIVIL LIABILITIES

We are a sociedad anónima (corporation) organized and existing under the laws of Panama. Substantially all of our directors, officers and certain of the experts named herein reside outside the United States, and all or a substantial portion of our and their assets are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons, including with respect to matters arising under the federal securities laws of the United States, or to enforce against such persons or against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States.

We will appoint Corporation Service Company (“CSC”) as our agent upon whom process may be served in connection with any proceeding in the United States. CSC’s offices are located at 1180 Avenue of the Americas, Suite 210, New York, New York 10036.

Peru

We have been advised by our Peruvian counsel, J&A Garrigues Perú S. Civil de R.L., that there is uncertainty as to the enforceability, in original actions in Peruvian courts, of liabilities predicated upon U.S. to federal securities cases, and that any final and conclusive judgment for a fixed and final sum obtained against us in any foreign court having jurisdiction in respect of any suit, action or proceeding against us for the enforcement of any of our respective obligations under the federal securities laws of the United States or under this prospectus will, upon request, be deemed valid and enforceable in Peru through an exequatur judiciary proceeding (which does not involve the reopening of the case), provided that: (1) there is a treaty in effect between the country where said foreign court sits and Peru regarding the recognition and enforcement of foreign judgments; or (2) in the absence of such a treaty, the original judgment is recognized by the Peruvian courts (Cortes de la República del Perú) under such exequatur proceeding, subject to the provisions of the Peruvian Civil Code and the Peruvian Civil Procedure Code. Such recognition and enforceability will occur provided that the following conditions and requirements are met:

• the foreign judgment does not resolve matters under the exclusive jurisdiction of Peruvian courts (and the matters contemplated in respect of this prospectus are not matters under the exclusive jurisdiction of Peruvian courts);

• such foreign court had jurisdiction under its own private international conflicts of law rules and under general principles of international procedural jurisdiction;

• we received service of process in accordance with the laws of the place where the proceeding took place, were granted a reasonable opportunity to appear before such foreign court and were guaranteed due process rights;

• the foreign judgment has the status of res judicata as defined in the jurisdiction of the court rendering such judgment;

• no pending litigation in Peru between the same parties for the same dispute was initiated before the commencement of the proceeding that concluded with the foreign judgment;

• the judgment is not incompatible with another judgment that fulfills the requirements of recognition and enforceability established by Peruvian law, unless such foreign judgment was rendered first;

• the judgment is not contrary to Peruvian public policy (orden público) or good morals (buenas costumbres);

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• it is not proven that such foreign court denies enforcement of Peruvian judgments or engages in a review of the merits thereof;

• the judgment has been (a) duly apostilled by the competent jurisdiction of the issuing court, in case of jurisdictions that are parties to the Hague Apostille Convention, or (b) certified by Peruvian consular authorities, in case of jurisdictions that are not parties to the Hague Apostille Convention, and is accompanied by a certified and officially translated copy of such judgment into Spanish; and

• the applicable court taxes and fees have been paid.

We have no reason to believe that any of the obligations subject to New York law relating to the common shares would be contrary to Peruvian public policy (orden público), good morals (buenas costumbres) and international treaties binding upon Peru or generally accepted principles of international law.

Certain of our properties could be subject to the exemption set forth under Article No. 616 of the Peruvian Civil Procedure Code (Legislative Decree No. 768, which sole unified text was approved through Ministerial Resolution No. 10-933-JUS), pursuant to which any private property designated for the rendering of indispensable public services may not be subject to preliminary attachments (medidas cautelares) that could affect the normal rendering of such services.

The United States does not currently have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters with Peru. Therefore, unless the above-mentioned requirements are satisfied, a final judgment for payment of money rendered by a federal or state court in the United States based on civil liability, whether or not predicated solely upon U.S. federal securities laws, may not be enforceable, either in whole or in part, in Peru. However, if the party in whose favor such unenforced final judgment was rendered brings a new suit in a competent court in Peru, such party may submit to the Peruvian court the final judgment rendered in the United States. Under such circumstances, a judgment by a federal or state court of the United States against our company may be regarded by a Peruvian court only as evidence of the outcome of the dispute to which such judgment relates, and a Peruvian court may choose to re-hear the dispute. In addition, awards of punitive damages in actions brought in the United States or elsewhere are unenforceable in Peru. In the past, Peruvian courts have enforced judgments rendered in the United States based on legal principles of reciprocity and comity.

Panama

There is no existing treaty between the United States and Panama for the reciprocal enforcement of foreign judgments of courts outside Panama, including without limitation, judgments of U.S. courts. Panamanian courts, however, have enforced judgments rendered in the United States based on legal principles of reciprocity and comity. We have been advised by Arias, Aleman & Mora, our Panamanian counsel, that judgments rendered by foreign courts may only be recognized and enforced by the courts of Panama in the event that the Supreme Court of Panama validates such judgment by the issuance of a writ of exequatur. Subject to a writ of exequatur, any final judgment rendered by any U.S. court will be recognized, conclusive and enforceable in the courts of Panama without reconsideration of the merits, provided that: (i) such foreign court grants reciprocity to the enforcement of judgments of courts of Panama; (ii) the party against which the judgment was rendered was personally served (service by mail not being sufficient) in such action within such foreign jurisdiction; (iii) the judgment arises out of a personal action against the defendant; (iv) the obligation in respect of which the judgment was rendered is lawful in Panama and does not contradict the public policy of Panama; (v) the judgment is properly authenticated by diplomatic or consular officers of Panama or pursuant to the 1961 Hague Convention on the Legalization of Documents; and (vi) a copy of the final judgment is translated into Spanish by a licensed translator in Panama. We have no reason to believe that any of our obligations relating to the common shares would be contrary to Panamanian law.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Intercorp Financial Services Inc. and Subsidiaries

Consolidated financial statements as of December 31, 2018 and 2017, and as of January 1, 2017, together with the Report of Independent Registered Public Accounting Firm

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Consolidated financial statements as of December 31, 2018 and 2017, and as of January 1, 2017, together with the Report of Independent Registered Public Accounting Firm

Content

Report of Independent Registered Public Accounting Firm	F-2
Consolidated financial statements	F-4
Consolidated statements of financial position	F-4
Consolidated statements of income	F-5
Consolidated statements of other comprehensive income	F-6
Consolidated statements of changes in equity	F-7
Consolidated statements of cash flows	F-9
Notes to the consolidated financial statements	F-11

F-1

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Intercorp Financial Services Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of financial position of Intercorp Financial Services Inc. and Subsidiaries (the “Company”) as of December 31, 2018 and 2017, and as of January 1, 2017, and the related consolidated statements of income, other comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Intercorp Financial Services Inc. and Subsidiaries as of December 31, 2018 and 2017, and as of January 1, 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Adoption of IFRS 9 Financial Instruments

As discussed in Note 4.2.2 to the consolidated financial statements, in 2018 the Company changed its method of accounting for the classification, measurement and impairment of financial instruments due to the adoption of IFRS 9 Financial Instruments. The accounting effects of the adoption of IFRS 9 are detailed in Note 4.7.

Change in Accounting Principle

As mentioned in Note 4.2.1(i) to the consolidated financial statements, during the year 2018, the Company has elected to change its method of accounting for the variations in the insurance contracts liabilities that comprise retirement, disability and survival pensions.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Paredes, Burga & Asociados S. Civil de R.L.

A member practice of Ernst & Young Global Limited

/s/ Victor Tanaka                                        

Victor Tanaka

We have served as the Company’s auditor since 2006

Lima, Peru

May 8, 2019

F-3

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Consolidated statements of financial position

As of December 31, 2018 and 2017, and as of January 1, 2017

	Note		2018			2017			01.01.2017
			S/(000)			S/(000)			S/(000)
						Note 4.2.1			Note 4.2.1
						Restated			Restated
Assets
Cash and due from banks		5(a)
Non-interest bearing				3,102,250			2,963,085			2,628,115
Interest bearing				3,991,629			6,264,339			5,869,583
Restricted funds				1,286,532			1,977,419			3,264,105
				8,380,411			11,204,843			11,761,803
Inter-bank funds		5(e)		495,037			403,526			5,002
Financial investments		6		17,629,445			16,924,143			10,209,840
Loans, net		7
Loans, net of unearned interest				34,325,721			29,406,286			28,192,647
Impairment allowance for loans				(1,364,804	)		(1,202,118	)		(1,166,782	)
				32,960,917			28,204,168			27,025,865
Investment property		8		986,538			1,118,608			745,185
Property, furniture and equipment, net		9		622,525			612,639			589,820
Due from customers on acceptances				132,961			41,715			16,392
Intangibles and goodwill, net		10		954,546			921,594			267,401
Accounts receivable and other assets, net		11		1,502,554			909,984			1,063,773
Deferred Income Tax asset, net		16		79,475			53,277			34,278
Total assets				63,744,409			60,394,497			51,719,359

	Note		2018			2017			01.01.2017
			S/(000)			S/(000)			S/(000)
						Note 4.2.1			Note 4.2.1
						Restated			Restated
Liabilities and equity
Deposits and obligations		12
Non-interest bearing				5,321,025			4,791,792			5,081,940
Interest bearing				28,360,925			27,815,845			25,015,910
				33,681,950			32,607,637			30,097,850
Inter-bank funds		5(e)		—			30,008			332,255
Due to banks and correspondents		13		4,293,361			4,407,392			5,328,603
Bonds, notes and other obligations		14		6,496,778			5,602,358			4,769,390
Due from customers on acceptances				132,961			41,715			16,392
Insurance contract liabilities		15		10,300,468			10,514,504			5,010,513
Accounts payable, provisions and other liabilities		11		1,750,363			1,353,719			1,162,064
Deferred Income Tax liability, net		16		52			257			3,946
Total liabilities				56,655,933			54,557,590			46,721,013
Equity, net		17
Equity attributable to IFS’s shareholders:
Capital stock				963,446			963,446			963,446
Treasury stock				(208,178	)		(467,200	)		(522,106	)
Capital surplus				268,077			268,077			268,077
Reserves				4,700,000			3,700,000			2,600,000
Unrealized results, net				121,686			(228,725	)		(463,118	)
Retained earnings				1,203,043			1,564,945			2,032,812
				7,048,074			5,800,543			4,879,111
Non-controlling interest				40,402			36,364			119,235
Total equity, net				7,088,476			5,836,907			4,998,346
Total liabilities and equity, net				63,744,409			60,394,497			51,719,359

The accompanying notes are an integral part of these consolidated financial statements.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Consolidated statements of income

For the years ended December 31, 2018, 2017 and 2016

	Note		2018			2017			2016
			S/(000)			S/(000)			S/(000)
						Note 4.2.1 Restated			Note 4.2.1 Restated
Interest and similar income		20		4,321,282			3,809,020			3,704,812
Interest and similar expenses		20		(1,170,586	)		(1,119,889	)		(1,081,859	)
Net interest and similar income				3,150,696			2,689,131			2,622,953
Impairment loss on loans, net of recoveries		7(d)		(660,072	)		(827,935	)		(783,645	)
Recovery (loss) due to impairment of financial investments		6(c) and 6(i)		13,077			(20,759	)		(28,323	)
Net interest and similar income after impairment loss				2,503,701			1,840,437			1,810,985
Fee income from financial services, net		21		874,426			849,242			809,452
Net gain on foreign exchange transactions				228,160			201,829			264,183
Net gain on sale of financial investments				14,240			184,847			103,338
Net gain (loss) on financial assets at fair value through profit or loss				11,979			18,443			(47,931	)
Net gain on investment property		8(b)		85,298			25,406			23,124
Other income		22		69,043			87,439			64,095
				1,283,146			1,367,206			1,216,261
Insurance premiums and claims
Net premiums earned		23		328,566			259,349			187,360
Net claims and benefits incurred for life insurance contracts and others		24		(736,032	)		(412,276	)		(318,200	)
				(407,466	)		(152,927	)		(130,840	)
Other expenses
Salaries and employee benefits		25		(755,914	)		(714,582	)		(711,358	)
Administrative expenses		26		(775,254	)		(730,564	)		(688,804	)
Depreciation and amortization		9(a) and 10(a)		(164,698	)		(145,162	)		(130,118	)
Other expense		22		(141,615	)		(120,326	)		(102,136	)
				(1,837,481	)		(1,710,634	)		(1,632,416	)
Income before translation result and Income Tax				1,541,900			1,344,082			1,263,990
Translation result				(34,991	)		15,898			20,062
Income Tax		16(c)		(415,515	)		(326,526	)		(333,863	)
Net profit for the year				1,091,394			1,033,454			950,189
Attributable to:
IFS’s shareholders				1,084,280			1,027,379			944,611
Non-controlling interest				7,114			6,075			5,578
				1,091,394			1,033,454			950,189
Earnings per share attributable to IFS’s shareholders basic and diluted (stated in Soles)		27		9.818			9.625			8.715
Weighted average number of outstanding shares (in thousands)		27		110,436			106,736			108,384

The accompanying notes are an integral part of these consolidated financial statements.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Consolidated statements of other comprehensive income

For the years ended December 31, 2018, 2017 and 2016

	Note		2018			2017			2016
			S/(000)			S/(000)			S/(000)
						Note 4.2.1 Restated			Note 4.2.1 Restated
Net profit for the year				1,091,394			1,033,454			950,189
Other comprehensive income that will not be reclassified to the income statements in subsequent periods:
Revaluation of gains on equity instruments at fair value through other comprehensive income		17(e)		41,398			—			—
Income Tax		17(e)		26			—			—
Total gains that will not be reclassified to the consolidated income statements				41,424			—			—
Other comprehensive income to be reclassified to the consolidated income statements in subsequent periods:
Net movement of debt instruments at fair value through other comprehensive income		17(e)		(478,005	)		—			—
Income Tax		17(e)		6,309			—			—
				(471,696	)		—			—
Insurance premiums reserve		4.2.1(i) and 17(e)		750,794			(195,619	)		(116,468	)
Net movement in available-for-sale investments		17(e)		—			439,828			393,106
Income Tax		17(e)		—			14,471			(4,837	)
				—			454,299			388,269
Net movement of cash flow hedges		17(e)		38,453			(2,528	)		2,494
Income Tax		17(e)		(10,335	)		1,172			(723	)
				28,118			(1,356	)		1,771
Translation of foreign operations		17(e)		26,589			(22,480	)		(11,340	)
Total unrealized gain to be reclassified to the consolidated income statements in subsequent periods				333,805			234,844			262,232
Total other comprehensive income for the year, net of Income Tax				1,466,623			1,268,298			1,212,421
Attributable to:
IFS’s shareholders				1,460,736			1,261,772			1,205,896
Non-controlling interest				5,887			6,526			6,525
				1,466,623			1,268,298			1,212,421

The accompanying notes are an integral part of these consolidated financial statements.

F-6

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Consolidated statements of changes in equity

For the years ended December 31, 2018, 2017 and 2016

						Attributable to IFS’s shareholders
															Unrealized results, net
	Number of shares														Instruments that will not be reclassified to the consolidated income statements		Instruments that will be reclassified to the consolidated income statements
	Issued		In treasury			Capital stock		Treasury stock			Capital surplus		Reserves		Equity instruments at fair value		Debt instruments at fair value		Insurance premiums reserves, Note 4.2.1(i)			Available-for-sale investments reserve			Cash flow hedges reserve			Foreign currency translation reserve			Retained earnings			Total			Non-controlling interest			Total equity, net
	(in thousands)		(in thousands)			S/(000)		S/(000)			S/(000)		S/(000)		S/(000)		S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Balances as of January 1, 2016 (Note 4.2.1 Restated)		113,110		(4,290	)		963,446		(322,214	)		268,077		2,000,000		—		—		(363,008	)		(471,151	)		(458	)		110,214			2,160,645			4,345,551			115,380			4,460,931
Net profit for the year		—		—			—		—			—		—		—		—		—			—			—			—			944,611			944,611			5,578			950,189
Other comprehensive income		—		—			—		—			—		—		—		—		(116,468	)		387,334			1,759			(11,340	)		—			261,285			947			262,232
Total other comprehensive income		—		—			—		—			—		—		—		—		(116,468	)		387,334			1,759			(11,340	)		944,611			1,205,896			6,525			1,212,421
Declared and paid dividends, Note 17(a)		—		—			—		—			—		—		—		—		—			—			—			—			(496,862	)		(496,862	)		—			(496,862	)
Dividends paid to non-controlling interest of Subsidiaries		—		—			—		—			—		—		—		—		—			—			—			—			—			—			(2,623	)		(2,623	)
Transfer of retained earnings to reserves, Note 17(g)		—		—			—		—			—		600,000		—		—		—			—			—			—			(600,000	)		—			—			—
Purchase of treasury stock, Note 17(b)		—		(1,889	)		—		(199,892	)		—		—		—		—		—			—			—			—			—			(199,892	)		—			(199,892	)
Dividends received by Subsidiaries on treasury stock		—		—			—		—			—		—		—		—		—			—			—			—			18,258			18,258			—			18,258
Others		—		—			—		—			—		—		—		—		—			—			—			—			6,160			6,160			(47	)		6,113
Balance as of December 31, 2016 (Note 4.2.1. Restated)		113,110		(6,179	)		963,446		(522,106	)		268,077		2,600,000		—		—		(479,476	)		(83,817	)		1,301			98,874			2,032,812			4,879,111			119,235			4,998,346
Net profit for the year		—		—			—		—			—		—		—		—		—			—			—			—			1,027,379			1,027,379			6,075			1,033,454
Other comprehensive income		—		—			—		—			—		—		—		—		(195,619	)		453,829			(1,337	)		(22,480	)		—			234,393			451			234,844
Total other comprehensive income		—		—			—		—			—		—		—		—		(195,619	)		453,829			(1,337	)		(22,480	)		1,027,379			1,261,772			6,526			1,268,298
Declared and paid dividends, Note 17(a)		—		—			—		—			—		—		—		—		—			—			—			—			(475,773	)		(475,773	)		—			(475,773	)
Dividends paid to non-controlling interest of Subsidiaries		—		—			—		—			—		—		—		—		—			—			—			—			—			—			(2,722	)		(2,722	)
Transfer of retained earnings to reserves, Note 17(g)		—		—			—		—			—		1,100,000		—		—		—			—			—			—			(1,100,000	)		—			—			—
Purchase of treasury stock, Note 17(b)		—		(500	)		—		(52,774	)		—		—		—		—		—			—			—			—			—			(52,774	)		—			(52,774	)
Sale of treasury stock, Note 17(b)		—		1,251			—		107,680			—		—		—		—		—			—			—			—			34,984			142,664			175			142,839
Dividends received by Subsidiaries on treasury stock		—		—			—		—			—		—		—		—		—			—			—			—			24,081			24,081			161			24,242
Acquisition of Subsidiary, Note 2		—		—			—		—			—		—		—		—		—			—			—			—			—			—			1,912			1,912
Purchase of non-controlling interest, Note 3(b)		—		—			—		—			—		—		—		—		—			—			—			—			21,462			21,462			(88,039	)		(66,577	)
Others		—		—			—		—			—		—		—		—		—			—			—			—			—			—			(884	)		(884	)

F-7

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Consolidated statements of changes in equity (continued)

													Attributable to IFS’s shareholders
																	Unrealized results, net
	Number of shares														Instruments that will not be reclassified to the consolidated income statements		Instruments that will be reclassified to the consolidated income statements
	Issued		In treasury			Capital stock		Treasury stock			Capital surplus		Reserves		Equity instruments at fair value		Debt instruments at fair value			Insurance premiums reserves, Note 4.2.1(i)			Available-for-sale investments reserve			Cash flow hedges reserve			Foreign currency translation reserve		Retained earnings			Total			Non-controlling interest			Total equity, net
		(in thousands)		(in thousands)			S/(000)		S/(000)			S/(000)		S/(000)		S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)		S/(000)			S/(000)			S/(000)			S/(000)
Balance as of December 31, 2017 (Note 4.2.1 restated)		113,110		(5,428	)		963,446		(467,200	)		268,077		3,700,000		—		—			(675,095	)		370,012			(36	)		76,394		1,564,945			5,800,543			36,364			5,836,907
Changes due to the first adoption of IFRS 9, see Note 4.7		—		—			—		—			—		—		105,619		238,348			—			(370,012	)		—			—		(57,271	)		(83,316	)		(584	)		(83,900	)
Restated balance as of January 1, 2018, Note 4.2.1		113,110		(5,428	)		963,446		(467,200	)		268,077		3,700,000		105,619		238,348			(675,095	)		—			(36	)		76,394		1,507,674			5,717,227			35,780			5,753,007
Net profit for the year		—		—			—		—			—		—		—		—			—			—			—			—		1,084,280			1,084,280			7,114			1,091,394
Other comprehensive income		—		—			—		—			—		—		41,935		(470,685	)		750,670			—			27,947			26,589		—			376,456			(1,227	)		375,229
Total other comprehensive income		—		—			—		—			—		—		41,935		(470,685	)		750,670			—			27,947			26,589		1,084,280			1,460,736			5,887			1,466,623
Declared and paid dividends, Note 17(a)		—		—			—		—			—		—		—		—			—			—			—			—		(510,688	)		(510,688	)		—			(510,688	)
Dividends paid to non-controlling interest of Subsidiaries		—		—			—		—			—		—		—		—			—			—			—			—		—			—			(2,969	)		(2,969	)
Transfer of retained earnings to reserves, Note 17(g)		—		—			—		—			—		1,000,000		—		—			—			—			—			—		(1,000,000	)		—			—			—
Sale of treasury stock, Note 17(b)		—		3,010			—		259,022			—		—		—		—			—			—			—			—		123,705			382,727			862			383,589
Dividends received by Subsidiaries on treasury stock		—		—			—		—			—		—		—		—			—			—			—			—		8,972			8,972			63			9,035
Purchase of non-controlling interest		—		—			—		—			—		—		—		—			—			—			—			—		—			—			(161	)		(161	)
Others		—		—			—		—			—		—		—		—			—			—			—			—		(10,900	)		(10,900	)		940			(9,960	)
Balance as of December 31, 2018		113,110		(2,418	)		963,446		(208,178	)		268,077		4,700,000		147,554		(232,337	)		75,575			—			27,911			102,983		1,203,043			7,048,074			40,402			7,088,476

The accompanying notes are an integral part of these consolidated financial statements.

F-8

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Consolidated statements of cash flows

For the years ended December 31, 2018, 2017 and 2016

	2018			2017			2016
	S/(000)			S/(000)			S/(000)
				Note 4.2.1 Restated			Note 4.2.1 Restated
Cash flows from operating activities
Net profit for the year		1,091,394			1,033,454			950,189
Plus (minus)
Impairment loss on loans, net of recoveries		660,072			827,935			783,645
Recovery (loss) due to impairment of financial investments		(13,077	)		20,759			28,323
Depreciation and amortization		164,698			145,162			130,118
Provision for sundry risks		3,504			9,748			14,685
Provision for asset seized		9,754			—			—
Deferred Income Tax		13,727			(4,376	)		1,043
Net gain on sale of financial investments		(14,240	)		(184,847	)		(103,338	)
Net (gain) loss of financial assets at fair value through profit or loss		(11,979	)		(18,443	)		47,931
Net (gain) loss for the valuation of investment property		(47,765	)		1,878			1,380
Translation result		34,991			(15,898	)		(20,062	)
Gain on sale of investment property		(4,655	)		—			(2,655	)
Increase in accrued interest receivable		(64,215	)		(70,112	)		(23,371	)
Increase (decrease) in accrued interest payable		24,627			(15,887	)		(7,648	)
Net changes in assets and liabilities
Increase in loans		(5,421,176	)		(2,035,076	)		(1,805,900	)
(Increase) decrease in accounts receivable and other assets, net		(350,494	)		282,092			(64,292	)
Net decrease in restricted funds		673,907			1,307,577			388,523
Increase in deposits and obligations		1,045,762			2,509,351			1,608,560
Decrease in due to banks and correspondents		(124,017	)		(900,386	)		(842,973	)
Increase in accounts payable, provisions and other liabilities		793,616			725,210			604,727
Income Tax paid		(426,356	)		(341,650	)		(338,586	)
(Increase) decrease of investments at fair value through profit or loss		(189,001	)		29,381			46,237
Net cash (used in) provided by operating activities		(2,150,923	)		3,305,872			1,396,536

F-9

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Consolidated statements of cash flows (continued)

	2018			2017			2016
	S/(000)			S/(000)			S/(000)
				Note 4.2.1 Restated			Note 4.2.1 Restated
Cash flows from investing activities
Purchase of investments at fair value through other comprehensive income and at amortized cost		(269,847	)		(1,275,199	)		(1,158,874	)
Purchase of property, furniture and equipment		(72,709	)		(84,685	)		(79,835	)
Purchase of intangible assets		(127,928	)		(160,515	)		(132,579	)
Purchase of investment property		(55,795	)		(124,089	)		(56,833	)
Sale of investment property		230,746			—			26,185
Acquisition of Subsidiaries, net of received cash		—			(660,527	)		—
Net cash used in investing activities		(295,533	)		(2,305,015	)		(1,401,936	)
Cash flows from financing activities
Issuance of bonds, notes and other obligations		595,258			956,575			—
Payments of bonds, notes and other obligations		(10,119	)		—			(88,375	)
Net (decrease) increase in payable inter-bank funds		(30,008	)		(300,938	)		332,255
Net (increase) decrease in receivable inter-bank funds		(93,821	)		(400,537	)		240,026
Sale (purchase) of treasury stock, net		383,589			90,065			(199,892	)
Payments of cash dividends		(510,688	)		(475,773	)		(496,862	)
Dividend payments to non-controlling interest		(2,969	)		(2,722	)		(2,623	)
Purchase of non-controlling interest		—			(66,577	)		—
Net cash provided by (used in) financing activities		331,242			(199,907	)		(215,471	)
Net (decrease) increase in cash and cash equivalents		(2,115,214	)		800,950			(220,871	)
Translation loss on cash and cash equivalents		(23,341	)		(72,380	)		(63,243	)
Cash and cash equivalents at the beginning of the year		9,225,617			8,497,047			8,781,161
Cash and cash equivalents at the end of the year, Note 4.4(ah)		7,087,062			9,225,617			8,497,047
Supplementary cash flow information:
Cash paid during the year for
Interest		1,089,114			1,088,261			1,089,507
Cash received during the year from
Interest		4,191,721			3,720,149			3,681,729

The accompanying notes are an integral part of these consolidated financial statements.

F-10

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Notes to the consolidated financial statements

As of December 31, 2018, 2017, and as of January 1, 2017

1. Business activity

Intercorp Financial Services Inc. and Subsidiaries (henceforth “IFS”, “the Company” or “the Group”) is a limited liability holding company incorporated in the Republic of Panama on September 19, 2006 and is a Subsidiary of Intercorp Perú Ltd. (henceforth “Intercorp Perú”), a holding Company incorporated in 1997 in the Commonwealth of the Bahamas. As of December 31, 2018, Intercorp Perú holds directly and indirectly 76.46 percent (79.12 percent as of December 31, 2017), of IFS’s capital stock.

IFS’s legal domicile is located at Av. Carlos Villarán 140 Urb. Santa Catalina, La Victoria, Lima, Peru.

As of December 31, 2018, IFS holds 99.30 percent of the capital stock of Banco Internacional del Perú S.A.A.— Interbank (henceforth “Interbank”), 99.84 percent of the capital stock of Interseguro Compañía de Seguros S.A. (henceforth “Interseguro”), 100 percent of the capital stock of Inteligo Group Corp. (henceforth “Inteligo”) and 99.42 percent of the capital stock of Hipotecaria Sura Empresa Administradora Hipotecaria S.A. (henceforth “Hipotecaria Sura”). As of December 31, 2017, IFS held 99.30 percent, 100 percent, 100 percent and 99.40 percent of the capital stock of such companies, respectively. Also, as of December 31, 2017, IFS held 99.39 percent of the capital stock of Seguros Sura S.A. (henceforth “Seguros Sura”), which was absorbed by Interseguro through a merger; see Note 2.

Interbank, Interseguro and Hipotecaria Sura operate in Peru, while Inteligo and its subsidiaries (Inteligo Sociedad Agente de Bolsa S.A. and Inteligo Bank Ltd.) operate in Peru and Panama.

The main activities of IFS’s Subsidiaries and their assets, liabilities, equity, operating income, net income, balances and other relevant information are presented in Note 3.

The consolidated financial statements of IFS and Subsidiaries as of December 31, 2017, were approved by the General Shareholders’ Meeting held on April 2, 2018. The consolidated financial statements as of December 31, 2018, were approved by the Board of Directors on May 8, 2019.

2. Business combinations

In May 2017, IFS entered into an agreement with Sura Asset Management S.A. (Colombia), Sura Asset Management Perú S.A. (Peru) and Grupo Wiese (Peru) for the purchase of shares, which resulted in the direct and indirect acquisition of up to 100 percent of Seguros Sura (company incorporated in Peru with operations regulated by the Banking and Insurance Act and authorized to sell life insurance and general insurance policies) and up to 100 percent of Hipotecaria Sura (company incorporated in Peru with operations regulated by the Banking and Insurance Act and authorized to grant mortgage loans that, since the year 2015, does not grant new loans). The acquisition was approved by Peru’s Superintendence of Banking, Insurance and Private Pension Funds Administrators (henceforth “SBS”, by its Spanish acronym) on September 28, 2017.

As a consequence, in November 2017, IFS acquired 99.39 percent of Seguros Sura’s capital stock and 99.42 percent of Hipotecaria Sura’s capital stock. The aforementioned acquisition, including the purchase of 9.19 percent of Seguros Sura’s capital through Interseguro, while 30.10 percent of Seguros Sura’s capital stock and 29.40 percent of Hipotecaria Sura’s capital stock was acquired through the purchase of the companies Negocios e Inmuebles S.A. and Holding Retail Perú S.A.

F-11

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The price of the overall transaction was US$275,865,000 (equivalent to approximately S/891,911,000).

In accordance with the legal regulations in force in Peru, the SBS granted a six-month deadline to complete the merger between Interseguro and Seguros Sura as from the date the SBS approved the acquisition. In this sense, and in compliance with the legal regulations in force in Peru, Interseguro merged with Seguro Sura, using the method of absorption. The date of entry into force of the merger was March 31, 2018, date on which Seguros Sura transferred all its assets and liabilities to the absorbing company, extinguishing after completing this merger process without having to liquidate.

The acquisitions were recorded in accordance with the “Acquisition method” established by IFRS 3 “Business Combinations”. Under this method, the assets and liabilities were recorded at the fair value estimated on acquisition date, including certain intangible assets that the acquired entities had not previously recognized. The costs related to the acquisition, amounting to S/7,863,000, were registered as an expense and are presented in the caption “Administrative expenses” of the consolidated income statements as of December 31, 2017.

The following are the fair values of the entities acquired at the acquisition date:

	Fair value of the acquired entities
	S/(000)
Seguros Sura S.A.
Assets
Cash and due from banks		230,315
Trading securities and available-for-sale investments		4,656,932
Investment property		251,212
Accounts receivable and other assets, net
Insurance operations receivables, net		24,725
Present value of acquired in-force business (PVIF), Note 4.4(s)		137,900
Others		242,063
Liabilities
Bonds, notes and other obligations		(9,823	)
Insurance contract liabilities		(5,210,487	)
Accounts payable, provisions and other liabilities		(67,340	)
Hipotecaria Sura S.A.
Assets (*)		12,560
Liabilities		(2,452	)
Total net assets identified		265,605
Non-controlling interest—proportionate share of the acquired entities’ net assets, Note 4.4(u)		(1,912	)
Goodwill, Note 4.4(t)		628,218
Consideration transferred		891,911
(*)   The balance includes S/8,932,000 of cash and due from banks. The net cash flow used in the acquisition is presented below:
	S/(000)
Consideration transferred		891,911
Cash and due from banks of the acquired entities		(239,247	)
Transaction cost of the acquisition		7,863
		660,527

F-12

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The goodwill represents the future synergies that are expected to arise from the combination of operations, distribution channels, workforce and other efficiencies not included in the intangible assets of the present value of acquired in-force business.

Since the date of the acquisition until December 31, 2017, the acquired companies contributed to the Group with S/18,878,000 of net premiums assumed and S/48,742,000 of net financial income. In this sense, if the business combination had taken place at the beginning of 2017, they would have contributed with S/97,797,000 of net premiums assumed and S/311,508,000 of net financial income in that year. It should be noted that considering that Interseguro and Seguros Sura had to merge within a six-month term, Seguros Sura did not place new premiums and they were taken care of by Interseguro.

The net assets recognized in the consolidated financial statements as of December 31, 2017, are based on a preliminary fair value assessment. During 2018, Management completed the review of the fair value estimate of insurance contracts liabilities as of the acquisition date and, as consequence, the net identifiable assets were modified. These changes are detailed below:

Amendments were therefore made to the net identifiable assets, as detailed below:

	Preliminary balance			Amendment			Amended balance
	S/(000)			S/(000)			S/(000)
Insurance contracts liabilities		(5,210,487	)		195,339			(5,015,148	)
Goodwill		628,218			(195,339	)		432,879

As a result, the comparative information of 2017 was modified to show the adjustment of preliminary amounts, see Note 4.2.1 (ii).

3. Subsidiaries

IFS’s Subsidiaries are the following:

(a) Banco Internacional del Perú S.A.A.— Interbank and Subsidiaries

Interbank is incorporated in Peru and is authorized by the SBS to operate as a universal bank in accordance with Peruvian legislation. The Bank’s operations are governed by the Banking and Insurance Act, that establishes the requirements, rights, obligations, restrictions and other operating conditions that Peruvian financial and insurance entities must comply with.

As of December 31, 2018 and 2017, Interbank had 269 and 272 offices, respectively, and a branch established in the Republic of Panama. Additionally, it holds 100 percent of the shares of the following Subsidiaries:

Entity	Activity
Interfondos S.A. Sociedad Administradora de Fondos, Note 34	Manages mutual funds and investment funds.
Internacional de Títulos Sociedad Titulizadora S.A.—Intertítulos S.T.	Manages securitization funds.
Inversiones Huancavelica S.A.	Real estate activities.
Contacto Servicios Integrales de Créditos y Cobranzas S.A.	Collection services.
Compañía de Servicios Conexos—Expressnet S.A.C.	Services related to credit card transactions or products related to the brand “American Express”.

F-13

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(b) Interseguro Compañía de Seguros S.A. and Subsidiaries

Interseguro is incorporated in Peru and its operations are governed by the Banking and Insurance Act. It is authorized by the SBS to issue life and general risk insurance contracts.

As of December 31, 2018 and 2017, Interseguro controls the following Subsidiaries:

Entity	Activity
Empresa Administradora Hipotecaria S.A.	It was incorporated in February 2014 in Peru. In April 2018, this company was extinguished.
Centro Comercial Estación Central S.A.	Company dedicated to the administration of “Centro Comercial Estación Central”. As of December 31, 2017, Interseguro held a 75 percent interest in this Subsidiary. On January 19, 2018, Interseguro sold the entirety of said participation to a related company, Real Plaza, for S/2,086,000, generating a profit of S/1,526,000; which was recorded as “Gain from sale of investment property” in the consolidated income statements.

Patrimonio Fideicometido D.S.093-2002-EF, Interproperties Perú—

Interseguro holds participations in Patrimonio Fideicometido D.S.093-2002-EF, Interproperties Perú (henceforth “Patrimonio Fideicometido— Interproperties Perú”), that is a structured entity, incorporated in April 2008, and in which several investors (related parties to the Group) contributed investment properties. Each investor or investors have ownership of and specific control over the contributed investment property. The fair values of the properties contributed by Interseguro, which were included in this structured entity as of December 31, 2018 and 2017, amounted to S/430,030,000 and S/608,689,000, respectively; see Note 8 for further detail. For accounting purposes and under IFRS 10 “Consolidated Financial Statements” the assets included in said structure are considered “silos”, because they are ring-fenced parts of the wider structured entity (the Patrimonio Fideicometido— Interproperties Perú). The Group has ownership of and decision-making power over these properties, and the Group has the exposure or rights to their returns; therefore, the Group has consolidated the silos containing the investment properties that it controls.

Regarding the “Patrimonio Fideicometido”, until September 2017, Inteligo Real Estate (a related entity, Subsidiary of Intercorp Perú) and Interseguro held 27.17 percent and 72.83 percent, respectively, of an investment property located in San Isidro, Lima; see Note 8(a). On September 26, 2017, Interseguro purchased Inteligo Real Estate’s interest, thus obtaining the whole ownership of such investment property. The consideration transferred for the acquisition amounted to US$20,542,000 (equivalent to S/66,577,000), which corresponds to the purchase of the non-controlling interest and is reflected as an increase in Interseguro’s investment; additionally, S/21,462,000 were recognized as equity transaction because it is a non-controlling interest purchase.

F-14

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(c) Inteligo Group Corp. and Subsidiaries

Inteligo is an entity incorporated in the Republic of Panama. As of December 31, 2018 and 2017, it holds 100 percent of the shares of the following Subsidiaries:

Entity	Activity
Inteligo Bank Ltd.	It is incorporated in The Commonwealth of the Bahamas and has a branch established in the Republic of Panama that operates under an international license issued by the Superintendence of Banks of the Republic of Panama. Its main activity is to provide private and institutional banking services mainly to Peruvian citizens.
Inteligo Sociedad Agente de Bolsa S.A.	Brokerage firm incorporated in Peru.
Inteligo Perú Holding S.A.C	It is incorporated in Peru in December 2018, to engage in investment management activities in financial sectors. As of December 31, 2018, its paid-in capital amounts to S/1,000.

(d) Hipotecaria Sura Empresa Administradora Hipotecaria S.A., in liquidation

Hipotecaria Sura Empresa Administradora Hipotecaria S.A. is incorporated in Peru and is regulated by the SBS. Its main activity is to grant mortgage loans, and since 2015, it has not granted any new mortgage loans.

(e) Negocios e Inmuebles S.A. and Holding Retail Perú S.A.

These entities were acquired by IFS as part of the purchase of Seguros Sura and Hipotecaria Sura; see Note 2. As of December 31, 2018 and 2017, these entities maintain collectively 30.0 percent of Hipotecaria Sura’s capital stock. Additionally, as a result of the merger between Interseguro and Seguros Sura— see Note 2— both companies hold 8.50 percent of Interseguro’s capital stock.

(f) San Borja Global Opportunities S.A.C.

Its corporate purpose is the marketing of products and services through Internet, telephony or related. As of December 31, 2018 and 2017, maintains a paid-in capital of S/1,461,000 and S/1,000, respectively.

F-15

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The table below presents a summary of the consolidated financial statements of the main Subsidiaries, before adjustments and eliminations for consolidation, as of December 31, 2018 and 2017, in accordance with the IFRS (see Note 29):

	Interbank and Subsidiaries						Interseguro and Subsidiaries (*)						Inteligo and Subsidiaries
	2018			2017			2018			2017			2018		2017
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)		S/(000)
Consolidated statements of financial position
Cash and due from banks		7,726,699			10,655,090			206,659			196,561			465,497		377,486
Financial Investments		5,854,384			6,109,964			10,249,730			10,151,729			1,574,714		1,198,426
Loans, net		31,384,790			26,869,700			—			—			1,576,277		1,334,573
Investment property		—			—			986,538			1,118,608			—		—
Total assets		47,496,321			45,478,588			12,011,764			11,940,640			3,732,178		3,013,892
Deposits and obligations		31,286,749			30,559,299			—			—			2,622,423		2,268,248
Due to banks and correspondents		3,968,790			4,386,724			763			20,568			323,808		100
Bonds, notes and other obligations		5,386,171			4,537,204			172,082			175,308			—		—
Insurance contract liabilities		—			—			10,155,732			10,375,742			—		—
Total liabilities		41,994,455			40,555,067			10,797,239			10,868,269			2,967,308		2,304,094
Equity attributable to IFS’s shareholders		5,501,866			4,923,521			1,214,525			1,072,186			764,870		709,798
Non-controlling interest—equity		—			—			—			185			—		—
Consolidated income statements
Net interest and similar income		2,493,577			2,300,986			599,009			323,389			107,819		96,083
Impairment loss on loans, net of recoveries		(660,858	)		(830,474	)		—			—			786		2,539
Recovery (loss) due to impairment of financial investments		(72	)		—			11,349			(5,496	)		1,800		(15,263	)
Net gain (loss) from sale and valuation of investment property		—			—			52,420			(1,878	)		—		—
Fee income from financial services, net		798,935			774,620			(4,593	)		(3,692	)		123,626		116,927
Total net premiums earned less claims and benefits		—			—			(407,466	)		(152,927	)		—		—
Net profit (loss) for the year attributable to IFS’s shareholders		1,025,142			904,916			(7,834	)		53,115			183,302		187,766
Non-controlling interest		—			—			—			(89	)		—		—

(*) Include the balances of Seguros Sura (absorbed by Interseguro in the year 2018) from the date of acquisition; see Note 2.

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4. Significant accounting policies

4.1 Basis of presentation

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (henceforth “IFRS”) as issued by the International Accounting Standards Board (henceforth “IASB”) and are presented in Soles, which is the functional currency of the Group. All values are rounded to the nearest thousand (S/(000)), except when otherwise indicated.

The preparation of the consolidated financial statements in conformity with the IFRS requires Management to make estimations and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of significant events in the notes to the consolidated financial statements; see Note 4.6.

4.2 Change in accounting policy, adoption of new IFRS and disclosures

4.2.1 Change in accounting policy

Based on an analysis conducted by Management in 2018, and in application of IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, IFS modified its corresponding figures as of December 31, 2017, and January 1, 2017, and for the years ended December 31, 2017 and 2016. The Group has submitted the amended balances of the consolidated statements of financial position as of January 1, 2017, but it does not include the Notes for that period, according to what is established by IAS 1. The amended balances of the Group’s financial statements as of December 31, 2017, and January 1, 2017, and for the years ended December 31, 2017 and 2016, mainly result from the following:

(i) As of December 31, 2017, the Subsidiary Interseguro recognized in its consolidated income statements the effect of the change in the value of liabilities coming from retirement, disability and survivor’s pensions, caused by the variation in the market interest rates used to discount these liabilities. In the first quarter of 2018, Management decided to modify its accounting policy in order to show the effect of the change in market interest rates on the statements of other comprehensive income. This change was made to reduce volatility in the profits or losses associated to the effect of changes in market interest rates, as the financial assets supporting such insurance liabilities are measured at fair value through other comprehensive income.

According to IAS 8, as the aforementioned change constitutes a voluntary change in the accounting policy of the Company and, in compliance with the standard, must be applied retrospectively to previously released balances.

In that sense, the Group calculated the accounting effects of the retrospective application of these changes to the balances as of January 1, 2016. The cumulative effect as of that date amounted to S/363,008,000 (S/479,476,000 as of January 1, 2017, and S/675,095,000 as of December 31, 2017).

In addition, this change in the accounting policy has been made in accordance with IFRS 4 “Insurance Contracts” and, in Management’s opinion, provides more accurate and relevant information regarding the Group’s insurance contract operations.

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(ii) As detailed in Note 2, the net assets recognized in the consolidated financial statements as of December 31, 2017, as part of the acquisition of Seguros Sura, were based in a preliminary fair value assessment. During 2018, the Group completed the review of the fair value estimate of liabilities for insurance contracts as of the acquisition date; and, as result, the identifiable net assets acquired were modified. The value of the modification for both insurance contract liabilities and goodwill amounted to S/195,339,000. The Group applied the changes retrospectively to the balances as of December 31, 2017.

The reconciliation of the main items of the consolidated statements of financial position as of December 31, 2017, and January 1, 2017 is presented below:

	December 31, 2017								January 1, 2017
	Previous balances		Modifications			Restated balances			Previous balances		Modifications			Restated balances
	S/(000)		S/(000)			S/(000)			S/(000)		S/(000)			S/(000)
Assets
Cash and due from banks		11,204,843		—			11,204,843			11,761,803		—			11,761,803
Financial investments		16,924,143		—			16,924,143			10,209,840		—			10,209,840
Loans, net		28,204,168		—			28,204,168			27,025,865		—			27,025,865
Intangibles and goodwill, net		1,116,933		(195,339	)		921,594			267,401		—			267,401
Others		3,139,749		—			3,139,749			2,454,450		—			2,454,450
Total assets		60,589,836		(195,339	)		60,394,497			51,719,359		—			51,719,359
Liabilities
Deposits and obligations		32,607,637		—			32,607,637			30,097,850		—			30,097,850
Due to banks and correspondents		4,407,392		—			4,407,392			5,328,603		—			5,328,603
Bonds, notes and other obligations		5,602,358		—			5,602,358			4,769,390		—			4,769,390
Insurance contract liabilities		10,709,843		(195,339	)		10,514,504			5,010,513		—			5,010,513
Others		1,425,699		—			1,425,699			1,514,657		—			1,514,657
Total liabilities		54,752,929		(195,339	)		54,557,590			46,721,013		—			46,721,013
Equity, net
Equity attributable to IFS’s shareholders:
Capital stock, net of treasury stock		496,246		—			496,246			441,340		—			441,340
Capital surplus and reserves		3,968,077		—			3,968,077			2,868,077		—			2,868,077
Unrealized results, net		446,370		(675,095	)		(228,725	)		16,358		(479,476	)		(463,118	)
Retained earnings		889,850		675,095			1,564,945			1,553,336		479,476			2,032,812
		5,800,543		—			5,800,543			4,879,111		—			4,879,111
Non-controlling interest		36,364		—			36,364			119,235		—			119,235
Total equity, net		5,836,907		—			5,836,907			4,998,346		—			4,998,346
Total liabilities and equity, net		60,589,836		(195,339	)		60,394,497			51,719,359		—			51,719,359

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The reconciliation of the main items of the consolidated income statements for the year ended December 31, 2017, is presented below:

	Previous balances			Modifications		Restated balances
	S/(000)			S/(000)		S/(000)
Interest and similar income, net of impairment loss on loans		1,840,437			—		1,840,437
Total other income		1,367,206			—		1,367,206
Insurance premiums and claims
Net premiums earned		63,730			195,619		259,349
Net claims and benefits incurred for life insurance contracts and others		(412,276	)		—		(412,276	)
Total net premiums earned minus claims and benefits		(348,546	)		195,619		(152,927	)
Total other expenses		(1,710,634	)		—		(1,710,634	)
Income before translation result and Income Tax		1,148,463			195,619		1,344,082
Translation result		15,898			—		15,898
Income Tax		(326,526	)		—		(326,526	)
Net profit for the year		837,835			195,619		1,033,454
Attributable to:
IFS’s shareholders		831,760			195,619		1,027,379
Non-controlling interest		6,075			—		6,075
		837,835			195,619		1,033,454
Earnings per share attributable to IFS’s shareholders basic and diluted (in Soles)		7.793			—		9.625
Weighted average number of outstanding shares (in thousands)		106,736			—		106,736

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The reconciliation of the main items of the consolidated income statements for the year ended December 31, 2016, is presented below:

	Previous balances			Modifications		Restated balances
	S/(000)			S/(000)		S/(000)
Interest and similar income, net of Impairment loss on loans		1,810,985			—		1,810,985
Total other income		1,216,261			—		1,216,261
Insurance premiums and claims
Net premiums earned		70,892			116,468		187,360
Net claims and benefits incurred for life insurance contracts and others		(318,200	)		—		(318,200	)
Total net premiums earned minus claims and benefits		(247,308	)		116,468		(130,840	)
Total other expenses		(1,632,416	)		—		(1,632,416	)
Income before translation result and Income Tax		1,147,522			116,468		1,263,990
Translation result		20,062			—		20,062
Income Tax		(333,863	)		—		(333,863	)
Net profit for the year		833,721			116,468		950,189
Attributable to:
IFS’s shareholders		828,143			116,468		944,611
Non-controlling interest		5,578			—		5,578
		833,721			116,468		950,189
Earnings per share attributable to IFS’s shareholders basic and diluted (in Soles)		7.641			—		8.715
Weighted average number of outstanding shares (in thousands)		108,384			—		108,384

The reconciliation of the main items of the consolidated statements of other comprehensive income for the year ended December 31, 2017, is presented below:

	Previous balances			Modifications			Restated balances
	S/(000)			S/(000)			S/(000)
Net profit for the year		837,835			195,619			1,033,454
Other comprehensive income to be reclassified to the consolidated income statements in subsequent periods
Insurance premium reserves		—			(195,619	)		(195,619	)
Net movement in available-for-sale investments, net of Income Tax		454,299			—			454,299
Net movement of cash flow hedges, net of Income Tax		(1,356	)		—			(1,356	)
Translation of foreign operations		(22,480	)		—			(22,480	)
Total unrealized gain to be reclassified to the consolidated income statements in subsequent periods		430,463			(195,619	)		234,844
Total other comprehensive income of the year, net of Income Tax		1,268,298			—			1,268,298
Attributable to:
IFS’s shareholders		1,261,772			—			1,261,772
Non-controlling interest		6,526			—			6,526
		1,268,298			—			1,268,298

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The reconciliation of the main items of the consolidated statements of other comprehensive income for the year ended December 31, 2016, is presented below:

	Previous balances			Modifications			Restated balances
	S/(000)			S/(000)			S/(000)
Net profit for the year		833,721			116,468			950,189
Other comprehensive income to be reclassified to the consolidated income statements in subsequent periods
Insurance premium reserve		—			(116,468	)		(116,468	)
Net movement in available-for-sale investments, net of Income Tax		388,269			—			388,269
Net movement of cash flow hedges, net of Income Tax		1,771			—			1,771
Translation of foreign operations		(11,340	)		—			(11,340	)
Total unrealized gain to be reclassified to the consolidated income statements in subsequent periods		378,700			(116,468	)		262,232
Total other comprehensive income of the year, net of Income Tax		1,212,421			—			1,212,421
Attributable to:
IFS’s shareholders		1,205,896			—			1,205,896
Non-controlling interest		6,525			—			6,525
		1,212,421			—			1,212,421

The modifications did not generate changes in the cash flows of operations, investment or financing activities during the years 2017 and 2016.

4.2.2. Adoption of new standards and disclosures

In these financial statements, the Group has adopted for the first time IFRS 9 and IFRS 15, effective for annual periods beginning on or after January 1, 2018. Other standards, interpretations or amendments have also been adopted for the first time in 2018 but, as of December 31, 2018, they have not had a significant impact on the Group’s consolidated financial statements. The Group has not adopted any standard, interpretation or amendment that has been issued but is not effective, as explained below.

• First adoption of IFRS 9 “Financial Instruments”

IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” for annual periods starting on or after January 1, 2018.

As permitted by IFRS 9, the Group has not restated the comparative information for 2017 for financial instruments within the scope of IFRS 9. Therefore, the comparative information for 2017 is reported under IAS 39 and is not comparable to the information presented for 2018. Differences arising from the adoption of IFRS 9 have been recognized directly in the retained earnings as of January 1, 2018, and are disclosed in Note 4.7.

(a) Changes to classification and measurement

To determine the classification and measurement category, IFRS 9 requires all financial assets, except equity instruments and derivatives, to be assessed based on (i) a combination of the entity’s business model for managing financial assets; and (ii) the financial assets contractual cash flow characteristics.

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The IAS 39 measurement categories of financial assets (fair value through profit or loss, available-for-sale, held-to-maturity and loans and receivables) have been replaced by:

• Debt instruments at amortized cost.

• Debt instruments at fair value through other comprehensive income.

• Equity instruments at fair value through other comprehensive income.

• Financial assets at fair value through profit or loss.

The accounting for financial liabilities remains largely the same as it was under IAS 39, except for the treatment of gains or losses arising from an entity’s own credit risk relating to liabilities designated at fair value through profit or loss. Such movements are presented in other comprehensive income with no subsequent reclassification to the income statements. As of December 31, 2018, the Group has no liabilities designated at fair value through profit or loss.

Under IFRS 9, embedded derivatives are no longer separated from a host financial asset. Conversely, the accounting for derivatives embedded in financial liabilities and in non-financial host contracts has not changed.

The Group’s classification of its financial assets and liabilities is explained in Note 30. The quantitative impact of applying IFRS 9 as of January 1, 2018, is disclosed in Note 4.7.

(b) Changes to the impairment calculation

The adoption of IFRS 9 has fundamentally changed the Group’s accounting for loan loss impairments by replacing the incurred loss approach under IAS 39 with a forward-looking expected credit loss (ECL) approach. IFRS 9 requires the Group to record an allowance for expected credit loss for all loans and other debt financial assets not held at fair value through profit or loss, together with financial guarantee contracts. The allowance is based on the expected credit loss associated with the probability of default in the next twelve months unless there has been a significant increase in credit risk since origination. If the financial asset meets the definition of purchased or originated credit impaired (POCI), the allowance is based on the change in the expected credit loss over the life of the asset.

Details of the Group’s impairment method are disclosed in Note 4.4(h). The quantitative impact of applying IFRS 9 as of January 1, 2018, is disclosed in Note 4.7.

(c) Disclosures in accordance with IFRS 7

To reflect the differences between IFRS 9 and IAS 39, IFRS 7 “Financial Instruments: Disclosures” was updated and the Group has adopted it, together with IFRS 9, for the year beginning January 1, 2018. Changes include transition disclosures as shown in Note 4.7. The detailed qualitative and quantitative information about the expected credit loss calculations, such as the assumptions and inputs used, are presented in Notes 4.4(h.1) and 31.1(d).

The reconciliations of the expected credit loss from the date of transition until the closing date of the consolidated financial statements are presented in the respective Notes of the financial assets that apply; see Note 4.4(h.1).

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IFRS 7 also requires additional disclosures referenced to hedge accounting; see Note 11(b).

• IFRS 15 “Revenue from Contracts with Customers”

IFRS 15, which replaced IAS 18 “Revenue” and IAS 11 “Construction Contracts”, was adopted by the Group as of January 1, 2018, regarding all contracts with customers, except for lease agreements, financial instruments agreements and insurance contracts.

The standard establishes a more systematic approach to the measurement and recognition of income through the introduction of a five-step model that governs the recognition of income. This model requires the Group (i) to identify the contract with the client, (ii) identify each of the performance obligations included in the contract, (iii) determine the amount of the consideration in the contract, (iv) assign the consideration for each of the performance obligations identified; and (v) recognize income as each performance obligation is met.

As a result of the adoption of IFRS 15, there have been no significant impacts, in relation to the date when the Group recognizes income or when revenues must be recognized gross as a principal or net as an agent. Therefore, recognition of income in accordance with IFRS 15 does not differ significantly from recognition in accordance with IAS 18 and the Group recognizes fee income for banking services as those services are rendered (for example, by completing the underlying transaction).

• IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

This interpretation clarifies that in determining the exchange rate to be used in the initial recognition of the asset, expense or income (or part thereof), related to the derecognition of a non-monetary asset or liability related to an advance consideration, the date of the transaction is the date at which the entity initially recognizes the non-monetary asset or liability resulting from the advance consideration. If there are several payments or receipts in advance, the entity must determine a transaction date for each payment or receipt of the advance consideration. Management concluded that this interpretation had no effect on its consolidated financial statements.

• IAS 40 “Investment Property”—Amendments to IAS 40

The amendments clarify when an entity must transfer assets, including properties under construction or development, from or to investment properties. In addition, the amendments stipulate that a change in use occurs when the property meets or fails to meet the definition of investment property and there is evidence of change in use. A change in Management’s intentions for the use of a property does not provide evidence of a change in use. Management concluded that these modifications had no significant effects on its consolidated financial statements.

• Classification and measurement of share-based payment transactions—Amendments to IFRS 2

The IASB issued amendments to IFRS 2 “Share-based payments” in relation to the classification and measurement of share-based payment transactions. The amendments address three main areas: The effects of acquisition conditions on the measurement of a payment transaction based on shares settled in cash; the classification of a payment

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transaction based on shares with net settlement characteristics to retain tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from liquidation in cash to liquidation of equity.

Management concluded that these modifications had no effect on its consolidated financial statements.

• Application of IFRS 9 “Financial Instruments” with IFRS 4 “Insurance Contracts”—Amendments to IFRS 4

The amendments address the concerns that arise from the implementation of the new financial instruments standard, IFRS 9, before implementing IFRS 17, which replaces IFRS 4. The amendments introduce two options for entities issuing insurance contracts: a temporary exemption from the application of IFRS 9 and an overlay approach. The requirements raised are not applicable to the Group, because its activities are predominantly related to banking services. Consequently, the Group fully applies IFRS 9.

• Amendments to IAS 28 “Investments in Associates and Joint Ventures”

These modifications clarify that measuring investments at fair value through profit or loss is an investment for investment decision. Due to the nature of the Group’s operations, these modifications do not have any impact.

4.3 Basis of consolidation

The consolidated financial statements comprise the financial statements of IFS and its Subsidiaries; see Note 3.

For consolidation purposes, control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);

• Exposure, or rights, to variable returns from its involvement with the investee; and

• The ability to use its power over the investee to affect its returns.

Generally, it is presumed that a majority of voting rights entitles to control. In order to support this presumption and when the Group has less than the majority of votes or similar rights in the investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee;

• Rights arising from other contractual arrangements; and

• The Group’s voting rights and potential voting rights.

The Group assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation with a Subsidiary begins when the Group obtains control over the Subsidiary and ceases when the Group loses control of the Subsidiary.

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For consolidation purposes, profit and loss and each component of other comprehensive income (“OCI”) are attributed to the equity holders of the Group’s parent Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, income, expenses and cash flows relating to transactions between members of the Group are fully eliminated. When necessary, adjustments are made to the financial statements of Subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

The subsequent acquisition of the non-controlling interest is directly recorded in the consolidated statements of changes in equity; the difference between the paid amount and the acquired net assets is registered as an equity transaction. Therefore, the Group reports no additional goodwill after the purchase of the non-controlling interest and recognizes no profit or loss for the sale of the non-controlling interest.

Assets in custody or managed by the Group, such as investment funds and others, are not part of the Group’s consolidated financial statements; see Note 4.4(ad).

4.4 Summary of significant accounting policies

(a) Foreign currency translation—

Functional and presentation currency:

The Group has determined that its functional and presentation currency is the Sol, because it reflects the economic substance of the underlying events and circumstances relevant to most of the Group’s entities, insofar as its main operations and/or transactions, such as loans granted, financing obtained, sale of insurance premiums, interest and similar income, interest and similar expenses and an important percentage of purchases are established and settled in Soles; in addition, it corresponds to the functional currency to most of the Subsidiaries; except for Inteligo Bank, whose functional currency is the US Dollar.

Because Inteligo Bank has a functional currency different from the Sol, its balances were translated for consolidation purposes using the methodology established by IAS 21 “The Effects of Changes in Foreign Exchange Rates”, as follows:

• Assets and liabilities at the closing rate at the date of each consolidated statements of financial position.

• Income and expenses at the average exchange rate for each month of the year.

As a result of the translation, the Group has recorded the difference in the caption “Exchange differences on translation of foreign operations” in the consolidated statements of other comprehensive income.

Foreign currency balances and transactions:

Foreign currency transactions and balances are those performed in currencies different from the functional currency. Transactions in foreign currencies are initially recorded in the functional currency using the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate in effect on the reporting date. The differences between the closing rate at the date of each consolidated statements of financial position presented and the exchange rate initially used to record the transactions in foreign currency are recognized in the consolidated income statements

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in the period in which they arise, in the caption “Translation result”. Non-monetary assets and liabilities acquired in a foreign currency are recorded at the exchange rate at the date of the initial transaction.

(b) Interest income—

(b.1) Effective interest rate method—

According to IFRS 9 and IAS 39, interest income is recorded using the effective interest rate (EIR) method for all financial instruments measured at amortized cost. The interest income of financial assets that accrue interests measured at fair value through other comprehensive income according to IFRS 9 and the financial assets that accrue interests classified as available-for-sale or held-to-maturity according to IAS 39 are also recorded using the EIR method. EIR is the rate that exactly discounts estimated future cash flows through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset.

The EIR (and, therefore, the amortized cost of the asset) is calculated considering any discount, premium and cost that is part of the effective interest rate. The Group recognizes interest income using the best estimate of a constant rate of return over the expected life of the financial asset. Therefore, it recognizes the effect of interest rates considering credit risk and other characteristics of the product’s lifetime (including advance payments, charges, etc.).

If the prospects related to the financial asset’s cash flows are revised for reasons other than credit risk, the modification is recorded as a positive or negative adjustment to the asset’s carrying amount in the consolidated statements of financial position with an increase or reduction in the interest income. The adjustment is later amortized through interest in the consolidated income statements.

(b.2) Interest income and similar—

The Group calculates the interest income by applying the EIR to the gross carrying amount of non-impaired financial assets.

When a financial asset becomes impaired, and, therefore, it is classified as Stage 3 (as established in Note 4.4 (h.1)), the Group calculates the interest income by applying the EIR at the amortized cost of the asset. If the financial assets “recover”, as detailed in Note 31.1(d), and is no longer impaired, the Group recalculates the interest income in gross figures.

For purchased or originated credit-impaired (POCI) assets, as established in Note 31.1(d), the Group calculates the interest income by determining the credit-adjusted EIR at the amortized cost of the asset. The credit-adjusted EIR is the interest rate that, in the initial recognition, discounts the estimated future cash flows (including credit losses) at the amortized cost of POCI assets.

The interest income for all trading assets, that is, for those that are measured at fair value through profit or loss, are presented under the caption “Net gain (loss) of financial assets at fair value through profit or loss” of the consolidated income statements, within the movements of fair value.

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(c) Banking services commissions—

Income from fees and commissions include those that are not part of the EIR; see (b.1) above. The commissions included in “Fee income from financial services, net” in the consolidated income statements include, among others, the commission for the banking service in general such as maintenance of accounts, postages, transfers, fee for loan syndication and fee for contingent credits.

All other income and expenses are recognized in the period in which the performance obligation is satisfied.

(d) Insurance contracts—

Accounting policies for insurance activities:

For the adoption of IFRS 4 “Insurance Contracts”, the Group decided to continue applying to insurance contracts the existing accounting policies that were applicable prior to the adoption of IFRS (i.e., accounting standards established by the SBS for financial and insurance entities in Peru) with certain modifications as described below:

• Incurred but not reported claims reserve (IBNR): These reserves were calculated and applied at each recording period using the Chain Ladder methodology which considers past experience based on cumulative claims losses to estimate future claims developments.

• Technical reserves for life annuities and retirement, disability and survival pensions: Until May 31, 2018, to calculate the reserve for insurance contracts, the Group considered the Chilean current mortality and morbidity tables (improved RV—2009, B—2006 and MI—2006). In addition, to discount the future cash flows of these liabilities, for portfolio’s debt instruments, the Group set an average rate for matching periods and a 3-percent rate for non-matching periods. From June 30, 2018, the Group uses the Peruvian mortality tables (SPP-S-2017 and SPP-I-2017 (men and women)), published by the SBS through Resolution No. 886-2018 dated March 7, 2018, and set the interest rate through the Matching Adjustment method plus an illiquidity premium to discount all the pension cash flows; see Notes 4.6 and 15(e).

Product classification:

Insurance contracts are those contracts where the Group (the insurer) has accepted significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder for a specified uncertain future event (the insured event) that adversely affects the policyholder. As a general guideline, the Group determines whether it has significant insurance risk by comparing benefits paid with benefits payable if the insured event did not occur. Insurance contracts may also transfer a financial risk. When the contract has a financial component and transfers no relevant insurance risk as established by IFRS 4, the contract is recorded based on IFRS 9. These contracts are presented in the caption “Accounts payable, provisions and other liabilities” as “Contract liability with investment component” of the consolidated statements of financial position; see Note 11(a).

Once a contract has been classified as an insurance contract, it remains as an insurance contract for the remainder of its life, even if the insurance risk is reduced significantly during this period, unless all rights and obligations are extinguished or expire.

Life insurance contracts offered by the Group include retirement, disability and survival insurance, annuities and group and individual life. Non-life insurance contracts mainly include SOAT (mandatory individual car accident insurance) and credit card insurance, among others.

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Insurance receivables:

Insurance receivables are initially recognized when due and are measured at the fair value of the consideration received or receivable. Consequently, in its initial recognition, insurance receivables are measured at amortized cost. As of December 31, 2018 and 2017, the carrying value of the insurance receivables is similar to their fair value due to their short-term maturity. The carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recorded in the consolidated income statements.

Reinsurance:

The Group cedes the insurance risk in the normal course of its operations mainly due to pension fund risks and life insurance risks (individual and group). The reinsurance assets represent balances due and payable by reinsurance companies. Reinsurance is ceded on a proportional basis.

The amounts recoverable from the contracts with reinsurers are estimated consistently with the loss reserve pending settlement or losses settled and with the premiums ceded, associated with policies ceded, in accordance with the clauses established in the related reinsurance contracts.

Reinsurance assets are reviewed for impairment at each date of the consolidated statements of financial position or more frequently when necessary. Impairment arises when there is objective evidence the Group cannot receive all of the outstanding amounts receivable under the contract terms and the event has a reliably measurable impact on the amounts that the Group will obtain from the reinsurer. Impairment loss is registered in the consolidated income statements.

Reinsurance contracts ceded do not release the Group from its obligations to the insured.

The liabilities from reinsurance contracts represent balances due and payable to reinsurance companies. The amounts payable are estimated consistently with the related reinsurance contract.

Premiums and claims are presented as gross amounts for the reinsurance ceded. Reinsurance assets or liabilities are written off when the contractual rights are extinguished, expire, or when the contract is transferred to a third party.

Reinsurance commissions:

The commissions from the reinsurance contracts for premiums ceded are amortized on a straight-line basis over the term of the related insurance contract.

Insurance contract liabilities:

Life insurance contract liabilities are recognized when contracts are entered into.

The technical reserves for retirement, disability and survival insurance and annuities are determined as the sum of the discounted value of expected future pensions to be paid during a defined or non-defined period, computed on the basis of current mortality and morbidity tables and current discount interest rates described in Note 15(e).

During 2018, the Company adopted new mortality tables approved and published by the SBS through Resolution No. 886-2018; these tables reflect recent changes in life expectancy. Likewise, it modified the assumptions used to determine the discount rate, in order to reflect the nature of the business in the long term. The changes mentioned above have been considered as changes in the accounting estimates and are described in Notes 4.6(a) and (b).

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Individual life technical reserves are determined as the sum of the discounted value of expected future benefits, administration expenses, policyholder options and guarantees and investment income, less the discounted value of the expected premiums that would be required to meet the future cash outflows. Furthermore, the technical reserves for group life insurance contracts comprise the provision for unearned premiums and unexpired risks.

Insurance claims reserves include reserves for reported claims and an estimate of the IBNR. As of December 31, 2018 and 2017, IBNR reserves were determined on the basis of the Chain Ladder methodology, whereby the weighted average of past claims’ development is projected into the future. Adjustments to the liabilities at each reporting date are recorded in the consolidated income statements. The liability is derecognized when the obligation expires, is discharged or cancelled.

At each reporting date, an assessment is made on whether the recognized life insurance liabilities are sufficient, by using an existing liability adequacy test as established by IFRS 4. In the case of annuities and retirement, disability and survival insurance, this test was conducted by using current assumptions for mortality and morbidity tables and interest rates. As of December 31, 2018 and 2017, Management determined that liabilities were sufficient and therefore, it has not recorded any additional insurance liability.

The accounts payable to reinsurers and coinsurers arise from the ceded premiums issued based on the evaluation of the risk assumed and the losses coming from the reinsurance contracts accepted as well as from the clauses executed for the coinsurance received, and are registered in the item “Accounts payable to reinsurers and coinsurers” that is part of the caption “Accounts payable, provisions and other liabilities” of the consolidated statements of financial position.

Income recognition:

Life insurance contracts:

Gross premiums on life insurance are recognized as revenue when due from the policyholder. For single premium products, revenue is recognized on the date when the policy is effective. The net premiums earned include the annual variation of technical reserves.

Property, casualty and group life insurance contracts:

Unearned premiums are those proportions of premiums written in a year that relate to periods of risk afterwards the reporting date. Unearned premiums are calculated on a daily pro rata basis. The proportion attributable to subsequent periods is deferred as a provision for unearned premiums.

Recognition of benefits, claims and expenses:

(i) Gross benefits and claims—

Gross benefits and claims for life insurance contracts include the cost of all claims arising during the year, including internal and external claims handling costs that are directly related to the processing and settlement of claims.

Death, survival and disability claims are recorded on the basis of notifications received. Annuities payments are recorded, when due.

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(ii) Reinsurance premiums—

Reinsurance premiums comprise the total premiums payable for the whole coverage provided by contracts entered into in the period and are recognized at the date at which the policy is effective. Unearned ceded premiums are deferred during the period of the related insurance contract.

(iii) Reinsurance claims—

Reinsurance claims are recognized when the related gross insurance claim is recognized according to the terms of the relevant contract.

(iv) Acquisition costs—

Acquisition costs related to the sale of new policies are recognized when incurred.

(e) Financial instruments: Initial recognition—

(e.1) Date of recognition—

Financial assets and liabilities, with the exception of loans, are initially recognized at the trading date. This includes regular transactions of purchases or sales of financial assets that require the delivery of assets within the time frame generally established by regulation or convention on the marketplace. Loans are recognized when funds are transferred to the customers.

(e.2) Initial measurement of financial instruments—

The classification of financial instruments at initial recognition depends on the characteristics of the business model and contractual flows for managing the instruments, as described in Notes 4.4(f.1.1) and 4.4(f.1.2). Financial instruments are initially measured at their fair value (as defined in Note 4.4(e.4)), plus the transaction costs directly attributable to the acquisition of the asset, in the case of financial assets and financial liabilities that are not recorded at fair value through profit or loss. Accounts receivable are measured at the transaction price. When the fair value of financial instruments at initial recognition differs from the transaction price, the Group accounts for the Day 1 profit or loss, as described below.

(e.3) Day 1 profit or loss—

When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a valuation technique that only uses inputs observable in market transactions, the Group recognizes the difference between the transaction price and fair value in the net trading income. In those cases where fair value is based on models for which some of the inputs are not observable, the difference between the transaction price and the fair value is deferred and is only recognized in profit or loss when the inputs become observable, or when the instrument is derecognized. It should be noted that during 2018 and 2017, the Group did not originate differences related to these characteristics.

(e.4) Measurement categories of financial assets and liabilities—

From January 1, 2018, the Group classifies all of its financial assets based on the business model and the contractual terms, measured at either:

• Amortized cost, as explained in Note 4.4(f.1).

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• Fair value through other comprehensive income (FVOCI), as explained in Notes 4.4(f.4) and (f.5).

• Fair value through profit or loss (FVPL).

The Group classifies and measures its derivative and trading portfolio at FVPL as explained in Notes 4.4(f.2) and (f.3). The Group may designate financial instruments at FVPL, if so doing eliminates or significantly reduces measurement or recognition inconsistencies, as explained in Note 4.4(f.7).

Before January 1, 2018, the Group classified its financial assets as loans and receivables (amortized cost), FVPL, available-for-sale or held-to-maturity (amortized cost), as explained in Notes 4.4(f.1), 4.4(f.9) and 4.4(f.10).

Financial liabilities, other than financial guarantees, are measured at amortized cost or at FVPL when they are held for trading, are derivative instruments or the fair value designation is applied, as explained in Note 4.4(f.6). It should be noted that during 2018 and 2017, the Group only presents derivative financial instruments measured in this way.

(f) Financial assets and liabilities—

Following is the description of the assets and liabilities held by the Group, as well as the criteria for their classification:

(f.1) Assets measured at amortized cost—

Before January 1, 2018, cash and due from banks, inter-bank funds, financial investments, loans and other financial assets, were measured at amortized cost as long as the following was not fulfilled:

• The Group intended to sell immediately or in the near term.

• Upon initial recognition, the Group designated as at fair value through profit or loss or as FVOCI.

• The Group may not recover substantially all of its initial investment, other than because of credit deterioration, which were designated at fair value with changes in other comprehensive results.

From January 1, 2018, as required by IFRS 9, the Group measure cash and due from banks inter-bank funds, financial investments in debt instruments, loans and other financial assets at amortized cost if the following two conditions are met:

• The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

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The details of these conditions are outlined below:

(f.1.1) Business model assessment—

The Group’s business model is assessed at a higher level of aggregated portfolios, and not instrument by instrument, and is based on observable factors such as:

• How the performance of the business model and the financial assets held within that business model are assessed and reported to the entity’s key management personnel.

• The risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way those risks are managed.

• The expected frequency, value and timing of sales are also important aspects of the Group’s assessment.

The business model assessment is based on reasonably expected scenarios without taking “worst case” or “stress case”. If cash flows after initial recognition are realized in a way that is different from the Group’s original expectations, the classification of the remaining financial assets that remain in that business model will not be changed, but incorporates such information when assessing newly purchased financial assets going forward.

(f.1.2) The SPPI test (Solely payments of principal and interest)—

As a second step of its classification process, the Group assesses the contractual terms to identify whether they meet the SPPI test.

“Principal”, for the purpose of this test, is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortization of the premium/discount).

The most significant elements of attention within a lending arrangement are typically the consideration for the time value of money and credit risk. To perform the SPPI assessment, the Group applies judgement and considers relevant factors such as the currency in which the financial asset is denominated, and the period for which the interest rate is set. In contrast, contractual terms that introduce volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and interest on the amount outstanding. In such cases, the financial asset is required to be measured at FVPL.

(f.2) Derivatives recorded at fair value through profit or loss—

A derivative is a financial instrument or other contract with all three of the following characteristics:

• Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable; provided that, in the case of a non-financial variable, it is not specific to part of the contract (i.e., the ‘underlying’).

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• It requires no initial net investment or an initial net investment that is smaller than the required for other types of contracts expected to have a similar response to changes in market factors.

• It is settled at a future date.

The Group enters into derivative transactions with various counterparties. These include interest rate swaps, cross-currency swaps, foreign currency options and foreign currency forward contracts. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. The notional amount and fair value of such derivatives are disclosed separately in Note 11(b). Changes in the fair value of derivatives are included in net trading income unless hedge accounting is applied. Hedge accounting disclosures are presented in Note 4.4(i).

(f.2.1) Embedded derivatives—

An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host contract with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided that, in the case of a non-financial variable, it is not specific to a party to the contract. A derivative that is attached to a financial instrument, but is contractually transferable independently of that instrument, or has a different counterparty from that instrument, is not an embedded derivative, but a separate financial instrument.

Under IAS 39, embedded derivatives in financial assets, liabilities and non-financial host contacts, were treated as separate derivatives and recorded at fair value if they met the definition of a derivative (as defined above), their economic characteristics and risks were not closely related to those of the host contract, and the host contract was not itself held for trading or designated at FVPL. The embedded derivatives separated from the host were carried at fair value in the trading portfolio with changes in fair value recognized in the consolidated income statements.

From January 1, 2018, with the adoption of IFRS 9, the Group records in the same way the embedded derivatives in financial liabilities and non-financial host contracts.

In the case of embedded derivatives in financial assets, they are not separated from the financial asset and, therefore, the classification rules are applied to the hybrid instrument in its entirety, as described in Note 4.4(e.4).

(f.3) Financial assets or financial liabilities held for trading—

The Group classifies financial assets or financial liabilities as held for trading when they have been purchased or issued primarily for short-term profit making through trading activities or form part of a portfolio of financial instruments that are managed together, for which there is evidence of a recent pattern of short-term profit taking. Held-for-trading assets and liabilities are recorded and measured in the consolidated statements of financial position at fair value. Changes in fair value are recognized in the income statements.

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Interest income or expense and dividend are recorded in the income statements according to the terms of the contract, or when the right to payment has been established. Included in this classification are debt securities, equities and short positions that have been acquired mainly for the purpose of selling them in the near term.

(f.4) Debt instruments at fair value through other comprehensive income (Policy applicable from January 1, 2018)—

The Group applies the new category under IFRS 9 of debt instruments measured at fair value through other comprehensive income when both of the following conditions are met:

• The instrument is held within a business model, the objective of which is achieved by collecting contractual cash flows and selling financial assets.

• The contractual terms of the financial asset meet the SPPI test.

These instruments largely comprise assets that had previously been classified as available-for-sale financial investments under IAS 39.

FVOCI debt instruments are subsequently measured at fair value through other comprehensive income. Interest income and foreign exchange gains and losses are recognized in profit or loss in the same manner as for financial assets measured at amortized cost, as explained in Note 4.4(f.1). The ECL calculation for debt instruments at FVOCI is explained in Note 4.4(h.1)(iii) . When the Group holds more than one investment in the same security, they are deemed to be disposed of on a “first-in first-out” basis. On derecognition, cumulative gains or losses previously recognized in OCI are reclassified from OCI to profit or loss.

(f.5) Equity instruments at fair value through other comprehensive income (Policy applicable from January 1, 2018)—

Upon initial recognition , the Group occasionally elects to classify irrevocably some of its equity investments as equity instruments at FVOCI when not held for trading. Such classification is determined on an instrument-by- instrument basis.

Gains and losses on these equity instruments are never recycled to profit even when the asset is sold. Dividends are recognized in the consolidated income statements as income when the right of the payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the instrument, in which case, such gains are recorded in OCI. Equity instruments at FVOCI are not subject to an impairment assessment.

(f.6) Financial liabilities—

After initial measurement, financial liabilities, except those measured at fair value through profit or loss; see (f.7), are measured at amortized cost. Amortized cost Includes all commissions and basic points of interest, transaction lost and any other premium or discount. A compound financial instrument which contains both a liability and an equity component is separated at the issue date.

The Group first establishes whether the instrument is a compound instrument and classifies such instrument’s components separately as financial liabilities, financial assets, or equity instruments in accordance with IAS 32. Classification of the liability and equity

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components of a convertible instrument is not revised as a result of a change in the likelihood that a conversion option will be exercised, even when exercising the option may appear to have become economically advantageous to some holders. When allocating the initial carrying amount of a compound financial instrument to the equity and liability components, the equity component is assigned as the residual amount after deducting from the entire fair value of the instrument, the amount separately determined for the liability component. The value of any derivative features (such as call options) embedded in the compound financial instrument, other than the equity component (such as an equity conversion option), is included in the liability component. Once the Group has determined the split between equity and liability, it further evaluates whether the liability component has embedded derivatives that must be accounted for separately.

(f.7) Financial assets and financial liabilities at fair value through profit or loss—

Financial assets and financial liabilities in this category are those that are not held for trading and have been either designated by Management upon initial recognition or are mandatorily required to be measured at fair value under IFRS 9. Management designates an instrument at FVPL upon initial recognition when one of the following criteria is met:

• The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis; or

• The liabilities (and assets until January 1, 2018, under IAS 39) are part of a group of financial liabilities (or financial assets, or both under IAS 39), which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or

• The liabilities (and assets until January 1, 2018, under IAS 39) containing one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract.

Financial assets and financial liabilities at FVPL are recorded in the consolidated statements of financial position at fair value. Changes in fair value are recorded in profit and loss with the exception of movements in fair value of liabilities designated at FVPL due to changes in the Group’s own credit risk. Such changes in fair value are recorded in OCI and do not get reclassified to profit or loss. Interest accrued on assets that must be measured at FVPL is recorded using the contractual interest rate. Dividend income from equity instruments measured at FVPL is recorded in profit or loss as “Fee income from financial services, net” (see Note 20), when the right to the payment has been established.

(f.8) Financial guarantees and letters of credit—

The Group issues financial guarantees, and letters of credit. Financial guarantees are initially recognized in the consolidated financial statements (within provisions) at fair value, which is equivalent to the commission received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amount initially recognized less cumulative amortization recognized in the consolidated income statements, and—under IAS 39—the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee, or—under IFRS 9—an ECL provision as set out in Note 4.4(h.1)(ii).

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The commission received is recognized in the consolidated income statements in the caption “Fee income from financial services, net” on a straight-line basis over the life of the guarantee.

Letters of credit are commitments under which, over the duration of the commitment, the Group is required to provide a loan with pre-specified terms to the customer. Similar to financial guarantee contracts, under IAS 39, a provision was made if they were an onerous contract but, from January 1, 2018, these contracts are within the scope of the ECL requirements.

The nominal contractual value of financial guarantees and letters of credit, where the loan agreed to be provided is on market terms, is not recorded in the consolidated statements of financial position. The nominal values of these instruments together with the corresponding ECLs are disclosed in Note 7(d).

(f.9) Available-for-sale financial assets (policy applicable before January 1, 2018)—

Available-for-sale financial investments include equity investments and debt securities. Equity investments classified as available-for-sale are those that are neither classified as held for trading (trading securities) nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in market conditions.

After initial recognition, available-for-sale investments were measured at fair value and unrealized gains or losses were recognized as other comprehensive income in the available-for-sale investments reserve, net of their corresponding deferred Income Tax and non-controlling interest, until the investment is sold, at which moment the cumulative unrealized gain or loss is recognized in the consolidated income statements in the caption “Net gain on sale of securities”, or determined to be impaired, which is recognized in the consolidated income statements in the caption “Loss due to impairment on financial investments” and removed from the available-for-sale investments reserve.

The interest and accrued income were recognized in the consolidated income statements in the caption “Interest and similar income”. Accrued interest is reported as interest income using the effective interest rate method and is recognized when the collection right has been established.

(f.10) Held-to-maturity financial assets (policy applicable before January 1, 2018)—

Held-to-maturity investments are non-derivative financial assets with fixed or variable payments and fixed maturity, for which IFS has the intention and ability to hold them to maturity. After their initial measurement, held-to maturity investments are valued at the amortized cost, using the effective interest rate. The amortized cost is calculated taking into account any discount or premium acquisition and fees that are an integral part of the effective interest. The amortization is included in the caption “Interest and similar income” of the consolidated income statements. Losses arising from the impairment of these investments are recognized in the consolidated income statements.

Until December 31, 2017, the Group did not recognize any impairment loss on held-to-maturity investments.

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The Group is prohibited from classifying any financial assets as held-to-maturity if, during the current financial year or during the two preceding financial years, it has sold before maturity or has reclassified more than an insignificant amount of held-to-maturity investments (in relation with the total amount of held-to-maturity investments).

As of December 31, 2017, the Group did not sell, before maturity, or reclassified any of its held-to-maturity investments.

(f.11) Reclassification of financial assets and liabilities—

From January 1, 2018, the reclassification of financial assets will take place as long as the business model that manages the financial assets is changed. It is expected that this change is very rare. These changes are determined by Management as a result of external or internal changes, and must be significant for the Group’s operations and demonstrable to third parties. Consequently, a change in the Group’s business model will take place only when it begins or ceases to carry out an activity that is significant for its operations. As of December 31, 2018, the Group has not reclassified its financial assets after their initial recognition. Financial liabilities are never reclassified.

Until December 31, 2017, reclassifications of available-for-sale investments into held-to-maturity investments were permitted and the fair value of the carrying amount of the asset at the reclassification date was converted to the new amortized cost and any prior unrealized gain or loss from such financial asset that has been recognized in other comprehensive income was amortized over the remaining life of the financial asset using the effective interest rate method. For the years ended December 31, 2017 and 2016, Interbank recorded a net loss of approximately S/2,608,000 and S/2,537,000, respectively, as a result of the aforementioned reclassifications; see Note 6(e).

On the other hand, with respect to held-to-maturity investments, they cannot be reclassified into another category before their maturity for an amount that is not insignificant (in relation to the total amount of held-to-maturity investments). As of December 31, 2017, the Group did not reclassify held-to-maturity instruments.

(f.12) Repurchase agreements—

Securities sold under repurchase agreements on a specified future date are not derecognized from the consolidated statements of financial position since the Group retains substantially all of the risks and rewards inherent to its ownership. Cash received is recognized as an asset with the corresponding obligation to return it, including accrued interest, as a liability, reflecting the transaction’s economic substance as a loan to the Group. The difference between the sale and repurchase price is recorded as interest expense and is accrued over the life of the agreement using the effective interest rate and is recognized in the caption “Interest and similar expenses” of the consolidated income statements.

As of December 31, 2018 and 2017, the Group did not keep any repurchase agreements.

(g) Derecognition of financial assets and liabilities—

(g.1) Derecognition due to substantial change in terms and conditions—

The Group derecognizes a financial asset, such as a loan to a customer, when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan,

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with the difference recognized as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded.

When assessing whether or not to derecognize a loan to a customer, among others, the Group considers the following factors:

• Change in the loan’s currency.

• Introduction of an equity feature.

• Change in counterparty.

• If the modification is such that the instrument would no longer meet the SPPI criterion.

If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition. Based on the change in cash flows discounted at the original EIR, the Group records a modification gain or loss, to the extent that an impairment loss has not already been recorded.

(g.2) Derecognition other than for substantial modification—

(g.2.1) Financial assets—

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when the rights to receive cash flows from the financial asset have expired.

The Group has transferred the financial asset if, and only if, either:

• Has transferred its contractual rights to receive cash flows from the financial asset; or

• It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement.

Pass-through arrangements are transactions whereby the Group retains the contractual rights to receive the cash flows of a financial asset (the ‘original asset’), but assumes a contractual obligation to pay those cash flows to one or more entities (the ‘eventual recipients’), when all of the following conditions are met:

• The Group has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset.

• The Group cannot sell or pledge the original asset other than as security to the eventual recipients.

The Group has to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, the Group is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents including interest earned, during the period between the collection date and the date of required remittance to the eventual recipients.

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A transfer only qualifies for derecognition if either:

• The Group has transferred substantially all the risks and rewards of the asset; or

• The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

• The Group considers control to be transferred if and only if, the transferee has the ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.

When the Group has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognized only to the extent of the Group’s continuing involvement, in which case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group retains.

(g.2.2) Financial liabilities—

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognized in profit or loss.

(h) Impairment of financial assets—

(h.1) Impairment of financial assets (Policy applicable from January 1, 2018)—

(i) Overview of the ECL principles—

As described in Note 4.2.2(b), the adoption of IFRS 9 has fundamentally changed the Group’s loan loss impairment method by replacing IAS 39’s incurred loss approach with a forward-looking ECL approach. From January 1, 2018, the Group has been recording the allowance for expected credit losses for all loans and other debt financial assets not held at FVPL, together with financial guarantee contracts. Equity instruments are not subject to impairment under IFRS 9.

The ECL allowance is based on the credit losses expected to arise over the life of the asset, unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months’ expected credit loss as outlined in (ii). The policies for determining whether there has been a significant increase in credit risk are set out in Note 31.1(d).

Both lifetime ECLs and 12 months ECLs are calculated on either an individual basis or a collective basis, depending on the nature of the portfolio. The Group’s policy for grouping financial assets measured on a collective basis is explained in Note 31.1(d).

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The Group has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument’s credit risk has increased significantly since initial recognition. This is further explained in Note 31.1(d).

Based on the above mentioned process, IFS groups its loans into Stage 1, Stage 2, Stage 3 and POCI, as described below:

Stage 1: When loans are first recognized, the Group recognizes an allowance based on 12 months ECLs. Stage 1 also includes loans whose credit risk has improved and the loan has been reclassified from Stage 2.

Stage 2: When a loan has shown a significant increase in credit risk since origination, the Group records an allowance for the lifetime ECLs. Stage 2 also includes loans whose credit risk has improved and the loan has been reclassified from Stage 3.

Stage 3: Loans considered credit -impaired (as outlined in Note 31.1(d)). The Group records an allowance for the lifetime ECLs.

POCI: Purchased or originated credit impaired (POCI) assets are financial assets that are credit impaired on initial recognition. POCI assets are recorded at fair value at original recognition and interest income is subsequently recognized based on a credit-adjusted EIR. ECLs are only recognized or released to the extent that there is a subsequent change in the expected credit losses. It should be noted that during the year 2018, the Group has not purchased or originated POCI financial assets.

For financial assets for which the Group has no reasonable expectations of recovering either the entire outstanding amount, or a proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial) derecognition of the financial asset.

The Group recognizes a value correction for expected credit losses on the following financial assets:

• Financial assets that are measured at amortized cost.

• Financial assets that are measured at fair value with changes in other comprehensive income if the following two conditions are met:

(i) The financial asset is maintained within a business model whose objective is achieved by obtaining contractual cash flows and selling financial assets; and

(ii) The contractual terms of the financial asset give rise, on specified dates, to cash flows that are only payments of the principal and interest on the outstanding principal amount.

• Accounts receivable from leases.

• Assets from contracts.

• Financial guarantee contracts.

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In this regard, as of December 31, 2018, the Group’s financial assets subject to a correction for expected credit loss are the following:

• Cash and due from banks.

• Inter-bank funds.

• Financial investments; see Notes 4.4(e), 6 and 31.1(f).

• Loans; see Notes 4.4 (f.1), 7 and 31.1(d).

• Due from customers on acceptances.

• Other accounts receivable and other assets.

For those financial assets other than financial investments and the loan portfolio, Management has estimated the expected credit loss, concluding that it is neither significant nor relevant, given that the maximum period considered for measuring expected credit losses is very small or, even if it implies a longer term, the main debtor is the Central Reserve Bank of Peru (“BCRP”, by its Spanish acronym) or corresponds to cash in vaults of the Group.

(ii) Calculation of ECL—

The Group calculates ECL based on three probability-weighted scenarios to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.

The mechanics of the ECL calculations are outlined below, and the key elements are the following:

• PD (“Probability of default”) is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the financial asset has not been previously derecognized and is still in the portfolio. The concept of PDs is further explained in Note 31.1(d).

• EAD (“Exposure at default”) is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities, and accrued interest from missed payments. The EAD is further explained in Note 31.1.(d).

• LGD (“Loss Given Default”) is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realization of any collateral. It is usually expressed as a percentage of the EAD. The LGD is further explained in Note 31.1(d).

When estimating the ECLs, the Group considers three scenarios (optimistic, base and pessimistic). Each of these is associated with different PDs, as presented in

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Note 31.1.(d). When relevant, the assessment of multiple scenarios also incorporates how defaulted loans are expected to be recovered, including the probability that the loans will cure and the value of collateral or the amount that might be received for selling the asset.

With the exception of credit cards, for which the treatment is separately set out in (v), the maximum period for which the credit losses are determined is the contractual life of a financial instrument (considering the prepayments) unless the Group has the legal right to call it earlier.

Impairment losses and reversals are accounted for and disclosed separately from modification losses or gains that are accounted for as an adjustment of the financial asset’s gross carrying value.

The mechanics of the ECL method are summarized below:

• Stage 1: The provision for credit losses of those financial instruments that do not show a significant increase in risk since the initial recognition will be calculated as the expected credit losses in the following 12 months. The group calculates the expectation that there is a probability of default (PD) in the 12 months after the presentation date. To this probability of default is multiplied and expected loss in case of default (LGD) and exposure on the date of default (EAD) and discounting the original effective interest rate. This calculation is made for each of the three scenarios (base, optimistic and pessimistic) defined by the Group.

• Stage 2: When a loan has shown a significant increase in credit risk since origination, the Group records an allowance for the lifetime ECLs. The mechanics are similar to those explained above, including the use of multiple scenarios, but PDs and LGDs are estimated over the lifetime of the instrument.

• Stage 3: For loans deemed as impaired, the Group recognizes the lifetime expected credit losses for these loans. The method is similar to that for Stage 2, with the PD set at 100 percent.

• Financial guarantee contracts

The Group’s liability under each guarantee is measured at the higher of the amount initially recognized minus cumulative amortization recognized in the consolidated income statements, and the ECL provision. For this purpose, the Group estimates ECLs based on the present value of the expected payments to reimburse the holder for a credit loss that it incurs. The deficits are discounted by the risk-adjusted interest rate relevant to the exposure. The calculation is made using a probability-weighting of the four scenarios. The ECLs related to financial guarantee contracts are recognized in provisions.

(iii) Debt instruments measured at fair value through other comprehensive income—

The ECLs for debt instruments measured at FVOCI do not reduce the carrying amount of these financial assets in the consolidated statements of financial position, which remains at fair value. However, the expected losses that arise at each measurement date must be reclassified from other comprehensive income to results of the period.

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(iv) Credit cards—

The Group calculates the expected losses in a period that reflects the Group’s expectations regarding the client’s behavior, probability of default and the Group’s future risk mitigation procedures that could include the reduction or cancellation of lines of credit. Based on past experience and the Group’s expectations, the period during which the Group calculates the expected lifetime losses of this product is 17 months.

The assessment of whether there has been a significant increase in credit risk for revolving products is similar to other credit products. This is based on changes in the customer’s credit rating, as explained in Note 31.1(d).

(v) Forward-looking information

In its ECL models, the Group relies on a broad range of forward-looking information as economic inputs, such as:

• GDP growth.

• Unemployment rates.

• Economically active population occupied.

• Economically active population.

• Exchange terms.

• Consumer Price Index.

• Domestic demand.

• Government consumption.

• Exchange rate.

The inputs and models used (see Note 31.1), for calculating ECLs may not always capture all characteristics of the market at the date of the consolidated financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments when such differences are significantly material. Detailed information about these inputs and sensitivity analysis are provided in Note 31.1(d).

(vi) Valuation of guarantees—

To mitigate the credit risks on financial assets, the Group uses three types of guarantees, when possible: physical guarantee, personal guarantees and title guarantees.

The Group’s accounting policy for guarantees under IFRS 9 is the same as that established under IAS 39. The guarantee, unless recovered, is not recorded in the Group’s consolidated statements of financial position. However, the fair value of the guarantee affects the calculation of the expected losses, and because of that, it is assessed periodically.

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The nominal contract value of the guarantees and the letters of credit not used where the loan was agreed to be granted is in market terms, is not recorded in the consolidated statements of financial position. The nominal values of these instruments together with the corresponding expected losses are disclosed in Note 31.1(d).

(vii) Write-offs

The Group’s accounting policy under IFRS 9 remains the same as it was under IAS 39. Financial assets are written off only when the Group has stopped pursuing the recovery. Any subsequent recoveries are recognized as a recovery due to credit loss.

(viii) Refinanced and modified loans—

The Group may make concessions or modifications to the original terms of loans as a response to the borrower’s financial difficulties, rather than taking possession or to otherwise enforce collection of collateral. Once the terms have been renegotiated, any impairment is measured using the original EIR (as calculated before the modification of terms). It is the Group’s policy to monitor refinance loans to help ensure that future payments continue to be likely to occur.

A refinanced asset is initially classified into Stage 2 and there will be no clean-up period. However, if the financial asset presents a default mark, it will be reclassified from Stage 2 to Stage 3.

(h.2) Impairment of financial assets (Policy applicable before January 1, 2018)

The Group assessed at each date of the consolidated statements of financial position whether there is any objective evidence that a financial asset or a group of financial assets were impaired. There was an impairment if one or more events that have occurred since the initial recognition of the asset (an incurred “loss event”) had an impact on the estimated future cash flows of the financial asset or the group of financial assets that could be reliably estimated. Evidence of impairment could include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will go bankrupt or initiate any legal financial reorganization process and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

The criteria used for each category of financial assets were as follows:

(i) Financial assets carried at amortized cost—

For loans, receivables and held-to-maturity investments that were carried at amortized cost, the Group first assessed whether impairment exists individually for financial assets that were individually significant, or collectively for financial assets that were not individually significant. If the Group determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it included the asset in a group of financial assets with similar credit risk characteristics and collectively assessed them for impairment. Assets that were individually assessed for impairment and for which an impairment loss was, or continues to be, recognized are not included in a collective impairment assessment.

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The amount of any impairment loss identified was measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset was reduced through the use of an allowance account and the amount of the loss was recognized in the consolidated income statements.

If in any subsequent period, the amount of the estimated impairment loss increased or decreased because of an event occurring after the impairment was recognized, the previously recognized impairment loss was increased or reduced by adjusting the allowance account.

A loan, together with the associated allowance, was written off and derecognized when fully provisioned and there was real and verifiable evidence that the loan was unrecoverable and collection efforts concluded without success, impossibility of foreclosure or the entire collateral has been realized or has been transferred to the Group. If in the future a written-off loan was recovered, the recovery was recognized in the consolidated income statements as a credit to the caption “Impairment loss on loans, net of recoveries”.

The present value of the estimated future cash flows was discounted at the financial asset’s original effective interest rate. If a loan had a variable interest rate, the discount rate for measuring any impairment loss was the current effective interest rate. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not said foreclosure is probable.

For collective impairment assessment, financial assets are grouped considering the Group’s internal credit rating system, which considers credit risk characteristics; for example, type of asset, economic sector, geographical location, type of collateral, past-due status and other relevant factors.

Future cash flows from a group of financial assets that are collectively assessed for impairment were estimated on the basis of historical loss experience for assets with similar credit risk characteristics. Historical loss experience was adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the years on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist. The methodology and assumptions used were reviewed regularly to reduce any difference between loss estimates and actual loss experience.

(ii) Available-for-sale financial investments—

For available-for-sale financial investments, the Group assessed at each date of the consolidated statements of financial position whether there was objective evidence that an investment or a group of investments was impaired.

In the case of equity securities, objective evidence would include a significant or prolonged decline in their fair value below cost. The “significant” decline is to be evaluated against the original cost of the investment while the “prolonged” decline, against the period in which the fair value has been below its original cost. When there was evidence of impairment, the cumulative loss (measured as the difference

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between the acquisition cost and the current fair value, less any previously recognized impairment loss) was removed from the available-for-sale investments reserve of the consolidated statements of other comprehensive income and recognized in the consolidated income statements.

Impairment losses on equity securities were not reversed through the consolidated income statements; increases in their fair value after impairment were directly recognized in the consolidated statements of other comprehensive income.

In the case of debt instruments, impairment was assessed based on the same criteria as financial assets carried at amortized cost. The amount recorded for impairment was the cumulative loss measured as the difference between the amortized cost and the current fair value, minus any impairment loss on that investment previously recognized in the consolidated income statements. If in a subsequent period, the fair value of a debt instrument increased and the increase could be objectively related to an event occurring after the impairment loss was recognized in the consolidated income statements, the impairment loss was reversed through the consolidated income statements.

Future interest income was based on the reduced carrying amount and is accrued using the interest rate used to discount the future cash flows for the purpose of measuring the impairment loss. Interest income was recorded as part of the caption “Interest and similar income” of the consolidated income statements.

(iii) Rescheduled loans (refinanced)—

Where possible, the Group sought to modify the loans rather than to take possession of the collateral. The rescheduled loans are direct loans in which modifications are made in the time and/or amounts of the original contract due to difficulties in the payment capacity of the client. When a loan is rescheduled, it is no longer considered as past due but it maintains its previous classification as impaired or not impaired. If the debtor complies with the new agreement during the following six months, and an analysis of its payment capacity supports a new improved risk classification, it is classified as not impaired. If subsequent to the loan modification, the debtor fails to comply with the new agreement, it is considered as impaired and past due.

(i) Hedge derivatives—

Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured at their fair value. All derivatives are recognized as assets when the fair value is positive, and they are recorded as “Accounts receivables related to derivative financial instruments” under “Accounts receivable and other assets, net”, and as liabilities when they are negative, and they are recorded as “Accounts payable related to derivative financial instruments” under “Accounts payable, provisions and other liabilities” in the consolidated statements of financial position.

Derivatives can be designated as hedging instruments under hedge accounting and in the event they qualify, depending upon the nature of the hedged item, the method for recognizing gains or losses from changes in fair value will be different. These derivatives, which are used to hedge exposures to risk or modify the characteristics of financial assets and liabilities and that meet IFRS 9 criteria, are recognized as hedging accounting.

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Derivatives not designated as hedging instruments or that do not qualify for hedging accounting are initially recognized at fair value and are subsequently remeasured at their fair value, which is estimated based on the market exchange rate and interest rate. Gains or losses due to changes in their fair value are recorded in the consolidated income statements (see Note 4.4 (f.2)).

In accordance with IFRS 9, to qualify for hedge accounting, all of the following conditions must be met:

(i) The hedging relationship consists of only hedging instruments and eligible hedged items.

(ii) At the inception of the hedge, there is formal designation and documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge. This documentation will include the identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and the way the entity will assess if the hedging relationship meets the hedge effectiveness requirements.

(iii) The hedging relationship meets all the following hedge effectiveness requirements:

• There is an economic relationship between the hedged item and the hedging instrument.

• The effect of the credit risk does not dominate the value changes that result from that economic relationship.

• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of the hedged item.

In accordance with IAS 39, to qualify for hedge accounting, the hedging relationship had to meet all the following conditions:

(i) At the inception of the hedge, there was formal designation and documentation of the hedging relationship, as well as the entity’s risk management objective and strategy for undertaking the hedge.

(ii) It was expected that the hedge was highly effective in offsetting the changes in fair value or cash flows associated with the hedged risk. A prospective and retrospective effectiveness had to be performed, and the test results had to be within a range of 80 percent to 125 percent.

(iii) For a cash flow hedge, a forecast transaction that is the subject of the hedge had to be highly probable and had to present an exposure to variations in cash flows that could ultimately affect profit or loss.

(iv) The effectiveness of the hedge could be reliably measured.

(v) The hedge was assessed in an ongoing basis and it was really possible to determine that hedge had in fact been highly effective throughout the periods for which the hedge was designated.

Both IFRS 9 and IAS 39 present three hedge accounting categories: fair value hedge, cash flow hedge, and hedge of net investments in a foreign operation. The Group uses derivatives as hedging instruments under cash flow hedges, as detailed in Note 11 (b).

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For derivatives that are designated and qualify as cash flow hedge, the effective portion of derivative gains or losses is recognized in “Other comprehensive income for cash flow hedge”, and reclassified to income in the same period or periods in which the hedge transaction affects income. The portion of gain or loss on derivatives that represents the ineffective portion or the hedge components excluded from the assessment of effectiveness is recognized immediately in income. Amounts originally recorded in other comprehensive income and subsequently reclassified to income are recorded in the corresponding income or expenses lines in which the related hedged item is reported.

When a hedging instrument expires or is sold, when a hedge no longer meets the criteria for hedge accounting and also when the Group re-designates a hedge, any cumulative gain or loss existing in other comprehensive income is kept and recognized in income when the hedged item is ultimately recognized in the consolidated income statements. When a projected transaction is no longer expected to occur, the cumulative gain or loss recognized in other comprehensive income is immediately transferred to the consolidated income statements.

(j) Financial leases—

Financial leases are recognized as loans at the present value of the installments. The difference between the total value receivable and the present value of the loan is recognized as accrued interest. This income is recognized during the term of the lease using the effective interest rate method, which reflects a constant rate of return.

As of December 31, 2018 and 2017, leasing receivables are subject to the financial asset impairment policy; see Notes 4.2(h.1) and (h.2).

(k) Customer Loyalty Program—

The Group has a customer loyalty program, which allows customers to accumulate points that can be exchanged for products. Loyalty points give rise to a separate performance obligation, since they provide a material right to the customer. A part of the transaction price is allocated to the loyalty points granted to customers on the basis of the relative independent selling price and is recognized as a contractual liability until the points are redeemed and presented as “Other accounts payable” in the item “Other accounts payable, provisions and other liabilities” of the consolidated statements of financial position. Expenses are recognized when the customer redeems the products.

By estimating the selling price independent of the loyalty points, the Group considers the probability of a client redeeming points. The Group updates the estimates of points to be monthly redeemed and any adjustment to the liability balance will be recognized in the caption “Administrative expenses” of the consolidated income statements.

(l) Services of purchase-sale of financial investments “principal versus agent”—

The Group has contracts with customers to buy and sell, on their behalf, financial investments in the stock market and over-the-counter market. The Group acts as an agent in these agreements.

When another party participates in the supply of services to their client, the Group determines whether it is a principal or an agent in these transactions when evaluating the nature of its agreement with the client. The Group is a principal and records the revenue by gross amounts if it controls the committed services before transferring to the customer. However, if the Group’s role is only to arrange for another entity to provide the services, then the Group is an agent and records

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the revenues for the net amount it retains for its services as an agent. As of December 31, 2018, 2017 and 2016, the Group has recognized net income of S/9,158,000, S/7,884,000 and S/10,427,000, respectively, for transactions carried out on behalf of its customers, which have been recorded in the item “Fee income from financial services, net” of the consolidated income statements; see Note 21.

(m) Investments in associates—

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the entity, but without having control over those policies. The considerations taken for determining significant influence are similar to those needed to determine control over Subsidiaries.

The Group’s investments in its associates are recognized initially at cost and then are accounted for using the equity method. The Group’s investments in associates are included in the caption “Accounts receivable and other assets, net” of the consolidated statements of financial position. Gains resulting from the use of the equity method of accounting are included in the caption “Other income” of the consolidated income statements.

(n) Operating leases—

The determination of whether an arrangement is, or contains, a lease is based in the substance of the arrangement at its inception date: i.e., whether fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset even if that right is not explicitly specified in an arrangement.

Leases in which a significant portion of the risks and benefits of the asset are held by the lessor are classified as operating leases. Under this concept, the Group has mainly leased premises used as offices and agencies of the Group’s Subsidiaries.

When an operating lease is terminated before the lease period has expired, any penalty payment to the lessor is recognized as an expense in the period in which the contract termination takes place.

(o) Operating leases revenues—

Lease revenues obtained from investment properties are recorded using the straight-line method for the contract terms, and they are recorded as a revenue in the consolidated income statements due to their operative nature, except for contingent lease revenues, which are recorded when realized.

The lease term is the non-cancelable period, together with any other additional period for which a lessee has the option of continuing with the lease. As of the start date of the lease, Management is reasonably confident that a lessee will exercise such option.

Amounts received from tenants to terminate leases or to compensate impairment of leased facilities are recognized as revenues in the consolidated income statements when the right to receive them arises.

Service charges, administration expenses and other recoverable expenses paid by the lessees and the revenues resulting from expenses charged to the lessees are recognized in the period in which the compensation becomes an account receivable. Service charges and administration expenses and other receipts are included in the gross revenues from rentals of the related costs, given that Management considers that the Group acts as a principal party.

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(p) Investment property—

Investment property comprises land and buildings (mainly shopping malls) that are not occupied substantially for use by, or in the operations of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation. These buildings are substantially rented to tenants and not intended to be sold in the ordinary course of business. Investment property comprises completed property and property under construction or re-development.

The Group measures its investment property at fair value according to the requirements of IAS 40 “Investment Property”, as it has chosen to use the fair value model as its accounting policy.

Investment property is measured initially at cost including transaction costs that include transfer taxes, professional fees for legal services and initial leasing commissions to bring the property to the condition necessary to start operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.

Properties under construction are measured based on estimates prepared by independent real estate valuation experts, except where such values (e.g. work-in-progress incurred on properties under construction) cannot be readily determined. Accordingly, the work-in-progress incurred on properties under construction is measured at cost until either its fair value becomes reliably measurable or construction is completed (whichever is earlier). Investment property under construction includes the value of land, which is determined by appraisals performed by an accredited appraiser using the price per square meter as a market comparable method.

Subsequent to initial recognition, investment property is recorded at fair value. Gains or losses arising from changes in fair values are included in the caption “Net gain on investment property” of the consolidated income statements in the year in which they arise, including the corresponding deferred tax effect.

Fair values are assessed periodically by Management, based on the discounted cash flows that are expected to be obtained from these investments. Fair values of investment properties under construction or investment properties held to operate in the future are assessed by an independent external appraiser, through the application of a recognized valuation model. See Note 8 for details of fair value and related assumptions.

Transfers to or from “Investment property” are made only when there is a change in the use of the asset. In case of assets transferred from “Investment property” to “Property, furniture and equipment”, the reclassified amount corresponds to the asset’s fair value at the date when the asset’s use was changed. If an item of “Property, furniture and equipment” moves to “Investment property”, the Group transfers the fixed asset’s net cost to “Investment property” and the asset is subsequently measured at fair value according to the policies established by the Group.

In 2018, the Group transferred the “Las Orquídeas” building, located in San Isidro, Lima, from “Investment property” to “Property, furniture and equipment” for S/20,029,000. In addition, the Group transferred part of the “Pardo y Aliaga” building and part of the “Sede Wiese”, both located in San Isidro, Lima, from “Property, furniture and equipment” to “Investment property” for S/6,453,000 and S/4,037,000, respectively. As of December 31, 2017, the Group did not make any transfers; see Note 8(c).

Investment property is derecognized when it has been disposed or withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal

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proceeds and the carrying amount of the asset would result in either gains or losses at the retirement or disposal of investment property. Any gains or losses are recognized in the consolidated income statements of the year of retirement or disposal.

(q) Property, furniture and equipment—

Property, furniture and equipment are stated at historical acquisition cost less residual value, cumulative depreciation and impairment losses, if applicable. The historical acquisition cost includes the expenses that are directly attributable to the acquired property, furniture or equipment. Maintenance and repair costs are charged to the consolidated income statements; significant renewals and improvements are capitalized when it is probable that future economic benefits, in excess of the originally assessed standard of performance, will result from the use of the acquired property, furniture or equipment.

Land does not depreciate. Depreciation is calculated using the straight-line method over the estimated useful lives, which are as follows:

	Years
Buildings and facilities	40 - 75
Leasehold improvements	5
Furniture and equipment	10
Vehicles	5

An item of property, furniture and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising from the derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statements.

The residual value of each asset, its useful life and the selected depreciation method are periodically reviewed to ensure that they are consistent with current economic benefits and useful life expectations.

(r) Assets seized through legal actions—

Assets seized through legal actions are recorded in the item “Others” of the caption “Accounts receivable and other assets” at the lower value between the cost or the estimated market value (minus cost to sell), determined from valuations made by independent appraisers. Reductions in book value are recorded in the consolidated income statements.

(s) Intangible assets with finite useful lives—

Generally, the intangible assets with finite useful lives are included in the “Intangibles and goodwill, net” caption of the consolidated statements of financial position and they are mainly costs incurred in connection with the acquisition of computer software used in operations and other minor intangible assets. The amortization expense is calculated following the straight-line method over the useful life estimated between 4 and 5 years; see Note 10.

On the other hand, when an insurance contract portfolio is acquired, whether directly from another insurance company or as part of a business combination (in the case of the Group, the acquisition of Seguros Sura), the difference between the fair value of the insurance contract liability and the value of the insurance contract liability, as measured with the acquirer’s accounting policies, is recognized as an intangible asset named “Present Value of In-Force Business” (henceforth “PVIF”).

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In this sense, PVIFs resulting from the acquisition of Seguros Sura are recognized in the consolidated statements of financial position at their estimated market value at the acquisition date. After the initial recognition, the PVIF is recorded at cost, minus the cumulative amortization and cumulative impairment loss, if any. The PVIF is amortized on a linear basis over the useful life of the acquired policies, which has been estimated in ten years.

The recoverability of PVIF is considered as part of the liability adequacy test performed at each reporting period. PVIF is derecognized when the related contracts are settled or disposed of.

Changes in the estimated useful life or in the pattern of consumption of the expected future economic benefits embedded in the intangible asset (PVIF) are recorded by changing the amortization period or method and are treated as a change in an accounting estimate.

Gains or losses arising from the derecognition of an intangible asset are measured as the difference between the net amount of the disposal of the asset and the book value of said asset and they are recognized in the consolidated income statements at the derecognition date.

(t) Goodwill—

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests, and any previous interest held, if any, over the net identifiable assets acquired and liabilities assumed.

After initial recognition, goodwill is measured at cost less any cumulative impairment loss, if any. A goodwill impairment testing is performed on a yearly basis. To perform an impairment testing, goodwill acquired in a business combination is allocated, since the acquisition date, to one of the Group’s cash-generating units (henceforth “CGU”) that are expected to benefit from the business combination. Goodwill impairment is determined by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

Goodwill, recorded by the Group (see Note 2), arises from the acquisition of Seguros Sura and, considering that this entity was merged with Interseguro, has been allocated to the CGU of the insurance business.

(u) Business combinations—

Business combinations are accounted for using the acquisition method established by IFRS 3 “Business Combinations”. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at the acquisition date’s fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group chooses whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in the caption “Administrative expenses” of the consolidated income statements.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer shall be recognized at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial

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instrument and within the scope of IAS 39, is measured at fair value with the changes in the consolidated income statements or in the consolidated statements of other comprehensive income. If the contingent consideration is not within the scope of IAS 39, this shall be measured according to the applicable IFRS. The contingent consideration that is classified as equity must not be measured again and its subsequent settlement shall be recorded in equity. As of December 31, 2018 and 2017, there have been no contingencies arising from business combinations.

A combination of businesses between entities or businesses under common control is beyond the scope of IFRS 3, because it corresponds to a business combination in which all entities or businesses that are combined are ultimately controlled by the same Part or parts, both before and after the business combination. In these transactions, the Group recognizes the assets acquired under the method of unification of interest, whereby the assets and liabilities of the combined companies are reflected in their book values and no commercial credit is recognized as a result of the combination.

(v) Impairment of non-financial assets—

Property, furniture and equipment and intangible assets with a finite life are assessed to determine whether there are any indications of impairment as of the closing of each period. If any indication exists, the Group estimates the asset’s recoverable value. The recoverable amount of the assets is the highest between the value of an asset or a cash-generating unit less the costs of sale and its use value, and it is determined for an individual asset, unless the asset does not generate cash revenues that are largely independent from those of other assets or groups of assets.

When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value minus costs to sell, an appropriate valuation model is used.

(w) Due from customers on acceptances—

Due from customers on acceptances corresponds to accounts receivable from customers for import and export transactions, whose obligations have been accepted by the Group. The obligations that must be assumed by the Group for such transactions are recorded as liabilities.

(x) Defined contribution pension plan—

The Group only operates a defined contribution pension plan. The defined contribution payable in the pension plan is in proportion to the services rendered to the Group by the employees and it is recorded as an expense in the caption “Salaries and employee benefits” of the consolidated income statements. Unpaid contributions are recorded as liabilities.

(y) Provisions—

Provisions are recognized when the Group has a present obligation (legal or implicit) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required in order to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the consolidated income statements net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a pre-tax rate that reflects, where appropriate, the specific risks of the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a financial expense.

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(z) Contingencies—

Contingent liabilities are not recognized in the consolidated financial statements, but are disclosed in the notes to the consolidated financial statements, unless the probability of an outflow of resources is remote. Contingent assets are not recorded in the consolidated financial statements, but they are disclosed if it is probable that an inflow of economic benefits will emerge.

(aa) Fair value measurement—

Fair value is the price that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• On the principal market for the asset or liability; or

• In the absence of a principal market, on the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group. Also, the fair value of a liability reflects its non-performance risk.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

When available, the Group measures the fair value of a financial instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure the fair value, maximizing the use of relevant and observable data and variables, and minimizing the use of unobservable data and variables.

The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

In the case of investment property, the Group has considered the specific requirements relating to highest and best use, valuation of premises and principal (or most advantageous) market. The determination of investment property fair value requires the use of estimations such as the future cash flows of the assets (e.g., leases, sales, fixed rents for the different lessees, variable rents based on the sales percentage, operating costs, construction costs -henceforth “CAPEX”-, maintenance and the use of discount rates). Additionally, real estate development risks (such as construction and abandonment) are also taken into account when determining the fair value of the land related to the investment property under construction.

The fair value of investment property in the consolidated statements of financial position must reflect the volatile nature of real estate markets; therefore, Management and its appraisers use their market knowledge and professional criteria and do not depend solely on historical comparable transactions. In this sense, there is a higher degree of uncertainty than when a more active market exists for the estimation of fair value. Significant methods and assumptions used in the estimation of fair value of investment property are detailed in Note 8.

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All assets and liabilities for which the fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described below:

• Level 1—Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

• Level 2—Valuation techniques for input that is significant to the fair value measurement is directly or indirectly observable.

• Level 3—Valuation techniques for input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized at fair value in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of hierarchy of the fair value, as explained above.

Fair values of financial instruments measured at amortized cost are disclosed in Note 32(b).

(ab) Income Tax—

Income Tax is computed based on the separate financial statements of each Subsidiary.

Deferred Income Tax is accounted for in accordance with IAS 12 “Income Taxes”. In this sense, the deferred Income Tax reflects the effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts determined for tax purposes. Deferred assets and liabilities are measured using the tax rates that are expected to be in force in the years in which such temporary differences are expected to be recovered or settled. Consequently, the deferred Income Tax has been calculated by applying the rates that will be effective since January 1, 2017; see Note 18(c). The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that arise from the manner in which each individual entity of the Group expects, at the consolidated statements of financial position dates, to recover or settle the carrying amount of their assets and liabilities.

Deferred tax assets and liabilities are recognized regardless of when the temporary differences are likely to reverse. Deferred tax assets are recognized when it is probable that sufficient taxable income will be generated against which the deferred tax assets can be offset. At each consolidated statements of financial position date, unrecognized deferred assets and the carrying amount of deferred tax assets registered are assessed. A previously unrecognized deferred tax asset is recognized to the extent that it has now become probable that future taxable income will allow the deferred tax asset to be recovered. Likewise, the carrying amount of a deferred tax asset is reduced when it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax asset to be used.

According to IAS 12, the deferred Income Tax is determined by applying the Income Tax rate applicable to the retained earnings, recognizing any additional tax on distribution of dividends that may arise on the date when the liability is recognized.

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(ac) Segment information—

IFRS 8 “Operating Segments” requires that the information of operating segments be disclosed consistently with information provided by the chief operating decision maker, who allocates resources to the segments and assesses their performance. Segment information is presented in Note 29.

(ad) Fiduciary activities and management of funds—

The Group provides trust management, investment management, advisory and custody services to third parties that result in the holding of assets on their behalf. These assets and the income arising thereon are excluded from these consolidated financial statements, as they are not assets of the Group; see Note 33.

Commissions generated from these activities are included in the caption “Fee income from financial services, net” of the consolidated income statements.

(ae) Earnings per share—

The amount of basic earnings per share is calculated by dividing the net profit for the year attributable to common shareholders by the weighted average number of common shares outstanding during the year. As of December 31, 2018 and 2017, the Group does not have financial instruments with dilutive effect, therefore, basic and diluted earnings per share are identical for the years reported.

(af) Capital surplus—

It is the difference between the nominal value of shares issued and their offering price made in 2007. Capital surplus is presented net of expenses incurred in the issuance of shares.

(ag) Treasury stock—

Shares repurchased are recorded in the shareholders’ equity under treasury stock caption at their purchase price. No loss or gain is recorded in the consolidated income statements arising from the purchase, sale, issuance or amortization of these instruments. Shares that are subsequently sold are recorded as a reduction in treasury stock, measured at the average price of treasury stock held at such date; and the resulting gain or loss is recorded in the consolidated statements of changes in net equity in the caption “Retained earnings”.

(ah) Cash and cash equivalents—

Cash presented in the consolidated statements of cash flows includes cash and due from banks balances with original maturities lower than three months, excluding the restricted funds, which are subject to an insignificant risk of changes in value. The cash and cash equivalent item does not include accrued interest.

On the other hand, the cash collateral committed as part of a repurchase agreement is included in the “Cash and due from banks” caption of the consolidated statements of financial position; see Note 5(d).

(ai) Financial statements as of December 31, 2017 and 2016—

In 2018, after carrying out a detailed assessment of the nature of operations related to credit cards, Management decided to reclassify certain income and expenses from the captions “Other income”

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and “Administrative expenses”, respectively, to the captions “Fee income from financial services, net”; see Note 21. Said reclassifications allow a better presentation of the transactions based on the nature of operations and were retrospectively performed to compare consolidated financial statements. The reclassified amounts in each comparative period are presented below:

Year 2017	Before reclassification			Reclassification			After reclassification
	S/(000)			S/(000)			S/(000)
Fee income from financial services, net		910,770			(61,528	)		849,242
Other income		115,845			(28,406	)		87,439
Administrative expenses		(820,498	)		89,934			(730,564	)

Year 2016	Before reclassification			Reclassification			After reclassification
	S/(000)			S/(000)			S/(000)
Fee income from financial services, net		862,447			(52,995	)		809,452
Other income		98,614			(34,519	)		64,095
Administrative expenses		(776,318	)		87,514			(688,804	)

According to Management, these reclassifications allow a better presentation of the consolidated financial statements.

4.5 Standards issued but not yet effective

Following is the description of the new and amended standards and interpretations issued, but which are not yet in force at the date of issuance of these consolidated financial statements. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective.

• IFRS 16 “Leases”

IFRS 16 was issued in January 2016 and replaces IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement Contains a Lease”, SIC 15 “Operating Leases – Incentives”, and SIC 27 “Evaluating the Substance of Transactions in the Legal Form of a Lease”. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance exemption for leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less).

At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases.

IFRS 16, which is effective for annual periods beginning on or after January 1, 2019, requires lessees and lessors to make more extensive disclosures than under IAS 17.

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The Group plans to adopt IFRS 16 under the modified retrospective method through an adjustment due to the cumulative effect at the beginning of the 2019 period and will not restate amounts from comparative periods. The Group will choose to apply the standard to all contracts entered into before January 1, 2019, that were identified as leases in accordance with IAS 17 and IFRIC 4.

The Group will also use the exemptions proposed by the standard on lease contracts for which the lease terms end within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low value. The Group has leases of certain office equipment (i.e., personal computers, printing and photocopying machines) that are considered of low value.

The impact on the consolidated statement of financial position as of January 1, 2019, due to the adoption of IFRS 16, is as follows:

	S/(000)
Assets
Property, furniture and equipment (right to use the asset)		341,746
Liabilities
Financial leases (liabilities)		341,746

The adoption of IFRS 16, is expected to have no impact on the consolidated income statement.

• IFRS 17 “Insurance contracts”

In May 2017, the IASB issued IFRS 17, a new comprehensive accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure; however, in October 2018 the IASB proposed deferring the validity of IFRS 17 to the year 2022. Early adoption is allowed, provided that the entity also adopts IFRS 9 and IFRS 15 on the date that it adopts IFRS 17 for the first time or earlier. Once in force, IFRS 17 will replace IFRS 4 “Insurance Contracts”, which was issued in 2005.

IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in IFRS 4, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects and which additionally includes:

(i) A specific adaptation for contracts with direct participation features (the variable fee approach).

(ii) A simplified approach (the premium allocation approach) mainly for short-duration contracts.

• Interpretation of IFRIC 23 “Uncertainty over Income Tax Treatments”

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12. The interpretation does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.

The Interpretation specifically addresses the following:

• Whether an entity considers uncertain tax treatments separately.

• The assumptions an entity makes about the examination of tax treatments by taxation authorities.

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• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.

• How an entity considers changes in facts and circumstances.

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. The interpretation is effective for annual reporting periods beginning on or after January 1, 2019, but certain transition reliefs are available.

Although IFS and its Subsidiaries domiciled in the Republic of Panama and the Bahamas are not subject to any income tax or capital gains tax— see Note 18(a), and Peruvian companies of life insurance are exempted from Income Tax regarding the income derived from assets linked to technical reserves for pension insurance (retirement, disability and survival pensions) and annuities from the Private Pension Fund Administration System – see Note 18(e), the Group will apply the interpretation from the entry into force; however, as a result of a preliminary evaluation, Management concluded that this interpretation will not affect the consolidated financial statements.

• Amendments to IFRS 9: Prepayment features with negative compensation

Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract.

The amendments must be applied retrospectively and are effective from January 1, 2019, with early adoption permitted. In this sense, the Group has analyzed these modifications, concluding that they will not have a significant impact on its consolidated financial statements.

• Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint venture

The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognized in full. However, any gain or loss resulting from the sale or contribution of assets that do not constitute a business is recognized only to the extent of unrelated investors’ interests in the associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively.

The Group will apply these amendments when they become effective; likewise, the Group does not plan to adopt these modifications in advance.

• Amendments to IAS 19: Plan amendment, curtailment or settlement

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The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to:

• Determine the cost of current services for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event.

• Determine the net interest for the remainder of the period after the plan amendment, curtailment or settlement using: the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event; and the discount rate used to remeasure that net defined benefit liability (asset).

The amendments apply to plan amendments, curtailments, or settlements occurring on or after the beginning of the first annual reporting period that begins on or after January 1, 2019, or after that date. Since the Group does not maintain defined benefit plans, these modifications will not have an impact on its consolidated financial statements.

• Amendments to IAS 28: Long-term interests in associates and joint ventures

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests.

The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognized as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 “Investments in Associates and Joint Ventures”.

The amendments should be applied retrospectively and are effective from January 1, 2019. Since the Group does not have such long-term interests in associates and joint ventures, the amendments will not have an impact on its consolidated financial statements.

• Improvements to the IFRS (2015 – 2017 cycle)

• IFRS 3 “Business Combinations”, the amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation.

An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early adoption permitted.

In Management’s opinion, these modifications will not have an impact on the Group’s financial statements.

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• IFRS 11 “Joint Arrangements”, a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined by IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured.

An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early adoption permitted.

In Management’s opinion, these modifications will have no impact on the Group’s financial statements because they do not perform joint operations.

• IAS 12 “Income Taxes”, the amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.

An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted. When an entity first adopts those amendments, it applies them to the income tax consequences of dividends recognized on or after the beginning of the earliest comparative period.

Although IFS and its Subsidiaries domiciled in the Republic of Panama and the Bahamas are not subject to any income tax or capital gains tax – see Note 18(a), and Peruvian companies of life insurance are exempted from Income Tax regarding the income derived from assets linked to technical reserves for pension insurance (retirement, disability and survival pensions) and annuities from the Private Pension Fund Administration System— see Note 18(e); legal entities or natural persons not domiciled in Peru are subject to an additional tax on dividends received from entities domiciled in Peru. In this regard, since the Company controls the Subsidiaries that distribute the dividends, it recognizes the amount of the Income Tax as an expense of the year to which these dividends correspond. In this sense, the application of the interpretation will not affect the consolidated financial statements.

• IAS 23 “Borrowing Costs”, the amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first adopts those amendments. An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted.

In Management’s opinion, these modifications will not have any significant impact on the Group’s financial statements because they do not develop qualified assets or obtain financing for these purposes.

4.6 Significant accounting judgments, estimates and assumptions

The preparation of the consolidated financial statements of the Group requires Management to make judgments, estimates and assumptions that affect the reported amount of income, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. In the

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process of applying the Group’s accounting policies, Management has used judgments and assumptions about the future and other key sources to make its estimates at the reporting date, which have a significant risk that may cause a material adjustment to the value in books of assets and liabilities within the next financial year. The estimates and existing assumptions may change due to circumstances beyond the control of the Group and are reflected in assumptions if they occur. The items with the most impact recognized in the consolidated financial statements with judgements and/or considerable estimates are the following: the calculation of the impairment of the portfolio of loans and financial investments, the measurement of the fair value of the financial investments and investment properties, the assessment of the impairment of the goodwill, the liabilities for insurance contracts and the measurement of the fair value of derivative financial instruments; also, there are other estimates such as the estimated useful life of intangible assets, property, furniture and equipment, and the estimation of assets and liabilities for deferred Income Tax. The accounting criteria used for each of these items are described in Note 4.4.

On the other hand, during 2018, the Group made the following changes in the accounting estimate related to the determination of insurance contracts liabilities, as detailed below:

(a) Adoption of new mortality tables (SPP 2017)

Through SBS Resolution No.886-2018 dated March 7, 2018, the SBS published the new Peruvian mortality and morbidity tables “SPP-S-2017” and “SPP-I-2017” (for men and women) to be used in mathematical reserve calculations of pensions from the Private Pension System (“SPP”, by its Spanish acronym) and the Complementary Insurance of Hazardous Work. These tables gather updated information from Peru’s SPP and show the recent changes in the life expectancy. The population used for the analysis and study were those affiliated to the SPP.

Considering that, according to international actuarial and accounting standards, mortality tables need to be updated on a regular basis with information reflecting the reality of the insured, from June 1, 2018, the Group decided to use these new tables for its pension reserve calculation, as they show the recent changes in mortality and life expectancy and the improvement factors of mortality rates, see Note 15(e).

The effect of the first application of SPP-S-2017 and SPP-I-2017 tables as of June 1, 2018, amounted to S/144,777,000; which, in accordance with IAS 8, has been recognized prospectively, affecting the results of the year within the caption “Net premiums earned”.

(b) Changes in the assumptions used in calculating interest rates to discount pension reserves

Until May 31, 2018, in order to discount claim reserves, Interseguro used the average market rate of its financial assets portfolio for the matching currency pension flows and a reinvestment rate of 3 percent for non-matching currency pension flows. From the second quarter 2018, Interseguro modified the estimation of these assumptions, using the risk-free rate due to the currency of Peruvian government’s sovereign yield curves plus an illiquidity premium as a portion of the corporate bonds spread that is not related to loss given default or the cost of credit rating downgrade. These corporate bonds spread is calculated based on the performance of the asset portfolio designated by Interseguro to cover its pension obligations.

The purpose of changing the method to build the interest rate is to show the nature of the insurance business over the long term, therefore preventing changes in liability values in the short term caused by the fluctuation of the interest rate, which occurs due to market volatility, the speculative component and economic cycles.

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The effects of the first application of interest rates as of June 1, 2018, amount to S/423,080,000, which, according to IAS 8, has been prospectively recognized and is part of the year’s movement in other comprehensive results within the caption “Unrealized results, net”.

In accordance with IAS 8, as the changes above result from new information or events and are not error corrections nor related to previous periods, they are considered changes in accounting estimations and the effects shall be recognized prospectively and included in the consolidated income statements for:

(i) The period in which a change occurs, if it affects only such period; or

(ii) The period in which a change occurs and future periods, if it affects all of them.

As a consequence, Management considers that the changes in the mortality and morbidity tables and in the method for determining the discount interest rate reflect a better accounting estimation of insurance contracts liabilities.

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4.7. Transition disclosures

This table presents the impact of the adoption of IFRS 9 in the consolidated statements of financial position and the retained earnings. In addition, it presents the reconciliation between the book values according to IAS 39 and the balances reported according to IFRS 9, as of January 1, 2018:

	IAS 39							Adjustments for first adoption of IFRS 9						IFRS 9
	Category	Balance			Reclassifications			Expected credit loss			Others			Balance			Category
		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Assets
Cash and due from banks	Loans and accounts receivable		11,204,843			—			—			—			11,204,843		Amortized cost
Inter-bank funds	Loans and accounts receivable		403,526			—			—			—			403,526		Amortized cost
Financial investments
Trading securities	Fair value through profit or loss		216,008			(216,008	)		—			—			—		—
Available-for-sale investments	Available-for-sale		15,459,660			(15,459,660	)		—			—			—		—
Held-to-maturity investments	Held-to-maturity		1,248,475			(1,248,475	)		—			—			—		—
Investments at fair value through profit or loss	—		—			1,355,638			—			—			1,355,638		Fair value through profit or loss
Debt instruments measured at fair value through other comprehensive income	—		—			13,756,360			—			—			13,756,360		Debt instruments measured at Fair value through other comprehensive income
Equity instruments measured at fair value through other comprehensive income	—		—			563,670			—			—			563,670		Equity instruments measured at Fair value through other comprehensive income
Investments at amortized cost	—		—			1,248,475			—			18,016	A		1,266,491		Amortized cost
Loans, net of non-accrued interest			29,406,286			—			—			—			29,406,286
Impairment loss on loans, net			(1,202,118	)		—			(58,229	) B		—			(1,260,347	)
Loan portfolio, net	Loans and accounts receivable		28,204,168			—			(58,229	)		—			28,145,939		Amortized cost
Investment property	—		1,118,608			—			—			—			1,118,608		—
Property, furniture and equipment, net	—		612,639			—			—			—			612,639		—
Due from customers on acceptances	Loans and accounts receivable		41,715			—			—			—			41,715		Amortized cost
Intangibles and goodwill	—		921,594			—			—			—			921,594		—

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	IAS 39					Adjustments for first adoption of IFRS 9					IFRS 9
	Category	Balance		Reclassifications		Expected credit loss			Others		Balance		Category
		S/(000)		S/(000)		S/(000)			S/(000)		S/(000)
Accounts receivable and other assets, net
Financial assets
Accounts receivable related to derivative financial instruments					—		—			—		—
Held for trading, Note 11 (b)	Fair value through profit or loss		90,387		—		—			—		90,387	Fair value through profit or loss
Held as hedges, Note 11 (b)	Fair value through other comprehensive income		2,433		—		—			—		2,433	Fair value through other comprehensive income
Other assets	Loans and accounts receivable		570,965		—		—			—		570,965	Amortized cost
Non-financial assets	—		246,199		—		—			—		246,199	—
Deferred Income Tax assets, net	—		53,277		—		42,646	E		—		95,923	—
Total assets			60,394,497		—		(15,583	)		18,016		60,396,930
	IAS 39					Adjustments for first adoption of IFRS 9					IFRS 9
	Category	Balance		Reclassifications		Expected credit loss			Others		Balance		Category
		S/(000)		S/(000)		S/(000)			S/(000)		S/(000)
Liabilities
Deposits and obligations	Amortized cost		32,607,637		—		—			—		32,607,637	Amortized cost
Inter-bank funds	Amortized cost		30,008		—		—			—		30,008	Amortized cost
Due to banks and correspondents	Amortized cost		4,407,392		—		—			—		4,407,392	Amortized cost
Bonds, notes and other obligations	Amortized cost		5,602,358		—		—			—		5,602,358	Amortized cost
Due from customers on acceptances	Amortized cost		41,715		—		—			—		41,715	Amortized cost
Insurance contracts liabilities	Amortized cost		10,514,504		—		—			—		10,514,504	Amortized cost
Accounts payable, provisions and other liabilities
Financial liabilities
Accounts payable related to derivative financial instruments
Held for trading, Note 11 (b)	Fair value through profit or loss		129,736		—		—			—		129,736	Fair value through profit or loss
Held as hedges, Note 11 (b)	Fair value through other comprehensive income		4,185		—		—			—		4,185	Fair value through other comprehensive income
Provision for indirect credits	Amortized cost		52,845		—		86,333	B		—		139,178	Amortized cost
Other liabilities	Amortized cost		972,658		—		—			—		972,658	Amortized cost
Non-financial liabilities	—		194,295		—		—			—		194,295	—
Deferred Income Tax liability, net	—		257		—		—			—		257	—
Total liabilities			54,557,590		—		86,333			—		54,643,923

F-65

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	IAS 39						Adjustments for first adoption of IFRS 9						IFRS 9
	Category	Balance			Reclassifications		Expected credit loss			Others			Balance			Category
		S/(000)			S/(000)		S/(000)			S/(000)			S/(000)
Equity, net
Equity attributable to IFS’s shareholders:
Capital stock			963,446			—		—			—			963,446
Treasury stock			(467,200	)		—		—			—			(467,200	)
Capital surplus			268,077											268,077
Reserves			3,700,000			—		—			—			3,700,000
Unrealized results, net			(228,725	)		—		(43,936	) C,D		17,891	A		(254,770	)
Retained earnings			1,564,945			—		(57,271	) B,C,D,E		—			1,507,674
			5,800,543			—		(101,207	)		17,891			5,717,227
Non-controlling interest			36,364			—		(709	)		125			35,780
Total equity, net			5,836,907			—		(101,916	)		18,016			5,753,007
Total liabilities and equity, net			60,394,497			—		(15,583	)		18,016			60,396,930

A In accordance with IAS 39, from 2015 to 2017, sovereign bonds of the Republic of Peru classified as available-for-sale investments were reclassified as held-to-maturity investments. According to IAS 39 requirements, the unrealized net loss of these instruments was transferred to profit or loss in the remaining term of reclassified bonds.

The balance of said cumulative unrealized net loss in the net equity as of January 1, 2018, amounted to S/18,016,000. As a result of the first adoption of IFRS 9, this amount was transferred as “Financial investments” thus increasing investments at amortized cost; see Note 4.4 (f.11) and 6(e).

B It corresponds to the reconciliation of the provisions for credit loss according to IAS 39 and the provisions for contingent credits (letter of guarantee, collaterals, import and export letters of credit) according to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, with the provisions for expected credit loss according to IFRS 9.

C Recognition of expected credit losses under IFRS 9 for debt instruments at fair value through other comprehensive income (FVTOCI).

D Effect of reclassification of available-for-sale investments (IAS 39) to investments at fair value through profit or loss (IFRS 9).

E Corresponds to the impact of the adoption of IFRS 9 on the deferred Income Tax.

F-66

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The impact of the transition to IFRS 9 on unrealized results and retained earnings is as follows:

	Unrealized results and retained earnings
	S/(000)
Unrealized results
Balance according to IAS 39 (as of December 31, 2017)		(228,725	)
Impacts of the transition
Initial adjustment to the book value of investments at amortized cost		18,016
Recognition of expected credit losses under IFRS 9 for debt instruments at fair value through other comprehensive income (FVTOCI)		31,567
Effect of reclassification of available-for-sale investments to investments at fair value through profit or loss		(75,503	)
Non-controlling interest		(125	)
Total effects on unrealized results (i)		(26,045	)
Initial balance under IFRS 9 (as of January 1, 2018)		(254,770	)
Retained earnings
Balance according to IAS 39 (as of December 31, 2017)		1,564,945
Impacts of the transition
Effect of reclassification of available-for-sale investments at fair value through profit or loss		75,503
Recognition of expected credit losses under IFRS 9 for impairment of credit portfolio (direct and indirect) and debt instruments at fair value through other comprehensive income		(176,129	)
Deferred Income Tax and non-controlling interest		43,355
Total effects on retained earnings (ii)		(57,271	)
Initial balance under IFRS 9 (as of January 1, 2018)		1,507,674
Changes for the first adoption of IFRS 9 (i) + (ii)		(83,316	)

Reconciliation of the provision for expected credit loss

The following table presents the reconciliation of provisions for credit losses under IAS 39 and for contingent loans (letters of guarantee, documentary credits for imports and exports) under IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, against provisions for expected credit loss under IFRS 9. Additional details are presented in Notes 6(c) and 7(d).

	As of December 31, 2017		Adjustment		As of January 1, 2018
	S/(000)		S/(000)		S/(000)
Provision for impairment
Loans and accounts receivable under IAS 39 (loan portfolio) / financial assets at amortized cost under IFRS 9 (loan portfolio)		1,202,118		58,229		1,260,347
Available-for-sale debt instruments under IAS 39 / Debt instruments at fair value through other comprehensive income under IFRS 9		9,273		31,567		40,840
		1,211,391		89,796		1,301,187
Contingent credits (letters of guarantee, documentary credits of import and export) IAS 37 / IFRS 9, see Note 11 (a)		52,845		86,333		139,178
		1,264,236		176,129		1,440,365

F-67

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

5. Cash and due from banks and inter-bank funds

(a) The detail of cash and due from banks is as follows:

	2018		2017
	S/(000)		S/(000)
Cash and clearing (b)		1,860,442		2,073,077
Deposits in BCRP (b)		3,639,927		5,878,534
Deposits in banks (c)		1,586,693		1,274,006
Accrued interest		6,817		1,807
		7,093,879		9,227,424
Restricted funds (d)		1,286,532		1,977,419
Total		8,380,411		11,204,843

(b) In accordance with rules in force, Interbank is required to maintain a legal reserve in order to honor its obligations with the public. This reserve may be comprised of funds kept in Interbank and in the BCRP and is made up as follows:

	2018		2017
	S/(000)		S/(000)
Legal reserve
Deposits in BCRP		3,370,087		5,178,949
Cash in vaults		1,738,690		1,948,711
Subtotal legal reserve		5,108,777		7,127,660
Non-mandatory reserve
Overnight BCRP deposits		269,840		699,585
Cash and clearing		121,496		124,163
Subtotal non-mandatory reserve		391,336		823,748
Cash and due from banks not subject to legal reserve		256		203
Total		5,500,369		7,951,611

The legal reserve funds maintained in the BCRP are non-interest bearing, except for the part that exceeds the minimum reserve required that accrued interest at an annual rate established by the BCRP. As of December 31, 2018, the excess in foreign currency accrued interest in US Dollars at an annual average rate of 1.95 percent (0.37 percent as of December 31, 2017). During 2018 and 2017, Interbank did not maintain excess reserves in national currency.

In Management’s opinion, Interbank has complied with the requirements established by the rules in force related to the computation of the legal reserve.

(c) Deposits in domestic banks and abroad are mainly in Soles and US Dollars, they are freely available and accrue interests at market rates.

F-68

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(d) The Group maintains restricted funds related to:

	2018		2017
	S/(000)		S/(000)
Repurchase agreements with BCRP (*)		1,189,454		1,882,244
Derivative financial instruments, Note 11(b)		92,456		90,093
Others		4,622		5,082
Total		1,286,532		1,977,419

(*) As of December 31, 2018, correspond to deposits maintained in the BCRP which guarantee repurchase agreements amounting to S/1,156,825,000 including interests (guaranteed repurchase agreements amounting to S/1,890,962,000 including interests as of December 31, 2017); see Note 13(b).

Cash and cash equivalents presented in the consolidated statements of cash flows exclude the restricted funds and accrued interest; see Note 4.4(ah).

(e) Inter-bank funds

These are loans made between financial institutions whose maturity, in general, is less than 30 days. As of December 31, 2018, accrue interest at an annual rate of 2.75 percent in national currency (rates between 3.25 percent and 3.30 percent in national currency, and 1.50 percent in foreign currency, as of December 31, 2017) and do not have specific guarantees.

6. Financial investments

(a) This caption is made up as follows, as of December 31, 2018 and 2017 is as follow:

	2018		2017
	S/(000)		S/(000)
Debt instruments measured at fair value through other comprehensive income (b)		13,143,526		—
Investments at fair value through profit or loss (d)		1,571,468		—
Investments at amortized cost / held-to-maturity investments (e)		1,843,944		1,221,250
Equity instruments measured at fair value through other comprehensive income (f)		845,317		—
Available-for-sale financial investments (g)		—		15,289,196
Trading securities		—		216,008
Total financial investments		17,404,255		16,726,454
Accrued income
Debt instruments measured at fair value through other comprehensive income (b)		185,067		—
Investments at amortized cost / held-to-maturity investments (e)		40,123		27,225
Available-for-sale financial investments (g)		—		170,464
Total		17,629,445		16,924,143

F-69

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(b) Following is the detail of debt instruments measured at fair value through other comprehensive income:

			Unrealized gross amount									Annual effective interest rates
	Amortized cost		Gains		Losses (c)			Estimated fair value		Maturity		S/				US$
	S/(000)		S/(000)		S/(000)			S/(000)				Min %		Max %		Min %		Max %
Corporate, leasing and subordinated bonds (*)		7,687,065		80,122		(286,043	)		7,481,144		Jan-19 / Jan-114		2.01		9.58		2.80		8.90
Peruvian Sovereign Bonds		2,702,571		46,714		(65,955	)		2,683,330		Aug-20 / Feb-55		2.37		8.19		—		—
Negotiable Certificates of Deposit issued by BCRP (**)		1,381,011		179		(711	)		1,380,479		Jan-19 / Apr-20		2.73		3.05		—		—
Bonds guaranteed by the Peruvian Government		804,309		5,166		(14,477	)		794,998		May-24 / Jul -34		4.10		6.01		4.97		8.81
Global Bonds of the Republic of Peru		332,311		1,439		(14,692	)		319,058		Jul-25 / Feb-55		6.39		7.40		3.66		3.71
Global Bonds of the Republic of Colombia		271,482		—		(4,046	)		267,436		Mar-19 / Sep-37		—		—		2.29		7.48
Global Bonds of the United Mexican States		105,749		—		(7,133	)		98,616		Oct-23 / Sep-34		—		—		4.16		6.28
United States of America Treasury Bonds		83,888		—		(1,039	)		82,849		Dec-20 / Oct-23		—		—		2.47		2.53
Global Bonds of the Republic of Chile		36,983		—		(1,367	)		35,616		Feb-28		—		—		3.74		3.74
Total		13,405,369		133,620		(395,463	)		13,143,526
Accrued interest									185,067
Total									13,328,593

(*) As of December 31, 2018, Inteligo holds corporate bonds from different entities for approximately S/411,047,000, which guarantee loans with Credit Suisse First Boston and J. Safra Sarasin; see Notes 13(e) and (h).

(**) As of December 31, 2018, Interbank holds certificates of deposit issued by the BCRP for approximately S/256,777,000, which guarantee loans with said entity; see Note 13(b).

(c) The Group has determined that the unrealized losses on debt instruments as of December 31, 2018, not related to credit risk, are of temporary nature.

The Group, according to the business model applied to these debt instruments, has the capacity to maintain these investments for a sufficient period that allows the early recovery of the fair value, up to the maximum period for the early recovery or the due date.

On the other hand, the Group has recognized the losses related to the credit risk of the investments in the consolidated income statements as an impairment loss according to the policies on the estimation of the expected credit loss of the investments indicated in Note 4.4 (h).

F-70

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

As of December 31, 2018, the detail of the unrealized losses of the debt instruments classified as at fair value through other comprehensive income is as follows:

	2018
Issuer	Amortized cost		Unrealized gross gain		Unrealized gross loss			Maturity as of December 31, 2018		Risk rating as of December 31, 2018 (***)
	S/(000)		S/(000)		S/(000)
Peruvian Sovereign Bonds		2,702,571		46,714		(65,955	)		2020 - 2055		A- (*)
Global Bonds of the Republic of Peru		332,311		1,439		(14,692	)		2025 - 2055		BBB+ (*)
Global Bonds of the Republic of Colombia		271,482		—		(4,046	)		2019 - 2037		BBB (*)
Global Bonds of the United Mexican States		105,749		—		(7,133	)		2023 - 2034		BBB+ (*)
Bienes Raíces Uno Trust		183,572		—		(23,301	)		2044		BBB (*)
Cencosud S.A.		191,388		—		(20,819	)		2045		BBB- (*)
Corporación Financiera de Desarrollo S.A.		386,240		—		(19,238	)		2019 - 2046		AA (**)
Mexichem SAB de CV		178,387		—		(18,048	)		2042 - 2044		BBB- (*)
Banco de Crédito del Perú		222,072		—		(14,536	)		2019 - 2023		AA+ (**)
Celulosa Arauco y Constitución S.A.		163,796		—		(12,295	)		2047		BBB- (*)
PA Pacifico Trust		166,049		—		(12,280	)		2035		BBB- (*)
Fermaca Enterprises S.R.L.		229,906		—		(11,778	)		2038		BBB- (*)
Mexico City Airport Trust		94,948		—		(11,129	)		2047		BBB (*)
Electricite de France S.A.		72,431		—		(8,673	)		2114		A- (*)
Lima Metro Line 2 Finance Limited		149,512		—		(7,935	)		2034		BBB (*)
Southern Perú Copper Coporation		220,634		—		(7,653	)		2028 - 2042		BBB+ (*)
Goldman Sachs		63,129		—		(6,572	)		2030 - 2042		BBB+ (*)
Falabella Perú S.A.A.		101,341		—		(6,474	)		2028 - 2035		AA+ (**)
Celeo Redes Operación CL		94,252		—		(6,014	)		2047		BBB (*)
Enel Distribución Perú S.A.A.		85,665		426		(5,864	)		2025 - 2038		AAA (**)
México Generadora de Energía		72,009		—		(5,324	)		2032		BBB (*)
Línea Amarilla S.A.C.		173,130		1,042		(4,998	)		2037		AA (**)
H2Olmos S.A.		230,838		—		(4,793	)		2025 - 2032		AA (**)
BBVA Continental		199,326		2,039		(4,737	)		2022 - 2033		BBB+ (*)
PA Costera Trust		75,046		—		(4,716	)		2034		BBB- (*)
Taboada Finance Ltda.		93,010		612		(4,694	)		2029 - 2033		BBB+ (*)
Comisión Federal de Electricidad CFE.		35,007		—		(4,180	)		2045		BBB+ (*)
Red de Energia del Perú		109,665		—		(4,111	)		2026 - 2031		AAA (**)
Instruments with individual losses less than S/4 million		3,559,022		296		(73,475	)
Total		10,562,488		52,568		(395,463	)

(*) Instrument rated abroad.

(**) Instrument rated in Peru.

(***) Corresponds to the instrument’s rating with the largest unrealized loss.

F-71

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The analysis of changes in fair value and the corresponding expected credit loss is presented below:

	2018
Gross carrying amount of debt instruments measured at fair value through other comprehensive income	Stage 1			Stage 2			Stage 3		Total
	S/(000)			S/(000)			S/(000)		S/(000)
Beginning of year balances		13,182,318			444,418			—		13,626,736
New assets originated or purchased		4,629,335			—			—		4,629,335
Assets derecognized or matured (excluding write-offs)		(4,659,757	)		(148,240	)		—		(4,807,997	)
Change in fair value		(508,133	)		35,254			—		(472,879	)
Transfers to Stage 1		—			—			—		—
Transfers to Stage 2		—			—			—		—
Transfers to Stage 3		—			—			—		—
Write offs		—			—			—		—
Foreign exchange effect		192,964			3,417			—		196,381
End of year balances		12,836,727			334,849			—		13,171,576
	2018
Movement of the allowance for expected credit losses for debt instruments measured at fair value through other comprehensive income	Stage 1			Stage 2			Stage 3		Total
	S/(000)			S/(000)			S/(000)		S/(000)
Expected credit loss under IFRS 9 at the beginning of the period		5,330			35,510			—		40,840
New assets originated or purchased		1,215			—			—		1,215
Assets derecognized or matured (excluding write-offs)		(324	)		(13,139	)		—		(13,463	)
Transfers to Stage 1		—			—			—		—
Transfers to Stage 2		—			—			—		—
Transfers to Stage 3		—			—			—		—
Effect on the expected credit loss due to the change of the Stage during the year		—			—			—		—
Effect on the expected credit loss different to changes of the stage during the year (*)		181			(1,010	)		—		(829	)
Write offs		—			—			—		—
Recoveries		—			—			—		—
Foreign exchange effect		44			243			—		287
Expected credit loss under IFRS 9 at the end of the period		6,446			21,604			—		28,050

(*) Corresponds mainly to the variation in the inputs used for calculating the expected credit losses different to changes in the stage during the year.

As a result of the assessment of the impairment of its debt instruments at fair value through other comprehensive income, the Group recorded a reversal of the impairment of S/13,077,000 during the year 2018, which was presented in the caption “Recovery (loss) due to impairment of financial investments” in the consolidated income statements. The movement of unrealized results of investments at fair value through other comprehensive, net of Income Tax and non-controlling interest, is presented in Notes 17(d) and (e).

F-72

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(d) The composition of financial instruments at fair value through profit or loss is as follows:

	2018
	S/(000)
Equity instruments
Local and foreign mutual funds and investment funds participations		1,144,771
BioPharma Credit PLC (j)		144,157
Royalty Pharma (l)		78,808
LendUp		23,720
ViaSat Inc.		21,705
Ishare Core MSCI Word UCIT		18,195
Other minors		72,046
Debt instruments
Corporate, leasing and subordinated bonds		42,625
Peruvian Sovereign Bonds		21,927
United States of America Treasury Bonds		3,514
Total		1,571,468

(e) As of December 31, 2018 and 2017, the investments at amortized costs and held-to-maturity investments are totally comprised of Peruvian Sovereign Bonds for an amount of S/1,884,067,000 and S/1,248,475,000, respectively, including accrued interest. These investments present a low credit risk and the expected credit loss is insignificant.

As of December 31, 2018, these investments have maturity dates that range from August 2020 to August 2037, have accrued interests at an effective annual rate ranging from 4.05 percent and 6.33 percent, and its estimated fair value amounts to approximately S/1,856,325,000 (as of December 31, 2017, their maturity dates ranged from August 2020 to August 2037, accrued interests at an effective annual rate between 4.05 percent to 6.33 percent, and its estimated fair value amounts to approximately S/1,303,196,000).

In accordance with IAS 39, in force until December 31, 2017, Interbank reclassified from 2015 to 2017 Peruvian sovereign bonds from available-for-sale investments to held-to-maturity investments for S/487,385,000. Said instruments held an unrealized net loss in the net equity for S/24,690,000. According to IAS 39 requirements, the unrealized net loss of these instruments was transferred to profit and loss in their remaining maturity. Therefore, Interbank recorded in the income statements for the periods 2017 and 2016 a net loss of approximately S/2,608,000 and S/2,537,000, respectively; see Notes 17(d) and (e).

The balance of such cumulative unrealized net loss in the net equity as of December 31, 2017, amounted to S/18,016,000, which as part of the initial adoption of IFRS 9 by the Group was transferred to “Financial investments”, thereby increasing investments at amortized cost; see Note 4.7.

As of December 31, 2018 and 2017, Interbank holds loans with the BCRP that are guaranteed through the Peruvian Sovereign Bonds, which are classified as restricted, for approximately S/738,635,000 and S/362,644,000, respectively; see Note 13(b).

F-73

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(f) As of December 31, 2018, the composition of equity instruments measured at fair value through other comprehensive income is as follows:

	2018
	S/(000)
BioPharma Credit PLC (j)		261,484
InRetail Perú Corp (k)		228,122
Ferreycorp S.A.A.		78,528
Engie—Energía Perú S.A.		51,384
Ishares MSCI Chile—ETF		41,763
Ishare CORE S&P 500 ETF		28,723
Vanguard FTSE Emerging Market		25,702
Luz del Sur S.A.A.		23,727
Ishares MSCI ACW ETF		21,967
Gilead Sciences INC		18,988
Bolsa de Valores de Lima S.A.		15,737
Others below S/10 million		49,192
Total		845,317

F-74

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(g) The detail of the available-for-sale financial investments, of the debt instruments that form part of the available-for-sale investments as of December 31, 2017, is as follows:

			Unrealized gross amount								Annual effective interest rates
	Amortized cost		Gains		Losses			Estimated fair value		Maturity	S/				US$
	S/(000)		S/(000)		S/(000)			S/(000)			Min		Max		Min		Max
											%		%		%		%
Corporate, leasing and subordinated bonds		7,073,038		197,914		(48,087	)		7,222,865	Jan 2018 / Jan 2114		1.00		14.00		1.66		15.15
Peruvian Sovereign Bonds		2,439,351		67,811		(16,071	)		2,491,091	Feb 2018 / Feb 2055		2.00		8.09		—		—
Negotiable Certificates of Deposit issued by BCRP		1,933,640		2,328		(18	)		1,935,950	Jan 2018 / Jun 2019		3.50		3.71		—		—
Mutual funds and investment funds participations		895,304		82,440		(21,427	)		956,317	—		—		—		—		—
Bonds guaranteed by the Peruvian Government		857,344		15,883		(5,426	)		867,801	May 2024 / Jul 2034		4.00		6.01		4.00		6.60
Global Bonds of the Republic of Peru		478,144		1,330		(2,274	)		477,200	Jul 2025 / Nov 2050		—		—		2.47		4.20
Global Bonds of the Republic of Colombia		212,818		1,304		(1,509	)		212,613	Mar 2019 / Sep 2037		—		—		1.99		5.00
Indexed Certificates of Deposit issued by BCRP		169,002		—		(1,598	)		167,404	Feb 2018		—		—		0.00		0.00
Global Bonds of the United Mexican States		105,247		224		(375	)		105,096	Dec 2019 / Sep 2034		—		—		2.00		4.00
United States of America Treasury Bonds		45,611		—		(355	)		45,256	Jan 2018 / Nov 2024		—		—		1.09		2.31
Global Bonds of the Republic of Panama		35,295		120		(210	)		35,205	Apr 2034 / Jan 2036		—		—		4.00		5.00
Certificates of deposits payable in US Dollars issued by BCRP		21,446		—		(1	)		21,445	Jan 2018		3.30		3.30		—		—
Global Bonds of Canada		4,005		—		(31	)		3,974	Jul 2023		—		—		3.00		3.00
Total		14,270,245		369,354		(97,382	)		14,542,217
Listed shares
BioPharma Credit PLC (j)		280,601		11,359		—			291,960
InRetail Perú Corp. (k)		75,376		92,830		—			168,206
Energía del Sur		71,307		—		(7,167	)		64,140
Other Peruvian and foreign entities		152,927		6,075		(6,475	)		152,527
Non-listed shares and participations
Royalty Pharma (l)		60,766		7,774		—			68,540
Others		936		670		—			1,606
		641,913		118,708		(13,642	)		746,979
		14,912,158		488,062		(111,024	)		15,289,196
Accrued interest									170,464
Total									15,459,660

(h) The Group determined that the unrealized losses as of December 31, 2017, were of temporary nature. The Group had the intention and capacity to hold each investment for a sufficient period that allows the early recovery of the fair value, up to the maximum period for the early recovery or the due date.

The Group, in accordance with IAS 39, considered the following criteria to determine whether a loss was temporary or not for capital investments (shares) and, when applicable, for mutual and investment funds:

• The duration and magnitude at which the fair value was below cost;

• The severity of the impairment;

• The cause of the impairment, the financial condition and the short-term prospects of the issuer; and

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

• The activity in the issuer’s market, which could indicate adverse credit conditions.

The Group, in accordance with IAS 39, considered the following criteria to determine whether a loss was temporary or not for debt instruments (fixed maturity):

• For the assets in which it was probable that the Group would receive all the amounts owed in accordance with the contractual terms of the instrument (principal and interest), the identification of the instruments with credit impairment considered a series of factors, such as the nature of the instrument and the related guarantee, the amount of subordination or credit enhancement that supports the instrument, the credit rating and other evidence analysis of the probable cash flows of the instrument. If the recovery of all the amounts owed was not probable, it was considered that there was a “credit impairment” and the unrealized loss was recorded directly in the consolidated income statements. This unrealized loss recorded in the consolidated income statements represented the decrease in the fair value of the instrument generated as a result of the decrease in projected cash flows and the increase in market interest rates.

• For financial instruments with unrealized losses but not identified as impaired, the Group determined whether it had the intention and ability to maintain each investment for a sufficient period to allow an early recovery of the fair value. The Group estimated the projected recovery period using current estimates of volatility in market interest rates (including liquidity and risk premiums). The Group’s assertion regarding its intention and ability to maintain said investments considered a number of factors, including a quantitative estimate of the expected recovery period and the duration of that period (which may be extended to maturity), the severity of the impairment and the strategy of the Group with respect to the identified security or portfolio. If the Group did not have the intention or capacity to hold the security for a sufficient period, the unrealized loss was recorded directly in the consolidated income statements.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(i) As a result of the impairment assessment of its available-for-sale financial investments, the Group recorded an impairment loss of S/20,759,000 and S/28,323,000 during the years 2017 and 2016, respectively, which was presented in the caption “Recovery (loss) due to impairment of financial investments” in the consolidated income statements. The movement of the unrealized results of investments available for sale, net of deferred Income Tax and non-controlling interest, is presented in Notes 17(d) and (e). The following is a detail of the unrealized losses of debt instruments and mutual funds and investment funds participations classified as available-for-sale as of December 31, 2017:

	2017
Issuer	Amortized cost		Unrealized gross gain		Unrealized gross loss			Maturity as of December 31, 2017		Risk rating as of December 31, 2017 (***)
	S/(000)		S/(000)		S/(000)
Peruvian Sovereign Bonds		2,439,351		67,811		(16,071	)		2018 - 2055		A-	(*)
Bonds guaranteed by the Peruvian Government		857,344		15,883		(5,426	)		2024 - 2034		BBB+	(*)
Global Bonds of the Republic of Peru		478,144		1,330		(2,274	)		2025 - 2050		BBB+	(*)
Banco de Crédito del Perú S.A.		180,064		420		(12,283	)		2020 - 2069		BB-	(*)
Corporación Financiera de Desarrollo S.A.		376,004		8,416		(8,641	)		2019 - 2046		AA+	(*)
H2Olmos S.A.		173,838		35		(3,951	)		2018 - 2032		AA+	(**)
Fibra Uno		177,271		2,016		(3,329	)		2044		BBB	(*)
Instruments with individual losses minor than S/3 million				107,900		(45,407	)
				203,811		(97,382	)

(*) Instrument rated abroad.

(**) Instrument rated in Peru.

(***) Corresponds to the instrument’s rating with the largest unrealized loss.

(j) The Group has investments in BioPharma Credit PLC, a public limited liability company dedicated to the biological sciences industry and which is quoted in the “Specialist Fund Segment” (segment designed for highly specialized investment entities, which focus on highly informed institutional investors or professional investors) of the London Stock Exchange.

As of December 31, 2018, the Group, through IFS and its Subsidiary Inteligo Bank, holds a total of 40,159,328 shares classified as investments at fair value through profit and loss. Additionally, through its Subsidiary Interseguro, the Group holds a total of 72,791,326 shares classified as investment at fair value through other comprehensive income. Combined, it holds 112,950,654 shares that represent 8.22 percent of the capital stock of the entity.

As of December 31, 2017, the Group, through its Subsidiaries Interseguro, Inteligo Bank and Seguros Sura, held a total of 85,957,350 shares, which represented 9.40 percent of the share capital of BioPharma Credit PLC, classified as available-for-sale investments.

(k) As of December 31, 2018, the Group holds 2,396,920 shares, which represent 2.33 percent of the capital stock of InRetail Perú Corp. (a related entity), classified as equity instruments measured at fair value through other comprehensive income (2,473,621 shares, which represented 2.41 percent of the capital stock of InRetail Perú Corp., classified as available-for-sale investments as of December 31, 2017).

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(l) Corresponds to participations in RPI International Holding, which invests in a series of subordinated funds whose objective is to invest in Royalty Pharma Investments, an investment fund established under the laws of the Republic of Ireland and authorized by the Central Bank of Ireland. This investment fund is dedicated to buying medical and biotechnology patents. The holdings in RPI International Holding are not liquid and require authorization for trading.

As of December 31, 2018, the Group holds 152,251 participations in RPI International Holding classified as investments at fair value through profit or loss (152,251 participations classified as available-for-sale investments as of December 31, 2017).

During the years 2018, 2017 and 2016, the Group received dividends from these investments for approximately S/9,847,000, S/4,467,000 and S/22,097,000, respectively, which are included in the caption “Interest and similar income” in the consolidated income statements.

(m) The following is the balance of investments at fair value through other comprehensive income (debt and equity instruments) and investments at amortized cost as of December 31, 2018 (available-for-sale and held-to-maturity financial investments as of December 31, 2017), classified by contractual maturity (without considering accrued interest):

	2018				2017
	Investments at fair value through other comprehensive income		Investments at amortized cost		Available-for- sale  financial investments		Held-to-maturity investments
	S/(000)		S/(000)		S/(000)		S/(000)
Up to 3 months		763,539		—		1,592,653		—
From 3 months to 1 year		966,019		—		749,050		—
From 1 to 3 years		705,687		190,479		749,127		193,998
From 3 to 5 years		706,076		470,976		395,317		—
From 5 years onwards		10,002,205		1,182,489		10,099,753		1,027,252
Equity instruments (without maturity)		845,317		—		1,703,296		—
Total		13,988,843		1,843,944		15,289,196		1,221,250

(n) Below are the debt instruments measured at fair value through other comprehensive income and at amortized cost according to the stages indicated by IFRS 9 as of December 31, 2018:

	2018
Debt instruments measured at fair value through other comprehensive income and at amortized cost (*)	Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Corporate, leasing and subordinated bonds		7,167,899		313,245		—		7,481,144
Peruvian Sovereign Bonds		4,527,274		—		—		4,527,274
Negotiable Certificates of Deposit issued by BCRP		1,380,479		—		—		1,380,479
Bonds guaranteed by the Peruvian Government		794,998		—		—		794,998
Global Bonds of the Republic of Peru		319,058		—		—		319,058
Global Bonds of the Republic of Colombia		267,436		—		—		267,436
Global Bonds of the United Mexican States		98,616		—		—		98,616
United States of America Treasury Bonds		82,849		—		—		82,849
Global Bonds of the Republic of Chile		35,616		—		—		35,616
Total		14,674,225		313,245		—		14,987,470

(*) The amounts presented do not consider impairment.

F-78

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

7. Loans, net

(a) This caption is made up as follows:

	2018			2017
	S/(000)			S/(000)
Direct loans
Loans		25,569,152			21,833,083
Credit cards		4,881,404			3,798,746
Leasing		1,682,629			1,706,745
Discounted notes		494,953			547,857
Factoring		309,558			162,598
Advances and overdrafts		50,219			57,774
Refinanced loans		210,384			273,448
Past due and under legal collection loans		856,909			794,450
		34,055,208			29,174,701
Plus (minus)
Accrued interest from performing loans		318,250			286,543
Unearned interest and interest collected in advance		(47,737	)		(54,958	)
Impairment allowance for loans (d)		(1,364,804	)		(1,202,118	)
Total direct loans, net		32,960,917			28,204,168
Indirect loans, Note 19(a)		4,071,460			4,266,495

(b) The classification of the direct loan portfolio is as follows:

	2018 (***)		2017
	S/(000)		S/(000)
Commercial loans (*)		16,032,068		13,545,195
Consumer loans		10,891,278		9,187,000
Mortgage loans (**)		6,407,479		5,756,403
Small and micro-business loans		724,383		686,103
Total		34,055,208		29,174,701

(*) In 2018, Interbank acquired commercial loans from Bancolombia Panamá S.A., Bancolombia Puerto Rico Internacional Inc. and Itaú Corbanca NY Branch for approximately S/306,168,000, S/90,531,000 and S/198,000,000, respectively.

(**) In October 2017, Interbank acquired a mortgage loan portfolio from Seguros Sura and Hipotecaria Sura for approximately S/217,776,000 and S/3,757,000, respectively.

(***) For purposes of estimating the impairment loss in accordance with IFRS 9, the Group’s loan portfolio is segmented by homogeneous groups that share similar risk characteristics; the Group determined these 3 types of portfolios: Retail Banking (groups consumer and mortgage loans), Commercial Banking (groups commercial loans) and Small Business Banking (group loans to small and micro-business).

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(c) The following table shows the credit quality and maximum exposure to credit risk based on the Group’s internal credit rating as of December 31, 2018. The amounts presented do not consider impairment:

	2018
Direct loans, see (c.1)	Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		25,062,456		372,197		—		25,434,653
Standard grade		3,853,640		849,073		—		4,702,713
Sub-standard grade		417,701		845,995		—		1,263,696
Past due but not impaired		1,048,378		791,096		—		1,839,474
Impaired
Individually impaired		—		—		7,349		7,349
Collectively impaired		—		—		807,323		807,323
Total direct loans		30,382,175		2,858,361		814,672		34,055,208

	2018
Contingent Credits: Guarantees and stand by letters, import and export letters of credit (substantially all indirect loans correspond to commercial loans)	Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		3,256,280		223,735		—		3,480,015
Standard grade		211,784		110,420		—		322,204
Sub-standard grade		33,472		192,699		—		226,171
Past due but not impaired		—		—		—		—
Impaired
Individually impaired		—		—		35,738		35,738
Collectively impaired		—		—		7,332		7,332
Total indirect loans		3,501,536		526,854		43,070		4,071,460

(c.1) The following tables present the credit quality and maximum exposure to credit risk for each classification of the direct loan portfolio:

	2018
Commercial loans	Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		12,088,746		106,480		—		12,195,226
Standard grade		2,305,607		125,090		—		2,430,697
Sub-standard grade		226,849		124,051		—		350,900
Past due but not impaired		714,034		134,730		—		848,764
Impaired
Individually impaired		—		—		7,349		7,349
Collectively impaired		—		—		199,132		199,132
Total commercial loans		15,335,236		490,351		206,481		16,032,068

F-80

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	2018
Consumer loans	Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		7,481,529		223,261		—		7,704,790
Standard grade		980,918		643,553		—		1,624,471
Sub-standard grade		163,050		534,181		—		697,231
Past due but not impaired		97,943		442,380		—		540,323
Impaired
Individually impaired		—		—		—		—
Collectively impaired		—		—		324,463		324,463
Total consumer loans		8,723,440		1,843,375		324,463		10,891,278
	2018
Mortgage loans	Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		5,003,914		22,297		—		5,026,211
Standard grade		478,576		56,958		—		535,534
Sub-standard grade		22,575		170,556		—		193,131
Past due but not impaired		224,588		188,839		—		413,427
Impaired
Individually impaired		—		—		—		—
Collectively impaired		—		—		239,176		239,176
Total mortgage loans		5,729,653		438,650		239,176		6,407,479
	2018
Small and micro-business loans	Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		488,267		20,159		—		508,426
Standard grade		88,539		23,472		—		112,011
Sub-standard grade		5,227		17,207		—		22,434
Past due but not impaired		11,813		25,147		—		36,960
Impaired
Individually impaired		—		—		—		—
Collectively impaired		—		—		44,552		44,552
Total small and micro-business loans		593,846		85,985		44,552		724,383

F-81

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(d) The balances of the direct and indirect loan portfolio and the movement of the respective allowance for expected credit loss, calculated according to IFRS 9, is as follows:

(d.1) Direct loans

	2018
Gross carrying amount of direct loans	Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Beginning of year balances		25,492,417			2,941,897			740,387			29,174,701
New assets originated or purchased		16,526,772			—			—			16,526,772
Assets derecognized or repaid (excluding write offs)		(9,417,223	)		(918,338	)		(71,826	)		(10,407,387	)
Transfers to Stage 1		660,625			(659,573	)		(1,052	)		—
Transfers to Stage 2		(2,142,391	)		2,178,029			(35,638	)		—
Transfers to Stage 3		(402,281	)		(508,498	)		910,779			—
Write offs (***)		—			—			(791,107	)		(791,107	)
Others (*)		(630,465	)		(197,590	)		50,625			(777,430	)
Foreign exchange effect		294,721			22,434			12,504			329,659
End of year balances		30,382,175			2,858,361			814,672			34,055,208

	2018
Changes in the allowance for expected credit losses for direct loans, see (d.1.1)	Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of year balances		329,161			477,616			453,570			1,260,347
Impact of the expected credit loss in the consolidated income statements— New assets originated or purchased		366,155			—			—			366,155
Assets derecognized or repaid (excluding write offs)		(84,229	)		(77,827	)		(36,833	)		(198,889	)
Transfers to Stage 1		86,656			(85,814	)		(842	)		—
Transfers to Stage 2		(165,351	)		181,679			(16,328	)		—
Transfers to Stage 3		(62,418	)		(155,034	)		217,452			—
Impact on the expected credit loss for credits that change stage in the year		(72,574	)		147,616			511,285			586,327
Others (**)		(3,598	)		(28,858	)		18,086			(14,370	)
		64,641			(18,238	)		692,820			739,223
Write offs (***)		—			—			(791,107	)		(791,107	)
Recovery of written-off loans		—			—			145,586			145,586
Foreign exchange effect		999			3,371			6,385			10,755
Expected credit loss under IFRS 9 at the end of year balances		394,801			462,749			507,254			1,364,804

F-82

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(d.1.1) The following tables present the changes in the allowance for expected credit losses for direct loans for each classification of the direct loan portfolio:

Changes in the allowance for expected credit losses for direct loans—Commercial

	2018
	Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of year balances		48,699			28,437			75,335			152,471
Impact of the expected credit loss in the consolidated income statements— New assets originated or purchased		72,297			—			—			72,297
Assets derecognized or repaid (excluding write offs)		(28,714	)		(10,828	)		(10,812	)		(50,354	)
Transfers to Stage 1		3,542			(3,542	)		—			—
Transfers to Stage 2		(13,919	)		15,308			(1,389	)		—
Transfers to Stage 3		(13,744	)		(3,873	)		17,617			—
Impact on the expected credit loss for credits that change stage in the year		(2,937	)		4,748			38,308			40,119
Others (**)		2,703			(3,366	)		11,498			10,835
		19,228			(1,553	)		55,222			72,897
Write offs (***)		—			—			(34,355	)		(34,355	)
Recovery of written-off loans		—			—			1,163			1,163
Foreign exchange effect		778			513			746			2,037
Expected credit loss under IFRS 9 at the end of year balances		68,705			27,397			98,111			194,213

Changes in the allowance for expected credit losses for direct loans—Consumer

	2018
	Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of year balances		262,829			408,167			275,650			946,646
Impact of the expected credit loss in the consolidated income statements— New assets originated or purchased		276,193			—			—			276,193
Assets derecognized or repaid (excluding write offs)		(51,040	)		(62,795	)		(15,165	)		(129,000	)
Transfers to Stage 1		73,436			(72,594	)		(842	)		—
Transfers to Stage 2		(145,196	)		149,864			(4,668	)		—
Transfers to Stage 3		(47,111	)		(138,483	)		185,594			—
Impact on the expected credit loss for credits that change stage in the year		(60,980	)		136,396			407,614			483,030
Others (**)		(4,295	)		(24,826	)		3,239			(25,882	)
		41,007			(12,438	)		575,772			604,341
Write offs (***)		—			—			(710,980	)		(710,980	)
Recovery of written-off loans		—			—			140,049			140,049
Foreign exchange effect		117			2,624			4,154			6,895
Expected credit loss under IFRS 9 at the end of year balances		303,953			398,353			284,645			986,951

F-83

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Changes in the allowance for expected credit losses for direct loans—Mortgage

	2018
	Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of year balances		8,368			24,742			71,977			105,087
Impact of the expected credit loss in the consolidated income statements— New assets originated or purchased		2,035			—			—			2,035
Assets derecognized or repaid (excluding write offs)		(1,292	)		(1,795	)		(8,770	)		(11,857	)
Transfers to Stage 1		7,839			(7,839	)		—			—
Transfers to Stage 2		(1,117	)		11,388			(10,271	)		—
Transfers to Stage 3		(231	)		(5,084	)		5,315			—
Impact on the expected credit loss for credits that change stage in the year		(7,248	)		440			30,230			23,422
Others (**)		20			(1,917	)		(1,135	)		(3,032	)
		6			(4,807	)		15,369			10,568
Write offs (***)		—			—			(2,689	)		(2,689	)
Recovery of written-off loans		—			—			—			—
Foreign exchange effect		54			207			1,383			1,644
Expected credit loss under IFRS 9 at the end of year balances		8,428			20,142			86,040			114,610

Changes in the allowance for expected credit losses for direct loans—Small and micro-business

	2018
	Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of year balances		9,265			16,270			30,608			56,143
Impact of the expected credit loss in the consolidated income statements— New assets originated or purchased		15,630			—			—			15,630
Assets derecognized or repaid (excluding write offs)		(3,183	)		(2,409	)		(2,086	)		(7,678	)
Transfers to Stage 1		1,839			(1,839	)		—			—
Transfers to Stage 2		(5,119	)		5,119			—			—
Transfers to Stage 3		(1,332	)		(7,594	)		8,926			—
Impact on the expected credit loss for credits that change stage in the year		(1,409	)		6,032			35,133			39,756
Others (**)		(2,026	)		1,251			4,484			3,709
		4,400			560			46,457			51,417
Write offs (***)		—			—			(43,083	)		(43,083	)
Recovery of written-off loans		—			—			4,374			4,374
Foreign exchange effect		50			27			102			179
Expected credit loss under IFRS 9 at the end of year balances		13,715			16,857			38,458			69,030

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(d.2) Indirect loans (substantially all indirect loans correspond to commercial loans)

	2018
Gross carrying amount of contingent credits, guarantees and stand-by letters, import and export letters of credit	Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Beginning of year balances		3,763,245			470,231			33,019			4,266,495
New assets originated or purchased		1,599,629			—			—			1,599,629
Assets derecognized or repaid		(1,532,320	)		(224,143	)		(22,846	)		(1,779,309	)
Transfers to Stage 1		27,937			(27,937	)		—			—
Transfers to Stage 2		(378,387	)		382,098			(3,711	)		—
Transfers to Stage 3		(34	)		(50,348	)		50,382			—
Others (*)		(48,421	)		(30,765	)		(13,993	)		(93,179	)
Foreign exchange effect		69,887			7,718			219			77,824
End of year balances		3,501,536			526,854			43,070			4,071,460

	2018
Changes in the allowance for expected credit losses for contingent credits, guarantees and stand-by letters, import and export letters of credit	Stage 1			Stage 2			Stage 3			Total
	S(000)			S(000)			S(000)			S(000)
Expected credit loss under IFRS 9 at beginning of year balances		46,890			77,299			14,989			139,178
Impact of the expected credit loss in the consolidated income statements—
New assets originated or purchased		12,138			—			—			12,138
Assets derecognized or repaid		(8,925	)		(34,620	)		(10,245	)		(53,790	)
Transfers to Stage 1		1,177			(1,177	)		—			—
Transfers to Stage 2		(7,004	)		8,753			(1,749	)		—
Transfers to Stage 3		(12	)		(25,039	)		25,051			—
Impact on the expected credit loss for credits that change stage in the year		(838	)		3,519			(5,690	)		(3,009	)
Others (**)		(24,607	)		(9,972	)		89			(34,490	)
		(28,071	)		(58,536	)		7,456			(79,151	)
Foreign exchange effect and others (****)		1,010			990			24			2,024
Expected credit loss under IFRS 9 at the end of year balances, Note 11(b)		19,829			19,753			22,469			62,051

(*) Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of year and its amortized cost at the end of period (partial amortizations that did not represent a reduction or cancellation of the loan), and (ii) the execution of contingent loans (conversion of indirect debt into direct debt).

(**) Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of year and its amortized cost at the end of year (variation in the provision recorded for partial amortizations that did not represent a reduction or cancellation of the loan), (ii) variations in credit risk that did not generate transfers to other stages; and (iii) the execution of contingent loans (conversion of indirect debt into direct debt).

(***) The Group writes off financial assets that are still subject to collection activities. In this regard, the Group seeks to recover the amounts legally owed in full, but have been written off because there is no reasonable expectation of recovery.

(****) Corresponds mainly to the effect of the exchange rate and the variation of the value of money over time.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(e) The movement of the provision for impairment of the loan portfolio (direct and indirect) in accordance with IAS 39 for the years 2017 and 2016, is as follows:

	2017
	Commercial			Consumer and mortgage			Small and micro- business			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Beginning of year balances		221,134			912,424			57,200			1,190,758
Provision		47,325			752,629			27,981			827,935
Recovery of written-off loans		187			123,226			4,723			128,136
Written-off portfolio and sales		(19,772	)		(811,758	)		(26,174	)		(857,704	)
Translation result and others		(5,759	)		(28,104	)		(299	)		(34,162	)
End of year balances (*)		243,115			948,417			63,431			1,254,963
	2016
	Commercial			Consumer and mortgage			Small and micro- business			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Beginning of year balances		197,167			817,734			50,291			1,065,192
Provision		46,343			715,882			21,420			783,645
Recovery of written-off loans		527			115,108			3,429			119,064
Written-off portfolio and sales		(14,116	)		(734,395	)		(23,519	)		(772,030	)
Translation result and others		(8,787	)		(1,905	)		5,579			(5,113	)
End of year balances (*)		221,134			912,424			57,200			1,190,758

(*) The allowance for loan losses includes the allowance for direct and indirect loans amounting to S/1,202,118,000 and S/52,845,000, respectively, as of December 31, 2017 (S/1,166,782,000 and S/23,976,000, respectively, as of December 31, 2016). The allowance for loan losses for indirect loans is presented in the “Accounts payable, provisions and other liabilities” caption of the consolidated statements of financial position; see Note 11(a).

(f) In Management’s opinion, the allowance for loan losses recorded as of December 31, 2018 and 2017, has been established in accordance with IFRS 9 and IAS 39, respectively; and it is sufficient to cover incurred losses on the loan portfolio.

(g) Interest rates on loans are freely determined based on the rates prevailing in the market.

(h) Interest income from loans classified in Stage 3 is calculated through the effective interest rate adjusted for credit quality at amortized cost.

(i) The refinanced loans during the 2018 period amounted to approximately S/115,669,000, which had no significant effect on the consolidated income statements.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(j) The table below presents the direct loan portfolio without including accrued interest and interest to be accrued and collected in advance as of December 31, 2018 and 2017, classified by maturity dates:

	2018		2017
	S/(000)		S/(000)
Outstanding
Up to 1 month		3,084,717		2,658,985
From 1 to 3 months		4,092,882		3,584,372
From 3 months to 1 year		7,546,896		6,074,474
From 1 to 5 years		13,950,227		10,707,514
Over 5 years		4,523,577		5,354,906
		33,198,299		28,380,251
Past due and under legal collection loans, see (j.1)
Up to 4 months		184,587		171,189
Over 4 months		297,146		280,238
Under legal collection		375,176		343,023
		34,055,208		29,174,701

(j.1) The following tables present the past due and under legal collection loans for each classification of the direct loan portfolio:

	2018		2017
	S/(000)		S/(000)
Past due and under legal collection loans—Commercial loans
Up to 4 months		25,848		22,380
Over 4 months		63,804		53,148
Under legal collection		120,902		105,251
		210,554		180,779

	2018		2017
	S/(000)		S/(000)
Past due and under legal collection loans—Consumer loans
Up to 4 months		106,366		111,587
Over 4 months		144,175		160,244
Under legal collection		89,322		77,772
		339,863		349,603

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

	2018		2017
	S/(000)		S/(000)
Past due and under legal collection loans—Mortgage loans
Up to 4 months		38,912		24,476
Over 4 months		76,452		59,815
Under legal collection		137,008		131,702
		252,372		215,993

	2018		2017
	S/(000)		S/(000)
Past due and under legal collection loans—Small and micro-business loans
Up to 4 months		13,461		12,746
Over 4 months		12,715		7,031
Under legal collection		27,944		28,298
		54,120		48,075

See credit risk analysis in Note 31.1.

(k) Part of the loan portfolio is collateralized with guarantees received from clients, which mainly consist of mortgages, trust assignments, financial instruments as well as industrial commercial pledges.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

8. Investment property

(a) This caption is made up as follows:

	2018		2017		Acquisition or construction year		Hierarchy level (i)		Valuation methodology (f) 2018/2017
	S/(000)		S/(000)
Land
San Isidro—Lima		249,377		240,715		2009		Level 3	Appraisal
Miraflores—Lima		70,800		72,421		2017		Level 3	Appraisal
San Martín de Porres—Lima		64,501		63,299		2015		Level 3	Appraisal
Piura		50,708		40,142		2008		Level 3	Appraisal
Sullana		16,491		25,419		2012		Level 3	Appraisal
Santa Clara—Lima		10,342		9,937		2017		Level 3	Appraisal
Chimbote		7,421		9,399		2015		Level 3	Appraisal
Lurin (e)		4,032		5,322		2008		Level 3	Appraisal
Yanahuara—Arequipa (e)		—		26,323		2017		Level 3	Appraisal
Others		11,672		10,142		—		Level 3	Appraisal
		485,344		503,119
Completed investment property—“Real Plaza” Shopping Malls
Talara		41,337		37,932		2015		Level 3	DCF
Pucallpa (e)		—		190,676		2014		Level 3	DCF (2018) / appraisal (2017)
		41,337		228,608
Buildings
Orquídeas—San Isidro—Lima		144,645		116,317		2017		Level 3	DCF
Ate Vitarte—Lima		67,894		57,781		2006		Level 3	DCF
Chorrillos—Lima		51,552		24,798		2017		Level 3	DCF
Maestro—Huancayo		32,901		30,510		2017		Level 3	DCF
Cusco		28,472		23,794		2017		Level 3	DCF
Panorama—Lima		20,437		20,653		2016		Level 3	DCF
Pardo y Aliaga—Lima, Note 4.4(p)		19,164		3,310		2008		Level 3	DCF / appraisal
Trujillo		16,270		15,369		2016		Level 3	DCF
Cercado de Lima—Lima		12,929		11,577		2017		Level 3	DCF
Orquídeas—San Isidro—Lima, Note 4.4(p)		—		16,913		2017		Level 3	DCF
Others, Note 4.4(p)		24,100		26,971		2017		Level 3	DCF / appraisal
		418,364		347,993
Built on leased land
San Juan de Lurigancho—Lima		41,493		37,726		2017		Level 3	DCF
Others (e)		—		1,162		—		Level 3	DCF
		41,493		38,888
Total		986,538		1,118,608

DCF: Discounted cash flow

(i) During 2018 and 2017, there were no transfers between levels of hierarchy.

(ii) As of December 31, 2018 and 2017, there are no liens on investment property.

(b) The net gain on investment properties as of December 31, 2018, 2017 and 2016, consists of the following:

	2018		2017			2016
	S/(000)		S/(000)			S/(000)
Gain (loss) on valuation of investment property		47,765		(1,878	)		(1,380	)
Income for rental of investment property		32,878		27,284			21,849
Gain on sale of investment property (e)		4,655		—			2,655
Total		85,298		25,406			23,124

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(c) The movement of investment property for the years ended December 31, 2018, 2017 and 2016, is as follows:

	2018			2017			2016
	S/(000)			S/(000)			S/(000)
Beginning of year balances		1,118,608			745,185			713,262
Acquisition of Seguros Sura, Note 2		—			251,212			—
Additions (d)		55,795			124,089			56,833
Sales (e)		(226,091	)		—			(23,530	)
Valuation gain (loss)		47,765			(1,878	)		(1,380	)
Net transfers, Note 4.4(p)		(9,539	)		—			—
End of year balances		986,538			1,118,608			745,185

(d) In 2018, the main additions are outlays related to the construction of the “Orquídeas” (San Isidro—Lima) and “Chorrillos” (Lima) buildings.

During 2017, main additions correspond to the acquisition of a percentage of a land lot located in Miraflores, Lima (called “Cuartel San Martin”), for approximately S/48,600,000 from a related entity; also, a building located in Chorrillos, Lima, for approximately S/26,550,000, acquired from an unrelated entity and another building located in Cusco for approximately S/22,515,000 acquired from a related entity. The latter two amounts include subsequent disbursements related to the construction of said buildings.

During 2016, main additions correspond to the acquisition from unrelated parties of a land lot in Talara, a building in Trujillo and the “Panorama” building located in Lima.

(e) In January 2018, Interseguro sold, in cash and at market value, the Real Plaza Pucallpa shopping center, a parcel located in Lurín and a building through a surface rights agreement to related entities. Likewise, in October 2018, Interseguro sold, in cash and at market value, a parcel located in Arequipa to a related entity. For these sales, Interseguro reported a net profit of about S/4,655,000.

In May 2016, Interseguro sold, in cash and at fair value, the land lot located in Lurín, to a related entity, recognizing a gain amounting to approximately S/2,655,000.

(f) Fair value measurement—Investment property and investment property under construction

Valuation techniques

The discounted cash flow (DCF) method is used for completed shopping malls, buildings and investment property built on land leases and own lands.

This method involves the projection of a series of periodic cash flows at present value through a discount rate. The periodic calculation of the cash flows is normally determined as rental income net of operating expenses. The series of periodic net operating income, together with an estimation of the terminal value (which uses the traditional valuation method) at the end of the projection period, is discounted at present value. The sum of the net current values is equal to the investment property’s fair value.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The fair value of land is determined based on the value assigned by an external appraiser. The external appraiser uses the market comparable method; under this method a property’s fair value is estimated based on comparable transactions. The unit of comparison applied by the Group is the price per square meter. The following shows the minimum ranges, maximum ranges and the average price for the land:

	Minimum range		Maximum range		Average
	US$ per m2		US$ per m2		US$ per m2
San Isidro—Lima		4,750		7,000		6,288
Miraflores—Lima		2,011		2,960		2,440
San Martin de Porres—Lima		606		748		683
Other minors		—		—		228

Main assumptions

A brief description of the assumptions considered in the determination of cash flows as of December 31, 2018 and 2017, is presented below:

• ERV (Estimated Rental Value)

Corresponds to the Estimated Rental Value, which is the rent at which the space could be leased under the market conditions prevailing at the date of valuation.

• Long-term inflation

It is the increase of the general level of prices expected in Peru for the long term.

• Long-term occupancy rate

It is the expected occupancy level of lessees in the leased properties.

• Average growth rate of rental income

It is the rate that expresses the rental income growth and includes growth factors of the industry, inflation rates, stable exchange rate, per capita income and increasing expenses.

• Average Net Operating Income (NOI) margin

It is projected from the rental income from leasable areas, by property and marketing income, minus costs related to administration fees, other administrative expenses, insurance, taxes and other expenses.

• Discount rate

It reflects the current market risk and the uncertainty associated to obtaining cash flows.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

The main assumptions used in the valuation and estimation of the market value of investment property are detailed below:

	US$ / Percentage
	2018			2017
Average ERV	US$	59.1		US$	66.2
Long-term inflation		2.6	%		2.5	%
Long-term occupancy rate		98.9	%		95.0	%
Average growth rate of rental income		2.6	%		3.3	%
Average NOI margin		95.3	%		94.2	%
Discount rate		9.0	%		9.0	%

Sensitivity analysis

The sensitivity analysis on the valuation of investment property, against changes in factors deemed relevant by Management, is presented below:

			2018			2017
			S/(000)			S/(000)
Average growth rate of rental income (basis)
Increase	+0.25	%		14,836			15,608
Decrease	-0.25	%		(13,964	)		(14,486	)
Long-term inflation (basis)
Increase	+0.25	%		14,081			15,127
Decrease	-0.25	%		(12,949	)		(14,018	)
Discount rate (basis)
Increase	+0.5	%		(36,422	)		(41,218	)
Decrease	-0.5	%		42,485			47,817

A significant increase (decrease) in the price per square meter of the land lots could result in a significantly higher (lower) fair value measurement.

(g) The amounts of future minimum fixed rental income of the Group’s investment property are as follows:

Year	2018		2017
	S/(000)		S/(000)
Within 1 year		34,753		44,004
After 1 year but not more than 5 years		138,016		230,397
Over 5 years		657,485		1,142,181
Total		830,254		1,416,582

The minimum rental income is computed considering a period between 20 and 25 years, the decrease compared to December 31, 2017, is mainly due to the sale of the “Real Plaza” Shopping Center in Pucallpa.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

9. Property, furniture and equipment, net

(a) The movement of property, furniture and equipment and cumulative depreciation for the years ended December 31, 2018, 2017 and 2016, is as follows:

Description	Land		Buildings, facilities and leasehold improvements			Furniture and equipment			Vehicles			In-transit equipment and work-in-progress			Total 2018			Total 2017			Total 2016
	S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Cost
Balance as of January 1		179,354		502,546			580,371			1,170			50,113			1,313,554			1,252,023			1,202,180
Acquisition of Seguros Sura and Hipotecaria Sura, Note 2		—		—			—			—			—			—			8,201			—
Additions		—		9,712			38,035			392			24,570			72,709			84,685			79,835
Transfers		—		11,446			18,857			—			(30,303	)		—			—			—
Transfer (to) from investment property, Note 4.4(p)		8,739		(6,488	)		—			—			—			2,251			—			—
Disposals, write-offs and others (d)		—		(5,308	)		(30,460	)		(142	)		(5	)		(35,915	)		(31,355	)		(29,992	)
Balance as of December 31		188,093		511,908			606,803			1,420			44,375			1,352,599			1,313,554			1,252,023
Cumulative depreciation
Balance as of January 1		—		(276,813	)		(423,161	)		(941	)		—			(700,915	)		(662,203	)		(623,022	)
Depreciation of the year		—		(18,241	)		(52,907	)		(96	)		—			(71,244	)		(68,177	)		(65,840	)
Transfer (to) from investment property, Note 4.4(p)		—		7,288			—			—			—			7,288			—			—
Disposals, write-offs and others (d)		—		4,648			30,015			134			—			34,797			29,465			26,659
Balance as of December 31		—		(283,118	)		(446,053	)		(903	)		—			(730,074	)		(700,915	)		(662,203	)
Net book value		188,093		228,790			160,750			517			44,375			622,525			612,639			589,820

(b) Financial entities in Peru are prohibited from pledging their fixed assets.

(c) Management periodically reviews the residual values, useful life and the depreciation method to ensure they are consistent with the economic benefits and life expectation of property, furniture and equipment. In Management’s opinion, there is no evidence of impairment in property, furniture and equipment as of December 31, 2018, and 2017.

(d) During 2018 and 2017, corresponded mainly to write-offs performed on fully depreciated assets.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

10. Intangible assets and goodwill, net

(a) Intangible assets

The movement of intangible assets and cumulative amortization for the years ended December 31, 2018, 2017 and 2016, is as follows:

	2018																	2017			2016
Description	Software			In-transit- software			Present value of acquired in-force business (PVIF)			Other intangible assets			Goodwill		Total			Total			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)		S/(000)			S/(000)			S/(000)
Cost
Balance as of January 1 (Note 4.2.1(ii) Restated)		560,964			131,099			137,900			25,364			432,879		1,288,206			557,329			425,237
Acquisition of Seguros Sura and Hipotecaria Sura, Note 2		—			—			—			—			—		—			571,305			—
Additions and transfers		25,517			96,230			—			6,181			—		127,928			160,515			132,579
Disposals and write-offs		(256	)		—			—			(1,266	)		—		(1,522	)		(943	)		(487	)
Transfers		95,625			(95,625	)		—			—			—		—			—			—
Balance as of December 31		681,850			131,704			137,900			30,279			432,879		1,414,612			1,288,206			557,329
Cumulative amortization
Balance as of January 1		(352,365	)		—			(4,807	)		(9,440	)		—		(366,612	)		(289,928	)		(225,876	)
Amortization of the year		(79,467	)		—			(11,281	)		(2,706	)		—		(93,454	)		(76,985	)		(64,278	)
Disposals and write-offs		—			—			—			—			—		—			301			226
Balance as of December 31		(431,832	)		—			(16,088	)		(12,146	)		—		(460,066	)		(366,612	)		(289,928	)
Net book value		250,018			131,704			121,812			18,133			432,879		954,546			921,594			267,401

Management assesses periodically the amortization method used with the purpose of ensuring that it is consistent with the economic benefit of the intangible assets. In Management’s opinion, there is no evidence of impairment in the Group’s intangible assets as of December 31, 2018, 2017 and 2016.

(b) Goodwill

The goodwill recorded by the Group (see Note 2), comes from the purchase of Seguros Sura and, considering that this entity merged with Interseguro, it was allocated to the resulting CGU (Cash-generating units).

The recoverable amount for the CGU was determined based on the income approach, specifically the dividend discount model.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

As of December 31, 2018, the key assumptions used for the calculation of fair value are:

• Perpetuity growth rate: 4.5%.

• Discount rate: 12.0%.

10-year cash flows and a perpetuity estimate were included in the dividend discount model. The estimated growth rates are based on the historical performance and the expectations of Management over the development of the market. Long-term perpetuity growth rate was determined based on reports from the sector.

The discount rate represents the assessment of the CGU specific risks. The discount rate was established considering the Company’s capital structure, the cost of capital coming from the benefits that the Group’s investors expect to obtain, from the specific risk incorporated by applying comparable individual beta factors adapted to the CGU’s debt structure and from the country and market specific risk premiums for the CGU. Beta factors are assessed on an annual basis using available market information.

The key assumptions above can change if the market conditions and the economy change. As of December 31, 2018, the Group estimates that the reasonableness of possible changes in these assumptions would not make the recoverable amount of all the CGUs decrease to an amount lower than its book value.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

11. Accounts receivable and other assets, net; accounts payable, provisions and other liabilities

(a) These captions are comprised of the following:

	2018		2017
	S/(000)		S/(000)
Accounts receivable and other assets
Financial instruments
Other accounts receivable, net		440,531		239,671
Accounts receivable from sale of investments (c)		367,902		60,892
Accounts receivable related to derivative financial instruments (b)		185,376		92,820
Assets for technical reserves for claims and premiums by reinsurers		147,891		124,441
Operations in process (d)		54,428		67,783
Insurance operations receivables, net		42,795		27,200
Accounts receivable from reinsurers and coinsurers		39,875		36,427
Credit card commissions receivable		13,237		14,551
Total		1,292,035		663,785
Non-financial instruments
Deferred charges		80,113		78,114
Investments in associates		63,233		55,993
Public works tax deduction		22,608		4,664
Prepaid Income Tax		19,860		44,429
Prepaid rights to related entity, Note 28(f)		8,856		10,876
Value Added Tax credit (e)		5,517		50,571
Others		10,332		1,552
		210,519		246,199
Total		1,502,554		909,984
Accounts payable, provisions and other liabilities
Financial instruments
Other accounts payable		471,412		425,135
Contract liability with investment component, Note 4.4(d)		298,382		129,592
Accounts payable for acquisitions of investments (c)		228,687		96,804
Accounts payable related to derivative financial instruments (b)		154,116		133,921
Workers’ profit sharing and salaries payable		127,516		114,084
Operations in process (d)		116,717		148,483
Accounts payable to reinsurers and coinsurers		62,879		58,560
Allowance for indirect loan losses, Note 7(d)		62,051		52,845
		1,521,760		1,159,424
Non-financial instruments
Taxes payable		101,085		65,261
Deferred income		59,482		54,161
Provision for other contingencies		46,506		50,815
Others		21,530		24,058
		228,603		194,295
Total		1,750,363		1,353,719

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(b) The following table presents, as of December 31, 2018 and 2017, the fair value of derivative financial instruments recorded as assets or liabilities, including their notional amounts. The notional amount is the nominal amount of the derivative’s underlying asset and it is the base over which changes in the fair value of derivatives are measured; see Note 19(a):

2018	Note			Assets		Liabilities		Notional amount		Effective part recognized in other comprehensive income during the year			Maturity	Hedged instruments	Caption of the consolidated statements of financial position where the hedged item has been recognized
				S/(000)		S/(000)		S/(000)		S/(000)
Derivatives held for trading
Forward exchange contracts					20,009		21,529		5,177,208		—		Between January 2019 and February 2020	—	—
Interest rate swaps					19,249		19,854		2,018,220		—		Between November 2020 and December 2029	—	—
Currency swaps					48,452		48,915		909,114		—		Between January 2019 and January 2025	—	—
Cross currency swaps					—		59,683		198,529		—		January 2023	—	—
Options					628		1,956		234,780		—		Between January 2019 and June 2020	—	—
					88,338		151,937		8,537,851		—
Derivatives held as hedges
Cash flow hedges:
Cross currency swaps (CCS)		14	(g)		74,144		—		1,349,200		25,775		January 2023	Senior bonds	Bonds, notes and other obligations
Cross currency swaps (CCS)		14	(f)		22,675		—		505,950		3,420		October 2027	Senior bonds	Bonds, notes and other obligations
Interest rate swaps (IRS)		13	(g)		—		1,002		134,920		(684	)	November 2020	Due to banks	Due to banks and correspondents
Interest rate swaps (IRS)		13	(i)		—		588		84,325		(393	)	December 2020	Due to banks	Due to banks and correspondents
Interest rate swaps (IRS)		13	(j)		—		589		84,325		(394	)	December 2020	Due to banks	Due to banks and correspondents
Cross currency swaps (CCS)		14	(e)		219		—		67,460		2,562		October 2020	Senior bonds	Bonds, notes and other obligations
					97,038		2,179		2,226,180		30,286
					185,376		154,116		10,764,031		30,286

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2017	Note			Assets		Liabilities		Notional amount		Effective part recognized in other comprehensive income during the year			Maturity		Hedged instruments		Caption of the consolidated statements of financial position where the hedged item has been recognized
				S/(000)		S/(000)		S/(000)		S/(000)
Derivatives held for trading
Forward exchange contracts					22,221		17,138		5,473,643		—			Between January 2018 and October 2018		—		—
Interest rate swaps					16,463		11,937		2,220,102		—			Between February 2018 and December 2029		—		—
Currency swaps					51,697		47,405		989,181		—			Between January 2018 and January 2025		—		—
Options					6		1,587		227,647		—			Between January 2018 and April 2018		—		—
Cross currency swaps					—		51,669		190,759		—			January 2023		—		—
					90,387		129,736		9,101,332		—
Derivatives held as hedges
Cash flow hedges:
Cross currency swaps (CCS)		14	(f)		505		—		486,150		1,453			October 2027		Senior bonds		Bonds, notes and other obligations
Interest rate swaps (IRS)		13	(i)		217		—		162,050		(335	)		January 2018		Due to banks		Due to banks and correspondents
Interest rate swaps (IRS)		13	(k)		1,036		—		162,050		48			October 2018		Due to banks		Due to banks and correspondents
Interest rate swaps (IRS)		13	(l)		675		—		129,640		72			August 2018		Due to banks		Due to banks and correspondents
Cross currency swaps (CCS)		14	(e)		—		4,185		64,820		(2,586	)		October 2020		Senior bonds		Bonds, notes and other obligations
					2,433		4,185		1,004,710		(1,348	)
					92,820		133,921		10,106,042		(1,348	)

(i) As of December 31, 2018 and 2017, certain derivative financial instruments required the establishment of collateral deposits; see Note 5(d).

(ii) For the designated hedging derivatives mentioned in the chart above, changes in fair values of hedging instruments completely offset the changes in fair values of hedged items; therefore, there has been no hedge ineffectiveness in the fiscal years 2018 and 2017. Likewise, in 2018 and 2017, no hedge was discontinued.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(iii) Derivatives held for trading are traded mainly to satisfy clients’ needs. The Group may also take positions with the expectation of profiting from favorable movements in prices or rates. Also, this caption includes any derivatives which do not comply with IFRS 9 hedging accounting requirements, since January 1, 2018, and with IAS 39, until December 31, 2017.

(iv) The future effect of current cash flow hedges on the consolidated income statements, net of the deferred Income Tax, which will be included in the caption “Net (gains) losses of financial assets at fair value through profit or loss” when realized, is presented below:

As of December 31, 2018

As of December 31, 2017

Up to 1 year

From 1 to 3 years

Over 3 years

Expected effect

Up to 1 year

From 1 to 3 years

Over 3 years

Expected effect

S/(000)

S/(000)

S/(000)

S/(000)

S/(000)

S/(000)

S/(000)

S/(000)

Consolidated income statements—Income (expense)

571

4,608

22,732

27,911

713

(749

)

—

(36

)

The transfer of net unrealized losses on cash flow hedges to the consolidated income statements is presented in Note 17(d).

(v) The gain (loss) for cash flow hedges reclassified to the consolidated income statements as of December 31, 2018, is as follows:

December 31, 2018	S/(000)
Interest expenses from cash flow hedges		(58,792	)
Interest income from cash flow hedges		44,795
Expenses for exchange differences from cash flow hedges		(7,893	)
Income for exchange differences from cash flow hedges		35,094
		13,204

The following table shows the hedging instruments that the Group uses in its cash flow hedges due to maturities:

December 31, 2018	1 to 5 years		Over 5 years		Total
Cross currency swaps (CCS)
Notional		1,416,660		505,950		1,922,610
Average interest rate in US Dollars		3.49%		—		—
Average interest rate in Soles		5.06%		1.88%		—
Average exchange rate Soles / US Dollars		3.26		3.24		—
Interest rate swaps (IRS)
Notional		303,570		—		303,570
Average interest rate in US Dollars		3.96%		—		—

(c) As of December 31, 2018 and 2017, correspond to accounts receivable and payable for the sale and purchase of financial investments in the last days of the month, which have been settled during the first days of the following month, the balance corresponds mainly to the purchase and sale of Sovereign Bonds issued by the Peruvian Government.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(d) Operations in process include transactions made during the last days of the month and other types of similar transactions that are reclassified to their corresponding accounting accounts in the following month. These transactions do not affect the consolidated income statements.

(e) Corresponds mainly to the Value-Added Tax resulting from the purchase of goods devoted mostly to grant financial leasing loans, which is recovered through the collection of the loans.

12. Deposits and obligations

(a) This caption is made up as follows:

	2018		2017
	S/(000)		S/(000)
Time deposits (d)		11,074,316		11,562,024
Saving deposits		10,728,257		9,092,846
Demand deposits		10,109,492		10,364,653
Compensation for service time		1,763,826		1,582,278
Other obligations		6,059		5,836
Total		33,681,950		32,607,637

(b) Interest rates applied to deposits and obligations are determined based on the market interest rates.

(c) As of December 31, 2018 and 2017, approximately S/9,734,215,000 and S/8,689,589,000, respectively, of deposits and obligations are covered by the Peruvian Deposit Insurance Fund.

(d) The table below presents the balance of time deposits classified by maturity as of December 31, 2018 and 2017:

	2018		2017
	S/(000)		S/(000)
Up to 1 month		3,779,198		4,248,085
From 1 to 3 months		2,219,826		2,908,367
From 3 months to 1 year		4,176,935		3,652,917
From 1 to 5 years		783,575		722,699
Over 5 years		114,782		29,956
Total		11,074,316		11,562,024

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

13. Due to banks and correspondents

(a) This caption is comprised of the following:

	2018		2017
	S/(000)		S/(000)
By type
BCRP (b)		2,073,919		2,205,423
Promotional credit lines (c)		1,386,603		1,441,931
Loans received from foreign entities (d)		796,028		712,777
Loans received from Peruvian entities		763		20,668
		4,257,313		4,380,799
Interest and commissions payable		36,048		26,593
		4,293,361		4,407,392
By term
Short term		2,507,623		2,447,091
Long term		1,785,738		1,960,301
Total		4,293,361		4,407,392

(b) As of December 31, 2018 and 2017, correspond to currency repurchase operations according to which Interbank receives Soles for approximately S/1,154,500,000 and S/1,880,200,000, respectively, and delivers US Dollars to the BCRP (for an amount equivalent to the one received). The US Dollars delivered are recorded as restricted funds; see Note 5(d). As of December 31, 2018, these obligations have maturities between February and June 2019 and bear an effective interest rate between 0.28 and 1.22 percent; these operations accrued interest payable for approximately S/2,325,000 (with maturities between April 2018 and June 2019, and bearing effective interest rates between 3.00 and 6.38 percent; these operations generated interest payable for approximately S/10,762,000, as of December 31, 2017).

Additionally, as of December 31, 2018 and 2017, it includes repurchase agreements whereby Interbank receives Soles for approximately S/919,419,000 and S/325,223,000, respectively, and delivers securities of its investment portfolio as guarantees. In relation to such operations, as of December 31, 2018, Interbank delivered Peruvian Sovereign Bonds and certificates of deposit issued by BCRP as guarantee, which are recorded as investments at amortized cost and investments at fair value through other comprehensive income, see Note 6(e) and 6(b), respectively. These operations mature from January 2019 to July 2020 and accrue interests at effective annual interest rates between 3.22 percent to 4.72 percent. In addition, as of December 31, 2017, Interbank delivered Peruvian Sovereign Bonds, which were recorded as held-to-maturity investments, see Note 6(e) with maturities from June 2018 to July 2020 and effective annual interest rates between 4.05 percent and 4.72 percent.

(c) Promotional credit lines are loans in Soles and US Dollars from the Corporación Financiera de Desarrollo (COFIDE) and Fondo Mivivienda (FMV) whose purpose is to promote development in Peru. These liabilities are guaranteed by a loan portfolio up to the amount of the line and include specific agreements on the use of funds, the financial conditions to be met and other management issues. In Management’s opinion, Interbank is meeting these requirements.

COFIDE’s loans earned, in local currency, an effective annual interest rate between 7.55 percent to 10.00 percent and maturities from January 2027 to November 2031, and in foreign currency from 6.67 percent and 8.84 percent and maturities from April 2028 to December 2029 (as of December 31,

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2017, they generated, in local currency, an effective annual rate that between 7.55 percent to 10.00 percent and maturities from December 2018 to November 2031, and, in foreign currency, between 4.62 percent to 8.55 percent and maturities from December 2021 to March 2030).

FMV’s loans earned, in local currency, an effective annual interest rate between 5.00 percent and 8.30 percent and maturities from January 2019 and December 2038 and in foreign currency of 7.75 percent and maturities from January 2019 and November 2028 (as of December 31 2017, these generated, in local currency, the effective annual between 6.00 percent to 8.30 percent and maturities from January 2018 to December 2037 and in foreign currency of 7.75 percent and maturities from January 2018 to November 2028).

(d) As of December 31, 2018 and 2017, corresponds to the following funding in foreign currency:

Entity	Country		Final maturity		2018		2017
					S/(000)		S/(000)
Credit Suisse First Boston (e)		Switzerland		2019		229,364		—
Sumitomo Bank—U.S. (f)		United States of America		2019		168,650		—
Development Bank of Latin America—CAF (g)		Supranational		2020		134,920		—
Bank J. Safra Sarasin (h)		Switzerland		2019		94,444		—
Wells Fargo Bank & Co. (i)		United States of America		2020		84,325		—
Citibank N.A. (j)		United States of America		2020		84,325		—
Development Bank of Latin America—CAF (g)		Supranational		2018		—		243,075
HSBC Bank PLC (k)		United States of America		2018		—		162,050
Wells Fargo Bank & Co. (i)		United States of America		2018		—		162,050
JP Morgan Chase & Co. (l)		United States of America		2018		—		129,640
Foreign Trade Bank of Latin America, Inc.		Supranational		2018		—		15,962
						796,028		712,777

As of December 31, 2018, the operations with foreign entities accrue interests at effective annual rates between 2.51 percent to 3.65 percent (in 2017, effective annual rates between 1.45 percent to 4.55 percent).

(e) It corresponds to a loan received by Inteligo Bank in February 2018 for US$68,000,000 (equivalent to approximately S/229,364,000), which accrues interest at an effective annual rate of 2.56 percent, and is guaranteed by corporate bonds, see Note 6(b).

(f) It corresponds to a loan received by Interbank in October 2018 for US$50,000,000 (equivalent to approximately S/168,650,000) which accrues interest at a 3-month Libor rate plus 0.30 percent.

(g) As of December 31, 2018, it corresponds to a loan received by Interbank in October 2018 for US$40,000,000 (equivalent to approximately S/134,920,000), which accrues interests at a 6-month Libor rate plus 0.85 percent. Regarding this loan, in November 2018, Interbank signed an interest rate swap for US$40,000,000 (equivalent to approximately S/134,920,000), which was designated as cash flow hedge—see Note 11(b); through this operation, the loan was converted economically at a fixed rate of 4.00 percent.

As of December 31, 2017, it corresponded to a loan received by Interbank in September 2017 for US$75,000,000 (equivalent to approximately S/243,075,000) which accrued interests at a 4-month Libor rate plus 0.30 percent and with maturity in January 2018.

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(h) It corresponds to a loan received by Inteligo Bank in February 2018 for US$28,000,000 (equivalent to approximately S/94,444,000), which accrues interests at an effective annual rate of 2.64 percent and is guaranteed by corporate bonds; see Note 6(b).

(i) As of December 31, 2018, it corresponds to a loan received by Interbank in November 2018 for US$25,000,000 (equivalent to approximately S/84,325,000), which accrues interests at a 3-month Libor rate plus 0.90 percent. Regarding this loan, in December 2018, Interbank signed an interest rate swap for US$25,000,000 (equivalent to approximately S/84,325,000), which was designated as cash flow hedge, see Note 11(b); through this operation, the loan was converted economically at a fixed rate of 3.93 percent.

As of December 31, 2017, it corresponds to two loans received by Interbank in September 2016 for US$40,000,000 and US$10,000,000 (equivalent to approximately S/162,050,000), which accrued interests at a 3-month Libor rate plus 1.20 percent and a 3-month Libor rate plus 1.10 percent respectively. Regarding these loans, in October 2016, Interbank signed two interest rate swaps for US$50,000,000 (equivalent to approximately S/162,050,000), which were designated as cash flow hedges, see Note 11(b); through these operations, the loans were converted economically at fixed rates of 2.20 percent and 2.30 percent.

(j) It corresponds to a loan received by Interbank in November 2018 for US$25,000,000 (equivalent to approximately S/84,325,000), which accrues interests at a 3-month Libor rate plus 0.90 percent. Regarding this loan, in December 2018, Interbank signed an interest rate swap for US$25,000,000 (equivalent to approximately S/84,325,000), which was designated as cash flow hedge, see Note 11(b); through this operation, the loan was converted economically at a fixed rate of 3.93 percent.

(k) It corresponded to a loan received by Interbank in December 2015 for US$50,000,000 (equivalent to approximately S/162,050,000), which accrued interests at a 3-month Libor rate plus 0.90 percent. In July 2016, Interbank signed an interest rate swap for US$50,000,000 (equivalent to approximately S/162,050,000), which was designated as cash flow hedge, see Note 11(b); through this operation, the loan was converted economically at a fixed rate of 1.80 percent and matured in December 2018.

(l) It corresponded to a loan received by Interbank in July 2016 for US$40,000,000 (equivalent to approximately S/129,640,000) which accrued interests at a 6-month Libor rate plus 1.15 percent. In July 2016, Interbank signed an interest rate swap for US$40,000,000 (equivalent to approximately S/129,640,000), which was designated as a cash flow hedge, see Note 11(b); through this operation, the loan was economically converted at a fixed rate of 2.34 percent and matured in July 2018.

(m) As of December 31, 2018 and 2017, some of the Group loans agreements include standard clauses regarding the compliance of financial ratios, assets disposals and intercompany transactions under certain conditions, the use of funds and other management issues, such as:

(i) Submit audited financial statements on an annual basis and unaudited financial statements on a quarterly basis (both in Spanish and English).

(ii) Maintain a determined global capital ratio.

(iii) Maintain a determined coverage margin of non-performing loan portfolio.

(iv) Maintain a determined past due loans rate.

In the opinion of Management and its legal advisers, the Group complies with all covenants arising from its due to bank and correspondents as of December 31, 2018 and 2017.

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(n) As of December 31, 2018 and 2017, maturities of due to bank and other financial obligations are the following:

Year	2018		2017
	S/(000)		S/(000)
2018		—		2,447,091
2019		2,507,623		527,678
2020		633,572		328,482
2021 onwards		1,152,166		1,104,141
Total		4,293,361		4,407,392

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

14. Bonds, notes and other obligations

(a) This caption is comprised of the following:

Issuance	Issuer	Annual interest rate	Interest payment	Maturity		Amount issued		2018		2017
						(000)		S/(000)		S/(000)
Local issuances
Subordinated bonds—first program (b)
Second (B series)	Interbank	9.50%	Semi-annually		2023		US$30,000		94,086		89,977
Third (A series)	Interbank	3.5% + VAC (*)	Semi-annually		2023		S/110,000		70,000		70,000
Fifth (A series)	Interbank	8.50%	Semi-annually		2019		S/3,300		3,300		3,300
Sixth (A series)	Interbank	8.16%	Semi-annually		2019		US$15,110		50,966		48,972
Eighth (A series)	Interbank	6.91%	Semi-annually		2022		S/137,900		137,130		137,125
Second, first tranch	Interseguro	6.97%	Semi-annually		2024		US$35,000		118,055		113,435
Second, second tranch	Interseguro	6.00%	Semi-annually		2024		US$15,000		50,594		48,615
First—Interseguro	Interseguro	6.67%	Quarterly		2018		US$3,000		—		9,723
									524,131		521,147
Subordinated bonds—second program (b)
Second (A series)	Interbank	5.81%	Semi-annually		2023		S/150,000		149,776		149,729
Third (A series)	Interbank	7.50%	Semi-annually		2023		US$50,000		168,312		155,192
									318,088		304,921
Total local issuances									842,219		826,068
International issuances
Subordinated bonds (c)	Interbank	6.625%	Semi-annually		2029		US$300,000		1,006,875		966,729
Junior subordinated notes (d)	Interbank	8.50%	Semi-annually		2070		US$200,000		671,546		643,314
Senior bonds—First and second issuance (e)	Interbank	5.75%	Semi-annually		2020		US$650,000		1,309,248		2,109,565
Senior bonds (f)	IFS	4.125%	Semi-annually		2027		US$300,000		993,241		957,476
Senior bonds (g)	Interbank	3.375%	Semi-annually		2023		US$484,895		1,558,979		—
Total international issuances									5,539,889		4,677,084
Total local and international issuances									6,382,108		5,503,152
Interest payable									114,670		99,206
Total									6,496,778		5,602,358

(*) The Spanish term “Valor de actualización constante” is referred to an amount subject to adjustments.

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(b) Subordinated bonds do not have specific guarantees and in accordance with SBS rules, qualify as second level equity (Tier 2) in the determination of the effective equity; see Note 17(f).

(c) Starting in March 2024, the applicable interest rate will be a floating rate of 3-month Libor for US Dollar deposits plus 576 basis points payable quarterly. Starting on that date and on any interest payment date, Interbank can redeem all the notes without penalties.

In accordance with SBS regulation, this issuance qualifies as second level equity (Tier 2) in the determination of the effective equity; see Note 17(f).

As of December 31, 2018, Management does not intend to redeem these bonds before their maturity date.

(d) Starting in April 2020, the applicable interest rate will be a floating rate of 3-month Libor plus 674 basis points payable on a semi-annual basis, provided that the floating rate for any interest period will not be less than 10.5 percent per annum. Starting at that date, Interbank can redeem all the notes, without penalties. In accordance with the issuance conditions, the payment of principal will take place at the maturity date of the notes or when Interbank redeems the notes. Interest payments are non-cumulative if they cease to be made. Interest can stop being paid by mandatory prohibitions established by the SBS, or if it is determined that Interbank is in non-compliance with applicable minimum regulatory capital requirements. Interbank may not declare, pay or distribute any dividend for the period in which interest payments are not made.

This issuance qualifies as first level equity (Tier 1), nevertheless, the SBS establishes a 17.65 percent limit, which is computed over the capital, reserves and retained earnings pending capitalization of Interbank in the determination of its effective equity; any excess qualifies as second level equity (Tier 2); see Note 17(f).

As of December 31, 2018, Management does not intend to redeem these bonds before their maturity date.

(e) Starting in April 2016, Interbank can redeem these bonds, at the coupon payment date, paying a penalty equal to the United States Treasury rate plus 50 basis points.

The principal payment of both issuances will take place at the maturity date of the bonds or when Interbank redeems them.

As of December 31, 2018, Management does not intend to redeem these bonds before their maturity date; however, in the first quarter of the year, an exchange of part of these bonds was made; see (g) below.

In June 2017, Interbank entered into cross currency swaps for US$20,000,000 (as of December 31, 2018 and 2017, equivalents to approximately S/67,460,000 and S/64,820,000, respectively), which were designated as cash flow hedges – see Note 11(b); through these operations part of the issued amount of these bonds was economically converted into Soles at a fix rate of 4.61 percent.

(f) From 2018 until July 2027, IFS, on any time, can redeem these bonds, paying a penalty equal to the United States Treasury rate plus 30 basis points. The payment of principal will take place on the maturity date of the notes or when IFS redeems the notes.

In October 2017, IFS entered into a cross currency swap for US$150,000,000 (As of December 31, 2018 and 2017, equivalents to approximately S/505,950,000 and S/486,150,000, respectively), which

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was designated as a cash flow hedge, see Note 11(b); through this operation part of the issued amount of these bonds was economically converted to Soles at a fix rate of 5.063 percent.

As of December 31, 2018, Management does not intend to redeem these bonds before their maturity date.

(g) In January 2018, Interbank issued corporate bonds called “3.375% Senior Unsecured Notes” for US$200,000,000, under Rule 144A and Regulation S of the U.S. Securities Act of 1993 of the United States of America.

Likewise, as part of that program, Interbank made an exchange offer addressed to the holders of the corporate bonds denominated “5.750% Senior Notes due 2020” issued by the Panama Branch (see (e) above), managing to exchange bonds for an amount to US$263,322,000, which generated an exchange premium of approximately US$21,573,000 that are presented together in the caption “Bonds, notes and other obligations” for an amount of US$284,895,000.

In this regard, considering the issuance of bonds in January 2018 and the exchange of bonds made, the total balance of the “3.375 Senior Unsecured Notes” amounted to US$484,895,000.

The Group concluded that the aforementioned exchange did not generate any substantial modification in the terms and conditions of the financial liability; therefore, it did not recognize a new financial liability. Additionally, according to IFRS 9, the Group reported a gain of approximately US$4,672,000 (equivalent to S/15,286,000), caused by the difference between the present values of both obligations, which were discounted at the effective interest rate of the original financial liability and included in caption “Interest and similar expenses” of the consolidated income statements, thus decreasing the interest expenses generated by these issuances.

In 2018, Interbank entered into seven cross-currency swaps for a total of US$400,000,000 (equivalent to approximately S/1,349,200,000), which were designated as cash flow hedges; see Note 11(b). Through these operations, part of the issued amount by these bonds was economically converted into Soles at a fixed rate of 4.86 percent.

As of December 31, 2018, Management has no intention of redeeming these bonds before their maturity date.

(h) The international issuances are listed at the Luxembourg Stock Exchange. On the other hand, the local and international issuances include standard clauses of compliance with financial ratios, the use of funds and other administrative matters.

As of December 31, 2018 and 2017, the international issuances maintain mainly this clause: Submit audited financial statements on an annual basis and unaudited financial statements on a quarterly basis (both in Spanish and English).

In the opinion of Management and its legal advisers, this clause has been met by the Group as of December 31, 2018 and 2017.

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(i) As of December 31, 2018 and 2017, the repayment schedule of these obligations is as follows:

Year	2018		2017
	S/(000)		S/(000)
2018		—		75,608
2019		132,512		52,272
2020		1,309,248		2,109,565
2021 onwards		5,055,018		3,364,913
Total		6,496,778		5,602,358

15. Insurance contract liabilities

(a) This caption is comprised of the following:

	2018		2017
	S/(000)		S/(000)
Technical reserves for insurance premiums (b)		10,006,960		10,273,889
Technical reserves for claims (c)		293,508		240,615
		10,300,468		10,514,504
By term
Short term		935,182		583,692
Long term		9,365,286		9,930,812
Total		10,300,468		10,514,504

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(b) The movement of technical reserves for insurance premiums disclosed by type of insurance for the years ended December 31, 2018, 2017 and 2016, is as follows:

	2018														2017														2016
	Annuities			Retire ment, disa bility and survival annuities		Life insurance			General insurance			Total			Annuities			Retire ment, disa bility and survival annuities		Life insurance			General insurance			Total			Annuities			Retire ment, disa bility and survival annuities			Life insurance			General insurance			Total
	S/(000)			S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Beginning of year balances		9,034,796			676,949		525,662			36,482			10,273,889			4,526,171			121,592		152,957			37,540			4,838,260			4,061,692			122,527			131,186			32,329			4,347,734
Insurance subscriptions		287,869			—		6,383			30,301			324,553			294,267			—		3,064			27,941			325,272			425,895			—			3,953			27,631			457,479
Acquisition of Seguros Sura, Note 2		—			—		—			—			—			4,012,506			541,749		340,242			—			4,894,497			—			—			—			—			—
Acquisition of Mapfre portfolio (*)		—			—		—			—			—			181,849			855		—			—			182,704			—			—			—			—			—
Time passage adjustments (**)		(798,978	)		32,015		69,978			(26,269	)		(723,254	)		92,964			12,753		43,803			(29,402	)		120,118			68,318			(935	)		30,996			(22,523	)		75,856
Maturities and recoveries		—			—		(35,289	)		—			(35,289	)		—			—		(9,596	)		—			(9,596	)		—			—			(10,879	)		—			(10,879	)
Exchange differences		142,207			—		19,710			(829	)		161,088			(67,975	)		—		(4,808	)		403			(72,380	)		(29,734	)		—			(2,299	)		103			(31,930	)
Others		—			6,253		(278	)		(2	)		5,973			(4,986	)		—		—			—			(4,986	)		—			—			—			—			—
End of year balances		8,665,894			715,217		586,166			39,683			10,006,960			9,034,796			676,949		525,662			36,482			10,273,889			4,526,171			121,592			152,957			37,540			4,838,260

(*) On May 25, 2017, after the approval by the SBS, Interseguro acquired a portfolio of insurance policies from Mapfre Perú Vida Compañía de Seguros y Reaseguros S.A. (henceforth "Mapfre", an unrelated party), through the transfer of assets, liabilities, rights and obligations. The assets and liabilities transferred amounted to S/182,704,000 and comprised cash and technical reserves, respectively.

(**) The table below presents the composition of the adjustments due to time passage as of December 31, 2018, 2017 and 2016:

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	2018											2017											2016
	Annuities (***)			Life insurance		General insurance			Total			Annuities (***)			Life insurance		General insurance			Total			Annuities (***)			Life insurance		General insurance			Total
	S/(000)			S/(000)		S/(000)			S/(000)			S/(000)			S/(000)		S/(000)			S/(000)			S/(000)			S/(000)		S/(000)			S/(000)
Interest rate effect (****)		(750,794	)		—		—			(750,794	)		195,619			—		—			195,619			116,468			—		—			116,468
Aging insured population effect		(232,828	)		69,978		(26,269	)		(189,119	)		(97,539	)		43,803		(29,402	)		(83,138	)		(78,202	)		30,996		(22,523	)		(69,729	)
Effect by table change, Note 4.6 (a)		144,777			—		—			144,777			—			—		—			—			—			—		—			—
Inflation and other effects		71,882			—		—			71,882			7,637			—		—			7,637			29,117			—		—			29,117
Time passage adjustments		(766,963	)		69,978		(26,269	)		(723,254	)		105,717			43,803		(29,402	)		120,118			67,383			30,996		(22,523	)		75,856

(***) It includes retirement, disability and survival annuities.

(****) From March 31, 2018, the Group records interest rate effects in the caption “Unrealized results, net”. This change has been made retrospectively; see Note 4.2.1. Additionally, it includes the effect of changing the interest rate methodology for approximately S/423,080,000, which was registered prospectively; see Note 4.6 (b).

(c) Below is the balance of technical reserves for outstanding claims (according to the type of insurance) as of December 31, 2018 and 2017:

	2018										2017
	Annuities		Retirement, disability and survival annuities		Life insurance		General insurance		Total		Annuities		Retirement, disability and survival annuities		Life insurance		General insurance		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Reported claims		1,812		157,065		36,886		11,338		207,101		1,320		128,991		39,315		10,047		179,673
IBNR		—		56,996		29,133		278		86,407		—		42,583		18,085		274		60,942
		1,812		214,061		66,019		11,616		293,508		1,320		171,574		57,400		10,321		240,615

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The movement of technical reserves for claims for the years ended December 31, 2018, 2017 and 2016, is as follows:

	2018
	Annuities			Retirement, disability and survival annuities			Life insurance			General insurance			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Beginning of year balances		1,320			171,574			57,400			10,321			240,615
Claims of the period		573,883			(25,568	)		34,106			12,981			595,402
Adjustments to prior years claims		—			240,784			23,355			3,848			267,987
Payments		(573,785	)		(172,728	)		(45,794	)		(15,564	)		(807,871	)
Exchange difference		394			(1	)		(3,048	)		30			(2,625	)
End of year balances		1,812			214,061			66,019			11,616			293,508
	2017
	Annuities			Retirement, disability and survival annuities			Life insurance			General insurance			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Beginning of year balances		991			124,062			38,122			9,078			172,253
Claims of the period		331,888			24,316			33,191			26,834			416,229
Acquisition of Seguros Sura, Note 2		27			105,923			13,720			981			120,651
Adjustments to prior years claims		625			8,804			13,867			(8,351	)		14,945
Payments		(332,201	)		(91,762	)		(41,312	)		(18,164	)		(483,439	)
Exchange difference		(10	)		231			(188	)		(57	)		(24	)
End of year balances		1,320			171,574			57,400			10,321			240,615

	2016
	Annuities			Retirement, disability and survival annuities			Life insurance			General insurance			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Beginning of year balances		655			93,361			26,336			9,003			129,355
Claims of the period		251,911			75,342			35,441			12,710			375,404
Adjustments to prior years claims		—			60,606			12,991			5,685			79,282
Payments		(251,568	)		(105,246	)		(36,602	)		(18,287	)		(411,703	)
Exchange difference		(7	)		(1	)		(44	)		(33	)		(85	)
End of year balances		991			124,062			38,122			9,078			172,253

(d) In Management’s opinion, these balances reflect the exposure of life and general insurance contracts as of December 31, 2018, 2017 and 2016, in accordance with IFRS 4.

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(e) The main assumptions used in the estimation of retirement, disability and survival annuities and individual life reserves as of December 31, 2018 and 2017, were the following:

	2018 (***)		2017
Type	Mortality table	Technical rates	Mortality table	Technical rates
Annuities	SPP-S-2017, SPP-I-2017 with improvement factor for mortality	5.63% in US$ 2.74% in S/ VAC 5.84% in adjusted S/	RV - 2009, B- 2006 and MI - 2006 with improvement factor for mortality	5.51 - 4.66% (*) (**) in US$ 3.92 - 3.64% (*) (**) in S/ VAC 6.44 - 6.43% (*) (**) in adjusted S/
Retirement, disability and survival	SPP-S-2017, SPP-I-2017 with improvement factor for mortality	2.74% in S/ VAC	B - 2006 and MI - 2006 with improvement factor for mortality	3.92 – 3.64% (*) (**) in S/ VAC
Individual life insurance contracts (included linked insurance contracts)	CSO 80 adjusted	4.00 - 6.00%	CS0 80 adjusted	4.00 - 6.00%

(*) Adjusted by credit risk.

(**) In the tranches where the term of the investment differs from that of the obligations, the discount rate considered is the lowest between the market price published monthly by the SBS and 3 percent, which is the technical rate established by the SBS.

(***) As explained in Notes 4.6(a) and (b), Interseguro adopted new mortality tables and modified the assumptions used to determine the discount rate to discount the pension reserves.

The sensitivity of the estimates used by the Group to measure its insurance risks is represented primarily by life insurance risks; the main variables as of December 31, 2018 and 2017, are the interest rates and the mortality tables. The Group has assessed the changes of the reserves related to its most significant life insurance contracts included in the reserves of annuities, retirement, disability and survival of +/- 100 basis points (bps) in the interest rates and of +/- 500 basis points (bps) of the mortality factors, being the results as follows:

	2018								2017
			Variation of the reserve								Variation of the reserve
Variables	Reserve		Amount			Percentage			Reserve		Amount			Percentage
	S/(000)		S/(000)			%			S/(000)		S/(000)			%
Annuities
Portfolio in S/ and US Dollars—Basis amount
Changes in interest rate: + 100 bps		7,816,973		(848,921	)		(9.80	)		8,735,367		(457,282	)		(4.97	)
Changes in interest rate: - 100 bps		9,696,893		1,030,999			11.90			9,707,500		514,851			5.60
Changes in mortality table at 105%		8,587,633		(78,261	)		(0.90	)		9,083,954		(108,695	)		(1.18	)
Changes in mortality table at 95%		8,747,817		81,923			0.95			9,307,683		115,034			1.25
Retirements, disability and survival
Portfolio in S/—Basis amount
Changes in interest rate: + 100 bps		635,838		(79,379	)		(11.10	)		681,795		(32,640	)		(4.57	)
Changes in interest rate: - 100 bps		813,614		98,397			13.76			750,967		36,532			5.11
Changes in mortality table at 105%		706,495		(8,722	)		(1.22	)		705,980		(8,455	)		(1.18	)
Changes in mortality table at 95%		724,366		9,149			1.28			723,290		8,855			1.24

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16. Deferred Income Tax asset and liability

(a) As indicated in Note 4.4(ab), the net tax position has been met based on the financial statements of each Subsidiary domiciled in Peru. The following table presents a summary of the items comprising the Subsidiaries’ deferred Income Tax:

	2018			2017
	S/(000)			S/(000)
Deferred assets
Provision for loan portfolio and other provisions		184,014			142,085
Deferred income by stand-by letters		9,072			8,426
Net unrealized losses from fluctuation in investments through other comprehensive income		6,449			45
Unrealized losses from derivatives		—			628
Others		14,737			14,001
Deferred liabilities
Deemed cost of fixed assets		(58,859	)		(56,178	)
Amortization of intangible assets, net		(57,265	)		(51,918	)
Unrealized gain from derivatives		(9,707	)		—
Unrealized gain from fluctuation in investments through other comprehensive income		(424	)		—
Others		(8,542	)		(3,812	)
Total deferred Income Tax asset, net		79,475			53,277
Deferred liabilities
Net unrealized gain from fluctuation in investments through other comprehensive income		259			586
Others		(207	)		(329	)
Total deferred Income Tax liability, net		52			257

(b) In Management’s opinion, the deferred Income Tax assets will be recovered from the taxable income that will be generated by the Group over the coming years, including the portion that is recorded in the consolidated statements of equity.

(c) The table below presents the amounts reported in the consolidated income statements for the years ended December 31, 2018, 2017 and 2016:

	2018		2017			2016
	S/(000)		S/(000)			S/(000)
Current—Expense		401,788		330,902			332,820
Deferred—Expense (Income)		13,727		(4,376	)		1,043
		415,515		326,526			333,863

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(d) The table below presents the reconciliation of the effective Income Tax rate to the statutory tax rate for the Group:

	2018						2017						2016
	S/(000)			%			S/(000)			%			S/(000)			%
Income before Income Tax		1,506,909			100.0			1,359,980			100.0			1,284,052			100.0
Peruvian theoretical tax		444,538			29.5			401,194			29.5			359,535			28.0
Decrease from the income of Subsidiaries not domiciled in Peru		(37,681	)		(2.5	)		(32,365	)		(2.4	)		(55,984	)		(4.4	)
Non-taxable income, net		(49,484	)		(3.3	)		(87,891	)		(6.5	)		(33,432	)		(2.6	)
Permanent non-deductible expenses		80,555			5.3			43,571			3.2			42,226			3.3
Translation results non-taxable		(22,413	)		(1.4	)		2,017			0.2			20,371			1.6
Change in the Income Tax rate, see Note 18(c)		—			—			—			—			1,147			0.1
Income Tax		415,515			27.6			326,526			24.0			333,863			26.0

As of December 31, 2016, the effect of the change in the Income Tax rate generated an expense amounting to S/1,147,000, recorded in the 2016 consolidated income statements; see Note 18(c).

17. Equity

(a) Capital stock—

As of December 31, 2018 and 2017, IFS’s capital stock is represented by 113,110,864 common shares subscribed and paid in. IFS’s shares are quoted at the Lima Stock Exchange; have no nominal value and their issuance value was US$9.72 per share.

The General Shareholders’ Meeting of IFS held on April 1, 2019 agreed to distribute dividends for the year 2018 for approximately US$197,187,000 (equivalent to approximately S/654,464,000), US$1.75 per share, payable on May 3, 2019.

The General Shareholders’ Meeting of IFS, held on April 2, 2018, agreed to distribute dividends from the year 2017 for approximately US$157,750,000 (equivalent to approximately S/510,688,000), $1.40 per share.

The General Shareholders’ Meeting of IFS, held on April 10, 2017, agreed to distribute dividends from the year 2016 for approximately US$146,482,000 (equivalent to approximately S/475,773,000), US$1.30 per share.

The General Shareholders’ Meeting of IFS, held on April 11, 2016, agreed to distribute dividends from the year 2015 for approximately US$147,044,000 (equivalent to approximately S/496,862,000), US$1.30 per share.

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(b) Treasury stock held by Subsidiaries—

As of December 31, 2018 and 2017, the Group holds shares issued by IFS, as detailed below:

	2018				2017
Entity	Number of shares		Cost		Number of shares		Cost
	(000)		S/(000)		(000)		S/(000)
Interbank		1,986		164,295		4,996		423,317
IFS		432		43,883		432		43,883
Total		2,418		208,178		5,428		467,200

In the Shareholders’ Meeting of IFS, held on May 25, 2016, the program of acquisition of own issuance shares was approved. Such acquisition, as agreed, may be carried out on one or more occasions, as appropriate to IFS’s interests, according to market conditions and other legal limits and factors in force at the time of the acquisition. These acquisitions shall be subject to the current legal limit (10-percent limit of the capital stock) established in Article 84 of the Securities Market Act. Likewise, the Shareholders’ Meeting set a limit for the acquisitions made under this program, which may not exceed 3,500,000 shares (equivalent to 3.09 percent of the Company’s capital stock). Without taking into account the shares acquired prior to this program. In this sense, during 2017, IFS and its Subsidiaries bought treasury stock for 500,000 shares for an amount of approximately S/52,774,000 (1,889,000 shares for an amount of approximately S/199,892,000, during 2016). Also, in said Meeting, it was approved to delegate to Management the termination of this program, when it deems appropriate.

On August 9, 2017, Management, pursuant to said delegation, informed the Board of Directors of IFS its decision to terminate the program of acquisition of own issuance shares.

On the other land, in December 2017, Interbank sold 1,000,000 shares of IFS at their market price for US$34,542,000 (equivalent to approximately S/111,287,000) and Inteligo and Interfondos sold 251,000 shares of IFS at their market price for US$9,227,000 (equivalent to approximately S/31,377,000). Said sales were recorded as a decrease in “Treasury stock” by S/107,680,000; the aforementioned amount was determined by using the average cost of unit of treasury stock the Group held at the date of the transactions; and the highest value charged for the sale amounting to S/34,984,000 was recorded in “Retained earnings”.

In 2018, Interbank sold 3,009,490 shares of IFS at their market price for approximately US$121,133,000 (equivalent to approximately S/382,727,000) through the Lima Stock Exchange. Said sale was recorded as a decrease in “Treasury stock” by S/259,022,000 and the difference amounting to S/123,705,000 was recorded in “Retained earnings”.

(c) Capital surplus—

Corresponds to the difference between the nominal value of the shares issued and their public offering price, which was performed in 2007. Capital surplus is presented net of the expenses incurred and related to the issuance of such shares.

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(d) Unrealized results, net—

This item is made up as follows:

	Unrealized gain (loss)
	Instruments that will not be reclassified  to consolidated income statements		Instruments to be reclassified to the consolidated income statements
	Equity instruments at fair value		Debt instruments at fair value		Insurance premiums reserve, Note 4.2.1(i)			Available-for-sale investments reserve			Cash flow hedge reserve			Foreign currency translation reserve			Total
	S/(000)		S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Balances as of January 1, 2016 (Restated, Note 4.2.1)		—		—		(363,008	)		(471,151	)		(458	)		110,214			(724,403	)
Effect of changes in the discount rates of pension reserves, Note 4.2.1(i)		—		—		(116,468	)		—			—			—			(116,468	)
Unrealized gain from available-for-sale investments, net of unrealized loss		—		—		—			405,349			—			—			405,349
Transfer to realized gain from available-for-sale investments, net of realized loss		—		—		—			(48,875	)		—			—			(48,875	)
Transfer of impairment loss of available-for-sale investments to consolidated income statements, Note 6(i)		—		—		—			28,323			—			—			28,323
Accrual of unrealized loss from held-to-maturity investment to consolidated income statements, Note 6(e)		—		—		—			2,537			—			—			2,537
Variation for net unrealized gain on cash flow hedges		—		—		—			—			1,111			—			1,111
Transfer of realized loss on cash flow hedges to consolidated income statements, net of realized gain		—		—		—			—			648			—			648
Foreign currency translation		—		—		—			—			—			(11,340	)		(11,340	)
Balances as of December 31, 2016 (Restated, Note 4.2.1)		—		—		(479,476	)		(83,817	)		1,301			98,874			(463,118	)
Effect of changes in the discount rates of pension reserves, Note 4.2.1(i)		—		—		(195,619	)		—			—			—			(195,619	)
Unrealized gain from available-for-sale investments, net of unrealized loss		—		—		—			543,768			—			—			543,768
Transfer to realized gain from available-for-sale investments, net of realized loss		—		—		—			(113,306	)		—			—			(113,306	)
Transfer of impairment loss of available-for-sale investments to consolidated income statements, Note 6(i)		—		—		—			20,759			—			—			20,759
Accrual of unrealized loss from held-to-maturity investment to consolidated income statements, Note 6(e)		—		—		—			2,608			—			—			2,608
Variation for net unrealized loss on cash flow hedges		—		—		—			—			(1,477	)		—			(1,477	)
Transfer of realized loss on cash flow hedges to consolidated income statements, net of realized gain		—		—		—			—			140			—			140
Foreign currency translation		—		—		—			—			—			(22,480	)		(22,480	)

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	Unrealized gain (loss)
	Instruments that will not be reclassified  to consolidated income statements		Instruments to be reclassified to the consolidated income statements
	Equity instruments at fair value		Debt instruments at fair value			Insurance premiums reserve, Note 4.2.1(i)			Available-for-sale investments reserve			Cash flow hedge reserve			Foreign currency translation reserve		Total
	S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)		S/(000)
Balances as of December 31, 2017 (Restated, Note 4.2.1)		—		—			(675,095	)		370,012			(36	)		76,394		(228,725	)
Changes due to the first adoption of IFRS 9, Note 4.7		105,619		238,348			—			(370,012	)		—			—		(26,045	)
Balances as of January 1, 2018 (Restated, Note 4.2.1)		105,619		238,348			(675,095	)		—			(36	)		76,394		(254,770	)
Balances as of January 1, 2018 (Restated, Note 4.2.1)		105,619		238,348			(675,095	)		—			(36	)		76,394		(254,770	)
Effect of changes in the discount rates of pension reserves, Note 4.2(a)(i)		—		—			750,670			—			—			—		750,670
Unrealized gain from equity instruments at fair value through other comprehensive income, net of unrealized loss		41,935		—			—			—			—			—		41,935
Unrealized loss from debt instruments at fair value through other comprehensive income, net of unrealized gain		—		(471,940	)		—			—			—			—		(471,940	)
Transfer to realized loss from debt instruments at fair value through other comprehensive income, net of unrealized gain		—		14,315			—			—			—			—		14,315
Transfer of reversal of impairment loss on debt instruments at fair value through other comprehensive income, Note 6(c)		—		(13,060	)		—			—			—			—		(13,060	)
Variation for net unrealized gain on cash flow hedges		—		—			—			—			32,798			—		32,798
Transfer of realized loss on cash flow hedges to consolidated income statements, net of realized gain.		—		—			—			—			(4,851	)		—		(4,851	)
Foreign currency translation		—		—			—			—			—			26,589		26,589
Balances as of December 31, 2018		147,554		(232,337	)		75,575			—			27,911			102,983		121,686

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(e) Components of other comprehensive income—

The consolidated statements of comprehensive income include: (i) Other comprehensive income that will not be reclassified to the consolidated income statements in future periods, such as the revaluation of gain (loss) in equity instruments at fair value through other comprehensive income and; (ii) Other comprehensive income to be reclassified to the consolidated income statements in future periods, such as the comprehensive income of premium reserves, available-for-sales investments (until December 31, 2017), derivatives used as cash flow hedges, debt instruments at fair value through other comprehensive income (from January 1, 2018) and translation for foreign operations. Below is the movement of the caption:

	2018			2017		2016
	S/(000)			S/(000)		S/(000)
Other comprehensive income that will not be reclassified to the consolidated income statements in future periods:
Equity instruments at fair value through other comprehensive income
Revaluation of gain in equity instruments at fair value through other comprehensive income		41,935			—		—
Subtotal		41,935			—		—
Non-controlling interest		(511	)		—		—
Income Tax		(26	)		—		—
Total		41,398			—		—
Other comprehensive income to be reclassified to the consolidated income statements in future periods: Debt instruments at fair value through other comprehensive income
Net unrealized loss from debt instruments at fair value through other comprehensive income		(471,940	)		—		—
Transfer of net realized loss from debt instruments at fair value through other comprehensive income		14,315			—		—
Transfer of reversal of impairment loss of debt instruments at fair value through other comprehensive income		(13,060	)		—		—
Subtotal		(470,685	)		—		—
Non-controlling interest		(1,011	)		—		—
Income Tax		(6,309	)		—		—
Total		(478,005	)		—		—

	2018		2017			2016
	S/(000)		S/(000)			S/(000)
Insurance premiums reserve, Note 4.2.1 (i)		750,670		(195,619	)		(116,468	)
Non-controlling interest		124		—			—
Total		750,794		(195,619	)		(116,468	)
Available-for-sale investments:
Unrealized gain from available-for-sale investments		—		543,768			405,349
Transfer to realized gain from available-for-sale investments, net of realized loss		—		(113,306	)		(48,875	)
Transfer of impairment loss from available-for-sale investments to consolidated income statements, Note 6 (i)		—		20,759			28,323
Accrual of unrealized loss from held-to-maturity investments to consolidated income statements, Note 6 (e)		—		2,608			2,537
Subtotal		—		453,829			387,334

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	2018			2017			2016
	S/(000)			S/(000)			S/(000)
Non-controlling interest		—			470			935
Income Tax		—			(14,471	)		4,837
Total		—			439,828			393,106
Cash flow hedges:
Net unrealized gain (loss) from cash flow hedges		32,798			(1,477	)		1,111
Transfer of net realized loss (gain) from cash flow hedge to consolidated income statements		(4,851	)		140			648
Subtotal		27,947			(1,337	)		1,759
Non-controlling interest		171			(19	)		12
Income Tax		10,335			(1,172	)		723
Total		38,453			(2,528	)		2,494
Foreign currency translation reserve		26,589			(22,480	)		(11,340	)

(f) Shareholders’ equity for legal purposes (regulatory capital)—

IFS and Inteligo Group Corp. are not required to establish a regulatory capital for statutory purposes. As of December 31, 2018 and 2017, the regulatory capital required for Interbank, Interseguro and Hipotecaria Sura, is calculated based on the separate financial statements of each Subsidiary prepared following the accounting principles and practices stated by the SBS. Also, as of those dates, the regulatory capital required for Inteligo Bank is calculated in accordance with the requirements of the Central Bank of the Bahamas. The regulatory capital required for Interbank, Interseguro, Inteligo Bank and Hipotecaria Sura is detailed below:

Interbank’s regulatory capital

According to the provisions of Legislative Decree No. 1028, Interbank’s regulatory capital must be equal to or higher than 10 percent of the assets and contingent credits weighted by total risk represented by the sum of: the regulatory capital requirement for market risk multiplied by 10, the regulatory capital requirement for operational risk multiplied by 10 and the assets and contingent credits weighted by credit risk.

In application of Legislative Decree No. 1028, as amended, as of December 31, 2018 and 2017, Interbank maintains the following amounts related to its assets and contingent credits weighted by risk and regulatory capital (basic and supplementary):

	2018			2017
	S/(000)			S/(000)
Total risk weighted assets and credits		44,390,985			37,745,504
Total regulatory capital		7,007,381			6,066,349
Basic regulatory capital (Level 1)		5,042,037			4,250,426
Supplementary regulatory capital (Level 2)		1,965,344			1,815,923
Global capital to regulatory capital ratio		15.79	%		16.07	%

As of December 31, 2018 and 2017, Interbank has complied with SBS Resolutions No.2115-2009, No.6328-2009, No.14354-2009 and No.4128-2014, “Regulations for the Regulatory Capital Requirement for Operational Risk”, “Market Risk” and “Credit Risk”, respectively, as amended. These resolutions establish, mainly, the methodologies to be applied by financial entities to calculate the assets and credits weighted per type of risk.

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In July 2011, the SBS issued Resolution No. 8425-2011, which states that financial entities must determine an additional regulatory capital level and develop a process to assess the adequacy of their regulatory capital in relation with their risk profile, which must follow the methodology described in said resolution. The additional regulatory capital requirement shall be equivalent to the amount of regulatory capital requirements calculated for each of the following components: economic cycle, concentration risk, market concentration risk and interest rate risk in the bank book, among others.

As of December 31, 2018 and 2017, the additional regulatory capital estimated by Interbank amounts to approximately S/735,483,000 and S/710,314,000, respectively.

Interseguro’s regulatory capital

In accordance with SBS Resolution No. 1124-2006, and its amendments, Interseguro is required to maintain a level of regulatory capital in order to maintain a minimum equity to support technical risks and other risks that could affect it. The regulatory capital must be higher than the amount resulting from the sum of the solvency net equity, the guarantee fund and the regulatory capital intended to cover credit risks.

The solvency net equity is represented by the higher amount between the solvency margin and the minimal capital. As of December 31, 2018 and 2017, the solvency net equity is represented by the solvency margin. The solvency margin is the complementary support that insurance entities must maintain to deal with possible situations of excess claims not foreseen in the establishment of technical reserves. The total solvency margin corresponds to the sum of the solvency margins of each branch in which Interseguro operates.

Also, the guarantee fund represents the additional equity support that insurance companies must maintain to deal with the other risks that can affect them and that are not covered by the solvency net equity, such as investment risks and other risks. The monthly amount of said fund must be equivalent to 35 percent of the solvency net equity, calculated in accordance with SBS Resolution No. 1124-2006.

As of December 31, 2018 and 2017, Interseguro’s surplus equity is as follows:

	Interseguro				Seguros Sura
	2018 (*)		2017		2017
	S/(000)		S/(000)		S/(000)
Regulatory capital		1,042,699		549,281		488,262
Less:
Solvency equity (solvency margin)		559,930		301,671		231,720
Guarantee fund		195,975		105,584		81,102
Surplus		286,794		142,026		175,440

(*) As of December 31, 2018, Seguros Sura’s balances are part of Interseguro’s balances, as a result of the business combination carried out on March 31, 2018; see Note 2.

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Inteligo Bank’s regulatory capital

The Central Bank of the Bahamas requires Inteligo Bank to maintain a regulatory capital of not less than 8 percent of its risk weighted assets. Inteligo Bank’s capital ratio as of December 31, 2018 and 2017 is the following:

	2018		2017
	US$(000)		US$(000)
Total eligible capital		216,977		212,459
Total risk weighted assets		850,069		652,229
Capital adequacy ratio (in percentage)		25.52		32.57

Hipotecaria Sura’s regulatory capital

As of December 31, 2017, Hipotecaria Sura maintained a regulatory capital of S/11,171,000, assets and contingent credits weighted by total risk of S/4,289,000, keeping a ratio of 260.45 percent. Also, the additional regulatory capital estimated by Hipotecaria Sura amounts to approximately S/680,000. As of December 31, 2018, Hipotecaria Sura is in liquidation process, therefore it is not subject to these requirements.

In Management’s opinion, its Subsidiaries have complied with the requirements set forth by the SBS.

(g) Reserves—

The Board of Directors of IFS sessions held on June 25, 2018, and May 9, 2018, agreed to constitute a reserve of up to S/1,000,000,000 charged to retained earnings.

The Board of Directors of IFS session held on September 18, 2017, agreed to constitute a reserve of up to S/600,000,000 charged to retained earnings as of June 30, 2017. Likewise, the Board of Directors of IFS session, held on August 9, 2017, agreed to constitute a reserve of up to S/500,000,000 charged to retained earnings as of December 31, 2016.

The General Shareholders’ Meeting of IFS held on April 11, 2016, agreed to constitute a reserve of up to S/600,000,000 charged to retained earnings as of December 31, 2015.

(h) Subsidiaries’ legal and special reserves

The Subsidiaries domiciled in Peru are required to establish a reserve equivalent to a certain percentage of their paid-in capital (20 or 35 percent, depending on their economic activity) through annual transfers of 10 percent of their net income. As of December 31, 2018 and 2017, these reserves amounted to approximately S/1,000,764,000 and S/892,103,000, respectively.

18. Tax situation

(a) IFS and its Subsidiaries incorporated and domiciled in the Republic of Panama and the Commonwealth of the Bahamas (see Note 3), are not subject to any Income Tax, or any other taxes on capital gains, equity or property; nevertheless, IFS is subject to an additional tax on dividends received from its Subsidiaries incorporated and domiciled in Peru; see paragraph (b). The Subsidiaries incorporated and domiciled in Peru (see Note 3) are subject to the Peruvian Tax legislation; see paragraph (c).

(b) Legal entities or individuals not domiciled in Peru are subject to an additional tax on dividends received from entities domiciled in Peru. The corresponding tax is withheld by the entity that

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distributes the dividends. In this regard, since IFS controls the entities that distribute the dividends, it recognizes the amount of the additional Income Tax as expense of the financial year of the dividends. In this sense, as of December 31, 2018 and 2017, the Company has recorded expenses for S/37,880,000 and S/23,677,000, respectively, in the caption “Income Tax” of the consolidated income statements.

As of December 31, 2018 and 2017, dividends distributed by Peruvian Subsidiaries to IFS were subject to a withholding of 5.0 percent of the profits generated in those years, whereas as of December 31, 2016, dividends distributed by Peruvian Subsidiaries to IFS were subject to a withholding of 6.8 percent.

(c) IFS’s Subsidiaries incorporated in Peru are subject to the payment of Peruvian taxes; hence, they must calculate their tax expenses on the basis of their separate financial statements. The Income Tax rate as of December 31, 2018 and 2017, was 29.5 percent, over the taxable income.

Through Legislative Decree No.1261, published on December 10, 2016, the rate applicable to the third category Income Tax of domiciled taxpayers was modified, thus establishing a rate of 29.5 percent which shall be effective starting on January 1, 2017.

As of December 31, 2016, the applicable Income Tax rate was 28 percent over the taxable income.

On the other hand, there are considered as Peruvian-source income those arisen from the indirect sale of shares of stock or ownership interests of legal entities domiciled in the country. For that purpose, an indirect sale shall be considered to have occurred when shares of stock or ownership interests of a legal entity are sold and this legal entity is not domiciled in the country and, in turn, is the holder—whether directly or through other legal entity or entities—of shares of stock or ownership interests of one or more legal entities domiciled in the country, provided that certain conditions established by law occur. The law also defines the cases in which the issuer is jointly and severally liable thereof.

(d) The Tax Authority (henceforth “SUNAT”, by its Spanish acronym) is legally entitled to perform tax audits procedures for up to four years subsequent to the date at which the tax return regarding a taxable period must be filed. The Income Tax and the Value-Added-Tax returns subject to inspection by the Tax Authority in each of the Subsidiaries, are the following:

• Interbank, Hipotecaria Sura and Seguros Sura: Income Tax returns of the years 2012 and from 2014 to 2018, and Value-Added-Tax returns of the years 2014 to 2018, are pending reviewing by SUNAT.

• Interseguro: Income Tax returns of the years 2013, 2015, 2017 and 2018, and Value-Added-Tax returns of the years 2014 to 2018, are pending reviewing by SUNAT.

Given the possible interpretations that SUNAT may give to the legislation in effect, up to date it is not possible to determine whether or not any review to be conducted would result in liabilities for the Subsidiaries; any increased tax or surcharge that could arise from possible tax reviews would be applied to the results of the period in which such tax increase or surcharge may be determined.

In the case of Interbank, in April 2004, June 2006, February 2007, June 2007, November 2007, October 2008 and December 2010, it received a number of Tax Determination and Tax Penalty notices corresponding mainly to the Income Tax determination for the fiscal years 2000 to 2006. As a result, claims and appeals were filed and subsequent contentious administrative proceedings were started, with the exception of Income Tax 2006, which is still pending in the Tax Court.

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Regarding the tax litigations followed by the Bank related to the annual Income Tax returns for the years 2000 to 2006, the most relevant matter subject to discrepancy with SUNAT corresponds to whether the “interests in suspense” are subject to Income Tax or not. In this sense, the Bank considers that the interests in suspense do not constitute accrued income, in accordance with the SBS and the IFRS, which is also supported by a ruling of the Permanent Constitutional and Social Law Chamber of the Supreme Court issued in August 2009.

Notwithstanding the foregoing, in February 2018, the Bank was informed that the Third Transitory Chamber of Constitutional and Social Law of the Supreme Court, issued a ruling regarding a third bank that impacts the Bank’s original estimation regarding the degree of contingency indicated in the previous paragraph; which, based on this new circumstance and in compliance with the IFRS, the Bank estimates as possible as of the date of this report.

The tax liability requested for this concept and other minors matters by SUNAT as of December 31, 2018, amounts to approximately S/393,000,000, out of which S/50,000,000 correspond to taxes and the difference to fines and interest arrears.

From the tax and legal analysis carried out, the Bank’s Management and its external legal advisors consider that there is sufficient technical support for the prevalence of the Bank’s position; as a result, it has not recorded any provision for this contingency as of December 31, 2018 and 2017.

On the other hand, during the years 2013 and 2014, SUNAT closed the audit processes corresponding to the assessment of the Income Tax of the fiscal years 2007, 2008 and 2009, respectively, thus issuing a series of Assessment Resolutions without any additional levying of said tax.

On January 11, 2016, SUNAT closed the partial audit corresponding to the fiscal year 2013 for withholding of Income Tax from non-domiciled beneficiaries, issuing a series of Final Assessment Resolutions without any additional levying of the tax in question.

On February 3, 2017, SUNAT closed the inspection corresponding to the fiscal year 2010 related to Income Tax. The Bank paid the amount of the deficiency under protest and filed a complaint.

On February 14, 2018, SUNAT, through Letter No.180011585680-01-SUNAT notified Interbank of the beginning of the partial inspection process for the Income Tax for the year 2014.

On September 7, 2018, SUNAT closed the partial inspection process for the fifth category tax for the year 2014; without additional tax request.

On January 14, 2019, Interbank was notified of the Determination and Penalty Resolutions corresponding to the audit of the Income Tax for the fiscal year 2013. The tax debt sought by SUNAT amounts to approximately S/50,000,000. To date, Interbank Management has submitted the respective complaint to the resolutions indicated above. In Management opinion and its legal advisors, any eventual additional tax would not be significant for the financial statements as of December 31, 2018 and 2017.

On January 4, 2019, Interseguro was notified through a Tax Determination notice about the partial auditing of the Income Tax for non-domiciled entities for Sura corresponding to January 2015; see Note 2. The tax debt claimed by SUNAT amounts to approximately S/19,000,000 Considering that this debt corresponds to a period prior to the acquisition of Seguros Sura by the Group (see Note 2), and according to the conditions of the purchase and sale agreement of this entity, this tax assessment, if confirmed after the legal actions that Management is to file, would be assumed by the sellers. To date, Management and its legal advisors are evaluating the measures to be followed.

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Finally, as of the date of this report, SUNAT is reviewing the 2012 tax return of Interbank. In the opinion of Management and its legal advisors, any eventual additional tax assessment would not be significant for the consolidated financial statements as of December 31, 2018 and 2017.

(e) Peruvian life insurance companies are exempt from Income Tax regarding the income derived from assets linked to technical reserves for pension insurance (retirement, disability and survival pensions) and annuities from the Private Pension Fund Administration System.

(f) For the purpose of determining the Income Tax, the transfer prices of transactions with related companies and with companies domiciled in countries or territories that are non-cooperating or low or zero tax countries or territories, or with entities or permanent establishments whose income, revenues or gains from said contracts are subject to a preferential tax regime, must be supported by documented information on the valuation methods used and the criteria considered for their determination. On the basis of the analysis of the operations of the Group’s Subsidiaries, Management and its internal legal advisors believe that, as a consequence of the application of these standards, contingencies of importance to the Subsidiaries domiciled in Peru will not arise as of December 31, 2018 and 2017.

Through Legislative Decree No. 1312, published on December 31, 2016, the formal obligations for entities included within the scope of application of transfer pricing are modified, thus incorporating three new information requirements: (i) Local Report; (ii) Master Report; and (iii) Country Report. The first validity is as of 2017 for the operations that occurred during 2016 and the last two as of 2018 for the operations that have occurred since the fiscal year 2017.

(g) Through Legislative Decree No.1381, published on August 24, 2018, incorporated in the Income Tax Act the concept of “non-cooperating” countries or territories and preferential tax regimes to which are imposed the defensive measures already existing for countries and territories with low or zero taxation.

In this regard, it is important to emphasize that, at present, Interbank maintains a branch in Panama, a country that is considered “non-cooperating”, in accordance with the provisions of Legislative Decree No. 1381.

(h) In July 2018, Act No. 30823 was published, whereby the Congress delegated power to the Executive Branch to legislate on various issues, including tax and financial matters. In this sense, the main tax regulations issued are the following:

(i) Beginning on January 1, 2019, the treatment applicable to royalties and remuneration for services rendered by non-domiciled persons was modified, eliminating the obligation to pay the amount equivalent to the withholding due to the accounting record of the cost or expense. Now the Income Tax is withheld at the payment of the compensation. In order for said cost or expense to be deductible for the local company, the remuneration must have been paid to the filing date of the annual tax return for the Income Tax (Legislative Decree No. 1369).

(ii) The rules that regulate the obligation of legal persons and/or legal entities to inform the identification of their final beneficiaries (Legislative Decree No. 1372) were established. These rules are applicable to legal entities domiciled in the country, in accordance with the provisions of Article 7 of the Income Tax Act, and legal entities established in the country. The obligation covers non-domiciled legal entities and legal entities established abroad, provided that: a) they have a branch, agency or other permanent establishment in the country; b) the natural or juridical person who manages the autonomous patrimony or the investment funds from abroad, or the natural or legal person who has the status of trustee or administrator, is domiciled in the country; c) any of the members of a consortium is domiciled in the country. This obligation will be fulfilled through the presentation to SUNAT of an informative Sworn Statement, which must contain the

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information of the final beneficiary and be submitted, in accordance with the regulations and within the deadlines established by Superintendence Resolution issued by SUNAT.

(iii) The Tax Code was amended regarding the application of the general anti-avoidance rule (Rule XVI of the Preliminary Title of the Tax Code—Legislative Decree No. 1422).

As part of this amendment, a new assumption of joint and several liability is envisaged, when the tax debtor is subject to the application of the measures provided by Rule XVI in the event that tax evasion cases are detected; in such case, the joint and several liability shall be attributed to the legal representatives provided that they have collaborated with the design or approval or execution of actions or situations or economic relations viewed as evasion in Rule XVI. In the case of companies that have a Board of Directors, it is up to this corporate body to define the tax strategy of the entity, having to decide on the approval or not of actions, situations or economic relations to be carried out within the framework of tax planning, this power being non-delegable. The actions, situations and economic relations carried out within the framework of tax planning and implemented on the date of entry into force of Legislative Decree No. 1422 (September 14, 2018) and which continue to have effect, must be evaluated by the Board of Directors of the legal entity for the purpose of ratification or modification until March 29, 2019, without prejudice to the fact that the management or other managers of the company have approved the aforementioned actions, situations and economic relations.

Likewise, it has been established that the application of Rule XVI, regarding the re-characterization of tax evasion cases, will take place in the final inspection procedures in which acts, events or situations produced since July 19, 2012, are reviewed.

(iv) Amendments to the Income Tax Act were included, effective as of January 1, 2019, to improve the tax treatment applicable to the following (Legislative Decree No. 1424):

• Income obtained from the indirect transfer of shares of stock or capital representing participations of legal persons domiciled in the country. Among the most significant changes is the inclusion of a new indirect sale assumption, which is triggered when the total amount of the shares of the domiciled legal entity whose indirect disposal is made is equal to or higher than 40,000 Tax Units.

• Permanent establishments of sole proprietorships, companies and entities of any nature incorporated abroad. For this purpose, new cases of permanent establishment have been included, among them, when the rendering of services in the country occurs, with respect to the same project, service or related one, for a period that exceeds 183 calendar days in total within any period of twelve months.

• The system of credits against Income Tax for taxes paid abroad, to be included in the indirect credit (corporate tax paid by foreign subsidiaries) as credit applicable against the Income Tax of domiciled legal persons, in order to avoid double taxation.

• The deduction of interest expenses for the determination of corporate Income Tax. In the years 2019 and 2020, it shall be applicable the debt limit set at up to three times the net equity as of December 31 of the previous year will be applicable, both to loans with related parties, and to loans with third parties contracted as of September 14, 2018. Beginning in 2021, the limit for the deduction of financial expenses shall be equivalent to 30 percent of the entity’s EBITDA.

(v) Regulations have been adopted for the accrual of income and expenses for tax purposes as of January 1, 2019 (Legislative Decree No. 1425). Until 2018, there was no rule definition of this

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concept, so in many cases accounting rules were used for its interpretation. In general terms, with the new criterion, for the purpose of determining the Income Tax, it shall be considered whether the substantial events for the generation of income or expense agreed upon by the parties have occurred, provided they are not subject to a subsequent condition, in which case the recognition shall take place when it is fulfilled and when collection or payment is to take place will not be taken into account; and, if the determination of the consideration depends on a future action or event, the total or part of the corresponding income or expense will be deferred until that action or event occurs.

19. Off-balance sheet accounts

(a) The table below presents the components of this caption:

	2018		2017
	S/(000)		S/(000)
Contingent credits—indirect loans (b), Note 7(a)
Guarantees and stand-by letters		3,763,591		4,044,614
Import and export letters of credit		307,869		221,881
		4,071,460		4,266,495
Derivatives
Held for trading: Note 11(b)
Forward foreign currency agreements, see Note 31.2(b)(ii):
Forward currency agreements—purchase		2,023,812		2,317,935
Forward currency agreements—sale		2,709,626		2,776,324
Forward foreign currency agreements in other currencies		443,770		379,384
Interest rate swaps		2,018,220		2,220,102
Foreign currency options		234,780		227,647
Currency swap agreements, see Note 31.2(b)(ii):
Foreign currency delivery / receipt in Soles		484,553		499,816
Soles delivery / receipt in foreign currency		424,561		489,365
Cross currency swaps		198,529		190,759
Held as hedges: Note 11(b)
Cash flows:
Interest rate swaps		303,570		453,740
Cross currency swaps		1,922,610		550,970
		10,764,031		10,106,042
Responsibilities for credit lines granted (cancellable) (c)		7,916,890		7,048,951
Responsibilities for credit lines—commercial and others (d)		1,255,713		940,689
Total		24,008,094		22,362,177

(b) In the normal course of its operations, the Group performs contingent operations (indirect loans). These transactions expose the Group to additional credit risks to the amounts recognized in the consolidated statements of financial position.

The Group applies the same credit policies for granting and evaluating the provisions required for direct loans when performing contingent operations—see Note 7(a), including obtaining guarantees when deemed necessary. Guarantees vary and include deposits in financial institutions or other assets.

Taking into account that most of the contingent operations are expected to expire without the Group having to disburse cash, the total committed amounts do not necessarily represent future cash requirements.

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(c) Responsibilities under credit lines agreements include consumer credit lines and other consumer loans that are cancellable by the Bank.

(d) Corresponds to commitments of disbursement of future loans that Interbank has committed to carry out; provided that the borrower complies with the obligations under the corresponding loan agreements, however, they may be cancelled by Interbank.

20. Interest and similar income and expenses

(a) This caption is comprised of the following:

	2018			2017			2016
	S/(000)			S/(000)			S/(000)
Interest and similar income
Interest on loan portfolio		3,356,718			3,201,545			3,184,336
Interest on investments at fair value through other comprehensive income		761,411			—			—
Interest on available-for sale investments		—			513,545			436,534
Interest on investments at amortized cost		86,215			—			—
Interest on held-to-maturity investments		—			44,452			26,835
Interest on due from banks and inter-bank funds		51,592			30,057			20,537
Dividends on financial instruments through other comprehensive income		61,725			16,659			33,022
Other interest and similar income		3,621			2,762			3,548
Total		4,321,282			3,809,020			3,704,812
Interest and similar expenses
Interest and fees on deposits and obligations		(562,495	)		(534,211	)		(461,959	)
Interest on bonds, notes and other obligations		(377,506	)		(315,758	)		(320,986	)
Interest and fees on obligations with financial institutions		(173,740	)		(222,406	)		(255,268	)
Deposit insurance fund fees		(40,697	)		(37,304	)		(35,165	)
Result from hedging transactions		(9,241	)		(1,848	)		—
Other interest and similar expenses		(6,907	)		(8,362	)		(8,481	)
Total		(1,170,586	)		(1,119,889	)		(1,081,859	)

(b) The amounts shown in 20(a) include interest income and expenses calculated using the effective interest rate (EIR), which are related to the following items:

	2018		2017		2016
	S/(000)		S/(000)		S/(000)
Financial assets measured at amortized cost		3,494,525		3,276,054		3,231,708
Financial assets measured at fair value through other comprehensive income		761,411		513,545		436,534
Total interest from financial assets not measured at fair value		4,255,936		3,789,599		3,668,242
Financial liabilities measured at amortized cost		1,113,741		1,072,375		1,038,213

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

21. Fee income from financial services, net

This caption is comprised of the following:

	2018			2017			2016
	S/(000)			S/(000)			S/(000)
Income
Maintenance and mailing of accounts, transfer fees and commissions on credit and debit card		623,480			601,091			575,914
Commissions for banking services		186,783			167,805			157,812
Funds management fees		148,048			139,215			131,975
Fees from indirect loans		61,766			60,205			60,249
Collection services fees		37,068			32,792			30,205
Brokerage and custody services fees		11,035			11,638			13,204
Others		33,758			27,207			29,240
Total		1,101,938			1,039,953			998,599
Expenses
Credit cards		(103,645	)		(81,459	)		(80,353	)
Debtor’s life insurance premiums		(58,931	)		(50,777	)		(54,689	)
Fees paid to foreign banks		(15,324	)		(12,937	)		(10,749	)
Brokerage and custody services		(1,877	)		(3,754	)		(2,777	)
Others		(47,735	)		(41,784	)		(40,579	)
Total		(227,512	)		(190,711	)		(189,147	)
Net		874,426			849,242			809,452

22. Other income (and expenses)

(a) This caption is comprised of the following:

	2018			2017			2016
	S/(000)			S/(000)			S/(000)
Other income
Income from investments in associates		17,454			18,475			14,856
Gain from sale of written-off-loans (b)		13,615			16,956			8,207
Other technical income from insurance operations		10,908			9,273			10,308
Income from ATM rentals		4,606			4,562			3,184
Services rendered to third parties		2,779			5,160			4,827
Insurance recovery		940			1,122			268
Other income		18,741			31,891			22,445
Total other income		69,043			87,439			64,095
Other expenses
Sundry technical insurance expenses		(40,593	)		(16,753	)		(14,999	)
Commissions from insurance activities		(38,650	)		(50,971	)		(31,671	)
Provision for assets seized		(9,754	)		—			—
Donations		(5,068	)		(6,696	)		(5,932	)
Provision for sundry risk		(3,504	)		(9,748	)		(14,685	)
Administrative and tax penalties		(2,963	)		(2,185	)		(3,152	)
Provision for accounts receivable		(2,134	)		(8,699	)		(2,758	)
Expenses related to rental income		(3,901	)		(659	)		(1,091	)
Other expenses		(35,048	)		(24,615	)		(27,848	)
Total other expenses		(141,615	)		(120,326	)		(102,136	)

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(b) During the years 2018, 2017 and 2016, Interbank sold in cash to non-related third parties written-off loan portfolios with gross value amounting to S/466,264,000, S/714,379,000 and S/302,248,000, respectively.

23. Net premiums earned

This caption is comprised of the following:

	Premiums assumed						Adjustment of technical reserves									Gross premiums earned (*)									Premiums ceded to reinsurers									Net premiums earned
	2018		2017		2016		2018			2017			2016			2018			2017			2016			2018			2017			2016			2018			2017			2016
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Life insurance
Annuities (**)		264,305		226,564		337,755		(229,097	)		(191,612	)		(377,745	)		35,208			34,952			(39,990	)		—			—			—			35,208			34,952			(39,990	)
Group life		110,049		128,259		119,534		1,351			5			(630	)		111,400			128,264			118,904			(4,232	)		(3,437	)		(3,538	)		107,168			124,827			115,366
Individual life		130,419		64,467		48,986		(40,861	)		(35,010	)		(20,230	)		89,558			29,457			28,756			(3,678	)		(2,778	)		(2,177	)		85,880			26,679			26,579
Retirement, disability and survival (***) and (****)		160,388		36,436		139,633		(42,603	)		(12,753	)		935			117,785			23,683			140,568			(107,296	)		(26,189	)		(130,536	)		10,489			(2,506	)		10,032
Others		3		10		539		(1,562	)		(2,266	)		(3,250	)		(1,559	)		(2,256	)		(2,711	)		—			(1	)		(131	)		(1,559	)		(2,257	)		(2,842	)
Total life insurance		665,164		455,736		646,447		(312,772	)		(241,636	)		(400,920	)		352,392			214,100			245,527			(115,206	)		(32,405	)		(136,382	)		237,186			181,695			109,145
Total general insurance		96,921		77,894		84,109		(4,032	)		1,461			(3,952	)		92,889			79,355			80,157			(1,509	)		(1,701	)		(1,942	)		91,380			77,654			78,215
Total general		762,085		533,630		730,556		(316,804	)		(240,175	)		(404,872	)		445,281			293,455			325,684			(116,715	)		(34,106	)		(138,324	)		328,566			259,349			187,360

(*) It includes the annual variation of technical reserves and unearned premiums.

(**) The variation of the adjustment of technical reserves is due to variation in the rates with which technical reserves are determined; see rates in Note 15(e).

(***) As part of the SPP reform that started in 2013, as regards to the coverage of survival and disability of the pension insurance, the affiliates portfolio was divided into seven parts so that insurance companies manage obligations and rights as a whole. In this way, when an affiliate needs a pension from the pension insurance, the pension will be divided into seven parts and each insurance company will have to assume a corresponding part. This coverage is allocated through a public tender. In December 2016, the call for the “Third Public Tender No. 03/2016” was made to cover the period from January 1, 2017 to December 31, 2018; Interseguro did not win the allocation, but Seguros Sura was awarded a seventh part of this coverage, which is 70 percent reinsured.

(****) In April 2016, the Congress of the Republic of Peru approved the amendment of the SPP Act, through which the affiliates of the Pension Fund Administrators (AFPs) who turn 65 and retire, can choose, among other existing retirement modalities, the return of 95.5 percent of the total fund available from their Individual Capitalization Account (“CIC”, by its Spanish acronym). During 2017, in order to offset the contraction of retirement income as a result of the aforementioned amendment to the SPP Act, Interseguro launched the “Renta Particular Plus” product and raised funds from said product as of December 31, 2018 and 2017, for S/ 174,632,000 and S/128,200,000, respectively; see Note 11 (a). This allowed to maintain the product portfolio level and the long-term cash fundraising. As of December 31, 2018, retirement premiums amounted to S/10,469,000 (in 2017 and 2016, amounted to S/24,786,000 and S/137,119,000, respectively).

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24. Net claims and benefits incurred for life insurance contracts and others

This caption is comprised of the following:

	Gross claims and benefits									Ceded claims and benefits						Net insurance claims and benefits
	2018			2017			2016			2018		2017		2016		2018			2017			2016
	S/(000)			S/(000)			S/(000)			S/(000)		S/(000)		S/(000)		S/(000)			S/(000)			S/(000)
Life insurance
Annuities		(573,884	)		(332,513	)		(251,911	)		—		—		—		(573,884	)		(332,513	)		(251,911	)
Group life		(48,213	)		(41,110	)		(40,164	)		2,864		2,582		3,649		(45,349	)		(38,528	)		(36,515	)
Individual life		(7,539	)		(2,666	)		(3,404	)		1,410		518		830		(6,129	)		(2,148	)		(2,574	)
Retirement, disability and survival		(215,217	)		(33,120	)		(135,948	)		122,976		12,262		128,718		(92,241	)		(20,858	)		(7,230	)
Others		(1,710	)		(3,282	)		(4,864	)		85		3,386		3,215		(1,625	)		104			(1,649	)
General insurance		(16,829	)		(18,483	)		(18,395	)		25		150		74		(16,804	)		(18,333	)		(18,321	)
		(863,392	)		(431,174	)		(454,686	)		127,360		18,898		136,486		(736,032	)		(412,276	)		(318,200	)

25. Salaries and employee benefits

This caption is comprised of the following:

	2018		2017		2016
	S/(000)		S/(000)		S/(000)
Salaries		538,190		515,333		507,691
Workers’ profit sharing		81,837		70,267		70,441
Social security		50,244		47,116		45,868
Severance indemnities		39,862		37,655		36,942
Vacations, health insurance and others		45,781		44,211		50,416
Total		755,914		714,582		711,358

The average number of employees for the years 2018, 2017 and 2016 was 7,742, 7,817 and 7,955 respectively.

26. Administrative expenses

This caption is comprised of the following:

	2018		2017		2016
	S/(000)		S/(000)		S/(000)
Services received from third parties		740,261		699,621		658,728
Taxes and contributions		34,993		30,943		30,076
Total		775,254		730,564		688,804

Services received from third parties correspond mainly to computer equipments maintenance services, credit cards associated expenses, securities transportation services, rental of premises (agencies), telecommunications, advertising, among others.

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27. Earnings per share

The following table presents the calculation of the weighted average number of shares and the basic and diluted earnings per share, determined and calculated based on the earnings attributable to the Group, as described in Note 4.4(ae):

	Outstanding shares			Shares considered in computation			Effective days in the year		Weighted average number of shares
	(in thousands)			(in thousands)					(in thousands)
2016
Balance as of January 1, 2016		108,820			108,820			365		108,820
Sale of treasury stock		8			8			275		6
Purchase of treasury stock		(1,897	)		(1,897	)		85		(442	)
Balance as of December 31, 2016		106,931			106,931					108,384
Net earnings attributable to IFS S/(000) modified, Note 4.2.1										944,611
Basic and diluted earnings per share attributable to IFS (Soles), modified, Note 4.2.1										8.715
2017
Balance as of January 1, 2017		106,931			106,931			365		106,931
Purchase of treasury stock		(500	)		(500	)		213		(292	)
Sale of treasury stock		1,251			1,251			28		97
Balance as of December 31, 2017		107,682			107,682					106,736
Net earnings attributable to IFS S/(000), modified, Note 4.2.1										1,027,379
Basic and diluted earnings per share attributable to IFS (Soles), modified, Note 4.2.1										9.625
2018
Balance as of January 1, 2018		107,682			107,682			365		107,682
Sale of treasury stock		3,010			3,010			334		2,754
Balance as of December 31, 2018		110,692			110,692					110,436
Net earnings attributable to IFS S/(000)										1,084,280
Basic and diluted earnings per share attributable to IFS (Soles)										9.818

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

28. Transactions with shareholders, related parties and affiliated entities

(a) The table below presents the main transactions with shareholders, related parties and affiliated companies as of December 31, 2018 and 2017:

	2018		2017
	S/(000)		S/(000)
Assets
Instruments at fair value through profit or loss
Participations—Royalty Pharma, Note 6(l)		78,808		—
Negotiable certificates of deposit—Financiera Oh! S.A.		20,809		—
Shares—InRetail Perú Corp.		7,322		—
Investment funds participations—NGCP		2,890		—
Other minors		205		—
		110,034		—
Investments at fair value through other comprehensive income
Shares—InRetail Perú Corp, Note 6(k)		228,122		—
Corporate bonds—InRetail Shopping Malls S.A.		59,131		—
Corporate bonds—Colegios Peruanos S.A.		58,913		—
Corporate bonds—Intercorp Perú Ltd.		15,766		—
Corporate bonds—Cineplex S.A.		7,317		—
		369,249		—
Trading securities		—		7,808
Available-for-sale investments
Shares—InRetail Perú Corp. Note 6(k)		—		168,206
Participations—Royalty Pharma, Note 6(l)		—		68,540
Corporate bonds—InRetail Shopping Malls S.A.		—		65,334
Corporate bonds—Colegios Peruanos S.A.		—		64,985
Corporate bonds—Financiera Oh! S.A.		—		27,843
Corporate bonds—Intercorp Perú Ltd.		—		16,051
Corporate bonds—Cineplex S.A.		—		13,399
Corporate bonds—InRetail Consumer		—		10,194
Corporate bonds—Intercorp Retail Inc.		—		6,874
		—		441,426
Loans, net (b)		1,157,158		828,597
Accounts receivable from UTP (h)		58,968		32,713
Accounts receivable from Homecenters Peruanos S.A. (g)		20,877		23,009
Accounts receivable from Supermercados Peruanos S.A		18,264		—
Accounts receivable related to derivative financial instruments		3,908		5,832
Other assets (f)		10,183		15,089
Liabilities
Deposits and obligations		571,032		311,092
Other liabilities		214		2,251
Accounts payable related to derivative financial instruments		—		723
Off-balance sheet accounts
Indirect loans (b)		139,702		133,571

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	2018			2017			2016
	S/(000)			S/(000)			S/(000)
Income (expenses)
Interest and similar income		90,703			67,703			63,506
Interest and similar expenses		(17,747	)		(9,397	)		(3,383	)
Valuation of financial derivative instruments		(201	)		520			(229	)
Rental income		13,461			3,318			2,190
Gain on sale of investment property		4,655			—			2,655
Administrative expenses		(40,279	)		(42,743	)		(33,982	)
Others, net		17,114			37,383			31,041

(b) As of December 31, 2018 and 2017, the detail of loans is the following:

	2018						2017
	Direct loans		Indirect loans		Total		Direct loans		Indirect loans		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Supermercados Peruanos S.A.		236,826		701		237,527		198,843		6,753		205,596
Inretail Pharma S.A.		163,596		5,060		168,656		19,926		4,862		24,788
Nessus Hoteles Perú S.A.		102,851		169		103,020		67,767		—		67,767
GTP Inversionistas S.A.C.		102,027		—		102,027		105,527		—		105,527
Colegios Peruanos S.A.C.		80,379		1,843		82,222		50,006		810		50,816
Universidad Tecnológica del Perú		80,000		—		80,000		—		—		—
Financiera Oh! S.A.		65,009		291		65,300		28		321		349
Intercorp Perú Ltd.		65,046		—		65,046		45,004		—		45,004
Homecenters Peruanos S.A.		55,995		6,327		62,322		59,508		2,053		61,561
San Miguel Industrias PET S.A.		9,873		36,366		46,239		9,750		31,173		40,923
Cineplex S.A.		33,844		8,996		42,840		44,317		12,594		56,911
San Miguel Industrias Ecuador		32,910		—		32,910		32,500		—		32,500
Bembos S.A.C.		26,747		6,130		32,877		26,802		855		27,657
Procesos de Medios de Pago S.A.		7,704		20,575		28,279		10,357		19,770		30,127
PF Interproperties Perú		—		21,126		21,126		—		21,291		21,291
Centro de Salud Peruanos		20,701		—		20,701		—		—		—
Servicio de Transferencia Electrónica de Beneficios y Pagos S.A.		—		14,439		14,439		569		13,522		14,091
Tiendas Peruanas S.A.		12,388		9		12,397		20,249		4,032		24,281
EP de Franquicias S.A.C.		11,791		539		12,330		12,971		257		13,228
EP de Restaurantes S.A.C.		11,962		265		12,227		12,311		186		12,497
Corporación Peruana de Restaurantes S.A.		10,988		995		11,983		11,322		299		11,621
Agrícola Don Ricardo S.A.C.		—		—		—		57,933		—		57,933
Others		26,521		15,871		42,392		42,907		14,793		57,700
		1,157,158		139,702		1,296,860		828,597		133,571		962,168

(c) As of December 31, 2018 and 2017, the directors, executives and employees of the Group have been involved, directly and indirectly, in credit transactions with certain subsidiaries of the Group, as permitted by Peruvian law, which regulates and limits on certain transactions with employees, directors and officers of financial entities. As of December 31, 2018 and 2017, direct loans to employees, directors and officers amounted to S/223,381,000 and S/183,550,000, respectively; said loans are repaid monthly and bear interest at market rates.

There are no loans to the Group’s directors and key personnel guaranteed with shares of any Subsidiary.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

(d) The Group’s key personnel compensations, including the Income Tax assumed for the years ended December 31, 2018, 2017 and 2016, are presented below:

	2018		2017		2016
	S/(000)		S/(000)		S/(000)
Salaries		22,295		18,880		16,583
Board of Directors’ compensations		1,925		1,940		1,706
Total		24,220		20,820		18,289

(e) As of December 31, 2018 and 2017, the Group holds participations in different mutual funds managed by Interfondos that are classified as investment at fair value through profit or loss and amount to S/9,934,000 and S/324,000, respectively.

(f) It corresponds mainly to prepaid expenses for spaces ceded to Interbank in the stores of Supermercados Peruanos S.A. for the operation of financial agencies until the year 2030, and for an amount of approximately S/8,856,000 and S/10,876,000 as of December 31, 2018 and 2017, respectively (see Note 11(a)). Interbank may renew the term of the agreement for an additional term of 15 years.

(g) It corresponds to a loan with maturity in 2046 and bears interests at market value.

(h) As of December 31, 2018, corresponds to a financial lease for the construction of educational facilities in San Juan de Lurigancho and Ate Vitarte districts.

(i) In Management’s opinion, transactions with related companies have been performed under standard market conditions and within the limits permitted by the SBS. Taxes generated by these transactions and the taxable base used for computing them are those customarily used in the industry and they are determined according to the tax rules in force.

29. Business segments

The Chief Operating Decision Maker (“CODM”) of IFS is the Chief Executive Officer (“CEO”), and presents three operating segments based on products and services, as follows:

Banking

Mainly loans, credit facilities, deposits and current accounts.

Insurance

It provides annuities and conventional life insurance products, as well as other retail insurance products.

Wealth management

It provides brokerage and investment management services. Inteligo serves mainly Peruvian citizens.

The operating segments monitor the operating results of their business units separately for the purpose of making decisions on the distribution of resources and performance assessment. Segment performance is evaluated based on operating profit or loss and it is measured consistently with operating profit or loss in the consolidated financial statements.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

F-134

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

No revenue from transactions with a single external customer or counterparty exceeded 10 percent of the Group’s total revenues in the years 2018 and 2017.

The following table presents the Group’s financial information by business segments for the years ended December 31, 2018, 2017 and 2016:

	2018
	Banking			Insurance			Wealth management			Holding and consolidation adjustments			Total consolidated
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Total income (*)
Third party		4,628,369			1,002,607			351,518			(49,500	)		5,932,994
Inter-segment		(57,276	)		—			12,226			45,050			—
Total income		4,571,093			1,002,607			363,744			(4,450	)		5,932,994
Extracts of results
Interest and similar income		3,559,112			610,990			154,090			(2,910	)		4,321,282
Interest and similar expenses		(1,067,710	)		(54,343	)		(44,096	)		(4,437	)		(1,170,586	)
Net interest and similar income		2,491,402			556,647			109,994			(7,347	)		3,150,696
Impairment loss on loans, net of recoveries		(660,858	)		—			786			—			(660,072	)
Recovery (loss) due to impairment of financial investments		(63	)		11,349			1,791			—			13,077
Net interest and similar income after impairment loss on loans		1,830,481			567,996			112,571			(7,347	)		2,503,701
Fee income from financial services, net		759,518			(4,593	)		164,184			(44,683	)		874,426
Net gain on sale of financial investments		16,364			(30,684	)		28,560			—			14,240
Other income		293,375			98,328			4,684			(1,907	)		394,480
Total net premiums earned minus claims and benefits		—			(407,466	)		—			—			(407,466	)
Depreciation and amortization		(138,543	)		(16,982	)		(9,147	)		(26	)		(164,698	)
Other expenses		(1,364,155	)		(256,670	)		(97,377	)		45,419			(1,672,783	)
Income before translation result and Income Tax		1,397,040			(50,071	)		203,475			(8,544	)		1,541,900
Translation result		(10,208	)		(11,405	)		(227	)		(13,151	)		(34,991	)
Income Tax		(375,911	)		—			(5,725	)		(33,879	)		(415,515	)
Net profit for the year		1,010,921			(61,476	)		197,523			(55,574	)		1,091,394
Attributable to:
IFS’s shareholders		1,010,921			(61,476	)		197,523			(62,688	)		1,084,280
Non-controlling interest		—			—			—			7,114			7,114
		1,010,921			(61,476	)		197,523			(55,574	)		1,091,394

(*) Corresponds to interest and similar income, other income and net premiums earned.

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	2017
	Banking			Insurance (**)			Wealth management			Holding and consolidation adjustments			Total consolidated
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Total income (*)
Third party		4,455,055			703,262			380,518			(103,260	)		5,435,575
Inter-segment		(93,242	)		(46	)		(7,917	)		101,205			—
Total income		4,361,813			703,216			372,601			(2,055	)		5,435,575
Extracts of results
Interest and similar income		3,346,238			334,753			151,785			(23,756	)		3,809,020
Interest and similar expenses		(1,047,102	)		(19,713	)		(53,852	)		778			(1,119,889	)
Net interest and similar income		2,299,136			315,040			97,933			(22,978	)		2,689,131
Impairment loss on loans, net of recoveries		(830,474	)		—			2,539			—			(827,935	)
Loss due to impairment of financial investments		—			(5,496	)		(15,263	)		—			(20,759	)
Net interest and similar income after impairment loss on loans		1,468,662			309,544			85,209			(22,978	)		1,840,437
Fee income from financial services, net		740,519			(3,692	)		152,028			(39,613	)		849,242
Net gain on sale of financial investments		39,604			65,009			74,158			6,076			184,847
Gain on sale of IFS shares		25,220			—			9,764			(34,984	)		—
Other income		303,474			47,843			(7,217	)		(10,983	)		333,117
Total net premiums earned minus claims and benefits		—			(152,927	)		—			—			(152,927	)
Depreciation and amortization		(127,431	)		(9,656	)		(8,068	)		(7	)		(145,162	)
Other expenses		(1,271,804	)		(217,164	)		(103,640	)		27,136			(1,565,472	)
Income before translation result and Income Tax		1,178,244			38,957			202,234			(75,353	)		1,344,082
Translation result		13,908			873			1,233			(116	)		15,898
Income Tax		(298,641	)		41			(4,296	)		(23,630	)		(326,526	)
Net profit for the year		893,511			39,871			199,171			(99,099	)		1,033,454
Attributable to:
IFS’s shareholders		893,511			39,960			199,171			(105,263	)		1,027,379
Non-controlling interest		—			(89	)		—			6,164			6,075
		893,511			39,871			199,171			(99,099	)		1,033,454

(*) Corresponds to interest and similar income, other income and net premiums earned.

(**) For the year 2017, includes Interseguro and Seguros Sura.

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	2016
	Banking			Insurance			Wealth management			Holding and consolidation adjustments			Total consolidated
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Total income (*)
Third party		4,300,677			555,309			349,725			(97,278	)		5,108,433
Inter-segment		(60,916	)		(44	)		(6,573	)		67,533			—
Total income		4,239,761			555,265			343,152			(29,745	)		5,108,433
Extracts of results
Interest and similar income		3,274,127			292,960			157,558			(19,833	)		3,704,812
Interest and similar expenses		(1,009,900	)		(14,420	)		(59,396	)		1,857			(1,081,859	)
Net interest and similar income		2,264,227			278,540			98,162			(17,976	)		2,622,953
Impairment loss on loan losses, net of recoveries		(783,645	)		—			—			—			(783,645	)
Loss due to impairment of financial investments		—			(28,323	)		—			—			(28,323	)
Net interest and similar income after impairment loss on loans		1,480,582			250,217			98,162			(17,976	)		1,810,985
Fee income from financial services, net		707,604			(2,994	)		146,656			(41,814	)		809,452
Net gain on sale of financial investments		19,583			46,406			34,342			3,007			103,338
Other income		299,363			31,577			11,169			(38,638	)		303,471
Total net premiums earned minus claims and benefits		—			(130,840	)		—			—			(130,840	)
Depreciation and amortization		(118,129	)		(4,457	)		(7,532	)		—			(130,118	)
Other expenses		(1,250,555	)		(196,019	)		(99,868	)		44,144			(1,502,298	)
Income before translation result and Income Tax		1,138,448			(6,110	)		182,929			(51,277	)		1,263,990
Translation result		1,240			8,137			(1,289	)		11,974			20,062
Income Tax		(300,628	)		(662	)		(2,961	)		(29,612	)		(333,863	)
Net profit of the year		839,060			1,365			178,679			(68,915	)		950,189
Attributable to:
IFS’s shareholders		839,060			1,680			178,679			(74,808	)		944,611
Non-controlling interest		—			(315	)		—			5,893			5,578
		839,060			1,365			178,679			(68,915	)		950,189

(*) Corresponds to interest and similar income, other income and net premiums earned.

	2018
	Banking		Insurance		Wealth management		Holding and eliminations			Total consolidated
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)
Capital expenditures (*)		176,082		70,333		9,718		41			256,174
Total assets		47,440,393		12,572,396		3,808,939		(77,319	)		63,744,409
Total liabilities		41,986,416		11,795,308		2,996,179		(121,970	)		56,655,933
	2017
	Banking		Insurance		Wealth management		Holding and eliminations			Total consolidated
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)
Capital expenditures (*)		231,412		131,117		5,508		1,252			369,289
Total assets		45,430,249		12,317,209		3,083,295		(436,256	)		60,394,497
Total liabilities		40,566,849		11,637,693		2,313,375		39,673			54,557,590

(*) It includes the purchase of property, furniture and equipment, intangible assets and investment property.

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(i) The distribution of the Group’s total income based on the location of the customer and its assets, for the year ended December 31, 2018, is S/5,632,540,000 in Peru and S/319,383,000 in Panama (for the year ended December 31, 2017, it is S/5,108,239,000 in Peru and S/342,461,000 in Panama and for the year ended December 31, 2016, it is S/4,760,973,000 in Peru and S/3,013,892,000 in Panama). The distribution of the Group’s total assets based on the location of the customer and its assets, as of December 31, 2018 is S/60,012,231,000 in Peru S/3,732,178,000 in Panama (for the year ended December 31, 2017, it is S/57,380,605,000 in Peru and S/3,013,892,000 in Panama). It should be noted that both income and assets located in Panama correspond mainly to Peruvian citizens.

30. Financial instruments classification

The financial assets and liabilities of the consolidated statements of financial position as of December 31, 2018 and 2017, are presented below. As detailed in Note 4.2, the Group did not reformulate the comparative information for the year 2017, for those financial instruments within the scope of IFRS 9. Therefore, the comparative information for the year 2017 is presented according to IAS 39 and is not comparable with the information presented in the 2018 year. The differences arising from the adoption of IFRS 9 have been recognized directly in retained earnings as of January 1, 2018, and are disclosed in Note 4.7.

	As of December 31, 2018
	At fair value through profit or loss		Debt instruments measured at fair value through other comprehensive income		Equity instruments measured at fair value through other comprehensive income		Amortized cost		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Financial assets
Cash and due from banks		—		—		—		8,380,411		8,380,411
Inter-bank funds		—		—		—		495,037		495,037
Financial investments		1,571,468		13,328,593		845,317		1,884,067		17,629,445
Loans, net		—		—		—		32,960,917		32,960,917
Due from customers on acceptances		—		—		—		132,961		132,961
Accounts receivable and other assets, net		185,376		—		—		1,106,659		1,292,035
		1,756,844		13,328,593		845,317		44,960,052		60,890,806
Financial liabilities
Deposits and obligations		—		—		—		33,681,950		33,681,950
Due to banks and correspondents		—		—		—		4,293,361		4,293,361
Bonds, notes and other obligations		—		—		—		6,496,778		6,496,778
Due from customers on acceptances		—		—		—		132,961		132,961
Insurance contract liabilities		—		—		—		10,300,468		10,300,468
Accounts payable, provisions and other liabilities		154,116		—		—		1,367,644		1,521,760
		154,116		—		—		56,273,162		56,427,278

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	As of December 31, 2017
	Financial assets and liabilities designated at fair value
	Held for trading or hedging		Loans and accounts receivable		Available-for-sale investments		Held-to-maturity investments		Financial liabilities at amortized cost		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Financial assets
Cash and due from banks		—		11,204,843		—		—		—		11,204,843
Inter-bank funds		—		403,526		—		—		—		403,526
Trading securities		216,008		—		—		—		—		216,008
Available-for-sale investments		—		—		15,459,660		—		—		15,459,660
Held-to-maturity investments		—		—		—		1,248,475		—		1,248,475
Loans, net		—		28,204,168		—		—		—		28,204,168
Due from customers on acceptances		—		41,715		—		—		—		41,715
Accounts receivable and other assets, net		92,820		570,965		—		—		—		663,785
		308,828		40,425,217		15,459,660		1,248,475		—		57,442,180
Financial liabilities
Deposits and obligations		—		—		—		—		32,607,637		32,607,637
Inter-bank funds		—		—		—		—		30,008		30,008
Due to banks and correspondents		—		—		—		—		4,407,392		4,407,392
Bonds, notes and other obligations		—		—		—		—		5,602,358		5,602,358
Due from customers on acceptances		—		—		—		—		41,715		41,715
Insurance contract liabilities		—		—		—		—		10,514,504		10,514,504
Accounts payable, provisions and other liabilities		133,921		—		—		—		1,025,503		1,159,424
		133,921		—		—		—		54,229,117		54,363,038

31. Financial risk management

It comprises the management of the main risks, that due to the nature of their operations, IFS and its Subsidiaries are exposed to; and correspond to: credit risk, market risk, liquidity risk, and insurance and real estate risk.

• Credit risk: possibility of loss due to inability or lack of willingness to pay of debtors, counterparts or third parties bound to comply with their contractual obligations.

• Market risk: probability of loss in positions on and off the consolidated statements of financial position derived from variations in market conditions. It generally includes the following types of risk: exchange rate, fair value by interest rate, price, among others.

• Liquidity risk: possibility of loss due to noncompliance with the requirements of financing and fund application that arise from mismatches of cash flows.

• Insurance risk: possibility that the actual cost of claims and payments will differ from the estimates.

• Real estate risk: possibility of significant loss in rental income due to the insolvency of the lessee or, a decrease in the market price of real estate investments, due to economic slowdown and supply and demand distortions.

In order to manage the described risks, every Subsidiary of the Group has a specialized structure and organization in their management, measurement systems, mitigation and coverage processes that considers the specific needs and regulatory requirements to develop its business. The Group and its Subsidiaries,

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mainly Interbank, Interseguro and Inteligo Bank, operate independently but in coordination with the general provisions issued by the Board of Directors and Management of IFS; however, the Board of Directors and Management of IFS are ultimately responsible for identifying and controlling risks. The main objectives of IFS’ Audit Committee will be to verify the adequacy of the financial and accounting information process of each subsidiary, as well as to evaluate the activities conducted by the internal and external auditors. The Group is in the process of establishing its audit committee. Once formed, it expects its audit committee to comply with the criteria set forth under “Audit Committee Charter”, the rules of the NYSE and Rule 10A-3(b)(1) of the Exchange Act, each of applicable to foreign private issues.

(a) Structure and organization of risk management—

The Group’s risk management structure and organization for each of its Subsidiaries is as follows:

(i) Interbank

Board of Directors

Interbank’s Board of Directors is responsible for establishing an appropriate and integral risk management and promoting an internal environment that facilitates its development. The Board is continuously informed about the exposure degree of the various risks managed by Interbank.

The Board has created several specialized committees to which it has delegated specific tasks in order to strengthen risk management and internal control.

Audit Committee

The Audit Committee’s main purpose is to monitor that the accounting financial reporting processes are appropriate, as well as to evaluate the activities performed by the auditors, both internal and external. The Committee is comprised of three members of the Board and the Chief Executive Officer, the Internal Auditor, the Vice-President of Corporate and Legal Affairs. Other executives may also participate therein, when required. The Committee meets at least six times a year in ordinary sessions and informs the Board about the most relevant issues discussed.

Comprehensive Risk Management Committee

The Comprehensive Risk Management Committee (“GIR”, by its Spanish acronym) is responsible for approving the policies and organization for comprehensive risk management, as well as the amendments to said policies. This Committee defines the level of tolerance and the exposure degree to risk that Interbank is willing to assume in its business and also decides on the necessary actions aimed at implementing the required corrective measures in case of deviations from the levels of tolerance to risk. The Committee is comprised of two Directors, the Chief Executive Officer and the Vice-Presidents. The Committee reports monthly to the Board of Directors the main issues it has discussed and the resolutions taken in the previous meeting.

Assets and Liabilities Committee

The main purpose of the Assets and Liabilities Committee (“ALCO”) is to manage the financial structure of the statements of financial position of Interbank, based on profitability and risk targets. The ALCO is also responsible for the proposal of new products or operations that contain components of market risk. Likewise, it is the communication channel with the units that generate market risk. The ALCO meets monthly and it is comprised of the Chief Executive Officer, the Vice-Presidents of Risks, Retail, Commercial, Finance, Operations, Channel of Distribution, Capital Market and the Manager of Treasury / Position Desk.

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Internal Audit Division

Risk management processes of Interbank are monitored by the Internal Audit Division, which examines both the adequacy of the procedures and the compliance with them. The Internal Audit Division discusses the results of all assessments with Management and reports its findings and recommendations to the Audit Committee and Board of Directors.

(ii) Interseguro

Board of Directors

The Board of Directors is responsible for the overall approach to risk management and it is responsible for the approval of the policies and strategies currently used. The Board of Directors provides the principles for overall risk management, as well as the policies prepared for specific areas, such as foreign exchange risk, interest rate risk, credit risk and the use of derivative and non-derivative financial instruments.

Risk Committee

The Risk Committee is a corporate body created by Board of Directors; responsible for defining risk limits for Interseguro’s business approving risk policies and approving required corrective measures necessary to maintain adequate levels of risk tolerance. The Risk Committee is comprised of three board members and the Chief Executive Officer.

Investment Committee

The Investment Committee is responsible for approving the limits of each security or real estate which could be included in Interseguro’s investment portfolio. This Committee is comprised of several members of the board; the Chief Executive Officer and Vice President of investments. At Interseguro the functions of the ALCO Committee are assumed by the Investment Committee.

Internal Audit Division

Risk management processes throughout Interseguro are monitored by the Internal Audit Division, which examines both the adequacy of the procedures and the compliance of them. The Internal Audit Division discusses the results of all assessments with Management and reports its findings and recommendations to the Audit Committee and Board of Directors.

(iii) Inteligo Bank

Inteligo Bank’s Board of Directors is responsible for the establishment and monitoring of the risk administration policies. In order to manage and monitor the various risks Inteligo Bank is exposed to, the Board of Directors has created the Credit Committee, Investment Committee, the Assets and Liabilities Committee, the Integral Risk Management Committee and the Audit Committee. These committees are engaged in managing these risks and in making periodic reviews.

(b) Risk measurement and reporting systems—

The Group uses different models and rating tools. These tools measure and value the risk with a prospective vision, thus allowing the making of better risk decisions in the different stages or life cycle of client or product.

Said models and tools are permanently monitored and periodically validated in order to assure that the levels of prediction and performance are being maintained and to make the corrective actions or adjustments, when needed.

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(c) Risk mitigation and risk coverage—

In order to mitigate its exposure to the various financial risks and provide adequate coverage, the Group has established a series of measures, among which the following stand out:

• Policies, procedures, methodologies, models and parameters aimed to allow for the identification, measurement, control and reporting of financial risks;

• Review and assessment of credit risk, through specialized units of risk screening;

• Timely monitoring and tracking of financial risks and their maintenance within a defined tolerance level; and

• Compliance with regulatory limits and establishment of internal limits for exposure concentrations.

• Procedures for the management of guarantees.

Likewise, as part of its comprehensive risk management, in certain circumstances the Group uses derivative financial instruments to mitigate its risk exposure, which arises from the variations in interest rates and foreign exchange rates.

(d) Risk concentration—

Through its policies and procedures, the Group has established the guidelines and mechanisms needed to prevent excessive risk concentration. In case any concentration risk is identified, the Group works with specialized units that enable it to control and manage said risks.

31.1 Credit risk

(a) The Group opts for a credit risk policy that ensures sustained and profitable growth in all its products and business segments it operates. In doing so, it applies assessment procedures for the adequate decision-making, and uses tools and methodologies that allow the identification, measurement, mitigation and control of the different risks in the most efficient manner. Likewise, the Group incorporates, develops and reviews regularly management models that allow an adequate measurement, quantification and monitoring of the loans granted by each business unit and also encouraging the continuous improvement of its policies, tools, methodologies and processes.

(b) The Group is exposed to credit risk, which is the risk that a counterparty causes a financial loss by failing to comply with an obligation. Credit risk is the most important risk for the Group’s business; therefore, Management carefully manages its exposure to credit risk. Credit risk exposures arise mainly in lending activities that lead to loans and investment activities that contribute with securities and other financial instruments to the Group’s asset portfolio. There is also credit risk in the financial instruments of the consolidated statements of financial position, such as contingent credits (indirect loans), which expose the Group to risks similar to those of direct loans, being mitigated with the same control processes and policies. Likewise, credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded in the consolidated statements of financial position.

Until December 31, 2017, the Impairment allowances were established for losses that have been incurred as of the date of the consolidated statements of financial position under IAS 39; and from January 1, 2018, impairment allowances are established for expected credit losses at the date of the consolidated statements of financial position under IFRS 9. Significant changes in the

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economy or in the particular situation of an economic sector that represents a concentration in the Group’s portfolio could result in losses that are different from those provisioned for as of the date of the consolidated statements of financial position.

The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower or groups of borrowers and to geographical location and industry segments. Such risks are monitored on a revolving basis and subject to frequent reviews.

The Group’s exposure to credit risk is managed through the regular assessment of debtors and their potential capability to pay the principal and interest of their obligations, and through the change in exposure limits, when appropriate.

The exposure to credit risk is also mitigated, in part, through the obtaining of personal and corporate collateral. Nevertheless, there is a significant part of the financial instruments where said collateral cannot be obtained. Following is a description of the procedures and policies related to collateral management and valuation of guarantees:

Policies and procedures for management and valuation

Collateral required for financial assets other than the loan portfolio are determined according to the nature of the instrument. However, debt instruments, treasury papers and other financial assets are in general not guaranteed, except for securities guaranteed with similar assets and instruments.

The Group has policies and guidelines established for the management of collaterals received for loans granted. The assets that guarantee loan operations bear a certain value prior to the loan approval and the procedures for their updating are described in the internal rules.

In order to manage guarantees, the Group operates specialized divisions for the establishment, management and release of guarantees.

Collateral that backs loan operations include different goods, property and financial instruments (including cash and securities). Their preferential status depends on the following conditions:

• Easy convertibility into cash.

• Proper legal documentation, duly registered with the corresponding public registry.

• Do not present previous obligations that could reduce their value.

• Their fair value must be updated.

Long-term loans and fundings to corporate entities are generally guaranteed. Consumer loans to small companies are not generally guaranteed.

Management monitors the fair value of collateral, and with the purpose of mitigating credit losses, requests additional collateral to the counterparty as soon as impairment evidence exists. The proceeds from the settlement of the collateral obtained are used to reduce or repay the outstanding claim. In general, the Group does not use repossessed properties for its own business.

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In the case of derivative financial instruments, the Group maintains strict control limits on net open derivative positions (the difference between purchase and sale contracts), both in amount and term. The amount subject to credit risk is limited to the current fair value of instruments that are favorable to the Group (for example, an asset when its fair value is positive), which in relation to derivatives is only a small fraction of the contract, or notional amount used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the overall lending limits with customers, together with potential exposures from market movements. Collateral or other securities are not usually obtained for credit risk exposures on these instruments.

Settlement risk arises in any situation where a payment in cash, securities or equity is made in the expectation of a corresponding receipt in cash. Daily settlement limits are established for each counterparty in order to cover the aggregate of all settlement risk arising from the Group’s market transactions on any single day.

(c) Maximum exposure to credit risk—

As of December 31, 2018 and 2017, Management estimates that the maximum credit risk to which the Group is exposed is represented by the book value of the financial assets which show a potential credit risk and consist mostly of deposits in banks, inter-bank funds, investments, loans (direct and indirect), without considering the fair value of the collateral or guarantees, derivative financial instruments transactions, receivables from insurance transactions and other monetary assets. In this sense, as of December 31, 2018 and 2017:

• 79.8 percent and 87.8 percent, respectively, of the cash and due from banks represent amounts deposited in the Group’s vaults or in the BCRP;

• 89.0 percent, of the loan portfolio are classified into the two lower credit risk categories defined by the Group under IFRS 9 (high and standard grade) and 95.1 percent of the loan portfolio is classified in the two lowest-risk categories under IAS 39;

• 92.2 percent and 92.1 percent, respectively, of the loan portfolio is deemed non-past-due and non-impaired;

• 90.0 percent and 85.4 percent, respectively, of investments at fair value through other comprehensive income (before available-for-sale investments) and investments at amortized cost (before held-to-maturity investments) have at least an investment grade (BBB- or higher) or are debt instruments issued by the BCRP or the Peruvian Government; and

• 98.2 percent and 98.0 percent of the accounts receivable from insurance premiums and leases of the investment properties is considered as non-past due and non-impaired.

• In addition, as of December 31, 2018, the Group holds loans (direct and indirect) and investments in fixed income instruments issued by entities related to the infrastructure sector that, in recent months, have been exposed to local and international events, for an amount of approximately S/861,544,000 (S/50,434,000 in direct loans and S/811,110,000 in indirect loans) and S/874,618,000, respectively (S/1,166,218,000 (S/102,298,000 in direct loans and S/1,063,920,000 in indirect loans) and S/844,593,000, respectively, as of December 31, 2017). The performance of these instruments will depend on the future development of the aforementioned events, which are out of the Group control. However, it is important to mention that none of the instruments had a significant negative change in the credit category at the date of this report and have guarantees and coverage that significantly reduce the credit risk.

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(d) Impairment assessment for loan portfolios (Policy applicable from January 1, 2018)—

The main objective of the impairment requirements is to recognize expected credit losses during the average life of financial instruments when there has been a significant increase in credit risk after the initial recognition—as evaluated on a collective or individual basis—considering all reasonable and sustainable information, including that which refers to the future. If the instrument does not show a significant increase in credit risk after the initial recognition, the provision for credit losses shall be calculated as 12-month expected credit losses (Stage 1).

Under some circumstances, entities may not have reasonable and sustainable information available without disproportionate effort or cost to measure the expected credit losses during the lifetime of the asset on an individual instrument basis. In that case, expected credit losses during the asset’s lifetime shall be recognized on a collective basis considering information about the overall credit risk. The financial assets for which the Group calculates the expected loss under a collective assessment include:

• All direct and indirect (contingent) credits related to stand-by letters, guarantees, bank guarantees and letters of credit. Except for current situations with certain clients that belong to the infrastructure sector.

• Debt instruments measured at amortized cost or at fair value through other comprehensive income.

Expected credit losses are estimated collectively for each loan portfolio with shared credit risk characteristics. Not only default indicators, but all information such as macroeconomic projections, type of instrument, credit risk ratings, types of guarantees, date of initial recognition, remaining time to maturity, among others.

For the collective impairment assessment, the financial assets are grouped together based on the Group’s internal credit rating system, which considers credit risk characteristics such as type of asset, economic sector, geographical location, type of guarantee, among other relevant factors.

Expected losses are calculated under the identification and multiplication of the following risk parameters:

• Probability of Default (PD): It is the likelihood of a default over a particular time horizon that a counterpart will be unable to meet its debt obligations and with it is cataloged as default.

• Loss Given Default (LGD): Measures the loss in percentage terms on total exposure at default (see Exposure at default).

• Exposure at Default (EAD): It represents the total value that the Group can lose upon default of a counterpart.

Definition of default:

Credit-impaired financial assets are defined by IFRS 9 in a manner similar to credit-impaired financial assets according to IAS 39.

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In accordance with IFRS 9, the Group determines that there is default on a financial asset when:

• The borrower is unlikely to pay their credit obligations to the Group in full, without recourse by the Group to actions such as realizing guarantee (if applicable); or

• The borrower is past due by more than 90 days on any material credit obligation to the Group.

In assessing whether a borrower presents default, the Group considers the following indicators:

• Qualitative: contracts in judicial and prejudicial proceedings.

• Quantitative: contracts in default for more than 90 days.

• Data elaborated internally and obtained from external sources such as:

• Significant changes in indicators of credit risk;

• Significant changes in external market indicators;

• Actual or expected significant change in the external and/or internal credit rating;

• Existing or forecast adverse changes in the business, economic or financial conditions that are expected to cause a significant change in the borrower’s ability to meet their debt obligations;

• Actual or expected significant change in the operating results of the borrower; or

• Existing or future adverse changes in the regulatory, economic or technological environment of the borrower that results in a significant change in their ability to meet their debt obligations.

Likewise, losses recognized in the period are affected by several factors, as described below:

• Financial assets moving from Stage 1 to Stage 2 or Stage 3 because there has been a significant increase in credit risk since initial recognition or they have shown impairment when analyzed, respectively. As a result, lifetime expected losses are calculated.

• Impact on the measurement of expected losses due to changes in PD, EAD and LGD resulting from the update of the inputs used.

• Impact on the measurement of expected losses due to changes in the models and assumptions used.

• Additional provisions for new financial instruments reported during the period.

• Periodic reversion of the discount of expected losses due to the passage of time, as they are measured based on the present value.

• Financial assets written off during the period.

• Exchange difference arising from financial assets denominated in foreign currency (US Dollars).

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Internal rating and PD:

Interbank’s loan portfolio is segmented into homogeneous groups with shared similar credit risk characteristics as detailed below:

• Retail Banking (credit card, mortgage, payroll loan, consumer loan and vehicular loan)

• Small Business Banking (segments S1, S2 and S3)

• Commercial Banking (corporate, institutional, companies and real estate)

Interbank’s Credit Risk Department determines its internal credit rating models in the following manner:

Banking	Segment	High grade PD less than or equal to:	Standard grade PD Range	Grade lower than standard PD equal or  higher
	Credit card	9.48%	9.49% - 20.77%	20.78%
	Mortgage	2.17%	2.18% - 7.38%	7.39%
Retail Banking	Payroll loan	3.61%	3.62% - 8.27%	8.28%
	Consumer	8.26%	8.27% - 19.63%	19.64%
	Vehicular	3.56%	3.57% - 10.90%	10.91%
	Segments S1 and S2	6.01%	6.02% - 16.11%	16.12%
Small Business Banking	Segments S3	3.26%	3.27% - 7.91%	7.92%
	Corporate	1.80%	1.81% - 4.56%	4.57%
Commercial Banking	Institutional	0.50%	0.50%	0.50%
	Companies	2.23%	2.24% - 5.34%	5.35%
	Real estate	4.46%	4.47% - 7.11%	7.12%
		9.48%	9.49% - 20.77%	20.78%

The main objective is to generate statistical models that allow forecasting the applicant’s level of credit risk. The development of these models incorporates both qualitative and quantitative information, as well as client specific information that may affect their performance.

These qualification models shall be monitored on a regular basis because some factors may have a negative impact on the model’s discriminating power and stability due to changes in the population or its characteristics. Monitoring shall be done for all the qualification tools (Retail Banking and Commercial Banking).

Each rating has an associated PD, which is adjusted to incorporate prospective information. This is replicated for each macroeconomic scenario, as appropriate.

To calculate the PD, two differentiated methodologies have been developed, which are described below:

• Transition matrix

Its objective is to determine the probability of default over a 12-month horizon based on the maturity of the operation, by analyzing the conditional probability of transition from one credit

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rating state to another. This method is suitable for loans with high exposure and wide data availability. The intention is to calculate the PD based on the maturity of the operation.

• Default ratio

Its objective is to determine the probability of default over a 12-month horizon based on the level of risk with which the operation begins, based on a counting analysis and the percentage of cases that report a default mark. This method is suitable for loans with poor data availability by type of maturity.

Given the nature of the portfolios and the availability of historical information, the method to estimate the PD for each portfolio is presented below:

Banking / Segments	Transition matrix		Default ratio
Retail banking:
Credit cards		X
Mortgage
With cure				X
Without cure		X
Payroll loan		X
Consumer				X
Vehicular				X
Small business banking				X
Commercial banking
With cure and without rating				X
Without cure and with rating		X

Likewise, Interbank has implemented a system to monitor its commercial sector clients in a more personalized way, based on warnings, changes in rating, reputation problems, among others.

Additionally, as happens for direct credits, the expected loss for indirect loans (contingent loans) is calculated at each reporting date, depending on the stage in which each operation is found; that is, if it is in Stage 1, the expected loss is calculated with a 12-month view. If it is in Stage 2 (if the operation shows a significant risk increase since the initial recognition) or Stage 3 (if the operation has a default), the expected loss is calculated for the remaining life of the asset.

The Group considers the changes in credit risk based on the probability that the obligor will fail to comply with the loan agreement.

Likewise, as of December 31, 2018, the Group holds stand-by letters and guarantees with entities related to the infrastructure sector that, in recent months, has been exposed to national and international events. To determine the expected losses of these entities, the Group, in a complementary manner, has performed an individual assessment to determine if the operation is in Stage 1, Stage 2 or Stage 3.

The criteria established to assign the risk to each one of the operations that are evaluated under an individual evaluation use the following combination of factors: quantitative, qualitative and financial.

At Inteligo Bank, both for Retail Banking and Commercial Banking, the internal model developed (scorecard) assigns 5 levels of credit risk: low risk, medium low risk, medium risk, medium high risk, and high risk.

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This methodology follows a three-phase approach to assess the scoring, increase or decrease of risks, taking into consideration the loan structure and the type of client. Therefore, there is one scorecard for Retail Banking and another for Commercial Banking.

To estimate the PD for the lifetime of a financial asset, a transformation of the PD to 12-months is made according to the year of remaining life. That is, the PD is determined for a lifetime by an exponentiation of the PD at 12 months.

LGD:

It is an estimated loss in case of default. It is the difference between contractual cash flows due and those expected to be received, including guarantees. Generally, it is expressed as an EAD percentage.

In the case of Interbank, the calculation of the LGD has been developed under three differentiated methods, which are described below:

• Closed recoveries

Closed recovery processes are those in which a client entered and left default (due to debt settlement, application of penalty or refinancing) over a course of up to 24 months.

• Open recoveries

Open recovery processes are those in which a client entered and did not manage to exit default over a course of up to 24 months. This method identifies the adjustment factor that allows to simulate the effect of a closed recovery process. Thus, a recovery curve is built from the information of closed recovery processes and a recovery rate curve is estimated based on the number of months of each process.

These two methodologies are applied to all portfolios with the exception of Commercial Banking.

• Recoveries with coverage of guarantees

LGD is estimated based on the coverage rate of the guarantees associated with each client.

This methodology is applied to the Mortgage and Commercial Banking portfolios.

In the case of Inteligo Bank, for those credits that are classified in Stage 1 or Stage 2 at the reporting date, the regulatory recoveries of the Central Bank of the Bahamas and the Superintendency of Banks of Panama are used, using stressed scenarios for each type of guarantee.

EAD:

Exposure at default represents the gross carrying amount of financial instruments subject to impairment, which involves both the client’s ability to increase exposure as default approaches and possible early repayments. To calculate the EAD of a loan in Stage 1, potential default events are evaluated over a 12–month horizon. For financial assets in Stage 2 and Stage 3, exposure at default is determined over the life of the instrument.

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A calculation methodology has been developed for those portfolios that present a defined schedule, differentiating those transactions that consider prepayment and those that do not consider prepayment; and another methodology that is based on building the credit risk factor for those portfolios that allow the client the ability to use a line of credit (revolving products) and, therefore, the percentage of additional use of the credit line that the client could use in the event of a default must be calculated.

Significant increase in credit risk:

The Group has established a framework that incorporates quantitative and qualitative information to determine whether the credit risk on a financial instrument has significantly increased since initial recognition, both for loans and investments. The framework is aligned with the Group’s internal credit risk management process.

In certain cases, using its expert credit judgment and, where possible, relevant historical experience, the Group may determine that an exposure has experienced a significant increase in credit risk when certain qualitative indicators that may not be captured by a timely quantitative analysis point to it.

At each reporting date, expected losses are calculated depending on the stage of each loan, as each one is evaluated with a different life period.

• Stage 1

12-month expected losses are calculated. For this, the following risk parameters are multiplied: the 12-month forward-looking PD for year 1 of the remaining life, the client’s LGD, and the EAD for year 1 of the remaining life for operations with payment schedule or the balance as of the reporting date for operations without payment schedule.

• Stage 2

Lifetime expected losses are calculated for the entire remaining life of the asset. For operations with payment schedule, they are calculated in each year of remaining life by multiplying the following risk parameters: 12-month forward-looking PD, the client’s LGD, and the EAD of the corresponding year of remaining life, and then the summation is done. For operations without payment schedule, they are calculated by multiplying the lifetime forward-looking PD, the client’s LGD, and the balance as of the reporting date.

• Stage 3

Expected losses are calculated by multiplying the PD (equal to 100 percent) by the client’s LGD and the balance as of the reporting date.

The Group classifies the operations with a significant increase in the risk of each portfolio such as marked refinanced operations, operations with arrears longer than 30 days (for all portfolios except Mortgages that considers arrears longer than 60 days), or operations marked “Leave” or “Reduce” in the surveillance system for the Commercial Banking portfolio.

Likewise, the evaluation of the significant risk increase is made by comparing the PD to 12 months to the date of origin and the PD to 12 months to the date of the report adjusted by the forward-looking factor, according to the quantitative criteria of absolute variation

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and relative variation. The Group has established a range of absolute variation between 1 and 7 percent and a relative variation between 20 and 110 percent, depending on the type of portfolio.

The Group periodically evaluates the following warning signs and criteria to assess whether the placement presents a significant increase in credit risk (stage 2):

• Violation of to the covenants.

• Forced interventions by governments in the primary and secondary markets of obligors.

• Involvement of the borrower in illicit, political and fraud business.

• Impairment of collateral (underlying assets).

• Arrears or short and frequent failures to pay installments.

• Significantly adverse macroeconomic, regulatory, social, technological and environmental changes.

• Other assessments and/or warnings (financial statements, EBIT evaluation, financial indicators by industry, regulatory criteria, others).

On the other hand, the Group will monitor the effectiveness of the criteria used to identify significant increases in credit risk through periodic reviews to confirm that:

• Criteria are able to identify significant increases in credit risk before an exposure is in default;

• Criteria do not align with point in time (PiT) when an asset is more than 30 days past due;

• The average time between the identification of a significant increase in credit risk and default is reasonable;

• Exposures usually do not transfer directly from the measurement of 12-month expected losses to impaired loans; and

• There is no unjustified volatility in the allocation of expected credit losses between the measurement of 12-month expected credit losses and lifetime expected credit losses.

Subsequently, the expected loss of each scenario (optimistic, base and pessimistic) is calculated as the sum of the expected loss of each Stage. Finally, the expected loss of the portfolio is calculated by assigning weights to each scenario based on their respective probability of occurrence.

An operation transition from Stage 2 to Stage 1 will depend on whether or not it meets the aforementioned classification assignment requirements. That is, if the operation fails to meet the requirements that were the reason for its classification in Stage 2, the operation will be reclassified to Stage 1, except in Mortgage, Corporate and Company portfolios. For these portfolios, there is a mandatory period of permanence due to the volatility that may be caused given the nature of these loans. Therefore, in addition to failing to comply with the requirements to be reclassified to Stage 2, the operation must not have a mark of default in the last twelve months, otherwise it would stay in Stage 2.

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Prospective information

Expected credit losses consider information about the overall credit risk. Information about the overall credit risk must incorporate not only information on delinquency, but also all relevant credit information, including forward-looking macroeconomic information.

In order to comply with the regulatory requirement, it has been determined that the methodology includes the aforementioned effects within the expected loss.

The estimation of expected credit losses will always reflect the possibility of a credit loss, even if the most likely result is not credit loss. Therefore, estimates of expected credit losses are required to reflect a weighted, unbiased amount that is determined by evaluating a range of possible outcomes.

To capture these effects, the Group uses internally developed stress models that seek to stress the probability of default based on different macroeconomic variable projection scenarios. The Group has defined three possible scenarios for each portfolio: base, optimistic and pessimistic, assigning the following weights to each of them:

• Base—40%

• Optimistic—30%

• Pessimistic—30%

Within the analysis carried out for the projection of probability of default, the projection period determined is 36 months (3 years). For projections after that period, the same information of that last year is considered, because it is deemed that projections beyond this period lose statistical significance, as evidenced by observing thresholds of confidence levels.

Macroeconomic variables used as of January 1, 2018

	Scenario	2018			2019			2020
Gross domestic product	Base		2.4	%		3.3	%		3.3	%
	Optimistic		4.2	%		3.9	%		3.6	%
	Pessimistic		(3.4	%)		(1.2	%)		2.6	%
Economically active population	Base		2.2	%		1.4	%		1.5	%
	Optimistic		3.0	%		1.7	%		1.6	%
	Pessimistic		(0.4	%)		0.6	%		2.0	%
Economically active population occupied	Base		1.6	%		1.7	%		1.7	%
	Optimistic		4.7	%		2.0	%		1.9	%
	Pessimistic		0.9	%		0.6	%		2.3	%
Inflation	Base		3.9	%		2.3	%		2.0	%
	Optimistic		4.3	%		2.0	%		2.0	%
	Pessimistic		6.1	%		0.8	%		1.8	%
Terms of exchange	Base		(0.5	%)		(0.7	%)		(0.4	%)
	Optimistic		(2.9	%)		1.6	%		0.5	%
	Pessimistic		11.1	%		(7.3	%)		(5.4	%)

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Macroeconomic variables used as of December 31, 2018

	Scenario	2019			2020			2021
Gross domestic product	Base		4.6	%		2.6	%		3.1	%
	Optimistic		6.5	%		3.1	%		3.2	%
	Pessimistic		(1.0	%)		1.8	%		1.9	%
Unemployment rate	Base		4.7	%		(1.6	%)		(1.1	%)
	Optimistic		3.1	%		(1.0	%)		(0.6	%)
	Pessimistic		25.3	%		34.1	%		(12.0	%)
Public consumption	Base		3.8	%		3.7	%		3.6	%
	Optimistic		10.4	%		10.2	%		10.2	%
	Pessimistic		(2.7	%)		(2.9	%)		2.9	%
Inflation	Base		1.9	%		1.7	%		2.0	%
	Optimistic		0.8	%		1.7	%		1.1	%
	Pessimistic		4.1	%		2.8	%		3.1	%
Domestic demand	Base		4.9	%		2.5	%		3.1	%
	Optimistic		6.8	%		2.6	%		5.1	%
	Pessimistic		(1.3	%)		0.2	%		0.9	%
Exchange rate	Base		(2.8	%)		(1.3	%)		(0.4	%)
	Optimistic		(2.8	%)		(1.3	%)		(0.4	%)
	Pessimistic		3.4	%		(2.8	%)		(3.2	%)

The percentages presented correspond to the annual variations of the macroeconomic variables indicated above. Likewise, for the calculation of these variables, have been considered different external sources of recognized prestige.

The impact of these macroeconomic variables on the expected loss differs for each portfolio depending on the sensitivity of each of them.

As part of the review and calibration of the expected loss model, Management has estimated the expected loss of the loan portfolio as of December 31, 2018, using forward-looking information of certain economic variables other than the economic variables used at the date of adoption of IFRS 9. Management has assessed the impact that these new economic variables would have on the expected loss of the loan portfolio estimated at the adoption date, determining that said impact is not significant in the Group’s consolidated financial statements.

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Guarantees:

The fair value of the loan guarantees as of December 31, 2018 is presented below:

As of December 31, 2018			Fair value of the credit guarantee under the base scenario
	Maximum exposure to credit risk		Cash		Investments		Guarantees from third parties or governments		Properties		Others		Compensation agreements		Surplus of guarantee		Total guarantee (*)		Net exposure		Expected loss associated
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Type of guarantee or credit improvement
Commercial loans		16,032,068		892,911		792,218		—		10,139,704		2,609,190		—		—		14,434,023		1,598,045		194,214
Small and micro-business loans		724,383		—		—		—		—		—		—		—		—		724,383		69,030
Consumer and mortgage loans		17,298,757		—		—		—		11,100,975		—		—		—		11,100,975		6,197,782		1,099,560
		34,055,208		892,911		792,218		—		21,240,679		2,609,190		—		—		25,534,998		8,520,210		1,364,804
Indirect loans		4,071,460		25,829		122,837		—		925,802		732,831		—		—		1,807,299		2,264,161		62,051

The following table shows the analysis of the fair values of the guarantees classified in Stage 3 (2018) or impaired (2017).

			Fair value of the credit guarantee under the base scenario
As of December 31, 2018	Maximum exposure to credit risk		Cash		Investments		Guarantees from third parties or governments		Properties		Others		Compensation agreements		Surplus of guarantee		Total guarantee (*)		Net exposure			Expected loss associated
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)			S/(000)
Type of guarantee or credit improvement
Commercial loans		206,481		1		166		—		343,062		3,061		—		—		346,290		(139,809	)		98,110
Small and micro-business loans		44,552		—		—		—		—		—		—		—		—		44,552			38,459
Consumer and mortgage loans		563,639		—		—		—		465,144		—		—		—		465,144		98,495			370,685
		814,672		1		166		—		808,206		3,061		—		—		811,434		3,238			507,254
Indirect loans		43,070		—		—		—		—		—		—		—		—		43,070			22,469

(*) Only for presentation purposes, corresponds to the realization value of the guarantees held by the Group as of December 31, 2018.

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The following is the detail of the gross amount of credits impaired by type of credit, together with the fair value of the related guarantee and the amounts of their allowances for loan losses:

As of December 31, 2017

Impaired loans	Commercial loans		Consumer and mortgage loans		Small and micro- business loans		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Impaired loans		207,361		1,172,767		57,594		1,437,722
Fair value of the guarantee		174,894		357,907		47,266		580,067
Allowances for loan losses		123,419		523,744		44,076		691,239

(e) Assessment of impairment for the loan portfolio (policy applicable until December 31, 2017)—

The Group classified each client that is part of its credit portfolio in one of the following five risk categories, depending on the degree of risk of default in the payment of each debtor: (i) Normal—A, (ii) with potential problems—B, (iii) deficient—C, (iv) doubtful—D, and (v) loss—E, which had the following characteristics:

Normal (category A): Debtors of commercial loans that fall into this category have complied on a timely basis with their obligations and at the time of evaluation do not present any reason for doubt with respect to repayment of interest and principal on the agreed dates and there was no reason to believe that this situation will change before the next evaluation. To classify a loan into category A, a clear understanding of the use to be made of the funds and the origin of the cash flows to be used by the debtor to repay the loan is required. Consumer and small and micro-business loans are classified into category A if payments are made when due or up to 8 days past-due. Mortgage loans are classified as category A when payments are made when due or up to 30 days past-due.

With potential problems (category B): Debtors of commercial loans included in this category are those that at the time of the evaluation show certain deficiencies, which, if not corrected on a timely manner, imply risks with respect to the recovery of the loan. Certain common characteristics of loans in this category include: delays in loan payments which are promptly covered, a general lack of information required to analyze the credit, out-of-date financial information, temporary economic or financial imbalances on the part of the debtor which could affect its ability to repay the loan and market conditions that could affect the economic sector in which the debtor participates. Consumer and small and micro-business loans are classified as category B if payments are between 9 and 30 days past-due. Mortgage loans are classified as category B if payments are between 31 and 60 days past-due.

Substandard (category C): Debtors of commercial loans included in this category show serious financial weaknesses, often with operating results or available income insufficient to cover their financial obligations on agreed upon terms, with no reasonable short-term prospects for strengthening of their financial capacity. Debtors showing the same deficiencies that determine classification as category B, obtain a classification as category C if those deficiencies are such that if they are not corrected in the short term, they could impede the recovery of principal and interest on the loan on the originally agreed terms. In addition, commercial loans are classified in this category when payments are between 61 and 120 days past-due. Consumer and small and micro-business loans are classified as category C if payments are between 31 and 60 days past-due. Mortgage loans are classified as category C when payments are between 61 and 120 days past-due.

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Doubtful (category D): Debtors of commercial loans included in this category present characteristics that make doubtful the recovery of the loan. Although the loan recovery is doubtful, if there is a reasonable possibility that in the near future the creditworthiness of the debtor might improve, it is advisable to include it in this category. These credits are distinguished from category E credits by the requirement that the debtor remain in operation, generate cash flows and make payments on the loan, although at a rate lower than the one specified in its contractual obligations. In addition, commercial loans are classified in this category when payments are between 121 and 365 days past-due. Consumer and small and micro-business loans are classified as category D if payments are between 61 and 120 days past-due. Residential mortgage loans are classified as category D when payments are between 121 and 365 days past-due.

Loss (category E): Commercial loans which are considered unrecoverable or which for any other reason cannot be included in the Group’s assets based on the originally contracted terms fall into this category. In addition, commercial loans are classified in this category when payments are more than 365 days past-due. Consumer and small and micro-business loans are classified as category E if payments are more than 120 days past-due. Residential mortgage loans are classified as category E when payments are more than 365 days past-due.

The Group evaluated and reviewed the classification of the debtors of its credit portfolio permanently in order to maintain an adequate risk identification, assigning the corresponding risk category.

All loans deemed impaired (those classified as deficient, doubtful or loss) were analyzed by Management, which assesses the deterioration of its portfolio at two levels: individual provision and collective provision, as follows:

• Individually assessed allowance

The Group determined the appropriate allowance for each significant loan individually. The criteria considered to determine the measure of an allowance comprise the sustainability of the debtor’s business plan, its ability to improve its performance once a financial difficulty has arisen, projected cash flows and the expected payout should bankruptcy happens, the availability of other financial support, including the realizable value of collateral and the timing of the expected cash flows.

The methodology and assumptions used for the future cash flows were reviewed regularly by the Group in order to reduce any difference between the loss estimates and the actual loss experience.

• Collectively assessed allowance

The allowances required were assessed collectively in the case of loans and obligations that are not individually significant (including consumer, small and micro-business loans and residential mortgage loans) and for individually significant loans, where there is not yet objective evidence of individual impairment (included in categories A and B).

The collective allowance takes into account the impairment that is likely to be present in the portfolio even though there is not yet objective evidence of individual impairment. Impairment losses are estimated by taking into consideration the following information: historical losses on the portfolio, current economic conditions, the approximate delay between the time a loss is likely to have been incurred and the time it will be identified as requiring an individually assessed impairment allowance and expected receipts and recoveries once impaired. Management is responsible for deciding on the length of this period which can be extended for as long as one year. The impairment allowance is reviewed by Management to ensure consistency with the Group’s overall policy.

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The methodology includes three estimation scenarios: base, upper threshold and lower threshold. These scenarios are generated by modifying some assumptions, such as collateral recovery values and adverse effects due to changes in the political and economic environments. The process to select the best estimate within said range is based on Management’s best judgment, complemented by historical loss experience and the Group’s strategy (e.g. penetration in new segments).

Impairment loss was assessed at each reporting date as to whether there is any objective evidence that an asset or group of financial assets were impaired.

Financial guarantees and letters of credit (indirect loans) were assessed and a provision is estimated for them following a procedure similar to that of loans.

When a loan was uncollectible, it was written off against the provision for related impaired loans. Such loans were written off after all the necessary legal procedures had been completed. Subsequent recoveries of amounts previously written off decrease the amount of the allowance for loan impairment in the consolidated income statements.

In accordance with the provisions of IFRS 7, the total balance of the loan was considered past due when the debtor stopped making a payment at its contractual maturity. In this sense, as of December 31, 2017, the total past due loan amounted to S/2,301,186,000 of which S/1,437,722,000 were considered impaired and loans with a value of approximately S/807,969,000 were not impaired and had a maturity of less than 30 days.

As of December 31, 2017, refinanced loans in effect amounted to approximately S/273,448,000. The refinanced loans matured at such date amounted to S/41,724,000, of which S/4,022,000 were classified as past due but not impaired and S/37,702,000 as impaired.

In accordance with the requirements of the SBS regulations, the Group modified the contractual terms of the loans granted in areas affected by the weather phenomenon called “El Niño Costero” during the first quarter of 2017, without this modification resulting in “refinanced loans”. The balance of the rescheduled loans amounted to approximately S/388,000,000, which are not considered as refinanced loans. As of December 31, 2018 and 2017, the balance of the credits reprogrammed and not considered as “refinanced loans” amounts to approximately S/109,300,000 and S/274,300,000, respectively.

(f) Credit risk management for investments—

Scoring or internal rating and PD:

For this type of financial instruments, the Group analyzes the public information available from international risk rating agencies such as: Fitch, Moody’s and Standard & Poor’s, and assigns a rating to each instrument.

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For each rating agency, the ratings associated with higher to lower credit quality are shown:

Fitch	Moody’s	Standard & Poor’s
A-	A3	A-
BBB+	Baa1	BBB+
BBB	Baa2	BBB
BBB-	Baa3	BBB-
BB+	Ba1	BB+
BB	Ba2	BB
BB-	Ba3	BB-
B+	B1	B+
B	B2	B
B-	B3	B-
CCC+	Caa1	CCC+

Finally, each instrument is assigned a PD according to the transition matrices published by Fitch.

LGD:

For those issuers that are classified in Stage 1 or Stage 2 at the reporting date, the Group uses the recovery matrix published by Moody’s.

For those investments in Stage 3, an evaluation must be made to determine the severity of the expected loss according to the progress of the recovery process initiated.

EAD:

EAD represents the gross book value of the financial instruments subject to impairment. To calculate the EAD of an investment in Stage 1, possible non-compliance events are evaluated within 12 months. For financial assets in Stage 2 and Stage 3, exposure at default is determined for events throughout the life of the instrument.

Significant increase in credit risk:

The Group has assumed that the credit risk of a financial instrument has not increased significantly since the initial recognition if it is determined that the investment has a low credit risk at the reporting date, which occurs when the issuer has a strong ability to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the long term may reduce, but not necessarily, the ability of the issuer to meet its cash flow obligations contractual cash.

In accordance with the assignment of ratings to each debt instrument, the Group determines whether there is a significant increase in credit risk by comparing the rating at the date of acquisition with the rating at the reporting date, and designates the Stage in which each debt instrument is classified according to the quantitative and qualitative criteria, defined as follows:

(i) Quantitative criteria

The Group holds an investment that does not present a significant increase in risk if there is a movement of its credit risk rating within the investment grade. In case there is a movement of its credit risk rating outside the investment grade, it is deemed that the instrument presents a significant increase in risk.

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(ii) Qualitative criteria

The Group periodically evaluates the following warning signs and criteria to assess whether the financial instrument presents a significant risk increase (stage 2) at the reporting date:

• Significant decrease (30 percent of its original value) and prolonged (12 months) of the market value of the investment.

• Infringements of covenants without exemption from the bondholders committee.

• Forced interventions by governments in the primary and secondary markets of the issuers.

• Linkage of the issuer in illicit, political and fraud activities.

• Impairment of collateral (underlying assets) in the case of securitized instruments (project finance).

• Delays or short and frequent breaches in the payment of coupons.

• Macroeconomic, regulatory, social, technological and environmental changes are significantly adverse.

• Other evaluations and / or alerts made by each Subsidiary (financial statements, evaluation of EBIT, Financial indicators by industry, regulatory criteria, others).

Until December 31, 2017, the Group controlled the credit risk of its available-for-sale investments and held-to-maturity investments based on the risk assessment of the issuers. In the case of foreign investments, the assessment considers the risk classifications issued by international risk rating agencies, as well as the country risk of the issuer, which is evaluated considering its main macroeconomic variables.

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The table below presents the credit risk ratings issued by risk rating agencies of recognized prestige local and international of available-for-sale investments and held-to-maturity investments:

	As of December 31, 2018				As of December 31, 2017
	S/(000)		%		S/(000)		%
Instruments issued and rated in Peru:
AAA		874,261		5.0		1,176,330		7.0
AA- / AA+		2,308,698		13.1		1,951,211		11.5
A- / A+		321,128		1.8		345,453		2.0
BBB- / BBB+		—		—		890		0.0
BB- / BB+		4,884		0.0		60,311		0.4
		3,508,971		19.9		3,534,195		20.9
Instruments issued in Peru and rated abroad:
A- / A+		4,619,911		26.2		3,811,758		22.5
BBB- / BBB+		2,193,074		12.4		2,428,728		14.4
BB- / BB+		139,849		0.8		173,146		1.0
B- / B+		—		—		9,211		0.1
		6,952,834		39.4		6,422,843		38.0
Instruments issued and rated abroad:
AAA		86,364		0.5		89,852		0.5
AA- / AA+		129,972		0.7		199,760		1.2
A- / A+		334,708		1.9		283,906		1.7
BBB- / BBB+		2,246,423		12.7		1,861,354		11.0
BB- / BB+		97,925		0.6		141,736		0.8
B- / B+		3,436		0.0		—		—
Less than B-		65		0.0		—		—
		2,898,893		16.4		2,576,608		15.2
Unrated
Certificates of deposits issued by the BCRP		1,380,479		7.8		2,124,799		12.6
Mutual funds and investment funds participations (*)		1,144,771		6.5		1,120,845		6.6
Securitized bonds		4,456		0.0		8,744		0.1
Other		309,905		1.8		166,630		1.0
Listed shares
Peruvian and foreign entities		458,663		2.6		241,478		1.4
BioPharma Credit PLC		405,641		2.3		291,960		1.7
InRetail Perú Corp.		235,443		1.3		168,206		1.0
Non-listed shares and participations
Royalty Pharma		78,808		0.4		68,540		0.4
LendUP		23,720		0.1		—		—
Other		1,671		0.0		1,606		—
Total		17,404,255		98.7		16,726,454		98.8
Accrued interest		225,190		1.3		197,689		1.2
Total		17,629,445		100.0		16,924,143		100.0

(*) It includes mutual and investment funds which do not have risk rating.

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(g) Concentration of financial instruments exposed to credit risk—

Financial instruments exposed to credit risk were distributed according to the following economic sectors:

	As of December 31, 2018
	Designated at fair value through profit or loss		Debt instruments measured at fair value through other comprehensive income		Equity instruments measured at fair value through other comprehensive income		Amortized cost			Total
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)
BCRP		—		1,380,479		—		4,834,307			6,214,786
Consumer loans		—		—		—		11,747,061			11,747,061
Financial services		1,294,850		1,914,500		434,870		5,212,356	(*)		8,856,576
Mortgage loans		47,842		—		—		6,416,037			6,463,879
Manufacturing		85,105		681,104		97,516		3,622,652			4,486,377
Commerce		36,352		121,758		228,122		2,875,503			3,261,735
Construction and infrastructure		6,666		2,824,885		—		668,035			3,499,586
Government of Peru		21,397		3,002,388		—		1,843,944			4,867,729
Electricity, gas, water and oil		19,102		1,091,042		75,111		894,156			2,079,411
Agriculture		8,307		27,678		3,059		1,001,789			1,040,833
Leaseholds and real estate activities		22,618		79,596		4,336		1,144,567			1,251,117
Communications, storage and transportation		11,801		221,661		—		946,585			1,180,047
Mining		5,793		376,511		—		601,893			984,197
Community services		16,440		486,304		—		2,715,245			3,217,989
Insurance		1,089		—		—		239,092			240,181
Fishing		4,588		—		2,303		253,663			260,554
Commercial and small and micro-business loans		—		—		—		171,707			171,707
Activities of foreign organizations and bodies		—		—		—		39,879			39,879
Foreign governments		—		484,516		—		—			484,516
Education, health and other services		10,877		154,037		—		241,235			406,149
Medicine and biotechnology		92,746		156,326		—		—			249,072
Public administration and defense		68,800		133,516		—		227,438			429,754
Others		2,471		7,225		—		317,076			326,772
Total		1,756,844		13,143,526		845,317		46,014,220			61,759,907
Impairment allowance for loans											(1,364,804	)
Accrued interest											495,703
Total											60,890,806

(*) It includes mainly the available funds deposited in the vaults of Interbank and in foreign banks; see Note 5.

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	As of December 31, 2017
	Financial assets designated at fair value
	Held for trading or hedging		Loans and accounts receivable			Available-for-sale Investments		Held-to-maturity investments		Total
	S/(000)		S/(000)			S/(000)		S/(000)		S/(000)
BCRP		—		7,761,975			2,124,798		—		9,886,773
Consumer loans		—		9,681,178			—		—		9,681,178
Financial services		224,687		4,677,612	(*)		2,789,881		—		7,692,180
Mortgage loans		—		5,764,054			70,541		—		5,834,595
Manufacturing		13,010		3,072,624			651,585		—		3,737,219
Commerce		8,689		2,354,948			464,844		—		2,828,481
Construction and infrastructure		2,430		716,179			2,391,384		—		3,109,993
Government of Peru		—		—			2,968,289		1,221,250		4,189,539
Electricity, gas, water and oil		11,008		999,245			1,468,043		—		2,478,296
Agriculture		—		989,184			30,154		—		1,019,338
Leaseholds and real estate activities		6,989		883,547			326,258		—		1,216,794
Communications, storage and transportation		1,129		769,748			436,474		—		1,207,351
Mining		22,120		551,202			669,218		—		1,242,540
Community services		3,885		305,563			14,302		—		323,750
Insurance		1,337		288,363			333		—		290,033
Fishing		—		189,128			2,102		—		191,230
Foreign governments		—		—			402,144		—		402,144
Education, health and other services		1,221		114,721			197,606		—		313,548
Medicine and biotechnology		—		—			163,165		—		163,165
Public administration and defense		8,043		222,725			113,651		—		344,419
Others		4,280		2,053,754			4,424		—		2,062,458
Total		308,828		41,395,750			15,289,196		1,221,250		58,215,024
Impairment allowance for loans											(1,202,118	)
Accrued interest											429,274
Total											57,442,180

(*) It includes mainly the available funds deposited in the vaults of Interbank and in foreign banks; see Note 5.

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The financial instruments exposed to credit risk were distributed according to their geographic area:

	As of December 31, 2018
	Designated at fair value through profit or loss		Debt instruments measured at fair value through other comprehensive income		Equity instruments measured at fair value through other comprehensive income		Amortized cost			Total
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)
Peru		175,400		10,308,648		410,282		43,514,628			54,408,958
United States of America		647,378		543,091		171,759		1,121,268			2,483,496
United Mexican States		10,341		909,462		—		1,349			921,152
Cayman Islands		258,394		3,333		—		84,325			346,052
Canada		9,994		—		—		183,712			193,706
Luxembourg		282,816		3,110		—		29,687			315,613
Colombia		932		500,018		—		24,685			525,635
Chile		69,336		528,708		—		49,636			647,680
Panama		—		1,421		—		310,393	(*)		311,814
Brazil		103		107,940		—		40,636			148,679
United Kingdom		184,937		37,008		261,484		21,955			505,384
Germany		382		—		—		95,141			95,523
Ireland		79,636		—		—		—			79,636
Ecuador		2,028		—		—		95,000			97,028
Belgium		—		—		138		67,343			67,481
Others		35,167		200,787		1,654		374,462			612,070
Total		1,756,844		13,143,526		845,317		46,014,220			61,759,907
Impairment allowance for loans											(1,364,804	)
Accrued interest											495,703
Total											60,890,806

(*) It corresponds mainly to the loan portfolio maintained by Inteligo Bank (domiciled in Panama) with Peruvian citizens.

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	As of December 31, 2017
	Financial assets designated at fair value
	Held for trading or hedging		Loans and accounts receivable			Available-for-sale Investments		Held-to-maturity investments		Total
	S/(000)		S/(000)			S/(000)		S/(000)		S/(000)
Peru		196,555		39,645,712			11,229,972		1,221,250		52,293,489
United States of America		48,454		746,025			1,146,596		—		1,941,075
United Mexican States		10,013		2,475			875,016		—		887,504
Colombia		6,913		26,811			414,534		—		448,258
Chile		—		35,199			377,380		—		412,579
Panama		—		273,183	(*)		35,206		—		308,389
Brazil		102		113,240			243,149		—		356,491
United Kingdom		6,030		11,423			315,028		—		332,481
Germany		2,268		119,256			—		—		121,524
Ireland		19,303		—			99,234		—		118,537
Supranational		—		—			106,268		—		106,268
Ecuador		10		97,928			—		—		97,938
Belgium		—		12,858			133		—		12,991
Others		19,180		311,640			446,680		—		777,500
Total		308,828		41,395,750			15,289,196		1,221,250		58,215,024
Impairment allowance for loans											(1,202,118	)
Accrued interest											429,274
Total											57,442,180

(*) It corresponds mainly to the loan portfolio maintained by Inteligo Bank (domiciled in Panama) with Peruvian citizens.

(h) Offsetting of financial assets and liabilities -

The information contained in the tables below includes financial assets and liabilities that:

• Are offset in the statements of financial position of the Group; or

• Are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments, regardless of whether they are offset in the consolidated statements of financial position or not.

Similar arrangements of the Group include derivatives clearing agreements. Financial instruments such as loans and deposits are not disclosed in the following tables since they are offset in the consolidated statements of financial position.

The offsetting framework agreement issued by the International Swaps and Derivatives Association Inc. (“ISDA”) and similar master netting arrangements do not meet the criteria for offsetting in the statements of financial position because of such agreements were created in order for both parties to have an enforceable offsetting right in cases of default, insolvency or bankruptcy of the Group or the counterparties or following other predetermined events. In addition, the Group and its counterparties do not intend to settle such instruments on a net basis or to realize the assets and settle the liabilities simultaneously.

The Group receives and delivers guarantees in the form of cash with respect to transactions with derivatives; see Note 5.

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Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2018 and 2017:

	Gross amounts of recognized financial assets		Gross amounts of recognized financial liabilities and offset in the consolidated statements of financial position		Net amounts of financial assets presented in the consolidated statements of financial position		Related amounts not offset in the consolidated statements of financial position					Net amount
							Financial instruments (including non-cash collateral)			Cash collateral received
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)		S/(000)
2018
Description
Derivatives, Note 11(b)		185,376		—		185,376		(41	)		—		185,335
Total		185,376		—		185,376		(41	)		—		185,335
2017
Description
Derivatives, Note 11(b)		92,820		—		92,820		(20,010	)		—		72,810
Total		92,820		—		92,820		(20,010	)		—		72,810

Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2018 and 2017:

	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets and offset in the consolidated statements of financial position		Net amounts of financial liabilities presented in the consolidated statements of financial position		Related amounts not offset in the consolidated statements of financial position						Net amount
							Financial instruments (including non-cash collateral)			Cash collateral pledged
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)			S/(000)
2018
Description
Derivatives, Note 11(b)		154,116		—		154,116		(41	)		(92,456	)		61,619
Total		154,116		—		154,116		(41	)		(92,456	)		61,619
2017
Description
Derivatives, Note 11(b)		133,921		—		133,921		(20,010	)		(90,093	)		23,818
Total		133,921		—		133,921		(20,010	)		(90,093	)		23,818

31.2 Market risk management

Market risk is the possibility of loss due to variations in the financial market conditions. The main variations to which the Group is exposed to are exchange rates, interest rates and prices. Said variations can affect the value of the Group’s financial assets and liabilities.

The Group separates its exposure to market risk into two blocks: (i) the one that arises from the fluctuation of the value of the trading investment portfolios, due to movements of market rates or prices (“Trading Book”) and; (ii) the one that arises from the changes in the structural positions (“Banking Book”) due to movements in interest rates, prices and exchange rates.

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(a) Trading Book—

In order to control and monitor the risks arising from the volatility of risk factors involved within each instrument, maximum exposure limits by currency, by type of investment and Value-at-Risk (“VaR”), which are controlled on a daily basis, have been established.

The main measurement technique used to measure and control market risk is VaR, which is a statistical measurement that quantifies the maximum loss expected for a period of time and a determined significance level under normal market conditions. The Group uses the Montecarlo VaR model for a period of one day, with exponential volatility and a 99-percent confidence level. VaR is calculated by risk factor: interest rate, price or exchange rate and by type of investment: derivatives, fixed income and variable income.

VaR models are designed to measure the market risk within a normal market environment. Those models assume that all modifications in risk factors affecting the normal market environment will follow a normal distribution. Said distribution is calculated through the use of historical data weighted in an exponential manner. Since VaR is based mainly on historical data to provide information and does not clearly predict future changes and modifications in risk factors, the probability of big market movements may be underestimated if said changes in risk factors cannot be aligned with the considered normal distribution. VaR can also be under or overestimated due to the hypotheses made on the risk factors and the relation among these factors with the specific instruments. In order to determine the reliability of VaR models, the actual results are regularly monitored to prove the validity of the assumptions and parameters used in the calculation of VaR.

The Group includes within the VaR calculation the potential loss that may arise from the exposure to exchange rate risk. This risk is included in the VaR calculation because the exchange position is the result of the spot position plus the position in derivative products. Likewise, the total VaR includes the diversification effect that arises as a result of the interaction of the various market risk factors to which the Group is exposed.

The validity of the VaR calculation is proven through back-testing, which uses historical data to ensure that the model adequately estimates the potential losses. Additionally, the sensitivity of risk factors is calculated, which shows the potential portfolio losses in the event of certain fluctuations in factors. Said fluctuations include: interest rate shocks, exchange rate shocks and price shocks.

The VaR results of the Group’s portfolio by type of asset are presented below:

	2018			2017
	S/(000)			S/(000)
Equity investments		(41,075	)		18,844
Debt investments		4,955			13,970
Derivatives		30,291			15,708
Diversification effect		(25,853	)		(27,038	)
Consolidated VaR by type of asset (*)		(31,682	)		21,484

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The Group’s VaR results by type of risk are the following:

	2018			2017
	S/(000)			S/(000)
Exchange rate risk		682			2,285
Interest rate risk		13,138			6,525
Price risk		(40,857	)		18,839
Diversification effect		(4,645	)		(6,165	)
Consolidated VaR by type of risk (*)		(31,682	)		21,484

(*) The total VaR is lower than the sum of its components due to the benefits of risk diversification.

(b) Banking Book—

The portfolios which are not for trading are exposed to different financial risks, since they are sensitive to movements of the market rates, which can result in a negative effect on the value of the assets compared to its liabilities and, therefore, on its net value.

(i) Interest rate risk

Interest rates fluctuate permanently on the market. These fluctuations affect the Group in two ways: first, through the change in the valuation of assets and liabilities; and secondly, affecting the cash flows at repricing. The variation in the valuation of assets and liabilities is increasingly sensitive as the term at which the asset or liability is repriced is extended. This process consists in the assessment of repricing periods. On the other hand, cash flows are affected when the instruments reach maturity, when they are invested or placed at new interest rates effective in the market.

Repricing gap

An analysis of the repricing gaps is performed in order to determine the impact of the interest rates movements. Said analysis consists of assigning the balances of the operations that will change the interest rate into different time gaps. Based on this analysis, the impact of the variation in the valuation of assets and liabilities on each gap is calculated.

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The following table summarizes the Group’s exposure to interest rate risk. The Group’s financial instruments are presented at book value (including interest accrued), classified by the repricing period of the contract’s interest rate or maturity date, whichever occurs first:

	As of December 31, 2018
	Up to 1 month			From 1 to 3 months			From 3 to 12 months			From 1 to 5 years			More than 5 years		Non-interest bearing			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)		S/(000)			S/(000)
Financial assets
Cash and due from banks		3,906,236			825,326			510,512			36,087			—		3,102,250			8,380,411
Inter-bank funds		495,037			—			—			—			—		—			495,037
Investments at fair value through other comprehensive income		455,279			681,102			1,628,586			5,174,381			5,785,617		448,945			14,173,910
Investments at amortized cost		—			40,125			—			661,455			1,182,487		—			1,884,067
Loans, net		4,068,510			3,711,803			6,712,551			14,466,596			4,552,542		(551,085	)		32,960,917
Accounts receivable and other assets, net		144,800			243,632			119,893			76,334			82,789		3,522,813			4,190,261
Total assets		9,069,862			5,501,988			8,971,542			20,414,853			11,603,435		6,522,923			62,084,603
Financial liabilities
Deposits and obligations		21,343,198			1,865,574			3,541,866			1,495,507			114,780		5,321,025			33,681,950
Due to banks and correspondents		710,945			1,194,249			894,641			685,258			808,268		—			4,293,361
Bonds, notes and other obligations		177,602			192,641			935,070			4,034,094			1,157,371		—			6,496,778
Insurance contract liabilities		79,169			156,334			699,678			3,125,961			6,239,326		—			10,300,468
Accounts payable, provisions and other liabilities		129,763			111,198			84,968			31,786			6,172		1,367,552			1,731,439
Equity		16,117			—			—			1,030			—		7,071,329			7,088,476
Total liabilities and equity		22,456,794			3,519,996			6,156,223			9,373,636			8,325,917		13,759,906			63,592,472
Off-balance sheet accounts
Derivatives held as hedge assets		—			168,650			134,920			1,416,660			—		—			1,720,230
Derivatives held as hedge liabilities		—			—			—			1,720,230			—		—			1,720,230
		—			168,650			134,920			(303,570	)		—		—			—
Marginal gap		(13,386,932	)		2,150,642			2,950,239			10,737,647			3,277,518		(7,236,983	)		(1,507,869	)
Cumulative gap		(13,386,932	)		(11,236,290	)		(8,286,051	)		2,451,596			5,729,114		(1,507,869	)		—

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	As of December 31, 2017
	Up to 1 month			From 1 to 3 months			From 3 to 12 months			From 1 to 5 years		More than 5 years		Non-interest bearing			Total
	S/(000)			S/(000)			S/(000)			S/(000)		S/(000)		S/(000)			S/(000)
Financial Assets
Cash and due from banks		6,548,959			1,485,381			112,435			94,983		—		2,963,085			11,204,843
Inter-bank funds		403,526			—			—			—		—		—			403,526
Available-for-sale investments		434,120			1,375,908			1,233,907			3,827,066		6,885,360		1,703,299			15,459,660
Held-to-maturity investments		—			27,223			—			193,998		1,027,254		—			1,248,475
Loans, net		3,535,147			3,303,452			5,819,868			10,623,790		5,351,888		(429,977	)		28,204,168
Accounts receivable and other assets, net		21,172			152,662			51,476			—		92,267		3,249,853			3,567,430
Total assets		10,942,924			6,344,626			7,217,686			14,739,837		13,356,769		7,486,260			60,088,102
Financial liabilities
Deposits and obligations		20,871,597			2,585,304			3,592,924			736,067		29,953		4,791,792			32,607,637
Inter-bank funds		592,017			16,070			1,839,099			1,089,558		870,648		—			4,407,392
Due to banks and correspondents		30,008			—			—			—		—		—			30,008
Bonds, notes and other obligations		152,722			19,783			49,733			2,943,835		2,436,285		—			5,602,358
Insurance contract liabilities		74,098			147,504			657,369			3,008,814		6,822,058		(195,339	)		10,514,504
Accounts payable, provisions and other liabilities		70,630			122,290			51,931			22,464		133,342		865,298			1,265,955
Equity		—			—			—			—		—		5,836,907			5,836,907
Total liabilities and equity		21,791,072			2,890,951			6,191,056			7,800,738		10,292,286		11,298,658			60,264,761
Off- balance sheet accounts
Derivatives held as hedge assets		291,690			162,050			—			64,820		—		—			518,560
Derivatives held as hedge liabilities		162,050			—			291,690			64,820		—		—			518,560
		129,640			162,050			(291,690	)		—		—		—			—
Marginal gap		(10,718,508	)		3,615,725			734,940			6,939,099		3,064,483		(3,812,398	)		(176,659	)
Cumulative gap		(10,718,508	)		(7,102,783	)		(6,367,843	)		571,256		3,635,739		(176,659	)		—

Sensitivity to changes in interest rates

The table below presents the sensitivity to a reasonable possible change in interest rates, with all other variables kept constant, in the consolidated income statements and in the consolidated statements of changes in equity, before Income Tax and non-controlling interest.

In the case of Interbank, the exposure to the interest rate is supervised by the Integral Risk Management Committee and the ALCO Committee. The Integral Risk Management Committee approves the various limits applicable to the management of financial instruments. ALCO Committee analyzes and monitors the results of the asset and liability management strategies and decisions implemented. Likewise, it defines the strategies and analyzes the sources of financing, as well as the coverage of the balance executed by the Bank. In particular, the latter could be considered to cover the exposure due to the variation in cash flows attributed to changes in variable market rates, to fix the cost of funds considering the global context of future movement of rates in the currencies under evaluation, to transform the cost of funds from foreign currency to the functional currency, among other casuistic as reviewed and approved by the Committee, considering the risk limits.

In this regard, the effect of movements in interest rates is analyzed on the basis of the Regulatory Model and takes into account: (i) the financial margin for the next 12 months or Earning at Risk (EaR) and (ii) the Equity Value at Risk (EVaR), as detailed below:

• Earning at risk, calculated as a percentage of the effective equity, establishes the legal limit of 5 percent and an early warning of 4 percent.

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• Value at Risk, calculated as a percentage of the effective equity, establishes the internal limit of 15 percent and an early warning of 13 percent.

Thus, interest rate risk is managed and controlled by monitoring the aforementioned indicators, which allows Management to assess the potential effect of interest rates movements on the Group’s financial margin and thus manage the terms and the fixed and/or variable yields generated by the financial instruments held by the Group, including strategies on the derivative financial instruments designated as hedge accounting; see Note 31.2(b)(i).

For its part, the GIR Committee is in charge of approving levels of structural interest-rate risk capacity and appetite, which are detailed in the Bank’s Risk Appetite Framework.

In the case of Interseguro and Inteligo Bank, their Boards establish limits, which are controlled by their respective Investment Risk Unit.

The effects of the estimated changes in interest rates are as follows:

	As of December 31, 2018
Currency	Changes in basis points	Sensitivity of net income		Sensitivity of other net comprehensive income
		S/(000)		S/(000)
US Dollar	+/-25	+/-	5,331	+/-	14,381
US Dollar	+/-50	+/-	10,662	+/-	34,822
US Dollar	+75	+	15,994	+	61,365
US Dollar	+100	+	21,325	+	94,077
Sol	+/-50	-/+	19,032	-/+	115,524
Sol	+/-75	-/+	28,549	-/+	191,921
Sol	+/-100	-/+	38,065	-/+	280,145
Sol	+/-150	-/+	57,097	-/+	493,870

	As of December 31, 2017
Currency	Changes in basis points	Sensitivity of net income		Sensitivity of other net comprehensive income
		S/(000)		S/(000)
US Dollar	+/-25	+/-	4,435	+/-	62,091
US Dollar	+/-50	+/-	8,869	+/-	127,389
US Dollar	+75	+	13,304	+	196,026
US Dollar	+100	+	17,739	+	268,142
Sol	+/-50	-/+	22,361	-/+	238,883
Sol	+/-75	-/+	33,541	-/+	366,080
Sol	+/-100	-/+	44,721	-/+	499,962
Sol	+/-150	-/+	67,082	-/+	760,362

The interest rate sensitivities shown in the tables above are only illustrative and are based on simplified scenarios. The figures represent the effect of the pro-forma movements in the net interest income based on the projected scenarios yield curve and the Group’s current interest rate risk profile. However, this effect, does not include actions that would be taken by Management to mitigate the impact of this interest rate risk. In addition, the Group seeks proactively to change the interest rate risk profile to minimize losses and optimize net revenues. The above projections also assume that interest rate of all maturities move by the same amount and, therefore, do not reflect the potential impact on net interest income of some rates changing while others remain unchanged. The projections also include assumptions to facilitate calculations, such as that all positions are held to maturity.

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Sensitivity to price variation

Shares classified as investments at fair value through other comprehensive income, for the year 2018, and available-for-sale investments in shares and in mutual funds, for the year 2017, are not considered as part of the investments for interest rate sensitivity calculation purposes. However, a calculation of sensitivity in market prices and the effect on expected unrealized gain or loss in the consolidated statements of other comprehensive income, before Income Tax and non-controlling interest, as of December 31, 2018 and 2017, is presented below:

	Changes in market price		2018		2017
	%		S/(000)		S/(000)
Shares		+/-10		84,532		74,698
Shares		+/-25		211,329		186,745
Shares		+/-30		253,595		224,094
Mutual funds and investment funds participations		+/-10		—		95,632
Mutual funds and investment funds participations		+/-25		—		239,079
Mutual funds and investment funds participations		+/-30		—		286,895

(ii) Foreign exchange risk

The Group is exposed to fluctuations in the exchange rates of the foreign currency prevailing in its financial position and cash flows. Management sets limits on the levels of exposure by currency and total daily and overnight positions, which are monitored daily. Most of the assets and liabilities in foreign currency are stated in US Dollars. Transactions in foreign currency are made at the exchange rates of free market.

As of December 31, 2018, the weighted average exchange rate of free market published by the SBS for transactions in US Dollars was S/3.369 per US$1 bid and S/3.379 per US$1 ask (S/3.238 and S/3.245 as of December 31, 2017, respectively). As of December 31, 2018, the exchange rate for the accounting of asset and liability accounts in foreign currency set by the SBS was S/3.373 per US$1 (S/3.241 as of December 31, 2017).

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The table below presents the detail of the Group’s position:

	As of December 31, 2018
	US Dollars			Soles			Other currencies			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Assets
Cash and due from banks		6,802,749			1,224,791			352,871			8,380,411
Inter-bank funds		—			495,037			—			495,037
Financial investments		7,670,084			9,941,459			17,902			17,629,445
Loans, net		10,048,173			22,912,744			—			32,960,917
Due from customers on acceptances		112,653			—			20,308			132,961
Accounts receivable and other assets, net		154,643			1,102,800			34,592			1,292,035
		24,788,302			35,676,831			425,673			60,890,806
Liabilities
Deposits and obligations		13,584,983			19,807,644			289,323			33,681,950
Due to banks and correspondents		1,046,545			3,246,816			—			4,293,361
Bonds, notes and other obligations		6,110,077			386,701			—			6,496,778
Due from customers on acceptances		112,653			—			20,308			132,961
Insurance contract liabilities		4,072,811			6,227,657			—			10,300,468
Accounts payable, provisions and other liabilities		215,093			1,297,074			9,593			1,521,760
		25,142,162			30,965,892			319,224			56,427,278
Forwards position, net		(629,147	)		685,813			(56,666	)		—
Currency swaps position, net		(59,991	)		59,991			—			—
Cross currency swaps position, net		1,724,081			(1,724,081	)		—			—
Options position, net		81			(81	)		—			—
Monetary position, net		681,164			3,732,581			49,783			4,463,528

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	As of December 31, 2017
	US Dollars			Soles			Other currencies			Total
	S/(000)			S/(000)			S/(000)			S/(000)
Assets
Cash and due from banks		9,497,021			1,385,533			322,289			11,204,843
Inter-bank funds		113,449			290,077			—			403,526
Financial investments		7,131,951			9,691,509			100,683			16,924,143
Loans, net		8,566,434			19,637,734			—			28,204,168
Due from customers on acceptances		21,138			—			20,577			41,715
Accounts receivable and other assets, net		166,001			497,043			741			663,785
		25,495,994			31,501,896			444,290			57,442,180
Liabilities
Deposits and obligations		14,469,686			17,877,317			260,634			32,607,637
Inter-bank funds		—			30,008			—			30,008
Due to banks and correspondents		1,031,657			3,375,735			—			4,407,392
Bonds, notes and other obligations		5,215,011			387,347			—			5,602,358
Due from customers on acceptances		21,138			—			20,577			41,715
Insurance contract liabilities		4,142,822			6,371,682			—			10,514,504
Accounts payable, provisions and other liabilities		145,774			932,020			81,630			1,159,424
		25,026,088			28,974,109			362,841			54,363,038
Forwards position, net		(406,225	)		458,390			(52,165	)		—
Currency swaps position, net		54,369			(54,369	)		—			—
Cross currency swaps position, net		295,391			(295,391	)		—			—
Options position, net		(388	)		388			—			—
Monetary position, net		413,053			2,636,805			29,284			3,079,142

As of December 31, 2018, the Group granted indirect loans (contingent operations) in foreign currency for approximately US$696,510,000, equivalent to S/2,349,328,000 (US$673,040,000, equivalent to S/2,181,322,000 as of December 31, 2017); see Note 19.

The Group manages the exchange rate risk through the matching of its active and passive operations, supervising its global exchange position on a daily basis. The global exchange position of the Group is equivalent to long positions minus short positions in currencies other than the Sol. The global exchange position includes balance positions (spot) and also the positions in derivatives, including the positions of derivatives that have been designated as accounting hedges with the purpose of covering the exposure due to the variation of the exchange rate; see Note 11(b). Any depreciation/appreciation of the foreign currency would affect the consolidated income statements. An imbalance in the monetary position would make the Group’s consolidated statements of financial position vulnerable to the fluctuation of the foreign currency (exchange rate shock).

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The table below shows the analysis of variations of the US Dollar, the main currency to which the Group has exposure as of December 31, 2018 and 2017. The analysis determines the effect of a reasonably possible variation of the exchange rate of US Dollar against the Sol, considering all the other variables constant in the consolidated statements of other comprehensive income before Income Tax. A negative amount shows a potential net reduction in the consolidated income statements, while a positive amount reflects a net potential increase:

Sensitivity analysis	Changes in currency rates		2018			2017
	%		S/(000)			S/(000)
Devaluation
US Dollar		5		(746	)		51,084
US Dollar		10		(1,492	)		102,168
US Dollar		15		(2,238	)		153,252
Revaluation
US Dollar		5		746			(51,084	)
US Dollar		10		1,492			(102,168	)
US Dollar		15		2,238			(153,252	)

31.3 Liquidity risk

Liquidity risk consists in the Group’s inability to comply with the maturity of its obligations, thus incurring in losses that significantly affect its equity position. This risk may arise as a result of various events such as: the unexpected decrease of funding sources, the inability to rapidly settle assets, among others.

The Group has a set of indicators that are controlled and reported daily, which establish the minimum liquidity levels allowed for the short-term and reflect several risk aspects such as: concentration, stability, position by currency, main depositors, etc.

Likewise, the Group assesses medium-term and long-term liquidity through a structural analysis of its funds inflows and outflows in different maturity terms. This process allows to know, for each currency, the various funding sources, how liquidity needs increase and which terms are mismatched. For both, assets and liabilities, assumptions are considered for the operations that do not have determined maturity dates, such as revolving loans, savings and similar ones, as well as contingent liabilities, such as non-used letters of credit or lines of credit. Based on this information, the necessary decisions to maintain target liquidity levels are made.

In the case of Interbank, liquidity is managed by the Vice-Presidency of Capital Markets, which chairs the ALCO Committee, where positions, movements, indicators and limits on liquidity management are presented. Liquidity risk is supervised by the GIR Committee, defining the risk level that Interbank is willing to take and the corresponding indicators, limits and controls are reviewed. The Market Risk Division is in charge of tracking said indicators. Interbank takes short-term deposits and transforms them into longer-term loans. Therefore, its exposure to liquidity risk increases. Interbank maintains a set of deposits that are historically renewed or maintained, and which represent a stable funding source.

In the case of Interseguro, it is exposed to requirements other than their cash resources, mainly claims resulting from their short-term insurance contracts. The Board of Directors of the company establishes limits on the minimum proportion of the maturity funds available to meet these requirements and in a minimum level of lines of credit that must be available to cover claims at unexpected claim levels.

With regards to long-term insurance contracts, considering the types of products offered and the long-term contractual relationship with clients (the liquidity risk is not material), the emphasis is on

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sufficient availability of flow of assets, and the term matching of the latter with liability obligations (mathematical technical reserves), for which there are sufficiency and adequacy indicators.

In the case of Inteligo Bank, the Board of Directors has established liquidity levels as to the minimum amount of available funds required to meet such requirements and the minimum level of inter-banking facilities and other loan mechanisms that should exist to cover unexpected withdrawals. Inteligo Bank holds a short-term asset portfolio, comprised of loans and liquid investments to ensure sufficient liquidity.

Inteligo Bank’s financial assets include unlisted equity investments, which generally are liquid. In addition, Inteligo Bank holds investments in closed (unlisted) and open-ended investment funds, which may be subject to redemption restrictions such as “side pockets” and redemption limits. As a result, Inteligo Bank may not be able to settle some of its investments in these instruments in due time in order to meet its liquidity requirements.

The following table presents the Group’s undiscounted cash flows payable according to contractual terms agreed (including the payment of future interest):

	As of December 31, 2018
	Up to 1 month			From 1 to 3 months			From 3 to 12 months			From 1 to 5 years			Over 5 years			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Financial liabilities by type
Deposits and obligations		24,873,630			1,984,220			3,808,988			3,061,274			154,111			33,882,223
Inter-bank funds		—			—			—			—			—			—
Due to banks and correspondents		712,677			1,059,913			880,594			1,318,561			1,067,524			5,039,269
Bonds, notes and other obligations		34,249			208,164			330,916			5,239,468			2,113,760			7,926,557
Due from customers on acceptances		59,576			16,715			56,670			—			—			132,961
Insurance contract liabilities		79,169			156,334			699,678			3,125,961			14,620,567			18,681,709
Accounts payable, provisions and other liabilities		588,655			228,554			92,484			92,790			365,161			1,367,644
Total non-derivative financial liabilities		26,347,956			3,653,900			5,869,330			12,838,054			18,321,123			67,030,363
Derivatives held for trading (*)
Contractual amounts receivable (inflow)		595,238			290,639			527,875			1,807,669			1,105,214			4,326,635
Contractual amounts payable (outflow)		599,834			285,191			534,057			1,884,932			1,115,125			4,419,139
Total		(4,596	)		5,448			(6,182	)		(77,263	)		(9,911	)		(92,504	)
Derivatives held as hedge (**)
Contractual amounts receivable (inflow)		20,697			1,445			30,454			1,886,368			—			1,938,964
Contractual amounts payable (outflow)		29,208			1,567			38,478			1,869,967			7,623			1,946,843
Total		(8,511	)		(122	)		(8,024	)		16,401			(7,623	)		(7,879	)

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	As of December 31, 2017
	Up to 1 month		From 1 to 3 months		From 3 to 12 months			From 1 to 5 years			Over 5 years			Total
	S/(000)		S/(000)		S/(000)			S/(000)			S/(000)			S/(000)
Financial liabilities by type
Deposits and obligations		24,083,530		2,779,048		3,834,095			2,111,523			57,858			32,866,054
Inter-bank funds		30,008		—		—			—			—			30,008
Due to banks and correspondents		526,306		31,744		2,089,969			1,462,291			1,088,029			5,198,339
Bonds, notes and other obligations		9,873		34,889		321,999			3,939,848			2,965,502			7,272,111
Due from customers on acceptances		3,608		28,526		9,581			—			—			41,715
Insurance contract liabilities		61,989		122,234		550,055			2,658,734			13,671,744			17,064,756
Accounts payable, provisions and other liabilities		478,317		158,614		87,067			119,058			182,447			1,025,503
Total non-derivative financial liabilities		25,193,631		3,155,055		6,892,766			10,291,454			17,965,580			63,498,486
Derivatives held for trading (*)
Contractual amounts receivable (inflow)		875,269		1,073,104		1,006,013			1,320,374			739,406			5,014,166
Contractual amounts payable (outflow)		678,260		1,032,535		1,134,853			1,319,377			893,574			5,058,599
Total		197,009		40,569		(128,840	)		997			(154,168	)		(44,433	)
Derivatives held as hedge (**)
Contractual amounts receivable (inflow)		426		233		1,211			—			—			1,870
Contractual amounts payable (outflow)		—		—		11,524			51,148			36,690			99,362
Total		426		233		(10,313	)		(51,148	)		(36,690	)		(97,492	)

(*) It includes contracts with non-deliverable and full-deliverable settlements.

(**) It only includes contracts with non-deliverable settlements.

The table below shows maturity, by contractual term, of the contingent credits (indirect loans) granted by the Group as of the dates of the consolidated statements of financial position:

	2018		2017
	S/(000)		S/(000)
Contingent credits (indirect loans)
Up to 1 month		1,027,549		1,000,114
From 1 to 3 months		928,192		951,336
From 3 to 12 months		1,987,444		2,195,620
From 1 to 5 years		127,890		118,650
Over 5 years		385		775
Total		4,071,460		4,266,495

The Group expects that not all of the contingent liabilities or commitments will be used before the maturity date of the commitments.

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The following table shows the changes in liabilities arising from financing activities according to IAS 7:

	2018
	Balance as of January 1		Dividends payable		Cash flow			Effect of movement in exchange rate		Others		Balance as of December 31
	S/(000)		S/(000)		S/(000)			S/(000)		S/(000)		S/(000)
Payable inter-bank funds		30,008		—		(30,008	)		—		—		—
Bonds, notes and other obligations		5,602,358		—		585,139			274,957		34,324		6,496,778
Dividends payable		187		510,784		(510,688	)		—		—		283
Total liabilities for financing activities		5,632,553		510,784		44,443			274,957		34,324		6,497,061

	2017
	Balance as of January 1		Dividends payable		Cash flow			Effect of movement in exchange rate			Others		Balance as of December 31
	S/(000)		S/(000)		S/(000)			S/(000)			S/(000)		S/(000)
Payable inter-bank funds		332,255		—		(300,938	)		(1,309	)		—		30,008
Bonds, notes and other obligations		4,769,390		—		956,575			(145,068	)		21,461		5,602,358
Dividends payable		161		475,799		(475,773	)		—			—		187
Total liabilities for financing activities		5,101,806		475,799		179,864			(146,377	)		21,461		5,632,553

31.4 Operational risk

Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When internal controls fail, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Group is able to manage these risks. Controls include mainly the segregation of duties, accesses, authorization and reconciliation procedures, staff training and assessment processes, including the review by Internal Audit.

31.5 Insurance risk management

The risk under an insurance contract, in any of its various forms, is the possibility that the insured event occurs and, therefore, uncertainty is realized in the amount of the resulting claim. Given the nature of the insurance contract, this risk is aleatory and, therefore, unpredictable.

Regarding a portfolio of insurance contracts where the theory of large numbers and probabilities for pricing and provisions is applied, the main risk faced by the insurance business of the Group, managed by Interseguro, is that claims and/or payments of benefits covered by the policies exceed the book value of insurance liabilities. This could happen to the extent that the frequency and/or severity of claims and benefits are higher than estimated. The factors that are considered to perform the assessment of insurance risks are the following:

• Frequency and severity of claims;

• Sources of uncertainty in the calculation of payment of future claims;

• Mortality tables for different coverage plans in the life insurance segment;

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• Changes in market rates of investments that directly affect the discount rates to calculate mathematical reserves; and

• Specific requirements established by the SBS according to insurance plans.

On the other hand, Interseguro has signed contracts of automatic reinsurance coverage that protect it from losses due to frequency and severity. The objective of this reinsurance negotiation is that the total net insurance losses do not affect the equity and liquidity of Interseguro in any year. Interseguro’s policy is to sign contracts with companies with international rating determined by the rules of the SBS. Annuities contracts do not have reinsurance coverage.

(a) Life insurance contracts -

Interseguro has developed its insurance underwriting strategy in order to diversify the type of insurance risks accepted. Factors that aggravate the insurance risk include lack of risk diversification in terms of type and amount of risk and geographic location. The underwriting strategy aims to ensure that underwriting risks are well diversified in terms of type and amount of risk. Underwriting limits serve to implement the selection criteria for appropriate risk. As of December 31, 2018 and 2017, most of the insurance contracts entered into by Interseguro are located in the city of Lima.

The sufficiency of reserves is a principle of insurance management. Technical reserves for claims and premiums are estimated by Interseguro’s actuaries and reviewed by independent experts when deemed necessary.

Interseguro’s Management constantly monitors trends in claims, which allows it to perform estimates of claims incurred but not reported (IBNR) that are supported by recent information.

On the other hand, Interseguro is exposed to the risk that mortality and morbidity rates associated with customers do not reflect the actual mortality and morbidity and may cause the premium calculated for the coverage offered to be insufficient to cover claims. For this reason, Interseguro performs a careful risk selection or underwriting when issuing policies, because by doing so it can classify the degree of risk presented by a proposed insured, analyzing characteristics such as gender, smoking condition, health condition, among others.

In the particular case of annuities, the risk assumed by Interseguro is that the real life expectancy of the insured population is greater than that estimated when determining income, which would mean a deficit of reserves to comply with the payment of pensions.

On the other hand, insurance products do not have particularly relevant terms or clauses that could have a significant impact or represent significant uncertainties over Interseguro’s cash flows.

(b) Real estate risk management -

Real estate risk is defined as the possibility of losses due to changes or volatility of market prices of properties; see Note 8. Investment properties are held by Interseguro in order to manage its long term inflows and match its technical reserves. SBS Resolution No. 2840-2012, dated May 11, 2012, “Regulations on Real Estate Risk Management in Insurance Companies”, requires that insurance companies adequately identify, measure, control and report the real estate risk level they are exposed to.

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Additionally, Interseguro has identified the following risks associated to its real estate portfolios:

• The cost to develop a project may increase if there are delays in the planning process; however, Interseguro receives services from advisors in order to reduce the risks that may arise in the planning process.

• A major lessee may become insolvent thus causing a significant loss in rental income and a reduction in the value of the associated property. To reduce this risk, Interseguro reviews the financial position of all prospective lessees and decides on the appropriate level of safety required, such as lease deposits or guarantees.

• The fair values of the investment property portfolio could be affected by the cash flows generated by the tenants and/or lessees, as well as by the economic conditions of Peru and future expectations.

31.6 Capital management

The Group manages in an active manner a capital base in order to cover the risks inherent to its activities. Capital adequacy of the Group is monitored by using regulations and ratios established by the different regulators; see Note 17(f).

32. Fair value

(a) Financial instruments measured at their fair value and fair value hierarchy -

The following table presents an analysis of the financial instruments that are measured at their fair value, including the level of hierarchy of fair value. The amounts are based on the balances presented in the consolidated statements of financial position:

	As of December 31, 2018
	Level 1		Level 2		Level 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Financial assets
Financial investments
At fair value through profit or loss (*)		811,238		352,273		407,957		1,571,468
Debt instruments measured at fair value through other comprehensive income		9,822,970		3,320,556		—		13,143,526
Equity instruments measured at fair value through other comprehensive income		843,646		1,671		—		845,317
Derivatives receivable		—		185,376		—		185,376
	11,477,854		3,859,876		407,957		15,745,687
Accrued interest								185,066
Total financial assets								15,930,753
Financial liabilities
Accounts payable by derivatives		—		154,116		—		154,116

(*) As of December 31, 2018, correspond mainly to mutual funds and investment fund participations.

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	As of December 31, 2017
	Level 1		Level 2		Level 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)
Financial asset
Financial investment
Trading securities		200,962		12,704		2,342		216,008
Available-for-sale investments
Debt instruments		9,271,323		4,314,577		—		13,585,900
Mutual funds and investments funds participations		185,079		580,383		190,855		956,317
Shares of the private sector, foreign entities and others		676,832		1,607		68,540		746,979
Derivatives receivable		—		92,820		—		92,820
	10,334,196		5,002,091		261,737		15,598,024
Accrued interest								170,464
Total financial assets								15,768,488
Financial liabilities
Derivatives payable		—		133,921		—		133,921

Financial assets included in Level 1 are those measured on the basis of information that is available on the market, to the extent that their quoted prices reflect an active and liquid market and that are available in some centralized trading mechanism, trading agent, price supplier or regulatory entity.

Financial instruments included in Level 2 are valued based on the market prices of other instruments with similar characteristics or with financial valuation models based on information of variables observable in the market (interest rate curves, price vectors, etc.).

Financial assets included in Level 3 are valued by using assumptions and data that do not correspond to prices of operations traded on the market. Fair value is estimated using a discounted cash flow (DCF) model. The valuation requires Management to make certain assumptions about the model variables and data, including the forecast of cash flow, discount rate, credit risk and volatility.

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The table below presents a description of significant unobservable data used in valuation:

	Valuation technique	Significant unobservable inputs	Valuation	Sensitivity of inputs to fair value
Royalty Pharma	DCF Method	Sales forecast	Average sector analysis, estimates	10 percent increase (decrease) in the sales forecast would result in increase (decrease) in fair value by S/9,282,000.
				500 basis points increase in the WACC would result in decrease in fair value by S/16,453,000.
		WACC	8.0%	500 basis points decrease in the WACC would result in increase in fair value by S/23,884,000.
Mutual funds and investment funds participations	DCF Method	Discount rate	Depends on the credit risk	500 basis points increase in the discount rate would result in decrease in fair value by S/6,102,000.
				500 basis points decrease in the discount rate would result in increase in fair value by S/7,967,000.
		WACC	9.0%	500 basis points increase in the WACC would result in decrease in fair value by S/2,574,000.
				500 basis points decrease in the WACC would result in increase in fair value by S/3,245,000.
	Comparable multiples	Price-to-sales ratio	Depends on industry’s entity	10 percent increase (decrease) in the price-to-sales ratio would result in increase (decrease) in fair value by S/2,557,000.
	Equity value		Depends on the credit risk	500 basis points increase (decrease) in the equity value would result in increase (decrease) in fair value by S/462,000.

The table below includes a reconciliation of fair value measurement of financial instruments classified by the Group within Level 3 of the valuation hierarchy:

	2018			2017
	S/(000)			S/(000)
Initial balance as of January 1		261,737			331,729
Purchases		151,231			110,816
Sales		(61,328	)		(169,305	)
Total gain recognized on the consolidated income statements		56,317			—
Valuation recognized in the consolidated statements of other comprehensive income		—			(11,503	)
Balance as of December 31		407,957			261,737

As of December 31, 2017, the unrealized gain on Level 3 financial instruments amounts to S/26,562,000 and the unrealized loss amounts to S/945,000. During 2018 and 2017, there were no transfers of financial instruments from Level 3 to Level 1 or to Level 2. Also, during 2018 and 2017, there were no transfers of financial instruments between Level 1 and Level 2.

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(b) Financial instruments not measured at their fair value -

The table below presents the disclosure of the comparison between the carrying amounts and fair values of the Group’s financial instruments that are not measured at their fair value, presented by level of fair value hierarchy:

	As of December 31, 2018										As of December 31, 2017
	Level 1		Level 2		Level 3		Fair value		Book value		Level 1		Level 2		Level 3		Fair value		Book value
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Assets
Cash and due from banks		—		8,380,411		—		8,380,411		8,380,411		—		11,204,843		—		11,204,843		11,204,843
Inter-bank funds		—		495,037		—		495,037		495,037		—		403,526		—		403,526		403,526
Held-to-maturity investments		—		—		—		—		—		879,559		423,637		—		1,303,196		1,248,475
Investments at amortized cost		700,177		1,156,148		—		1,856,325		1,884,067		—		—		—		—		—
Loans, net		—		33,276,930		—		33,276,930		32,960,917		—		29,019,417		—		29,019,417		28,204,168
Due from customers on acceptances		—		132,961		—		132,961		132,961		—		41,715		—		41,715		41,715
Accounts receivable and other assets, net		—		1,106,659		—		1,106,659		1,106,659		—		570,965		—		570,965		570,965
Total		700,177		44,548,146		—		45,248,323		44,960,052		879,559		41,664,103		—		42,543,662		41,673,692
Liabilities
Deposits and obligations		—		33,699,626		—		33,699,626		33,681,950		—		32,629,914		—		32,629,914		32,607,637
Inter-bank funds		—		—		—		—		—		—		30,008		—		30,008		30,008
Due to banks and correspondents		—		4,291,346		—		4,291,346		4,293,361		—		4,434,484		—		4,434,484		4,407,392
Bonds, notes and notes issued		5,569,970		895,427		—		6,465,397		6,496,778		5,244,757		735,428		—		5,980,185		5,602,358
Due from customers on acceptances		—		132,961		—		132,961		132,961		—		41,715		—		41,715		41,715
Insurance contract liabilities		—		10,300,468		—		10,300,468		10,300,468		—		10,709,843		—		10,709,843		10,709,843
Accounts payable and other liabilities		—		1,367,644		—		1,367,644		1,367,644		—		1,025,303		—		1,025,503		1,025,503
Total		5,569,970		50,687,472		—		56,257,442		56,273,162		5,244,757		49,606,895		—		54,851,652		54,424,456

The methodologies and assumptions used to determine fair values depend on the terms and risk characteristics of each financial instrument and they include the following:

(i) Long-term fixed-rate and variable-rate loans are assessed by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the estimated losses of these loans. As of December 31, 2018 and 2017, the book value of loans, net of allowances, was not significantly different from the calculated fair values.

(ii) Instruments whose fair value approximates their book value: For financial assets and financial liabilities that are liquid or have short-term maturity (less than 3 months) it is assumed that the carrying amounts approximate to their fair values. This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable-rate financial instruments.

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(iii) Fixed-rate financial instruments: The fair value of fixed-rate financial assets and financial liabilities at amortized cost is determined by comparing market interest rates when they were first recognized with current market rates related to similar financial instruments for their remaining term to maturity. The fair value of fixed interest rate deposits is based on discounted cash flows using market interest rates for financial instruments with similar credit risk and maturity. For quoted debt issued, the fair value is determined based on quoted market prices. When quotations are not available, a discounted cash flow model is used based on the yield curve of the appropriate interest rate for the remaining term to maturity.

33. Fiduciary activities and management of funds

The Group provides custody, trustee, investment management and advisory services to third parties; therefore, the Group makes purchase and sale decisions in relation to a wide range of financial instruments. Assets that are held in trust are not included in the consolidated financial statements. These services give rise to the risk that the Group could eventually be held responsible of poor yielding of the assets under its administration.

As of December 31, 2018 and 2017, the value of the managed off-balance sheet financial assets is as follows:

	2018		2017
	S/(000)		S/(000)
Investment funds		12,924,575		11,982,512
Mutual funds		4,668,076		4,247,369
Total		17,592,651		16,229,881

34. Subsequent events

• On December 18, 2018, the Board of Directors of Interbank approved the sale of 100 percent of the shares representing the capital stock of Interfondos S.A., Sociedad Administradora de Fondos to Inteligo Perú Holding S.A.C., a subsidiary of Inteligo Group Corp. The transaction was performed through the signing of a purchase and sale contract dated January 8, 2019, between the Bank and Inteligo Perú Holding S.A.C. for 100 percent of the shares of Interfondos S.A. The purchase value amounted to US$30,000,000. This transaction was considered as a transaction under common control and did not generate effects in the consolidated financial statements of the Group.

• On January 28, 2019, Interseguro made the First Issuance, Single Series, of the Third Program of subordinated bonds on the local market for US$20,000,000 (equivalent to S/67,060,000). This bond matures in January 2029, and the agreed annual interest rate was 6 percent.

• On March 25, 2019, Interbank made the Fifth Issuance, Series A , of the Second Program of Corporate Bonds on the local market for S/150,000,000. This bond matures in March 2029, and the agreed annual interest rate was VAC plus 3.41 percent.

• On March 25, 2019, Interbank issued the First Program of Negotiable Certificates of Deposit on the local market for S/150,000,000. These certificates mature in March 2020, and the implied interest rate was 4.28 percent.

F-183

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Intercorp Financial Services Inc. and Subsidiaries

Unaudited interim condensed consolidated financial statements as of March 31, 2019, and for the three-month period then ended

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INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Unaudited interim condensed consolidated financial statements as of

March 31, 2019, and for the three-month period then ended

Content

Interim condensed consolidated financial statements
Interim condensed consolidated statements of financial position	F-186
Interim condensed consolidated statements of income	F-187
Interim condensed consolidated statements of other comprehensive income	F-188
Interim condensed consolidated statements of changes in equity	F-189
Interim condensed consolidated statements of cash flows	F-190
Notes to the interim condensed consolidated financial statements	F-192

F-185

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Interim condensed consolidated statements of financial position

As of March 31, 2019 (unaudited) and December 31, 2018 (audited)

	Note		As of March 31, 2019			As of December 31, 2018
			S/(000)			S/(000)
Assets
Cash and due from banks		3
Non-interest bearing				2,280,873			3,102,250
Interest bearing				6,532,517			3,991,629
Restricted funds				847,223			1,286,532
				9,660,613			8,380,411
Inter-bank funds				70,017			495,037
Financial investments		4		17,852,773			17,629,445
Loans, net		5
Loans, net of unearned interest				35,018,985			34,325,721
Impairment allowance for loans				(1,396,243	)		(1,364,804	)
				33,622,742			32,960,917
Investment property		6		989,595			986,538
Property, furniture and equipment, net		2(c)		948,512			622,525
Due from customers on acceptances				89,748			132,961
Intangibles and goodwill, net				946,793			954,546
Accounts receivable and other assets, net		7		1,493,649			1,502,554
Deferred Income Tax asset, net				81,765			79,475
Total assets				65,756,207			63,744,409

	Note		As of March 31, 2019			As of December 31, 2018
			S/(000)			S/(000)
Liabilities and equity
Deposits and obligations		8
Non-interest bearing				7,179,404			5,321,025
Interest bearing				27,610,596			28,360,925
				34,790,000			33,681,950
Inter-bank funds				106,524			—
Due to banks and correspondents		9		3,726,119			4,293,361
Bonds, notes and other obligations		10		6,663,213			6,496,778
Due from customers on acceptances				89,748			132,961
Insurance contract liabilities		11		10,407,237			10,300,468
Accounts payable, provisions and other liabilities		7		2,246,543			1,750,363
Deferred Income Tax liability, net				63			52
Total liabilities				58,029,447			56,655,933
Equity, net		12
Equity attributable to IFS’s shareholders:
Capital stock				963,446			963,446
Treasury stock				(208,178	)		(208,178	)
Capital surplus				268,077			268,077
Reserves				4,700,000			4,700,000
Unrealized results, net				407,244			121,686
Retained earnings				1,556,198			1,203,043
				7,686,787			7,048,074
Non-controlling interest				39,973			40,402
Total equity, net				7,726,760			7,088,476
Total liabilities and equity, net				65,756,207			63,744,409

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-186

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Interim condensed consolidated statements of income

For the three-month periods ended March 31, 2019 and 2018 (unaudited)

	Note		2019			2018
			S/(000)			S/(000)
Interest and similar income		14		1,166,740			1,036,275
Interest and similar expenses		14		(335,785	)		(266,895	)
Net interest and similar income				830,955			769,380
Impairment loss on loans, net of recoveries		5(c)		(186,414	)		(172,885	)
Impairment recovery on financial investments		4(c)		1,887			2,258
Net interest and similar income after impairment loss				646,428			598,753
Fee income from financial services, net		15		222,998			216,597
Net gain on foreign exchange transactions				41,306			40,878
Net gain on sale of financial investments				29,917			25,262
Net gains on financial assets at fair value through profit or loss				37,061			13,170
Net gain on investment property		6(b)		11,874			3,175
Other income		16		18,730			14,412
				361,886			313,494
Insurance premiums and claims
Net premiums earned		17		97,963			96,271
Net claims and benefits incurred for life insurance contracts and others				(172,037	)		(175,138	)
				(74,074	)		(78,867	)
Other expenses
Salaries and employee benefits				(195,375	)		(182,433	)
Administrative expenses				(176,719	)		(180,440	)
Depreciation and amortization				(62,904	)		(37,620	)
Other expenses		16		(46,718	)		(43,371	)
				(481,716	)		(443,864	)
Income before translation result and Income Tax				452,524			389,516
Translation result				10,091			5,987
Income Tax		13(c)		(109,890	)		(105,519	)
Net profit for the period				352,725			289,984
Attributable to:
IFS’s shareholders				350,568			288,209
Non-controlling interest				2,157			1,775
				352,725			289,984
Earnings per share attributable to IFS’s shareholders basic and diluted (stated in Soles)		18		3.167			2.628
Weighted average number of outstanding shares (in thousands)		18		110,692			109,655

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-187

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Interim condensed consolidated statements of other comprehensive income

For the three-month periods ended March 31, 2019 and 2018 (unaudited)

	2019			2018
	S/(000)			S/(000)
Net profit for the period		352,725			289,984
Other comprehensive income that will not be reclassified to the consolidated income statements in subsequent periods:
Net movement of equity instruments at fair value through other comprehensive income		68,991			(6,392	)
Income Tax		(2	)		13
Total gains that will not be reclassified to the consolidated income statements		68,989			(6,379	)
Other comprehensive income to be reclassified to the consolidated income statements in subsequent periods:
Net movement of debt instruments at fair value through other comprehensive income		387,600			(12,201	)
Income Tax		(4,508	)		4,000
		383,092			(8,201	)
Insurance premiums reserve		(148,100	)		21,934
Net movement of cash flow hedges		(9,139	)		1,193
Income Tax		3,632			(789	)
		(5,507	)		404
Translation of foreign operations		(12,254	)		(2,871	)
Total unrealized gain to be reclassified to the consolidated income statements in subsequent periods		217,231			11,266
Total other comprehensive income for the period, net of Income Tax		638,945			294,871
Attributable to:
IFS’s shareholders		636,126			293,713
Non-controlling interest		2,819			1,158
		638,945			294,871

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-188

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Interim condensed consolidated statements of changes in equity

For the three-month periods ended March 31, 2019 and 2018 (unaudited)

						Attributable to IFS’s shareholders
															Unrealized results, net
	Number of shares														Instruments that will not be reclassified to the consolidated income statements			Instruments that will be reclassified to the consolidated income statements
	Issued		In treasury			Capital stock		Treasury stock			Capital surplus		Reserves		Equity instruments at fair value			Debt instruments at fair value			Insurance premiums reserves			Cash flow hedges reserve			Foreign currency translation reserve			Retained earnings			Total			Non-controlling interest			Total equity, net
	(in thousands)		(in thousands)			S/(000)		S/(000)			S/(000)		S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Balances as of January 1, 2018 (Restated, Note 2(b))		113,110		(5,428	)		963,446		(467,200	)		268,077		3,700,000		105,619			238,348			(675,095	)		(36	)		76,394			1,507,674			5,717,227			35,780			5,753,007
Net profit for the period		—		—			—		—			—		—		—			—			—			—			—			288,209			288,209			1,775			289,984
Other comprehensive income		—		—			—		—			—		—		(5,845	)		(8,070	)		21,899			391			(2,871	)		—			5,504			(617	)		4,887
Total other comprehensive income		—		—			—		—			—		—		(5,845	)		(8,070	)		21,899			391			(2,871	)		288,209			293,713			1,158			294,871
Dividends paid to non-controlling interest of Subsidiaries		—		—			—		—			—		—		—			—			—			—			—			—			—			(2,825	)		(2,825	)
Sale of treasury stock, Note 12(c)		—		3,010			—		259,022			—		—		—			—			—			—			—			123,705			382,727			862			383,589
Others		—		—			—		—			—		—		—			—			—			—			—			(15,934	)		(15,934	)		(281	)		(16,215	)
Balance as of March 31, 2018		113,110		(2,418	)		963,446		(208,178	)		268,077		3,700,000		99,774			230,278			(653,196	)		355			73,523			1,903,654			6,377,733			34,694			6,412,427
Balance as of January 1, 2019		113,110		(2,418	)		963,446		(208,178	)		268,077		4,700,000		147,554			(232,337	)		75,575			27,911			102,983			1,203,043			7,048,074			40,402			7,088,476
Net profit for the period		—		—			—		—			—		—		—			—			—			—			—			350,568			350,568			2,157			352,725
Other comprehensive income		—		—			—		—			—		—		68,876			382,240			(147,857	)		(5,447	)		(12,254	)		—			285,558			662			286,220
Total other comprehensive income		—		—			—		—			—		—		68,876			382,240			(147,857	)		(5,447	)		(12,254	)		350,568			636,126			2,819			638,945
Dividends paid to non-controlling interest of Subsidiaries		—		—			—		—			—		—		—			—			—			—			—			—			—			(3,228	)		(3,228	)
Others		—		—			—		—			—		—		—			—			—			—			—			2,587			2,587			(20	)		2,567
Balance as of March 31, 2019		113,110		(2,418	)		963,446		(208,178	)		268,077		4,700,000		216,430			149,903			(72,282	)		22,464			90,729			1,556,198			7,686,787			39,973			7,726,760

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Interim condensed consolidated statements of cash flows

For the three-month periods ended March 31, 2019 and 2018 (unaudited)

	2019			2018
	S/(000)			S/(000)
Cash flows from operating activities
Net profit for the period		352,725			289,984
Plus (minus)
Impairment loss on loans, net of recoveries		186,414			172,885
Impairment recovery on financial investments		(1,887	)		(2,258	)
Depreciation and amortization		62,904			37,620
Provision for sundry risks		3,190			473
Deferred Income Tax		(5,579	)		25,528
Net gain on sale of financial investments		(29,917	)		(25,262	)
Net gain of financial assets at fair value through profit or loss		(37,061	)		(13,170	)
Net (gain) loss for the valuation of investment property		(1,322	)		5,106
Translation result		(10,091	)		(5,987	)
Gain on sale of investment property		—			(1,559	)
Decrease in accrued interest receivable		38,990			42,607
Increase in accrued interest payable		35,194			38,643
Net changes in assets and liabilities
Increase in loans		(826,104	)		(782,861	)
Increase in accounts receivable and other assets, net		(123,960	)		(57,887	)
Net decrease in restricted funds		442,710			20,097
Increase (decrease) in deposits and obligations		1,077,096			(1,383,929	)
Decrease in due to banks and correspondents		(570,671	)		(265,961	)
Increase in accounts payable, provisions and other liabilities		259,055			35,937
Decrease (increase) of investments at fair value through profit or loss		35,061			(184,226	)
Income Tax paid		(118,604	)		(68,285	)
Net cash provided by (used in) operating activities		768,143			(2,122,505	)

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Interim condensed consolidated statements of cash flows (continued)

	2019			2018
	S/(000)			S/(000)
Cash flows from investing activities
Sale (purchase) of investments at fair value through other comprehensive income and at amortized cost		216,678			(941,532	)
Purchase of property, furniture and equipment		(14,435	)		(6,663	)
Purchase of intangible assets		(20,992	)		(11,618	)
Purchase of investment property		(1,735	)		(22,546	)
Sale of investment property		—			194,080
Net cash provided by (used in) investing activities		179,516			(788,279	)
Cash flows from financing activities
Issuance of bonds, notes and other obligations		360,287			649,001
Payments of bonds, notes and other obligations		(116,130	)		—
Net increase in payable inter-bank funds		106,524			99,531
Net decrease in receivable inter-bank funds		425,020			224,472
Sale of treasury stock, net		—			383,589
Dividend payments to non-controlling interest		(3,228	)		(2,825	)
Lease payments and others		(26,854	)		(8,033	)
Net cash provided by financing activities		745,619			1,345,735
Net increase (decrease) in cash and cash equivalents		1,693,278			(1,565,049	)
Translation result on cash and cash equivalents		23,947			(2,755	)
Cash and cash equivalents at the beginning of the period		7,087,062			9,225,617
Cash and cash equivalents at the end of the period		8,804,287			7,657,813
Supplementary cash flow information:
Cash paid during the period for
Interest		302,691			213,255
Cash received during the period from
Interest		1,187,616			1,067,950

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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INTERCORP FINANCIAL SERVICES INC. AND SUBSIDIARIES

Notes to the interim condensed consolidated financial statements

As of March 31, 2019 (unaudited) and December 31, 2018 (audited)

1. Business activity and business combination

(a) Business activity

Intercorp Financial Services Inc. and Subsidiaries (henceforth “IFS”, “the Company” or “the Group”) is a limited liability holding company incorporated in the Republic of Panama on September 19, 2006, and is a Subsidiary of Intercorp Perú Ltd. (henceforth “Intercorp Perú”), a holding company incorporated in 1997 in the Commonwealth of the Bahamas. As of March 31, 2019 and December 31, 2018, Intercorp Perú holds directly and indirectly 76.46 percent, of IFS’s capital stock.

IFS’s legal domicile is located at Av. Carlos Villarán 140 Urb. Santa Catalina, La Victoria, Lima, Peru.

As of March 31, 2019, IFS holds 99.30 percent of the capital stock of Banco Internacional del Perú S.A.A. — Interbank (henceforth “Interbank”), 99.84 percent of the capital stock of Interseguro Compañía de Seguros S.A. (henceforth “Interseguro”) and 100 percent of the capital stock of Inteligo Group Corp. (henceforth “Inteligo”). As of December 31, 2018, IFS holds 99.30 percent of the capital stock of Interbank, 99.84 percent of the capital stock of Interseguro, 100 percent of the capital stock of Inteligo and 99.42 percent of the capital stock of Hipotecaria Sura Empresa Administradora Hipotecaria S.A. (henceforth “Hipotecaria Sura”). Interbank and Interseguro operate in Peru, while Inteligo and its Subsidiaries (Inteligo Sociedad Agente de Bolsa S.A. and Inteligo Bank Ltd.) operate in Peru and Panama. Hipotecaria Sura was liquidated on February 20, 2019.

The interim condensed consolidated financial statements of IFS and Subsidiaries as of March 31, 2019, and for the three-month period then ended were approved by the Board of Directors on June 13, 2019.

(b) Business combinations

In May 2017, IFS entered into an agreement with Sura Asset Management S.A. (Colombia), Sura Asset Management Perú S.A. (Peru) and Grupo Wiese (Peru) for the purchase of shares, which resulted in the direct and indirect acquisition of up to 100 percent of Seguros Sura S.A. (henceforth “Seguros Sura”) and up to 100 percent of Hipotecaria Sura. The acquisition was approved by Peru’s Superintendence of Banking, Insurance and Private Pension Funds Administrators (henceforth “SBS”, by its Spanish acronym) on September 28, 2017.

As a consequence, in November 2017, IFS acquired directly and indirectly 99.39 percent of Seguros Sura’s capital stock and 99.42 percent of Hipotecaria Sura’s capital stock.

The price of the overall transaction was US$275,865,000 (equivalent to approximately S/891,911,000).

In accordance with the legal regulations in force in Peru, the SBS granted a six-month deadline to complete the merger between Interseguro and Seguros Sura as from the date the SBS approved the acquisition. In this sense, Interseguro merged with Seguro Sura effectively on March 31, 2018, date on which Seguros Sura transferred all its assets and liabilities to the absorbing company, extinguishing after completing this merger process without having to liquidate.

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Notes to the interim condensed consolidated financial statements (continued)

The acquisitions were recorded in accordance with the “Acquisition method” established by IFRS 3 “Business Combinations”. The costs related to the acquisition, amounting to S/7,863,000, were registered as an expense at the date of adquisition.

The following are the fair values of the entities acquired at the acquisition date:

	Fair value of the acquired entities
	S/(000)
Seguros Sura S.A.
Assets		5,543,147
Liabilities		(5,287,650	)
Hipotecaria Sura S.A.
Assets		12,560
Liabilities		(2,452	)
Total net assets identified		265,605
Non—controlling interest — proportionate share of the acquired entities’ net assets		(1,912	)
Goodwill		628,218
Consideration transferred		891,911
The net cash flow used in the acquisition is presented below:
	S/(000)
Consideration transferred		891,911
Cash and due from banks of the acquired entities		(239,247	)
Transaction cost of the acquisition		7,863
		660,527

The goodwill represents the future synergies that are expected to arise from the combination of operations, distribution channels, workforce and other efficiencies not included in the intangible assets of the present value of acquired in-force business.

The net assets recognized in the consolidated financial statements of IFS at the adquisition date were based on a preliminary fair value assessment. During 2018, Management completed the review of the fair value estimate of insurance contracts liabilities as of the acquisition date and, as consequence, the net identifiable assets were modified. Amendments were therefore made to the net identifiable assets, as detailed below:

	Preliminary balance			Amendment			Amended balance
	S/(000)			S/(000)			S/(000)
Insurance contracts liabilities		(5,210,487	)		195,339			(5,015,148	)
Goodwill		628,218			(195,339	)		432,879

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Notes to the interim condensed consolidated financial statements (continued)

2. Significant accounting policies

(a) Basis of presentation and use of estimates

The interim condensed consolidated financial statements as of March 31, 2019, and for the three-month period ended March 31, 2019 have been prepared in accordance with IAS 34 “Interim Financial Reporting”.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group’s consolidated audited financial statements as of December 31, 2018 and 2017, and as of January 1, 2017 (henceforth “2018 Annual Consolidated Financial Statements”), dated May 8, 2019.

The interim condensed consolidated financial statements have been prepared on a historical cost basis, except for investment property, derivative financial instruments, financial investments at fair value through profit or loss and through other comprehensive income, which have been measured at fair value. The interim condensed consolidated financial statements are presented in Soles, which is the functional currency of the Group, and all values are rounded to the nearest thousand (S/(000)), except when otherwise indicated.

The preparation of the interim condensed consolidated financial statements, in conformity with the International Financial Reporting Standards (henceforth “IFRS”) as issued by the International Accounting Standards Board (IASB), requires Management to make estimations and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of significant events in the notes to the interim condensed consolidated financial statements.

Estimates and criteria are continually assessed and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Existing circumstances and assumptions about future developments, however, may change due to markets’ behavior or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Actual results could differ from those estimates. The most significant estimates comprised in the accompanying interim condensed consolidated financial statements are related to the calculation of the impairment of the portfolio of loan and financial investments, the measurement of the fair value of the financial investments and investment property, the assessment of the impairment of goodwill, the liabilities for insurance contracts and measurement of the fair value of derivative financial instruments; also, there are other estimates such as the estimated useful life of intangible assets, property, furniture and equipment, and the estimation of deferred Income Tax.

Regarding the liabilities for insurance contracts, in the second quarter of 2018, the Group made the following changes in its accounting estimates related to the determination of these liabilities:

(i) Adoption of new mortality tables (SPP 2017)

Through SBS Resolution No.886-2018 dated March 7, 2018, the SBS published the new Peruvian mortality and morbidity tables “SPP-S-2017” and “SPP-I-2017” (for men and women) to be used in mathematical reserve calculations of pensions from the Private Pension System (“SPP”, by its Spanish acronym) and the Complementary Insurance of Hazardous Work. These tables gather updated information from Peru’s SPP and show the recent changes in life expectancy. The population used for the analysis and study were those affiliated to the SPP. From June 1, 2018, the Group decided to use these new tables for its pension reserve calculation.

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Notes to the interim condensed consolidated financial statements (continued)

(ii) Changes in the assumptions used in calculating interest rates to discount pension reserves

Until May 31, 2018, in order to discount claim reserves, Interseguro used the average market rate of its financial assets portfolio for the matching currency pension flows and a reinvestment rate of 3 percent for non-matching currency pension flows. From the second quarter 2018, Interseguro modified the estimation of these assumptions, using the risk-free rate due to the currency of Peruvian government’s sovereign yield curves plus an illiquidity premium as a portion of the corporate bonds spread that is not related to loss given default or the cost of credit rating downgrade. These corporate bonds spread is calculated based on the performance of the asset portfolio designated by Interseguro to cover its pension obligations.

In accordance with IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors” as the changes above result from new information or events and are not error corrections nor related to previous periods, they are considered changes in accounting estimations and the effects were recognized prospectively and included in the interim condensed consolidated income statements for:

(i) The period in which a change occurs, if it affects only such period; or

(ii) The period in which a change occurs and future periods, if it affects all of them.

As a consequence, Management considers that the changes in the mortality and morbidity tables and in the method for determining the discount interest rate reflect a better accounting estimation of insurance contracts liabilities; see Note 4.6 (a) and (b) of the 2018 Annual Consolidated Financial Statements. Since these changes in accounting estimates were recorded during the second quarter of 2018, the interim condensed consolidated financial statements as of March 31, 2018, did not contain such modifications.

(b) Change in accounting policy

As of December 31, 2017, the Subsidiary Interseguro recognized in its consolidated income statements the effect of the change in the value of liabilities coming from retirement, disability and survivor’s pensions, caused by the variations in the market interest rates used to discount these liabilities. In the first quarter of 2018, Management decided to modify its accounting policy in order to show the effect of the change in market interest rates on the interim condensed consolidated statements of other comprehensive income. This change was made to reduce volatility in the profits or losses associated to the effect of changes in market interest rates, as the financial assets supporting such insurance liabilities are measured at fair value through other comprehensive income. According to IAS 8, as the aforementioned change constitutes a voluntary change in the accounting policy of the Company and, in compliance with said the standard, was applied retrospectively, see Note 4.2.1 of the 2018 Annual Consolidated Financial Statements.

(c) New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended December 31, 2018, except for the adoption of new standards effective as of January 1, 2019. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The Group has adopted, for the first time, IFRS 16 “Leases” and, as required by IAS 34, the nature and effect of these changes are disclosed below. Several other amendments and interpretations have been

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Notes to the interim condensed consolidated financial statements (continued)

adopted for the first time in 2019, but do not have an impact on the interim condensed consolidated financial statements of the Group.

• IFRS 16 “Leases”

IFRS 16 supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement Contains a Lease”, SIC 15 “Operating Leases-Incentives” and SIC 27 “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model.

Lessor accounting under IFRS 16 is substantially unchanged from the one under IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Group is the lessor.

As permitted by the transitional provisions of IFRS 16, the Group elected to apply the modified retrospective approach and has not restated comparative figures. Under this method, the Group recognizes lease liabilities for an amount equivalent to the current values of future payments agreed as of January 1, 2019. The Group also chose to use the recognition exemptions for lease contracts that, at the commencement date, the underlying asset is of low value (‘low-value assets’).

The effect of adoption IFRS 16 as of January 1, 2019, is as follows:

	S/(000)
Assets
Property, furniture and equipment (Right-of-use assets)		341,746
Liabilities
Accounts payable, provisions and other liabilities (Lease liabilities)		341,746

The adoption of IFRS 16 does not have impact neither on the interim condensed consolidated statements of income nor on the interim condensed consolidated statements of changes in equity.

(c.1) Nature of the effect of adoption of IFRS 16

Before the adoption of IFRS 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. A lease was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Group; otherwise it was classified as an operating lease. Finance leases were capitalized at the commencement of the lease at the fair value of the inception date of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between interest (recognized as finance costs) and reduction of the lease liability. In an operating lease, the leased property was not capitalized and the lease payments were recognized as rent expense in the consolidated income statements on a straight-line basis over the lease term. Any prepaid rent and accrued rent were recognized under the captions “Prepaid rights” and Other accounts payable, respectively. Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases, except for leases of low-value assets. The

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Notes to the interim condensed consolidated financial statements (continued)

standard provides specific transition requirements and practical expedients, which have been applied by the Group.

• Leases previously classified as finance leases

The Group did not change the initial carrying amounts of recognized assets and liabilities at the date of initial adoption for leases previously classified as finance leases (i.e., the right-of-use assets and lease liabilities equal the lease assets and liabilities recognized under IAS 17). The requirements of IFRS 16 were applied to these leases from January 1, 2019.

• Leases previously classified as operating leases

The Group recognized right-of-use assets and lease liabilities for leases previously classified as operating leases, except for leases of low-value assets. The right-of-use assets for most leases were recognized based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognized. Lease liabilities were recognized based on the present value of the remaining lease payments, discounted by using the incremental borrowing rate at the date of initial application.

The Group also applied the available practical expedients wherein it:

• Used a single discount rate to a portfolio of leases with reasonably similar characteristics.

• Relied on its assessment of whether leases are onerous immediately before the date of initial application.

• Applied the exemption to leases of low-value assets at the date of initial application.

• Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.

The leases liabilities as of January 1, 2019 can be reconciled to the operating lease commitments as of December 31, 2018 as follows:

	S/(000)
Operating lease commitments as of December 31, 2018		508,085
Weighted average incremental borrowing rate as of January 1, 2019		5.58%
Discounted operating lease commitments as of January 1, 2019		341,749
Minus:
Commitments relating to leases of low-value assets		(3	)
Lease liabilities as of January 1, 2019		341,746

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Notes to the interim condensed consolidated financial statements (continued)

(c.2) Summary of new accounting policies

Set out below are the new accounting policies of the Group upon adoption of IFRS 16, which have been applied from the date of initial application:

• Right-of-use assets

The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, minus any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

• Lease liabilities

At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in- substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate it. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

• Leases and leases of low-value assets

The Group applies the lease of low-value assets recognition exemption to leases of small items of office furniture. Lease payments and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.

• Significant judgement in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

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Notes to the interim condensed consolidated financial statements (continued)

The Group has the option, under some of its leases, to lease the assets for additional terms. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal the lease. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).

The Group includes the renewal period as part of the lease term for leases, if it is appropriate, based on the paragraphs described above.

(c.3) Amounts recognized in the interim condensed statements of financial position and interim condensed consolidated statements of income

Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period:

	Right-of-use assets
	Land		Buildings and facilities			Total			Lease liabilities
	S/(000)		S/(000)			S/(000)			S/(000)
As of January 1, 2019		56,657		285,089			341,746			341,746
Additions		—		7,037			7,037			7,037
Depreciation expense		—		(18,746	)		(18,746	)		—
Interest expense		—		—			—			765
Payments		—		—			—			(19,355	)
As of March 31, 2019		56,657		273,380			330,037			330,193

• Interpretation of IFRIC 23 “Uncertainty over Income Tax Treatments”

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 “Income Taxes”. The interpretation does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.

The Interpretation specifically addresses the following:

• Whether an entity considers uncertain tax treatments separately.

• The assumptions an entity makes about the examination of tax treatments by taxation authorities.

• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.

• How an entity considers changes in facts and circumstances.

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed.

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CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

Although IFS and its Subsidiaries domiciled in the Republic of Panama and the Bahamas are not subject to any income tax or capital gains tax, and Peruvian companies of life insurance are exempted from Income Tax regarding the income derived from assets linked to technical reserves for pension insurance (retirement, disability and survival pensions) and annuities from the Private Pension Funds Administration System—see Note 13(a), the Group applied the interpretation from the entry into force; however, as a result of the evaluation made, Management concluded that this interpretation has not affected the interim condensed consolidated financial statements.

• Amendments to IFRS 9 “Financial Instruments”: Prepayment features with negative compensation

Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. These amendments had no significant impact on the interim condensed consolidated financial statements of the Group.

• Amendments to IAS 19 “Employee Benefits”: Plan amendment, curtailment or settlement

The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to determine the cost of current services for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event. An entity is also required to determine the net interest for the remainder of the period after the plan amendment, curtailment or settlement using the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event; and the discount rate used to remeasure that net defined benefit liability (asset).

The amendments had no impact on the interim condensed consolidated financial statements of the Group as it does not maintain defined benefit plans.

Amendments to IAS 28 “Investments in Associates and Joint Ventures”: Long-term interests in associates and joint ventures

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests.

The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognized as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28.

These amendments had no impact on the interim condensed consolidated financial statements as the Group does not have long-term interests in associates and joint ventures.

F-200

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

• Annual improvements 2015—2017 cycle

• IFRS 3 “Business Combinations”, the amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation.

An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early adoption permitted.

These amendments had no impact on the interim condensed consolidated financial statements of the Group as there is no transaction where a joint control is obtained.

• IFRS 11 “Joint Arrangements”, a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined by IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured.

An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early adoption permitted.

These amendments had no impact on the interim condensed consolidated financial statements of the Group as there is no transaction where a joint control is obtained.

• IAS 12 “Income Taxes”, the amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.

An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted. When an entity first adopts those amendments, it applies them to the income tax consequences of dividends recognized on or after the beginning of the earliest comparative period.

Although IFS and its Subsidiaries domiciled in the Republic of Panama and the Bahamas are not subject to any income tax or capital gains tax—see Note 13(a), and Peruvian companies of life insurance are exempted from Income Tax regarding the income derived from assets linked to technical reserves for pension insurance (retirement, disability and survival pensions) and annuities from the Private Pension Fund Administration System; legal entities or natural persons not domiciled in Peru are subject to an additional tax on dividends received from entities domiciled in Peru. In this regard, since the Company controls the Subsidiaries that distribute the dividends, it recognizes the amount of the Income Tax as an expense of the year to which these dividends correspond. Since the Group´s currect practice is in line with these amendments, they had no impact on the interim condensed consolidated financial statements of the Group.

F-201

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

• IAS 23 “Borrowing Costs”, the amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first adopts those amendments. An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted.

These modifications had no impact on the Group’s interim condensed consolidated financial statements because they do not develop qualified assets or obtain financing for these purposes.

(d) Basis of consolidation

There were no changes in the composition of IFS in the period. The interim condensed consolidated financial statements of IFS comprise the condensed financial statements of Intercorp Financial Services Inc. and Subsidiaries. The method adopted by IFS to consolidate its Subsidiaries is described in Note 4.3 of the 2018 Annual Consolidated Financial Statements.

As described in Note 34 of the 2018 Annual Consolidated Financial Statements, in January 8, 2019, Interbank sold Interfondos S.A., Sociedad Administradora de Fondos (henceforth “Interfondos”) to Inteligo Perú Holding S.A.C.. Such transaction was eliminated for consolidation purposes.

3. Cash and due from banks

(a) This caption is made up as follows:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Cash and clearing		1,611,311		1,860,442
Deposits in the Central Reserve Bank of Peru—BCRP		5,897,045		3,639,927
Deposits in banks		1,295,931		1,586,693
Accrued interest		9,103		6,817
		8,813,390		7,093,879
Restricted funds (b)		847,223		1,286,532
Total		9,660,613		8,380,411

Cash and cash equivalents presented in the interim condensed consolidated statements of cash flows exclude the restricted funds and accrued interest.

F-202

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(b) The Group maintains restricted funds related to:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Repurchase agreements with BCRP (*)		759,686		1,189,454
Derivative financial instruments		82,837		92,456
Others		4,700		4,622
Total		847,223		1,286,532

(*) As of March 31, 2019, correspond to deposits maintained in the BCRP which guarantee repurchase agreements amounting to S/751,700,000 (guaranteed repurchase agreements amounting to S/1,154,500,000 as of December 31, 2018), see Note 9(a).

4. Financial investments

(a) As of March 31, 2019 and December 31, 2018, this caption is made up as follows:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Debt instruments measured at fair value through other comprehensive income (b)		13,361,566		13,143,526
Investments at fair value through profit or loss (d)		1,565,096		1,571,468
Investments at amortized cost (e)		1,837,509		1,843,944
Equity instruments measured at fair value through other comprehensive income (f)		928,737		845,317
Total financial investments		17,692,908		17,404,255
Accrued income
Debt instruments measured at fair value through other comprehensive income (b)		148,643		185,067
Investments at amortized cost (e)		11,222		40,123
Total		17,852,773		17,629,445

F-203

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(b) Following is the detail of debt instruments measured at fair value through other comprehensive income:

			Unrealized gross amount									Annual effective interest rates
	Amortized cost		Gains		Losses (c)			Estimated fair value		Maturity		S/				US$
	S/(000)		S/(000)		S/(000)			S/(000)				Min %		Max %		Min %		Max %
As of March 31, 2019
Corporate, leasing and subordinated bonds (*)		7,941,503		172,324		(138,384	)		7,975,443		Apr-19 / Jan-114		2.00		9.00		2.77		11.00
Peruvian Sovereign Bonds		2,512,686		107,755		(19,293	)		2,601,148		Sep-23 / Feb-55		2.00		8.00		—		—
Negotiable Certificates of Deposit issued by BCRP		1,490,243		1,057		(31	)		1,491,269		Apr-19 / Aug-20		2.56		2.95		—		—
Bonds guaranteed by the Peruvian Government		745,420		12,062		(6,953	)		750,529		May-24 / Jul -34		4.00		6.00		5.00		7.00
Global Bonds of the Republic of Peru		331,653		2,271		(1,343	)		332,581		Jul-25 / Feb-55		6.00		7.00		2.88		2.92
United States of America Treasury Bonds		83,405		—		(537	)		82,868		Dec-20 / Oct-23		—		—		2.25		2.29
Global Bonds of the Republic of Colombia		64,273		448		(98	)		64,623		Jul-21 / Jan-33		—		—		3.09		7.00
Global Bonds of the United Mexican States		63,738		—		(633	)		63,105		Oct-23		—		—		3.32		3.32
Total		13,232,921		295,917		(167,272	)		13,361,566
Accrued interest									148,643
Total									13,510,209
As of December 31, 2018
Corporate, leasing and subordinated bonds (*)		7,687,065		80,122		(286,043	)		7,481,144		Jan-19 / Jan-114		2.01		9.58		2.80		8.90
Peruvian Sovereign Bonds		2,702,571		46,714		(65,955	)		2,683,330		Aug-20 / Feb-55		2.37		8.19		—		—
Negotiable Certificates of Deposit issued by BCRP (**)		1,381,011		179		(711	)		1,380,479		Jan-19 / Apr-20		2.73		3.05		—		—
Bonds guaranteed by the Peruvian Government		804,309		5,166		(14,477	)		794,998		May-24 / Jul -34		4.10		6.01		4.97		8.81
Global Bonds of the Republic of Peru		332,311		1,439		(14,692	)		319,058		Jul-25 / Feb-55		6.39		7.40		3.66		3.71
Global Bonds of the Republic of Colombia		271,482		—		(4,046	)		267,436		Mar-19 / Sep-37		—		—		2.29		7.48
Global Bonds of the United Mexican States		105,749		—		(7,133	)		98,616		Oct-23 / Sep-34		—		—		4.16		6.28
United States of America Treasury Bonds		83,888		—		(1,039	)		82,849		Dec-20 / Oct-23		—		—		2.47		2.53
Global Bonds of the Republic of Chile		36,983		—		(1,367	)		35,616		Feb-28		—		—		3.74		3.74
Total		13,405,369		133,620		(395,463	)		13,143,526
Accrued interest									185,067
Total									13,328,593

(*) As of March 31, 2019 and December 31, 2018, Inteligo holds corporate bonds from different entities for approximately S/450,590,000 and S/411,047,000, respectively, which guarantee loans with Credit Suisse First Boston and J. Safra Sarasin; see Note 9(a).

(**) As of December 31, 2018, Interbank holds certificates of deposit issued by the BCRP for approximately S/256,777,000, which guarantee loans with said entity for approximately S/268,557,000; see Note 9(a).

F-204

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(c) The Group has determined that the unrealized losses on debt instruments as of March 31, 2019 and December 31, 2018, not related to credit risk, are of temporary nature.

The Group, according to the business model applied to these debt instruments, has the capacity to hold these investments for a sufficient period that allows the early recovery of the fair value, up to the maximum period for the early recovery or the due date.

F-205

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

As of March 31, 2019 and December 31, 2018, the detail of the unrealized losses of the debt instruments classified as at fair value through other comprehensive income is as follows:

	As of March 31, 2019							As of December 31, 2018
Issuer	Amortized Cost		Unrealized gross gain		Unrealized gross loss			Amortized cost		Unrealized gross gain		Unrealized gross loss			Maturity as of March 31, 2019		Risk rating as of December 31, 2018 (***)
	S/(000)		S/(000)		S/(000)			S/(000)		S/(000)		S/(000)
Peruvian Sovereign Bonds		2,512,686		107,755		(19,293	)		2,702,571		46,714		(65,955	)		2023 - 2055		A- (*)
Global Bonds of the Republic of Peru		331,653		2,271		(1,343	)		332,311		1,439		(14,692	)		2025 - 2055		BBB+ (*)
Global Bonds of the Republic of Colombia		64,273		448		(98	)		271,482		—		(4,046	)		2021 - 2033		BBB (*)
Global Bonds of the United Mexican States		63,738		—		(633	)		105,749		—		(7,133	)		2023		BBB+ (*)
Corporación Financiera de Desarrollo S.A.		386,581		301		(12,696	)		386,240		—		(19,238	)		2019 - 2046		AA (**)
PA Pacifico Trust		162,982		—		(10,147	)		166,049		—		(12,280	)		2035		BBB- (*)
Cencosud S.A.		143,448		—		(9,740	)		191,388		—		(20,819	)		2045		BBB- (*)
Banco de Crédito del Perú		227,007		—		(9,453	)		222,072		—		(14,536	)		2019 - 2023		AA+ (**)
Bienes Raíces Uno Trust		180,499		—		(9,342	)		183,572		—		(23,301	)		2044		BBB (*)
Fermaca Enterprises S.R.L.		223,019		—		(9,089	)		229,906		—		(11,778	)		2038		BBB- (*)
Mexico City Airport Trust		93,512		—		(7,299	)		94,948		—		(11,129	)		2047		BBB (*)
BBVA Continental		247,292		5,042		(6,900	)		199,326		2,039		(4,737	)		2020 - 2033		BBB+ (*)
Electricite de France S.A.		71,246		—		(5,243	)		72,431		—		(8,673	)		2114		A- (*)
Línea Amarilla S.A.C.		173,499		2,525		(4,030	)		173,130		1,042		(4,998	)		2037		AA (**)
Taboada Finance Ltda.		92,414		892		(3,913	)		93,010		612		(4,694	)		2029 - 2033		BBB+ (*)
Celeo Redes Operación CL		92,714		—		(3,594	)		94,252		—		(6,014	)		2047		BBB (*)
Enel Distribución Perú S.A.A.		85,609		680		(3,375	)		85,665		426		(5,864	)		2025 - 2038		AAA (**)
Falabella Perú S.A.A.		101,294		206		(3,130	)		101,341		—		(6,474	)		2028 - 2035		AA+ (**)
Mexichem SAB de CV		175,449		—		(3,065	)		178,387		—		(18,048	)		2042 - 2044		BBB- (*)
Lima Metro Line 2 Finance Limited		146,903		—		(3,040	)		149,512		—		(7,935	)		2034		BBB (*)
Celulosa Arauco y Constitución S.A.		161,186		—		(2,480	)		163,796		—		(12,295	)		2047		BBB- (*)
Goldman Sachs		63,471		2,253		(2,386	)		63,129		—		(6,572	)		2030 - 2042		BBB+ (*)
H2Olmos S.A.		229,707		—		(2,268	)		230,838		—		(4,793	)		2025 - 2032		AA (**)
México Generadora de Energía		70,812		—		(1,663	)		72,009		—		(5,324	)		2032		BBB (*)
Southern Perú Copper Corporation		216,795		11,111		(992	)		220,634		—		(7,653	)		2028 - 2042		BBB+ (*)
PA Costera Trust		73,807		—		(689	)		75,046		—		(4,716	)		2034		BBB- (*)
Comisión Federal de Electricidad CFE		—		—		—			35,007		—		(4,180	)		—		BBB+ (*)
Red de Energía del Perú		107,800		1,362		—			109,665		—		(4,111	)		2026 - 2031		AAA (**)
Instruments with individual losses less than S/4 million as of March 31, 2019 or December 31, 2018		1,445,484		449		(31,371	)		3,559,022		296		(73,475	)
Total		7,944,880		135,295		(167,272	)		10,562,488		52,568		(395,463	)

(*) Instrument rated abroad.

(**) Instrument rated in Peru.

(***) Corresponds to the instrument’s rating with the largest unrealized loss.

F-206

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

The movement of the allowance for expected credit losses for debt instruments measured at fair value through other comprehensive income is presented below:

	As of March 31, 2019			As of December 31, 2018			As of March 31, 2018
	S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of the period		28,050			40,840			40,840
New assets originated or purchased		588			1,215			455
Assets derecognized or matured (excluding write-offs)		(177	)		(13,463	)		(2,438	)
Effect on the expected credit loss due to the change of the Stage during the period		—			—			—
Effect on the expected credit loss different to changes of the stage during the period (*)		(2,298	)		(829	)		(275	)
Change in the models and inputs used to calculate the expected credit losses		—			—			—
Write offs		—			—			—
Foreign exchange effect		(28	)		287			108
Expected credit loss under IFRS 9 at the end of the period		26,135			28,050			38,690

(*) Corresponds mainly to the variation in the inputs used for calculating the expected credit losses.

As a result of the assessment of the impairment of its debt instruments at fair value through other comprehensive income, the Group recorded a recovery of the impairment of S/1,887,000 and S/2,258,000 for the three-month periods ended March 31, 2019 and 2018, respectively; and a recovery of the impairment of S/13,077,000 during the year 2018, which were presented in the caption “Impairment recovery on financial investments” in the interim condensed consolidated statements of income.

F-207

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(d) The composition of financial instruments at fair value through profit or loss is as follows:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Equity instruments
Local and foreign mutual funds and investment funds participations		1,102,969		1,144,771
BioPharma Credit PLC.		140,558		144,157
Royalty Pharma, Note 19 (a)		140,126		78,808
ViaSat Inc.		28,286		21,705
LendUp		23,389		23,720
Ishare Core MSCI World UCIT		20,068		18,195
Others		62,320		72,046
Debt instruments
Corporate, leasing and subordinated bonds		31,762		42,625
Peruvian Sovereign Bonds		15,618		21,927
United States of America Treasury Bonds		—		3,514
Total		1,565,096		1,571,468

(e) As of March 31, 2019 and December 31, 2018, the investments at amortized costs are totally comprised of Peruvian Sovereign Bonds for an amount of S/1,848,731,000 and S/1,884,067,000, respectively, including accrued interest. These investments present a low credit risk and the expected credit loss is non-significant.

As of March 31, 2019, the estimated fair value of these investments amounts to approximately S/1,858,634,000 (S/1,856,325,000, as of December 31, 2018).

As of March 31, 2019 and December 31, 2018, Interbank holds loans with the BCRP for approximately S/768,988,000 and S/650,862,000, respectively, see Note 9(a), that are guaranteed through the Peruvian Sovereign Bonds; which are classified as restricted for approximately S/792,262,000 and S/738,635,000, respectively.

F-208

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(f) As of March 31, 2019 and December 31, 2018, the composition of equity instruments measured at fair value through other comprehensive income is as follows:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
InRetail Perú Corp., Note 19 (a)		283,750		228,122
BioPharma Credit PLC		254,806		261,484
Ishares diverse countries (ETF)		141,076		130,155
Ferreycorp S.A.A.		76,365		78,528
Engie Energía Perú S.A.		57,866		51,384
Luz del Sur S.A.A.		40,660		23,727
Vanguard FTSE Emerging Markets		28,203		25,702
Gilead Sciences INC		19,413		18,988
Bolsa de Valores de Lima S.A.		15,661		15,737
Others below S/5 million		10,937		11,490
Total		928,737		845,317

(g) Below are the debt instruments measured at fair value through other comprehensive income and at amortized cost according to the stages indicated by IFRS 9 as of March 31, 2019 and December 31, 2018:

	March 31, 2019								December 31, 2018
Debt instruments measured at fair value through other comprehensive income and at amortized cost (*)	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Corporate, leasing and subordinated bonds		7,659,654		315,789		—		7,975,443		7,167,899		313,245		—		7,481,144
Peruvian Sovereign Bonds		4,438,657		—		—		4,438,657		4,527,274		—		—		4,527,274
Negotiable Certificates of Deposit issued by BCRP		1,491,269		—		—		1,491,269		1,380,479		—		—		1,380,479
Bonds guaranteed by the Peruvian Government		750,529		—		—		750,529		794,998		—		—		794,998
Global Bonds of the Republic of Peru		332,581		—		—		332,581		319,058		—		—		319,058
United States of America Treasury Bonds		82,868		—		—		82,868		82,849		—		—		82,849
Global Bonds of the Republic of Colombia		64,623		—		—		64,623		267,436		—		—		267,436
Global Bonds of the United Mexican States		63,105		—		—		63,105		98,616		—		—		98,616
Global Bonds of the Republic of Chile		—		—		—		—		35,616		—		—		35,616
Total		14,883,286		315,789		—		15,199,075		14,674,225		313,245		—		14,987,470

(*) The amounts presented do not consider impairment.

F-209

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

5. Loans, net

(a) This caption is made up as follows:

	As of March 31, 2019			As of December 31, 2018
	S/(000)			S/(000)
Direct loans
Loans		26,107,303			25,569,152
Credit cards		5,131,764			4,881,404
Leasing		1,635,600			1,682,629
Discounted notes		467,285			494,953
Factoring		256,149			309,558
Advances and overdrafts		39,918			50,219
Refinanced loans		213,747			210,384
Past due and under legal collection loans		867,239			856,909
		34,719,005			34,055,208
Plus (minus)
Accrued interest from performing loans		342,297			318,250
Unearned interest and interest collected in advance		(42,317	)		(47,737	)
Impairment allowance for loans (c)		(1,396,243	)		(1,364,804	)
Total direct loans, net		33,622,742			32,960,917
Indirect loans		3,992,027			4,071,460

(b) The classification of the direct loan portfolio is as follows:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Commercial loans		16,013,120		16,032,068
Consumer loans		11,380,611		10,891,278
Mortgage loans		6,586,861		6,407,479
Small and micro-business loans		738,413		724,383
Total		34,719,005		34,055,208

For purposes of estimating the impairment loss in accordance with IFRS 9, the Group’s loan portfolio is segmented by homogeneous groups that share similar risk characteristics; the Group determined these 3 types of portfolios: Retail Banking (groups consumer and mortgage loans), Commercial Banking (groups commercial loans) and Small Business Banking (groups loans to small and micro-business).

F-210

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(c) The movement of the allowance for expected credit loss, calculated according to IFRS 9, is as follows:

(c.1) Total direct loans

	As of March 31, 2019												As of March 31, 2018												As of December 31, 2018
Changes in the allowance for expected credit losses for direct loans	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of period balances		394,801			462,749			507,254			1,364,804			329,161			477,616			453,570			1,260,347			1,260,347
Impact of the expected credit loss in the consolidated income statements—
New assets originated or purchased		93,533			—			—			93,533			81,456			—			—			81,456			366,155
Assets derecognized or repaid (excluding write offs)		(33,186	)		(22,042	)		(9,612	)		(64,840	)		(32,555	)		(22,249	)		(26,745	)		(81,549	)		(198,889	)
Transfers to Stage 1		78,148			(77,386	)		(762	)		—			71,692			(70,973	)		(719	)		—			—
Transfers to Stage 2		(60,936	)		74,221			(13,285	)		—			(55,940	)		69,402			(13,462	)		—			—
Transfers to Stage 3		(3,152	)		(73,550	)		76,702			—			(2,206	)		(75,309	)		77,515			—			—
Impact on the expected credit loss for credits that change stage in the period		(55,334	)		122,047			116,857			183,570			(51,322	)		105,639			102,987			157,304			586,327
Others (*)		(6,160	)		(5,770	)		(2,673	)		(14,603	)		2,933			(3,508	)		21,148			20,573			(14,370	)
		12,913			17,520			167,227			197,660			14,058			3,002			160,724			177,784			739,223
Write offs (**)		—			—			(193,042	)		(193,042	)		—			—			(213,810	)		(213,810	)		(791,107	)
Recovery of written-off loans		—			—			31,312			31,312			—			—			35,129			35,129			145,586
Foreign exchange effect (***)		(362	)		(1,156	)		(2,973	)		(4,491	)		(102	)		(419	)		(824	)		(1,345	)		10,755
Expected credit loss under IFRS 9 at the end of period balances		407,352			479,113			509,778			1,396,243			343,117			480,199			434,789			1,258,105			1,364,804

F-211

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(c.1.1) The following tables present the changes in the allowance for expected credit losses for direct loans for each classification of the direct loan portfolio:

Changes in the allowance for expected credit losses for direct loans—Commercial

	As of March 31, 2019												As of March 31, 2018												As of December 31, 2018
	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of period balances		68,705			27,397			98,111			194,213			48,692			28,438			75,341			152,471			152,471
Impact of the expected credit loss in the consolidated income statements—
New assets originated or purchased		22,939			—			—			22,939			21,842			—			—			21,842			72,297
Assets derecognized or repaid (excluding write offs)		(16,696	)		(4,757	)		(749	)		(22,202	)		(18,258	)		(4,867	)		(1,822	)		(24,947	)		(50,354	)
Transfers to Stage 1		1,892			(1,892	)		—			—			2,066			(2,066	)		—			—			—
Transfers to Stage 2		(5,453	)		5,765			(312	)		—			(5,646	)		7,017			(1,371	)		—			—
Transfers to Stage 3		(613	)		(2,435	)		3,048			—			—			(2,095	)		2,095			—			—
Impact on the expected credit loss for credits that change stage in the period		(1,186	)		4,372			4,717			7,903			(1,350	)		3,496			5,668			7,814			40,119
Others (*)		(4,502	)		(1,551	)		(417	)		(6,470	)		1,265			331			1,321			2,917			10,835
		(3,619	)		(498	)		6,287			2,170			(81	)		1,816			5,891			7,626			72,897
Write offs (**)		—			—			(1,124	)		(1,124	)		—			—			(2,588	)		(2,588	)		(34,355	)
Recovery of written-off loans		—			—			213			213			—			—			306			306			1,163
Foreign exchange effect (***)		(275	)		(164	)		(579	)		(1,018	)		(83	)		(58	)		(148	)		(289	)		2,037
Expected credit loss under IFRS 9 at the end of period balances		64,811			26,735			102,908			194,454			48,528			30,196			78,802			157,526			194,213

Changes in the allowance for expected credit losses for direct loans—Consumer

	As of March 31, 2019												As of March 31, 2018												As of December 31, 2018
	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of period balances		303,953			398,353			284,645			986,951			262,827			408,166			275,653			946,646			946,646
Impact of the expected credit loss in the consolidated income statements—
New assets originated or purchased		64,494			—			—			64,494			53,781			—			—			53,781			276,193
Assets derecognized or repaid (excluding write offs)		(14,707	)		(16,532	)		(5,814	)		(37,053	)		(12,728	)		(15,134	)		(17,195	)		(45,057	)		(129,000	)
Transfers to Stage 1		70,421			(69,659	)		(762	)		—			63,373			(62,654	)		(719	)		—			—
Transfers to Stage 2		(53,224	)		58,372			(5,148	)		—			(46,295	)		52,174			(5,879	)		—			—
Transfers to Stage 3		(2,371	)		(65,351	)		67,722			—			(2,142	)		(67,914	)		70,056			—			—
Impact on the expected credit loss for credits that change stage in the period		(49,057	)		113,558			97,081			161,582			(44,774	)		97,624			81,689			134,539			483,030
Others (*)		960			(4,256	)		(1,561	)		(4,857	)		642			(3,499	)		14,361			11,504			(25,882	)
		16,516			16,132			151,518			184,166			11,857			597			142,313			154,767			604,341
Write offs (**)		—			—			(179,361	)		(179,361	)		—			—			(201,877	)		(201,877	)		(710,980	)
Recovery of written-off loans		—			—			30,086			30,086			—			—			33,883			33,883			140,049
Foreign exchange effect (***)		(58	)		(917	)		(1,761	)		(2,736	)		(12	)		(338	)		(508	)		(858	)		6,895
Expected credit loss under IFRS 9 at the end of period balances		320,411			413,568			285,127			1,019,106			274,672			408,425			249,464			932,561			986,951

F-212

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

Changes in the allowance for expected credit losses for direct loans—Mortgage

	As of March 31, 2019												As of March 31, 2018												As of December 31, 2018
	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of period balances		8,428			20,142			86,040			114,610			8,377			24,743			71,967			105,087			105,087
Impact of the expected credit loss in the consolidated income statements—
New assets originated or purchased		544			—			—			544			579			—			—			579			2,035
Assets derecognized or repaid (excluding write offs)		(160	)		(290	)		(2,768	)		(3,218	)		(375	)		(484	)		(7,094	)		(7,953	)		(11,857	)
Transfers to Stage 1		4,207			(4,207	)		—			—			4,670			(4,670	)		—			—			—
Transfers to Stage 2		(732	)		8,416			(7,684	)		—			(661	)		6,873			(6,212	)		—			—
Transfers to Stage 3		(24	)		(1,774	)		1,798			—			(40	)		(2,655	)		2,695			—			—
Impact on the expected credit loss for credits that change stage in the period		(3,776	)		12			8,927			5,163			(4,104	)		301			10,676			6,873			23,422
Others (*)		221			(278	)		(788	)		(845	)		741			(760	)		4,246			4,227			(3,032	)
		280			1,879			(515	)		1,644			810			(1,395	)		4,311			3,726			10,568
Write offs (**)		—			—			—			—			—			—			(455	)		(455	)		(2,689	)
Recovery of written-off loans		—			—			—			—			—			—			—			—			—
Foreign exchange effect (***)		(22	)		(72	)		(581	)		(675	)		(6	)		(22	)		(146	)		(174	)		1,644
Expected credit loss under IFRS 9 at the end of period balances		8,686			21,949			84,944			115,579			9,181			23,326			75,677			108,184			114,610

Changes in the allowance for expected credit losses for direct loans—Small and micro-business

	As of March 31, 2019												As of March 31, 2018												As of December 31, 2018
	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of period balances		13,715			16,857			38,458			69,030			9,265			16,269			30,609			56,143			56,143
Impact of the expected credit loss in the consolidated income statements—
New assets originated or purchased		5,556			—			—			5,556			5,254			—			—			5,254			15,630
Assets derecognized or repaid (excluding write offs)		(1,623	)		(463	)		(281	)		(2,367	)		(1,194	)		(1,764	)		(634	)		(3,592	)		(7,678	)
Transfers to Stage 1		1,628			(1,628	)		—			—			1,583			(1,583	)		—			—			—
Transfers to Stage 2		(1,527	)		1,668			(141	)		—			(3,338	)		3,338			—			—			—
Transfers to Stage 3		(144	)		(3,990	)		4,134			—			(24	)		(2,645	)		2,669			—			—
Impact on the expected credit loss for credits that change stage in the period		(1,315	)		4,105			6,132			8,922			(1,094	)		4,218			4,954			8,078			39,756
Others (*)		(2,839	)		315			93			(2,431	)		285			420			1,220			1,925			3,709
		(264	)		7			9,937			9,680			1,472			1,984			8,209			11,665			51,417
Write offs (**)		—			—			(12,557	)		(12,557	)		—			—			(8,890	)		(8,890	)		(43,083	)
Recovery of written-off loans		—			—			1,013			1,013			—			—			940			940			4,374
Foreign exchange effect (***)		(7	)		(3	)		(52	)		(62	)		(1	)		(1	)		(22	)		(24	)		179
Expected credit loss under IFRS 9 at the end of period balances		13,444			16,861			36,799			67,104			10,736			18,252			30,846			59,834			69,030

F-213

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(c.2) Indirect loans (substantially all indirect loans correspond to commercial loans)

	As of March 31, 2019												As of March 31, 2018												As of December 31, 2018
	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss under IFRS 9 at the beginning of period balances		19,829			19,753			22,469			62,051			46,890			77,299			14,989			139,178			139,178
Impact of the expected credit loss in the consolidated income statements—
New assets originated or purchased		2,201			—			—			2,201			4,528			—			—			4,528			12,138
Assets derecognized or repaid (excluding write offs)		(6,200	)		(5,046	)		(12	)		(11,258	)		(3,061	)		(7,152	)		(117	)		(10,330	)		(53,790	)
Transfers to Stage 1		572			(572	)		—			—			705			(705	)		—			—			—
Transfers to Stage 2		(586	)		612			(26	)		—			(1,890	)		1,890			—			—			—
Transfers to Stage 3		(2	)		(1	)		3			—			—			(24	)		24			—			—
Impact on the expected credit loss for credits that change stage in the period		(344	)		31			97			(216	)		(231	)		986			509			1,264			(3,009	)
Others (*)		(314	)		654			(2,313	)		(1,973	)		286			(785	)		138			(361	)		(34,490	)
		(4,673	)		(4,322	)		(2,251	)		(11,246	)		337			(5,790	)		554			(4,899	)		(79,151	)
Write offs (**)		—			—			—			—			—			—			—			—			—
Recovery of written-off loans		—			—			—			—			—			—			—			—			—
Foreign exchange effect (***)		(156	)		(227	)		(8	)		(391	)		(107	)		(105	)		(10	)		(222	)		2,024
Expected credit loss under IFRS 9 at the end of period balances		15,000			15,204			20,210			50,414			47,120			71,404			15,533			134,057			62,051

(*) Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of period and its amortized cost at the end of period (variation in the provision recorded for partial amortizations that did not represent a reduction or cancellation of the loan), (ii) variations in credit risk that did not generate transfers to other stages; and (iii) the execution of contingent loans (conversion of indirect debt into direct debt).

(**) The Group writes off financial assets that are still subject to collection activities. In this regard, the Group seeks to recover the amounts legally owed in full, but have been written off because there is no reasonable expectation of recovery.

(***) Corresponds mainly to the effect of the exchange rate and the variation of the value of money over time.

(d) In Management’s opinion, the impairment allowance for loan recorded as of March 31, 2019 and 2018 and December 31, 2018 has been established in accordance with NIIF 9 and is sufficient to cover incurred losses on the loan portfolio.

F-214

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

6. Investment property

(a) This caption is made up as follows:

	As of March 31, 2019		As of December 31, 2018		Acquisition or construction year		Hierarchy level (i)		Valuation methodology As of March 31, 2019 / As of December 31, 2018
	S/(000)		S/(000)
Land
San Isidro—Lima		245,768		249,377		2009		Level 3		Appraisal
Miraflores—Lima		69,646		70,800		2017		Level 3		Appraisal
San Martín de Porres—Lima		63,449		64,501		2015		Level 3		Appraisal
Piura		49,881		50,708		2008		Level 3		Appraisal
Sullana		16,223		16,491		2012		Level 3		Appraisal
Santa Clara—Lima		10,128		10,342		2017		Level 3		Appraisal
Chimbote		7,300		7,421		2015		Level 3		Appraisal
Lurin		4,032		4,032		2008		Level 3		Appraisal
Others		11,631		11,672		—		Level 3		Appraisal
		478,058		485,344
Completed investment property—“Real Plaza” Shopping Malls
Talara		39,837		41,337		2015		Level 3		DCF
Buildings
Orquídeas—San Isidro—Lima		138,689		144,645		2017		Level 3		DCF
Ate Vitarte—Lima		69,319		67,894		2006		Level 3		DCF
Chorrillos—Lima, (d)		64,572		51,552		2017		Level 3		DCF
Maestro—Huancayo		32,229		32,901		2017		Level 3		DCF
Cusco		30,740		28,472		2017		Level 3		DCF
Panorama—Lima		20,571		20,437		2016		Level 3		DCF
Pardo y Aliaga—Lima		18,627		19,164		2008		Level 3		DCF
Trujillo		17,636		16,270		2016		Level 3		DCF
Cercado de Lima—Lima		12,783		12,929		2017		Level 3		DCF
Others		24,773		24,100		2017		Level 3		DCF
		429,939		418,364
Built on leased land
San Juan de Lurigancho—Lima		41,761		41,493		2017		Level 3		DCF
Total		989,595		986,538

DCF: Discounted cash flow

(i) There were no transfers between levels of hierarchy.

(ii) As of March 31, 2019 and December 31, 2018, there are no liens on any investment property.

(b) The net gain on investment property as of March 31, 2019 and 2018, consists of the following:

	As of March 31, 2019		As of March 31, 2018
	S/(000)		S/(000)
Gain (loss) on valuation of investment property		1,322		(5,106	)
Income for rental of investment property		10,552		6,722
Gain on sale of investment property (e)		—		1,559
Total		11,874		3,175

F-215

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(c) The movement of investment property is as follows:

	As of March 31, 2019		As of March 31, 2018
	S/(000)		S/(000)
Beginning of period balances		986,538		1,118,608
Additions (d)		1,735		22,546
Sales (e)		—		(192,521	)
Valuation gain (loss)		1,322		(5,106	)
Balance as of March 31		989,595		943,527
Balance as of December 31, 2018				986,538

(d) During 2019, the main additions are outlays related to the construction of the “Chorrillos-Lima” building.

During 2018, the main additions are outlays related to the construction of the “Orquídeas-San Isidro—Lima” building.

(e) In January 2018, Interseguro sold, in cash and at market value, the Real Plaza Pucallpa shopping center, a parcel located in Lurín (Lima) and a building through a surface rights agreement to related entities.

(f) Fair value measurement—Investment property—Valuation techniques

The valuation techniques to estimate the fair value and the main assumptions used are described in Note 8 “Investment property” of the 2018 Annual Consolidated Financial Statements.

The main assumptions used in the valuation and estimation of the fair value of investment property are detailed below:

	As of March 31, 2019		As of December 31, 2018
Average ERV	US$	61.3	US$	59.1
Long-term inflation		2.6%		2.6%
Long-term occupancy rate		99.0%		98.9%
Average growth rate of rental income		2.6%		2.6%
Average NOI margin		93.0%		95.3%
Discount rate		9.0%		9.0%

F-216

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

7. Accounts receivable and other assets, net; accounts payable, provisions and other liabilities

(a) These captions are comprised of the following:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Accounts receivable and other assets
Financial instruments
Accounts receivable from sale of investments		556,613		367,902
Other accounts receivable, net		371,294		440,531
Accounts receivable related to derivative financial instruments (b)		138,367		185,376
Assets for technical reserves for claims and premiums by reinsurers		122,207		147,891
Accounts receivable from reinsurers and coinsurers		37,762		39,875
Operations in process		33,553		54,428
Insurance operations receivables, net		14,606		42,795
Credit card commissions receivable		13,534		13,237
Total		1,287,936		1,292,035
Non-financial instruments
Deferred charges		95,081		80,113
Investments in associates		66,507		63,233
Prepaid Income Tax		16,725		19,860
Prepaid rights to related entity		8,175		8,856
Public works tax deduction		7,637		22,608
Value Added Tax credit		5,310		5,517
Others		6,278		10,332
		205,713		210,519
Total		1,493,649		1,502,554
Accounts payable, provisions and other liabilities
Financial instruments
Accounts payable for acquisitions of investments		446,179		228,687
Other accounts payable		430,086		471,412
Contract liability with investment component		348,160		298,382
Lease liabilities, Note 2(c)		330,193		—
Accounts payable related to derivative financial instruments (b)		144,142		154,116
Operations in process		129,094		116,717
Workers’ profit sharing and salaries payable		79,314		127,516
Allowance for indirect loan losses		50,414		62,051
Accounts payable to reinsurers and coinsurers		36,500		62,879
		1,994,082		1,521,760
Non-financial instruments
Taxes payable		130,517		101,085
Deferred income		63,159		59,482
Provision for other contingencies		47,567		46,506
Others		11,218		21,530
		252,461		228,603
Total		2,246,543		1,750,363

F-217

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(b) The following table presents, as of March 31, 2019 and December 31, 2018, the fair value of derivative financial instruments recorded as assets or liabilities, including their notional amounts.

As of March 31, 2019	Assets		Liabilities		Notional amount		Effective part recognized in other comprehensive income during the three-month period ended March 31, 2019			Maturity	Hedged instruments	Caption of the interim condensed consolidated statements of financial position where the hedged item has been recognized
	S/(000)		S/(000)		S/(000)		S/(000)
Derivatives held for trading
Forward exchange contracts		10,948		9,856		3,057,613		—		Between April 2019 and March 2020	—	—
Interest rate swaps		29,005		36,479		2,385,006		—		Between November 2020 and December 2029	—	—
Currency swaps		35,529		36,226		1,018,894		—		Between April 2019 and January 2025	—	—
Cross currency swaps		—		54,766		195,291		—		January 2023	—	—
Options		263		838		128,975		—		Between April 2019 and June 2020	—	—
		75,745		138,165		6,785,779		—
Derivatives held as hedges
Cash flow hedges:
Cross currency swaps (CCS)		46,626		1,307		1,393,560		(8,015	)	January 2023	Senior bonds	Bonds, notes and other obligations
Cross currency swaps (CCS)		15,996		—		497,700		3,174		October 2027	Senior bonds	Bonds, notes and other obligations
Interest rate swaps (IRS)		—		1,436		132,720		(231	)	November 2020	Due to banks	Due to banks and correspondents
Interest rate swaps (IRS)		—		862		82,950		(176	)	December 2020	Due to banks	Due to banks and correspondents
Interest rate swaps (IRS)		—		861		82,950		(176	)	December 2020	Due to banks	Due to banks and correspondents
Cross currency swaps (CCS)		—		1,511		66,360		(83	)	October 2020	Senior bonds	Bonds, notes and other obligations
		62,622		5,977		2,256,240		(5,507	)
		138,367		144,142		9,042,019		(5,507	)

F-218

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

As of December 31, 2018	Assets		Liabilities		Notional amount		Effective part recognized in other comprehensive income during the year			Maturity	Hedged instruments		Caption of the interim condensed consolidated statements of financial position where the hedged item has been recognized
	S/(000)		S/(000)		S/(000)		S/(000)
Derivatives held for trading
Forward exchange contracts		20,009		21,529		5,177,208		—		Between January 2019 and February 2020		—	—
Interest rate swaps		19,249		19,854		2,018,220		—		Between November 2020 and December 2029		—	—
Currency swaps		48,452		48,915		909,114		—		Between January 2019 and January 2025		—	—
Cross currency swaps		—		59,683		198,529		—		January 2023		—	—
Options		628		1,956		234,780		—		Between January 2019 and June 2020		—	—
		88,338		151,937		8,537,851		—
Derivatives held as hedges
Cash flow hedges:
Cross currency swaps (CCS)		74,144		—		1,349,200		25,775		January 2023		Senior bonds	Bonds, notes and other obligations
Cross currency swaps (CCS)		22,675		—		505,950		3,420		October 2027		Senior bonds	Bonds, notes and other obligations
Interest rate swaps (IRS)		—		1,002		134,920		(684	)	November 2020		Due to banks	Due to banks and correspondents
Interest rate swaps (IRS)		—		588		84,325		(393	)	December 2020		Due to banks	Due to banks and correspondents
Interest rate swaps (IRS)		—		589		84,325		(394	)	December 2020		Due to banks	Due to banks and correspondents
Cross currency swaps (CCS)		219		—		67,460		2,562		October 2020		Senior bonds	Bonds, notes and other obligations
		97,038		2,179		2,226,180		30,286
		185,376		154,116		10,764,031		30,286

(i) As of March 31, 2019 and December 31, 2018, certain derivative financial instruments required the establishment of collateral deposits, see Note 3(b).

(ii) For the designated hedging derivatives mentioned in the chart above, changes in fair values of hedging instruments completely offset the changes in fair values of hedged items; therefore, there has been no hedge ineffectiveness during the three-month period ended March 31, 2019 and during the fiscal year 2018. Likewise, during the three-month period ended March 31, 2019 and during the fiscal year 2018 no hedge was discontinued.

(iii) Derivatives held for trading are traded mainly to satisfy clients’ needs. The Group may also take positions with the expectation of profiting from favorable movements in prices or rates. Also, this caption includes any derivatives which do not comply with IFRS 9 hedge accounting requirements.

F-219

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

8. Deposits and obligations

(a) This caption is made up as follows:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Demand deposits		11,721,409		10,109,492
Time deposits		10,710,418		11,074,316
Savings deposits		10,678,989		10,728,257
Severance indemnity deposits		1,664,804		1,763,826
Other obligations		14,380		6,059
Total		34,790,000		33,681,950

(b) Interest rates applied to deposits and obligations are determined by Interbank based on the market interest rates.

(c) As of March 31, 2019 and December 31, 2018, approximately S/9,694,219,000 and S/9,734,215,000, respectively, of deposits and obligations are covered by the Peruvian Deposit Insurance Fund.

9. Due to banks and correspondents

(a) This caption is made up as follows:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
By type
BCRP, Notes 3(b), 4(b) (**) and (e)		1,520,688		2,073,919
Promotional credit lines		1,381,431		1,386,603
Loans received from foreign entities, (b) and Note 4(b) (*)		783,048		796,028
Loans received from Peruvian entities		1,482		763
		3,686,649		4,257,313
Interest and commissions payable		39,470		36,048
		3,726,119		4,293,361
By term
Short term		1,935,638		2,507,623
Long term		1,790,481		1,785,738
Total		3,726,119		4,293,361

(b) As of March 31, 2019 and December 31, 2018, some of the Group loan agreements include standard clauses regarding the compliance of financial ratios, assets disposals and intercompany transactions under certain conditions, the use of funds and other management issues, such as:

(i) Submit audited financial statements on an annual basis and unaudited financial statements on a quarterly basis (both in Spanish and English).

(ii) Maintain a determined global capital ratio.

F-220

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(iii) Maintain a determined coverage margin of non-performing loan portfolio.

(iv) Maintain a determined past due loans rate.

In the opinion of Management and its legal advisors, the Group complies with all covenants arising from its due to banks and correspondents as of March 31, 2019 and December 31, 2018.

F-221

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

10. Bonds, notes and other obligations

(a) This caption is made up as follows:

Issuance	Issuer	Annual interest rate	Interest payment	Maturity		Amount issued		As of March 31, 2019		As of December 31, 2018
						(000)		S/(000)		S/(000)
Local issuances
Subordinated bonds—first program
Second (B series)	Interbank	9.50%	Semi-annually		2023		US$30,000		92,568		94,086
Third (A series)	Interbank	3.5% + VAC (*)	Semi-annually		2023		S/110,000		70,000		70,000
Fifth (A series)	Interbank	8.50%	Semi-annually		2019		S/3,300		3,300		3,300
Sixth (A series)	Interbank	8.16%	Semi-annually		2019		US$15,110		50,135		50,966
Eighth (A series)	Interbank	6.91%	Semi-annually		2022		S/137,900		137,120		137,130
Second, first tranch (**)	Interseguro	6.97%	Semi-annually		2024		US$35,000		—		118,055
Second, second tranch	Interseguro	6.00%	Semi-annually		2024		US$15,000		49,770		50,594
									402,893		524,131
Subordinated bonds—second program
Second (A series)	Interbank	5.81%	Semi-annually		2023		S/150,000		149,789		149,776
Third (A series)	Interbank	7.50%	Semi-annually		2023		US$50,000		165,582		168,312
									315,371		318,088
Subordinated bonds—third program
First (Single series)	Interseguro	9.50%	Semi-annually		2029		US$20,000		66,360		—
Corporate bonds—second program
Fifth (A series)	Interbank	3.41% + VAC (*)	Semi-annually		2029		S/150,000		150,000		—
Negotiable certificates of deposits—first program
First (A series)	Interbank	4.28%	Annually		2020		S/150,000		143,927		—
Total local issuances									1,078,551		842,219
International issuances
Subordinated bonds	Interbank	6.625%	Semi-annually		2029		US$300,000		990,633		1,006,875
Junior subordinated notes	Interbank	8.50%	Semi-annually		2070		US$200,000		661,075		671,546
Senior bonds—First and second issuance	Interbank	5.75%	Semi-annually		2020		US$650,000		1,287,160		1,309,248
Senior bonds	IFS	4.125%	Semi-annually		2027		US$300,000		979,078		993,241
Senior bonds	Interbank	3.375%	Semi-annually		2023		US$484,895		1,537,962		1,558,979
Total international issuances									5,455,908		5,539,889
Total local and international issuances									6,534,459		6,382,108
Interest payable									128,754		114,670
Total									6,663,213		6,496,778

(*) The Spanish term “Valor de actualización constante” is referred to an amount subject to adjustments.

(**) On February 12, 2019, Interseguro executed the early redemption of said instruments and paid interest for approximately US$1,200,000.

F-222

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(b) The international issuances are listed at the Luxembourg Stock Exchange. On the other hand, the local and international issuances include standard clauses of compliance with financial ratios, the use of funds and other administrative matters.

As of March 31, 2019 and December 31, 2018, the international issuances maintain mainly this clause: Submit audited financial statements on an annual basis and unaudited financial statements on a quarterly basis (both in Spanish and English).

In the opinion of Management and its legal advisors, this clause has been met by the Group as of March 31, 2019 and December 31, 2018.

11. Insurance contract liabilities

(a) This caption is made up as follows:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Technical reserves for insurance premiums (b)		10,150,835		10,006,960
Technical reserves for claims		256,402		293,508
		10,407,237		10,300,468
By term
Short term		938,338		935,182
Long term		9,468,899		9,365,286
Total		10,407,237		10,300,468

F-223

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(b) The movement of technical reserves disclosed by type of insurance for the periods ended March 31, 2019 and 2018, is as follows:

	2019															2018
	Annuities			Retirement, disability and survival annuities			Life insurance			General insurance			Total			Annuities			Retirement, disability and survival annuities		Life insurance			General insurance			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)		S/(000)			S/(000)			S/(000)
Beginning of period balances		8,665,894			715,217			586,166			39,683			10,006,960			9,034,796			676,949		525,662			36,482			10,273,889
Insurance subscriptions		78,343			—			548			28,792			107,683			58,117			1		4,256			17,916			80,290
Interest rate effect		136,166			11,934			—			—			148,100			(32,143	)		10,209		—			—			(21,934	)
Time passage adjustments		(27,041	)		(1,646	)		29,533			(27,459	)		(26,613	)		(28,288	)		377		11,500			(17,513	)		(33,924	)
Maturities and recoveries		—			—			(8,037	)		—			(8,037	)		—			—		(3,393	)		—			(3,393	)
Exchange differences		(68,531	)		—			(8,718	)		(9	)		(77,258	)		(11,591	)		121		(988	)		(702	)		(13,160	)
Balances as of March 31		8,784,831			725,505			599,492			41,007			10,150,835			9,020,891			687,657		537,037			36,183			10,281,768
Balances as of December 31																	8,665,894			715,217		586,166			39,683			10,006,960

(c) In Management’s opinion, these balances reflect the exposure of life and general insurance contracts as of March 31, 2019 and December 31, 2018 in accordance with IFRS 4.

F-224

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(d) As of March 31, 2019 and December 31, 2018, the main assumptions used in the estimation of retirement, disability and survival annuities and individual life reserves are the following:

	As of March 31, 2019		As of December 31, 2018
Type	Mortality table	Technical rates	Mortality table	Technical rates
Annuities	SPP-S-2017, SPP-I-2017 with improvement factor for mortality	5.19% in US$ 2.61% in S/ VAC 6.00% in adjusted S/	SPP-S-2017, SPP-I-2017 with improvement factor for mortality	5.63% in US$ 2.74% in S/VAC 5.84% in adjusted S/
Retirement, disability and survival	SPP-S-2017, SPP-I-2017 with improvement factor for mortality	2.61% in S/ VAC	SPP-S-2017, SPP-I-2017 with improvement factor for mortality	2.74% in S/ VAC
Individual life insurance contracts (included linked insurance contracts)	CSO 80 adjusted	4.00 - 5.00%	CSO 80 adjusted	4.00 - 6.00%

The sensitivity of the estimates used by the Group to measure its insurance risks is represented primarily by life insurance risks; the main variables as of March 31, 2019 and December 31, 2018, are the interest rates and the mortality tables. The Group has assessed the changes of the reserves related to its most significant life insurance contracts included in the reserves of annuities, retirement, disability and survival of +/- 100 basis points (bps) in the interest rates and of +/- 500 bps of the mortality factors, being the results as follows:

	As of March 31, 2019								As of December 31, 2018
			Variation of the reserve								Variation of the reserve
Variables	Reserve		Amount			Percentage			Reserve		Amount			Percentage
	S/(000)		S/(000)			%			S/(000)		S/(000)			%
Annuities
Portfolio in S/ and US Dollars—Basis amount
Changes in interest rate: + 100 bps		7,917,218		(867,613	)		(9.88	)		7,816,973		(848,921	)		(9.80	)
Changes in interest rate: - 100 bps		9,839,830		1,054,999			12.01			9,696,893		1,030,999			11.90
Changes in mortality table at 105%		8,703,412		(81,419	)		(0.93	)		8,587,633		(78,261	)		(0.90	)
Changes in mortality table at 95%		8,870,098		85,267			0.97			8,747,817		81,923			0.95
Retirements, disability and survival
Portfolio in S/—Basis amount
Changes in interest rate: + 100 bps		644,088		(81,417	)		(11.22	)		635,838		(79,379	)		(11.10	)
Changes in interest rate: - 100 bps		826,534		101,029			13.93			813,614		98,397			13.76
Changes in mortality table at 105%		716,446		(9,059	)		(1.25	)		706,495		(8,722	)		(1.22	)
Changes in mortality table at 95%		735,014		9,509			1.31			724,366		9,149			1.28

12. Equity

(a) Capital stock—

As of March 31, 2019 and December 31, 2018, IFS’s capital stock is represented by 113,110,864 common shares subscribed and paid in. IFS’s shares are quoted at the Lima Stock Exchange; have no nominal value and their issuance value was US$9.72 per share.

The General Shareholders’ Meeting of IFS held on April 1, 2019, agreed to distribute dividends for the year 2018 for approximately US$197,187,000 (equivalent to approximately S/654,464,000), US$1.75 per share, paid on May 3, 2019.

F-225

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

The General Shareholders’ Meeting of IFS held on April 2, 2018, agreed to distribute dividends for the year 2017 for approximately US$157,750,000 (equivalent to approximately S/510,688,000), US$1.40 per share.

(b) Shareholders’ equity for legal purposes (regulatory capital)—

IFS and Inteligo Group Corp. are not required to establish a regulatory capital for statutory purposes. As of March 31, 2019 and December 31, 2018, the regulatory capital required for Interbank and Interseguro is calculated based on the separate financial statements of each Subsidiary prepared following the accounting principles and practices stated by the SBS. Also, as of those dates, the regulatory capital required for Inteligo Bank is calculated in accordance with the requirements of the Central Bank of the Bahamas. The regulatory capital required for Interbank, Interseguro and Inteligo Bank is detailed in Note 17(f) of the 2018 Annual Consolidated Financial Statements.

(c) Treasury stock held by IFS and Subsidiaries—

As of March 31, 2019 and December 31, 2018, the Group holds shares issued by IFS, as detailed below:

Entity	Number of shares		Cost
	(000)		S/(000)
Interbank		1,986		164,295
IFS		432		43,883
Total		2,418		208,178

In the Shareholders’ Meeting of IFS, held on May 25, 2016, the program of acquisition of own issuance shares was approved. Such acquisition, as agreed, may be carried out on one or more occasions, as appropriate to IFS’s interests, according to market conditions and other legal limits and factors in force at the time of the acquisition. These acquisitions shall be subject to the current legal limit (10-percent limit of the capital stock) established in Article 84 of the Securities Market Act. Likewise, the Shareholders’ Meeting set a limit for the acquisitions made under this program, which may not exceed 3,500,000 shares (equivalent to 3.09 percent of the Company’s capital stock), without taking into account the shares acquired prior to this program. On August 9, 2017, Management, pursuant to said delegation, informed the Board of Directors of IFS its decision to terminate the program of acquisition of own issuance shares.

In 2018, Interbank sold 3,009,490 shares of IFS at their market price for approximately US$121,133,000 (equivalent to approximately S/382,727,000) through the Lima Stock Exchange. Said sale was recorded as a decrease in “Treasury stock” by S/259,022,000 and the difference amounting to S/123,705,000 was recorded in “Retained earnings”.

13. Tax situation

(a) IFS and its Subsidiaries incorporated and domiciled in the Republic of Panama and the Commonwealth of the Bahamas are not subject to any Income Tax, or any other taxes on capital gains, equity or property; nevertheless, IFS is subject to an additional tax on dividends received from its Subsidiaries incorporated and domiciled in Peru. The Subsidiaries incorporated and domiciled in Peru are subject to the Peruvian Tax legislation.

F-226

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(b) The Tax Authority (henceforth “SUNAT”, by its Spanish acronym) is legally entitled to perform tax audits procedures for up to four years subsequent to the date at which the tax return regarding a taxable period must be filed. The Income Tax and the Value-Added-Tax returns subject to inspection by the Tax Authority in each of the Subsidiaries, are the following:

• Interbank, Hipotecaria Sura and Seguros Sura: Income Tax returns of the years 2012 and from 2014 to 2018, and Value-Added-Tax returns of the years 2014 to 2018, are pending reviewing by SUNAT.

• Interseguro: Income Tax returns of the years 2013, 2015, 2017 and 2018, and Value-Added-Tax returns of the years 2014 to 2018, are pending reviewing by SUNAT.

Given the possible interpretations that SUNAT may give to the legislation in effect, up to date it is not possible to determine whether or not any review to be conducted would result in liabilities for the Subsidiaries; any increased tax or surcharge that could arise from possible tax reviews would be applied to the results of the period in which such tax increase or surcharge may be determined.

In the case of Interbank, in April 2004, June 2006, February 2007, June 2007, November 2007, October 2008 and December 2010, it received a number of Tax Determination and Tax Penalty notices corresponding mainly to the Income Tax determination for the fiscal years 2000 to 2006. As a result, claims and appeals were filed and subsequent contentious administrative proceedings were started, with the exception of Income Tax 2006, which is still pending in the Tax Court.

Regarding the tax litigations followed by Interbank related to the annual Income Tax returns for the years 2000 to 2006, the most relevant matter subject to discrepancy with SUNAT corresponds to whether the “interests in suspense” are subject to Income Tax or not. In this sense, Interbank considers that the interests in suspense do not constitute accrued income, in accordance with the SBS and the IFRS, which is also supported by a ruling of the Permanent Constitutional and Social Law Chamber of the Supreme Court issued in August 2009.

Notwithstanding the foregoing, in February 2018, Interbank was informed that the Third Transitory Chamber of Constitutional and Social Law of the Supreme Court, issued a ruling regarding a third bank that impacts Interbank’s original estimation regarding the degree of contingency indicated in the previous paragraph; which, based on this new circumstance and in compliance with the IFRS, Interbank estimates as possible as of the date of this report.

The tax liability requested for this concept and other minor matters by SUNAT as of March 31, 2019, amounts to approximately S/382,000,000. This amount has been calculated according to the resolutions issued by SUNAT on March, 2019, in compliance with the mandate of the Tax Court.

From the tax and legal analysis carried out, Interbank’s Management and its external legal advisors consider that there is sufficient technical support for the prevalence of Interbank’s position; as a result, it has not recorded any provision for this contingency as of March 31, 2019.

On the other hand, during the years 2013 and 2014, SUNAT closed the audit processes corresponding to the assessment of the Income Tax of the fiscal years 2007, 2008 and 2009, respectively, thus issuing a series of Assessment Resolutions without any additional levying of said tax.

On January 11, 2016, SUNAT closed the partial audit corresponding to the fiscal year 2013 for withholding of Income Tax from non-domiciled beneficiaries, issuing a series of Final Assessment Resolutions without any additional levying of the tax in question.

F-227

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

On February 14, 2018, SUNAT, through Letter No.180011585680-01-SUNAT notified Interbank of the beginning of the partial inspection process for the Income Tax for the year 2014.

On September 7, 2018, SUNAT closed the partial inspection process for the fifth category tax for the year 2014; without additional tax request.

On November 6, 2018, SUNAT closed the inspection corresponding to the fiscal year 2010 related to Income Tax. Interbank paid the amount of the deficiency under protest and filed a tax claim. Currently, the claim is pending resolution by the Tax Administration.

On January 14, 2019, Interbank was notified of the Determination and Penalty Resolutions corresponding to the audit of the Income Tax for the fiscal year 2013. The tax debt sought by SUNAT amounts to approximately S/53,000,000. To date, Interbank Management has submitted the respective complaint to the resolutions indicated above. In Management opinion and its legal advisors, consider that there are technical arguments for the prevalence of Interbank’s position.

On January 4, 2019, Interseguro was notified through a Tax Determination notice about the partial auditing of the Income Tax for non-domiciled entities for Sura corresponding to January 2015; see Note 1. The tax debt claimed by SUNAT amounts to approximately S/19,000,000 Considering that this debt corresponds to a period prior to the acquisition of Seguros Sura by the Group (see Note 1), and according to the conditions of the purchase and sale agreement of this entity, this tax assessment, if confirmed after the legal actions that Management is to file, would be assumed by the sellers. On January 30, 2019, the Company filed an appeal against the determination decision with the Tax Authority.

Finally, as of the date of this report, SUNAT is reviewing the 2012 tax return of Interbank. In the opinion of Management, any eventual additional tax assessment would not be significant for the interim condensed consolidated financial statements as of March 31, 2019.

(c) IFS calculates the period’s Income Tax expense using the best estimate of the weighted average annual tax rate expected for the full annual earnings. The table below presents the amounts reported in the interim condensed consolidated statements of income for the three-month periods ended March 31, 2019 and 2018:

	For the  three-month periods ended March 31,
	2019			2018
	S/(000)			S/(000)
Current — Expense		115,469			79,991
Deferred — (Income) expense		(5,579	)		25,528
		109,890			105,519

F-228

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Notes to the interim condensed consolidated financial statements (continued)

14. Interest and similar income and expenses

(a) This caption is comprised of the following:

	For the three-month periods ended March 31,
	2019			2018
	S/(000)			S/(000)
Interest and similar income
Interest on loan portfolio		905,215			797,290
Interest on investments at fair value through other comprehensive income		194,159			197,819
Interest on due from banks and inter-bank funds		27,289			11,256
Interest on investments at amortized cost		21,961			18,979
Dividends on financial instruments through other comprehensive income		17,113			9,760
Other interest and similar income		1,003			1,171
Total		1,166,740			1,036,275
Interest and similar expenses
Interest and fees on deposits and obligations		(178,154	)		(129,374	)
Interest on bonds, notes and other obligations		(99,639	)		(79,742	)
Interest and fees on obligations with financial institutions		(42,373	)		(44,253	)
Deposit insurance fund fees		(10,900	)		(9,824	)
Result from hedging transactions		(2,502	)		(2,279	)
Other interest and similar expenses		(2,217	)		(1,423	)
Total		(335,785	)		(266,895	)

(b) The amounts shown in Note 14(a) include interest income and expenses calculated using the effective interest rate (EIR), which are related to the following items:

	For the three-month periods ended March 31,
	2019		2018
	S/(000)		S/(000)
Financial assets measured at amortized cost		954,465		827,525
Financial assets measured at fair value through other comprehensive income		194,159		197,819
Total interest from financial assets not measured at fair value		1,148,624		1,025,344
Financial liabilities measured at amortized cost		320,166		253,369

F-229

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Notes to the interim condensed consolidated financial statements (continued)

15. Fee income from financial services, net

This caption is comprised of the following:

	For the three-month periods ended March 31,
	2019			2018
	S/(000)			S/(000)
Income
Maintenance and mailing of accounts, transfer fees and commissions on credit and debit card		155,391			151,385
Commissions for banking services		51,951			58,392
Funds management fees		35,116			38,204
Fees from indirect loans		13,797			15,237
Collection services fees		9,786			8,426
Brokerage and custody services fees		2,092			3,397
Others		8,944			8,885
Total		277,077			283,926
Expenses
Credit cards		(24,385	)		(24,091	)
Debtor’s life insurance premiums		(10,533	)		(23,288	)
Fees paid to foreign banks		(3,671	)		(3,262	)
Brokerage and custody services		(172	)		(963	)
Others		(15,318	)		(15,725	)
Total		(54,079	)		(67,329	)
Net		222,998			216,597

F-230

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Notes to the interim condensed consolidated financial statements (continued)

16. Other income and expenses

This caption is comprised of the following:

	For the three-month periods ended March 31,
	2019			2018
	S/(000)			S/(000)
Other income
Income from investments in associates		5,736			3,501
Other technical income from insurance operations		3,129			2,518
Income from ATM rentals		1,419			708
Services rendered to third parties		995			691
Other income		7,451			6,994
Total other income		18,730			14,412
Other expenses
Commissions from insurance activities		(13,412	)		(16,922	)
Sundry technical insurance expenses		(10,359	)		(9,912	)
Provision for sundry risk		(3,190	)		(473	)
Expenses related to rental income		(1,544	)		(42	)
Donations		(1,291	)		(1,361	)
Other expenses		(16,922	)		(14,661	)
Total other expenses		(46,718	)		(43,371	)

F-231

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Notes to the interim condensed consolidated financial statements (continued)

17. Net premiums earned

(a) For the three-month periods ended March 31, 2019 and 2018, this caption is comprised of the following:

	Premiums assumed				Adjustment of technical reserves						Gross premiums earned (*)						Premiums ceded to reinsurers						Net premiums earned (incurred)
	2019		2018		2019			2018			2019			2018			2019			2018			2019			2018
	S/(000)		S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Life insurance
Annuities (**)		78,324		47,389		(56,553	)		(19,042	)		21,771			28,347			—			—			21,771			28,347
Group life		33,083		26,660		(85	)		131			32,998			26,791			(1,275	)		(1,435	)		31,723			25,356
Individual life		33,297		32,531		(21,939	)		(12,194	)		11,358			20,337			(1,155	)		(1,442	)		10,203			18,895
Retirement, disability and survival		4,980		38,316		6,934			(10,737	)		11,914			27,579			(1,700	)		(24,818	)		10,214			2,761
Others		—		1		(68	)		(411	)		(68	)		(410	)		—			—			(68	)		(410	)
Total life insurance		149,684		144,897		(71,711	)		(42,253	)		77,973			102,644			(4,130	)		(27,695	)		73,843			74,949
Total general insurance		25,776		22,088		(1,548	)		(338	)		24,228			21,750			(108	)		(428	)		24,120			21,322
Total		175,460		166,985		(73,259	)		(42,591	)		102,201			124,394			(4,238	)		(28,123	)		97,963			96,271

(*) Includes the annual variation of technical reserves and unearned premiums.

(**) The variation of the adjustment of technical reserves is due to the variation in the rates with which technical reserves are determined; see rates in Note 11(d).

F-232

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Notes to the interim condensed consolidated financial statements (continued)

18. Earnings per share

The following table presents the basic and diluted earnings per share computations:

	Outstanding shares		Shares considered in computation		Effective days in the period		Weighted average number of shares
	(in thousands)		(in thousands)				(in thousands)
2018
Balance as of January 1, 2018		107,682		107,682		90		107,682
Sale of treasury stock		3,010		3,010		59		1,973
Balance as of March 31, 2018		110,692		110,692				109,655
Net earnings attributable to IFS S/(000)								288,209
Basic and diluted earnings per share attributable to IFS (Soles)								2.628
2019
Balance as of January 1, 2019		110,692		110,692		90		110,692
Balance as of March 31, 2019		110,692		110,692				110,692
Net earnings attributable to IFS S/(000)								350,568
Basic and diluted earnings per share attributable to IFS (Soles)								3.167

F-233

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Notes to the interim condensed consolidated financial statements (continued)

19. Transactions with shareholders, related parties and affiliated entities

(a) The table below presents the main transactions with shareholders, related parties and affiliated companies as of March 31, 2019 and December 31, 2018:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Assets
Instruments at fair value through profit or loss
Participations—Royalty Pharma		140,126		78,808
Negotiable certificates of deposit—Financiera Oh! S.A.		20,062		20,809
Investment funds participations—NGCP		2,850		2,890
Shares—InRetail Perú Corp.		—		7,322
Others		216		205
		163,254		110,034
Investments at fair value through other comprehensive income
Shares—InRetail Perú Corp.		283,750		228,122
Corporate bonds—InRetail Shopping Malls S.A.		72,843		59,131
Corporate bonds—Colegios Peruanos S.A.		56,100		58,913
Corporate bonds—Intercorp Perú Ltd.		4,342		15,766
Corporate bonds—Intercorp Retail Inc.		29,394		—
Corporate bonds—Cineplex S.A.		—		7,317
		446,429		369,249
Loans, net (b)		1,274,733		1,157,158
Accounts receivable from UTP (h)		66,334		58,968
Accounts receivable from Homecenters Peruanos S.A. (g)		20,877		20,877
Accounts receivable from Supermercados Peruanos S.A		18,264		18,264
Accounts receivable related to derivative financial instruments		2,596		3,908
Other assets (f)		11,399		10,183
Liabilities
Deposits and obligations		665,818		571,032
Other liabilities		148		214
Off-balance sheet accounts
Indirect loans (b)		120,186		139,702

F-234

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Notes to the interim condensed consolidated financial statements (continued)

	For the three-month periods ended March 31,
	2019			2018
	S/(000)			S/(000)
Income (expenses)
Interest and similar income		21,947			31,314
Interest and similar expenses		(4,599	)		(2,398	)
Valuation of financial derivative instruments		7			(1,146	)
Rental income		1,198			1,386
Gain on sale of investment property		—			1,559
Administrative expenses		(11,453	)		(10,010	)
Others, net		10,424			6,317

(b) As of March 31, 2019 and December 31, 2018, the detail of loans to shareholders and related entities is the following:

	As of March 31, 2019						As of December 31, 2018
	Direct loans		Indirect loans		Total		Direct loans		Indirect loans		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Supermercados Peruanos S.A.		221,154		701		221,855		236,826		701		237,527
Intercorp Perú Ltd.		169,168		—		169,168		65,046		—		65,046
InRetail Pharma S.A.		152,458		4,977		157,435		163,596		5,060		168,656
GTP Inversionistas S.A.C.		100,364		—		100,364		102,027		—		102,027
Nessus Hoteles Perú S.A.		97,871		166		98,037		102,851		169		103,020
Financiera Oh! S.A.		84,009		287		84,296		65,009		291		65,300
Colegios Peruanos S.A.C.		79,053		1,830		80,883		80,379		1,843		82,222
Universidad Tecnológica del Perú		80,000		—		80,000		80,000		—		80,000
Homecenters Peruanos S.A.		61,113		—		61,113		55,995		6,327		62,322
San Miguel Industrias PET S.A.		26,463		30,395		56,858		9,873		36,366		46,239
Cineplex S.A.		31,483		8,096		39,579		33,844		8,996		42,840
San Miguel Industrias Ecuador		32,910		—		32,910		32,910		—		32,910
Bembos S.A.C.		26,289		6,128		32,417		26,747		6,130		32,877
Centros de Salud Peruanos		28,717		—		28,717		20,701		—		20,701
Procesos de Medios de Pago S.A.		6,805		20,240		27,045		7,704		20,575		28,279
PF Interproperties Perú		—		20,925		20,925		—		21,126		21,126
Others		76,876		26,441		103,317		73,650		32,118		105,768
		1,274,733		120,186		1,394,919		1,157,158		139,702		1,296,860

(c) As of March 31, 2019 and December 31, 2018, the directors, executives and employees of the Group have been involved, directly and indirectly, in credit transactions with certain subsidiaries of the Group, as permitted by Peruvian law, which regulates and limits certain transactions with employees, directors and officers of financial entities. As of March 31, 2019 and December 31, 2018, direct loans to employees, directors and officers amounted to S/212,288,000 and S/223,381,000, respectively; said loans are repaid monthly and bear interest at market rates.

There are no loans to IFS’s directors and key personnel guaranteed with shares of any Subsidiary.

F-235

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(d) IFS’s key personnel compensation, including the Income Tax assumed for the three-month periods ended March 31, 2019 and 2018, comprised the following:

	2019		2018
	S/(000)		S/(000)
Salaries		7,415		4,079
Board of Directors’ compensations		367		372
Total		7,782		4,451

(e) As of March 31, 2019 and December 31, 2018, the Group holds participations in different mutual funds managed by Interfondos, which are classified as investments at fair value through profit or loss and amounted S/13,000 and S/9,934,000, respectively.

(f) It corresponds mainly to prepaid expenses for spaces ceded to Interbank in the stores of Supermercados Peruanos S.A. for the operation of financial agencies until the year 2030, and for an amount of approximately S/8,175,000 and S/8,856,000 as of March 31, 2019 and December 31, 2018, respectively, see Note 7(a). Interbank may renew the term of the agreements for an additional term of 15 years.

(g) It corresponds to a loan with maturity in 2046 and bears interests at market value.

(h) As of March 31, 2019 and December 31, 2018, correspond to a finance lease for the construction of educational facilities in San Juan de Lurigancho and Ate Vitarte districts.

(i) In Management’s opinion, transactions with related parties have been performed under standard market conditions and within the limits permitted by the SBS. Taxes generated by these transactions and the taxable base used for computing them are those customarily used in the industry and they are determined according to the tax rules in force.

20. Business segments

The Chief Operating Decision Maker (“CODM”) of IFS is the Chief Executive Officer (“CEO”) and presents three operating segments based on products and services as follows:

Banking

Mainly loans, credit facilities, deposits and current accounts.

Insurance

It provides annuities and conventional life insurance products, as well as other retail insurance products.

Wealth management

It provides brokerage and investment management services. Inteligo serves mainly Peruvian citizens.

The operating segments monitor the operating results of their business units separately for the purpose of making decisions on the distribution of resources and performance assessment. Segment performance is evaluated based on operating profit or loss and it is measured consistently with operating profit or loss in the interim condensed consolidated financial statements.

F-236

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Notes to the interim condensed consolidated financial statements (continued)

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

No revenue from transactions with a single external customer or counterparty exceeded 10 percent of the Group’s total revenues in the three-month periods ended March 31, 2019 and 2018.

F-237

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Notes to the interim condensed consolidated financial statements (continued)

The following table presents the Group’s financial information by business segments for the three-month periods ended March 31, 2019 and March 31, 2018:

	For the three-month period ended March 31, 2019															For the three-month period ended March 31, 2018
	Banking			Insurance			Wealth management			Holding and consolidation adjustments			Total consolidated			Banking			Insurance			Wealth management			Holding and consolidation adjustments			Total consolidated
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Total income (*)
Third party		1,291,408			278,593			121,325			(64,737	)		1,626,589			1,113,075			264,023			77,897			(8,955	)		1,446,040
Inter-segment		(10,557	)		—			(227	)		10,784			—			(4,362	)		—			(2,003	)		6,365			—
Total income		1,280,851			278,593			121,098			(53,953	)		1,626,589			1,108,713			264,023			75,894			(2,590	)		1,446,040
Extracts of results
Interest and similar income		964,986			156,801			45,586			(633	)		1,166,740			843,132			157,632			33,749			1,762			1,036,275
Interest and similar expenses		(307,418	)		(13,640	)		(14,860	)		133			(335,785	)		(242,449	)		(13,728	)		(9,135	)		(1,583	)		(266,895	)
Net interest and similar income		657,568			143,161			30,726			(500	)		830,955			600,683			143,904			24,614			179			769,380
Impairment loss on loans, net of recoveries		(186,342	)		—			(72	)		—			(186,414	)		(173,268	)		—			383			—			(172,885	)
Impairment recovery on financial investments		(2	)		2,361			(472	)		—			1,887			(130	)		97			2,291			—			2,258
Net interest and similar income after impairment loss		471,224			145,522			30,182			(500	)		646,428			427,285			144,001			27,288			179			598,753
Fee income from financial services, net		193,361			(999	)		38,914			(8,278	)		222,998			179,719			(1,682	)		43,079			(4,519	)		216,597
Net gain on sale of financial investments		11,543			(6,169	)		24,543			—			29,917			11,583			2,091			11,588			—			25,262
Other income (**)		121,518			30,997			12,282			(55,826	)		108,971			78,641			9,711			(10,519	)		(6,198	)		71,635
Total net premiums earned minus claims and benefits		—			(74,074	)		—			—			(74,074	)		—			(78,867	)		—			—			(78,867	)
Depreciation and amortization		(55,399	)		(5,031	)		(2,474	)		—			(62,904	)		(34,137	)		(2,244	)		(2,168	)		929			(37,620	)
Other expenses		(335,392	)		(65,657	)		(24,420	)		6,657			(418,812	)		(327,967	)		(59,537	)		(24,274	)		5,534			(406,244	)
Income before translation result and Income Tax		406,855			24,589			79,027			(57,947	)		452,524			335,124			13,473			44,994			(4,075	)		389,516
Translation result		233			4,353			683			4,822			10,091			1,900			1,020			530			2,537			5,987
Income Tax		(107,386	)		—			(1,408	)		(1,096	)		(109,890	)		(94,469	)		—			(1,565	)		(9,485	)		(105,519	)
Net profit for the year		299,702			28,942			78,302			(54,221	)		352,725			242,555			14,493			43,959			(11,023	)		289,984
Attributable to:
IFS’s shareholders		299,702			28,942			78,302			(56,378	)		350,568			242,555			14,493			43,959			(12,798	)		288,209
Non-controlling interest		—			—			—			2,157			2,157			—			—			—			1,775			1,775
		299,702			28,942			78,302			(54,221	)		352,725			242,555			14,493			43,959			(11,023	)		289,984

(*) Corresponds to interest and similar income, other income and net premiums earned.

(**) For Banking Segment “Other income” for the three months ended March 31, 2019, included approximately S/32,422,000, after taxes, as gain on the sale of Interfondos to Inteligo Perú Holding S.A.C., which is eliminated upon consolidation, see Note 2(d).

F-238

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

	As of March 31, 2019
	Banking		Insurance		Wealth management		Holding and eliminations			Total consolidated
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)
Capital expenditures (*)		30,354		13,364		1,992		—			45,710
Total assets		49,231,104		12,967,548		3,754,231		(196,676	)		65,756,207
Total liabilities		43,850,841		11,938,997		2,923,890		(684,281	)		58,029,447

	As of December 31, 2018
	Banking		Insurance		Wealth management		Holding and eliminations			Total consolidated
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)
Capital expenditures (*)		176,082		70,333		9,718		41			256,174
Total assets		47,440,393		12,572,396		3,808,939		(77,319	)		63,744,409
Total liabilities		41,986,416		11,795,308		2,996,179		(121,970	)		56,655,933

(*) It includes the purchase of property, furniture and equipment, intangible assets and investment property.

The distribution of the Group’s total income based on the location of the customer and its assets, for the three-month period ended March 31, 2019 amounts to S/1,519,101,000 in Peru and S/107,488,000 in Panama (for the three-month period ended March 31, 2018 amounts to S/1,384,142,000 in Peru and S/61,898,000 in Panama). The distribution of the Group’s total assets based on the location of the customer and its assets, as of March 31, 2019 is S/62,164,114,000 in Peru and S/3,592,093,000 in Panama (S/60,033,938,000 in Peru and S/3,710,471,000 in Panama as of December 31, 2018). It should be noted that both income and assets located in Panama correspond mainly to Peruvian citizens.

F-239

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

21. Financial instruments classification

The financial assets and liabilities of the interim condensed consolidated statements of financial position as of March 31, 2019 and December 31, 2018, are presented below:

	As of March 31, 2019										As of December 31, 2018
	At fair value through profit or loss		Debt instruments measured at fair value through other comprehensive income		Equity instruments measured at fair value through other comprehensive income		Amortized cost		Total		At fair value through profit or loss		Debt instruments measured at fair value through other comprehensive income		Equity instruments measured at fair value through other comprehensive income		Amortized cost		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Financial assets
Cash and due from banks		—		—		—		9,660,613		9,660,613		—		—		—		8,380,411		8,380,411
Inter-bank funds		—		—		—		70,017		70,017		—		—		—		495,037		495,037
Financial investments		1,565,096		13,510,209		928,737		1,848,731		17,852,773		1,571,468		13,328,593		845,317		1,884,067		17,629,445
Loans, net		—		—		—		33,622,742		33,622,742		—		—		—		32,960,917		32,960,917
Due from customers on acceptances		—		—		—		89,748		89,748		—		—		—		132,961		132,961
Accounts receivable and other assets, net		138,367		—		—		1,149,569		1,287,936		185,376		—		—		1,106,659		1,292,035
		1,703,463		13,510,209		928,737		46,441,420		62,583,829		1,756,844		13,328,593		845,317		44,960,052		60,890,806
Financial liabilities
Deposits and obligations		—		—		—		34,790,000		34,790,000		—		—		—		33,681,950		33,681,950
Inter-bank funds		—		—		—		106,524		106,524		—		—		—		—		—
Due to banks and correspondents		—		—		—		3,726,119		3,726,119		—		—		—		4,293,361		4,293,361
Bonds, notes and other obligations		—		—		—		6,663,213		6,663,213		—		—		—		6,496,778		6,496,778
Due from customers on acceptances		—		—		—		89,748		89,748		—		—		—		132,961		132,961
Insurance contract liabilities		—		—		—		10,407,237		10,407,237		—		—		—		10,300,468		10,300,468
Accounts payable, provisions and other liabilities		144,142		—		—		1,849,940		1,994,082		154,116		—		—		1,367,644		1,521,760
		144,142		—		—		57,632,781		57,776,923		154,116		—		—		56,273,162		56,427,278

F-240

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

22. Financial risk management

It comprises the management of the main risks, that due to the nature of their operations, IFS and its Subsidiaries are exposed to; and correspond to: credit risk, market risk, liquidity risk, insurance risk and real estate risk.

In order to manage this risks, every Subsidiary of the Group has a specialized structure and organization in their management, measurement systems, mitigation and coverage processes that considers the specific needs and regulatory requirements to develop its business. The Group and its Subsidiaries, mainly Interbank, Interseguro and Inteligo Bank, operate independently but in coordination with the general provisions issued by the Board of Directors and the Management of IFS.

A full description of the Group’s financial risk management is presented in Note 31 “Financial risk management” of the 2018 Annual Consolidated Financial Statements; following is presented the financial information related to credit risk management for the loan portfolio, offsetting of financial assets and liabilities, and foreign exchange risk.

(a) Credit risk management for loans

Interbank’s loan portfolio is segmented into homogeneous groups that shared similar credit risk characteristics. These groups are: (i) Retail Banking (credit card, mortgage, payroll loan, consumer loan and vehicular loan), (ii) Small Business Banking (segments S1, S2 and S3), and (iii) Commercial Banking (corporate, institutional, companies and real estate). In addition, at Inteligo Bank, the internal model developed (scorecard) assigns 5 levels of credit risk classified as follows: low risk, medium low risk, medium risk, medium high risk, and high risk. These categories are described in Note 31.1.(d) of the 2018 Annual Consolidated Financial Statements.

The following table shows the credit quality and maximum exposure to credit risk of loans (direct and indirect) based on the Group’s internal credit rating as of March 31, 2019 and December 31, 2018. The amounts presented do not consider impairment.

	As of March 31, 2019								As of December 31, 2018
Total direct loans	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		25,136,048		375,369		—		25,511,417		25,062,456		372,197		—		25,434,653
Standard grade		3,814,678		899,704		—		4,714,382		3,853,640		849,073		—		4,702,713
Sub-standard grade		332,470		936,820		—		1,269,290		417,701		845,995		—		1,263,696
Past due but not impaired		1,576,701		829,420		—		2,406,121		1,048,378		791,096		—		1,839,474
Impaired
Individually impaired		—		—		8,007		8,007		—		—		7,349		7,349
Collectively impaired		—		—		809,788		809,788		—		—		807,323		807,323
Total direct loans		30,859,897		3,041,313		817,795		34,719,005		30,382,175		2,858,361		814,672		34,055,208

F-241

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

	As of March 31, 2019								As of December 31, 2018
Commercial loans	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		11,568,705		96,842		—		11,665,547		12,088,746		106,480		—		12,195,226
Standard grade		2,202,440		157,987		—		2,360,427		2,305,607		125,090		—		2,430,697
Sub-standard grade		128,702		205,612		—		334,314		226,849		124,051		—		350,900
Past due but not impaired		1,301,234		138,211		—		1,439,445		714,034		134,730		—		848,764
Impaired
Individually impaired		—		—		8,007		8,007		—		—		7,349		7,349
Collectively impaired		—		—		205,380		205,380		—		—		199,132		199,132
Total commercial loans		15,201,081		598,652		213,387		16,013,120		15,335,236		490,351		206,481		16,032,068
	As of March 31, 2019								As of December 31, 2018
Consumer loans	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		7,842,258		235,714		—		8,077,972		7,481,529		223,261		—		7,704,790
Standard grade		1,034,900		658,099		—		1,692,999		980,918		643,553		—		1,624,471
Sub-standard grade		174,934		522,278		—		697,212		163,050		534,181		—		697,231
Past due but not impaired		109,561		477,270		—		586,831		97,943		442,380		—		540,323
Impaired
Individually impaired		—		—		—		—		—		—		—		—
Collectively impaired		—		—		325,597		325,597		—		—		324,463		324,463
Total consumer loans		9,161,653		1,893,361		325,597		11,380,611		8,723,440		1,843,375		324,463		10,891,278
	As of March 31, 2019								As of December 31, 2018
Mortgage loans	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		5,191,469		25,530		—		5,216,999		5,003,914		22,297		—		5,026,211
Standard grade		514,422		60,950		—		575,372		478,576		56,958		—		535,534
Sub-standard grade		25,599		194,787		—		220,386		22,575		170,556		—		193,131
Past due but not impaired		151,920		185,810		—		337,730		224,588		188,839		—		413,427
Impaired
Individually impaired		—		—		—		—		—		—		—		—
Collectively impaired		—		—		236,374		236,374		—		—		239,176		239,176
Total mortgage loans		5,883,410		467,077		236,374		6,586,861		5,729,653		438,650		239,176		6,407,479

F-242

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

	As of March 31, 2019								As of December 31, 2018
Small and micro-business loans	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		533,616		17,283		—		550,899		488,267		20,159		—		508,426
Standard grade		62,916		22,668		—		85,584		88,539		23,472		—		112,011
Sub-standard grade		3,235		14,143		—		17,378		5,227		17,207		—		22,434
Past due but not impaired		13,986		28,129		—		42,115		11,813		25,147		—		36,960
Impaired
Individually impaired		—		—		—		—		—		—		—		—
Collectively impaired		—		—		42,437		42,437		—		—		44,552		44,552
Total small and micro-business loans		613,753		82,223		42,437		738,413		593,846		85,985		44,552		724,383
Total indirect loans (substantially all indirect loans correspond to commercial loans)
Contingent Credits: Guarantees and stand by letters, import and export letters of credit	As of March 31, 2019								As of December 31, 2018
	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		3,292,599		194,085		—		3,486,684		3,256,280		223,735		—		3,480,015
Standard grade		177,172		20,023		—		197,195		211,784		110,420		—		322,204
Sub-standard grade		19,479		253,533		—		273,012		33,472		192,699		—		226,171
Past due but not impaired		—		—		—		—		—		—		—		—
Impaired
Individually impaired		—		—		27,692		27,692		—		—		35,738		35,738
Collectively impaired		—		—		7,444		7,444		—		—		7,332		7,332
Total indirect loans		3,489,250		467,641		35,136		3,992,027		3,501,536		526,854		43,070		4,071,460

b) Offsetting of financial assets and liabilities

The information contained in the tables below includes financial assets and liabilities that: (i) are offset in the interim condensed consolidated statements of financial position of the Group or; (ii) are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments, regardless of whether they are offset in the interim condensed consolidated statements of financial position or not.

Similar arrangements of the Group include derivatives clearing agreements. Financial instruments such as loans and deposits are not disclosed in the following tables since they are offset in the interim condensed consolidated statements of financial position.

The offsetting framework agreement issued by the International Swaps and Derivatives Association Inc. (“ISDA”) and similar master netting arrangements do not meet the criteria for offsetting in the interim condensed consolidated statements of financial position because of such agreements were created in order for both parties to have an enforceable offsetting right in cases of default, insolvency or bankruptcy of the Group or the counterparties or following other predetermined events. In addition, the Group and its counterparties do not intend to settle such instruments on a net basis or to realize the assets and settle the liabilities simultaneously.

The Group receives and delivers guarantees collaterals in the form of cash with respect to transactions with derivatives; see Note 3.

F-243

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

Financial assets and liabilities subject to offsetting, enforceable master netting arrangement and similar agreement as of March 31, 2019 and December 31, 2018 are as follows:

	Gross amounts of recognized financial instruments		Gross amounts of recognized financial instruments and  offset in the interim condensed consolidated statements of financial position		Net amounts of financial instruments presented in the interim condensed consolidated statements of financial position		Related amounts not offset in the interim condensed consolidated statements of financial position						Net amount
							Financial instruments (including non-cash collateral)			Cash collateral received (pledged), Note 3(b)
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)			S/(000)
Assets
As of March 31, 2019
Derivatives, Note 7(b)		138,367		—		138,367		(45	)		—			138,322
Total assets		138,367		—		138,367		(45	)		—			138,322
As of December 31, 2018
Derivatives, Note 7(b)		185,376		—		185,376		(41	)		—			185,335
Total assets		185,376		—		185,376		(41	)		—			185,335
Liabilities
As of March 31, 2019
Derivatives, Note 7(b)		144,142		—		144,142		(45	)		(82,837	)		61,260
Total liabilities		144,142		—		144,142		(45	)		(82,837	)		61,260
As of December 31, 2018
Derivatives, Note 7(b)		154,116		—		154,116		(41	)		(92,456	)		61,619
Total liabilities		154,116		—		154,116		(41	)		(92,456	)		61,619

(c) Foreign exchange risk

The Group is exposed to fluctuations in the exchange rates of the foreign currency prevailing on its financial position and cash flows. Management sets limits on the levels of exposure by currency and total daily and overnight positions, which are monitored daily. Most of the assets and liabilities in foreign currency are stated in US Dollars. Transactions in foreign currency are made at the exchange rates of the free market.

As of March 31, 2019, the weighted average exchange rate of the free market published by the SBS for transactions in US Dollars was S/3.361 per US$1 ask and S/3.321 per US$1 bid (S/3.369 and S/3.379 as of December 31, 2018, respectively). As of March 31, 2019, the exchange rate for the accounting of asset and liability accounts in foreign currency set by the SBS was S/3.318 per US$1 (S/3.373 as of December 31, 2018).

F-244

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

The table below presents a detail of the Group’s position:

	As of March 31, 2019											As of December 31, 2018
	US Dollars			Soles			Other currencies			Total		US Dollars			Soles			Other currencies			Total
	S/(000)			S/(000)			S/(000)			S/(000)		S/(000)			S/(000)			S/(000)			S/(000)
Assets
Cash and due from banks		8,325,676			1,010,807			324,130			9,660,613		6,802,749			1,224,791			352,871			8,380,411
Inter-bank funds		—			70,017			—			70,017		—			495,037			—			495,037
Financial investments		7,684,914			10,156,160			11,699			17,852,773		7,670,084			9,941,459			17,902			17,629,445
Loans, net		10,115,034			23,507,708			—			33,622,742		10,048,173			22,912,744			—			32,960,917
Due from customers on acceptances		72,242			—			17,506			89,748		112,653			—			20,308			132,961
Accounts receivable and other assets, net		287,365			982,555			18,016			1,287,936		154,643			1,102,800			34,592			1,292,035
		26,485,231			35,727,247			371,351			62,583,829		24,788,302			35,676,831			425,673			60,890,806
Liabilities
Deposits and obligations		14,964,017			19,538,035			287,948			34,790,000		13,584,983			19,807,644			289,323			33,681,950
Inter-bank funds		—			106,524			—			106,524		—			—			—			—
Due to banks and correspondents		1,030,288			2,695,831			—			3,726,119		1,046,545			3,246,816			—			4,293,361
Bonds, notes and other obligations		5,982,827			680,386			—			6,663,213		6,110,077			386,701			—			6,496,778
Due from customers on acceptances		72,242			—			17,506			89,748		112,653			—			20,308			132,961
Insurance contract liabilities		3,839,190			6,568,047			—			10,407,237		4,072,811			6,227,657			—			10,300,468
Accounts payable, provisions and other liabilities, net		458,518			1,527,633			7,931			1,994,082		215,093			1,297,074			9,593			1,521,760
		26,347,082			31,116,456			313,385			57,776,923		25,142,162			30,965,892			319,224			56,427,278
Forwards position, net		(984,364	)		1,016,617			(32,253	)		—		(629,147	)		685,813			(56,666	)		—
Currency swaps position, net		(14,423	)		14,423			—			—		(59,991	)		59,991			—			—
Cross currency swaps position, net		1,762,329			(1,762,329	)		—			—		1,724,081			(1,724,081	)		—			—
Options position, net		(279	)		279			—			—		81			(81	)		—			—
Monetary position, net		901,412			3,879,781			25,713			4,806,906		681,164			3,732,581			49,783			4,463,528

As of March 31, 2019, the Group granted indirect loans (contingent operations) in foreign currency for approximately US$649,612,000, equivalent to S/2,155,412,000 (US$696,510,000, equivalent to S/2,349,328,000 as of December 31, 2018).

F-245

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

23. Fair value

(a) Financial instruments measured at fair value and fair value hierarchy

The following table presents an analysis of the financial instruments that are measured at their fair value including the level of hierarchy of fair value. The amounts are based on the balances presented in the interim condensed consolidated statements of financial position:

	As of March 31, 2019								As of December 31, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Financial assets
Financial investments
At fair value through profit or loss (*)		813,479		304,653		446,964		1,565,096		811,238		352,273		407,957		1,571,468
Debt instruments measured at fair value through other comprehensive income		10,221,076		3,140,490		—		13,361,566		9,822,970		3,320,556		—		13,143,526
Equity instruments measured at fair value through other comprehensive income		927,093		1,644		—		928,737		843,646		1,671		—		845,317
Derivatives receivable		—		138,367		—		138,367		—		185,376		—		185,376
		11,961,648		3,585,154		446,964		15,993,766		11,477,854		3,859,876		407,957		15,745,687
Accrued interest								148,643								185,067
Total financial assets								16,142,409								15,930,754
Financial liabilities
Accounts payable by derivatives		—		144,142		—		144,142		—		154,116		—		154,116

(*) As of March 31, 2019 and December 31, 2018, correspond mainly to mutual funds and investments funds participations.

Financial assets included in Level 1 are those measured on the basis of information that is available in the market, to the extent that their quoted prices reflect an active and liquid market and that are available in some centralized trading mechanism, trading agent, price supplier or regulatory entity.

Financial instruments included in Level 2 are valued based on the market prices of other instruments with similar characteristics or with financial valuation models based on information of variables observable in the market (interest rate curves, price vectors, etc.).

Financial assets included in Level 3 are valued by using assumptions and data that do not correspond to prices of operations traded on the market. Fair value is estimated using a discounted cash flow (DCF) model. The valuation requires Management to make certain assumptions about the model variables and data, including the forecast of cash flow, discount rate, credit risk and volatility.

F-246

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

The table below presents a description of significant unobservable data used in valuation:

	Valuation technique	Significant unobservable inputs	Valuation	Sensitivity of inputs to fair value
Royalty Pharma	DCF Method	Sales forecast	Average sector analysis, estimates	10 percent increase (decrease) in the sales forecast would result in increase (decrease) in fair value by S/14,676,000.
				500 basis points increase in the WACC would result in decrease in fair value by S/27,032,000.
		WACC	8.0%	500 basis points decrease in the WACC would result in increase in fair value by S/38,704,000.
Mutual funds and investment funds participations	DCF Method	Discount rate	Depends on the credit risk	500 basis points increase in the discount rate would result in decrease in fair value by S/4,768,000.
				500 basis points decrease in the discount rate would result in increase in fair value by S/6,221,000.
		WACC	9.0%	500 basis points increase in the WACC would result in decrease in fair value by S/1,344,000.
				500 basis points decrease in the WACC would result in increase in fair value by S/1,632,000.
	Comparable multiples	Price-to-sales ratio	Depends on industry’s entity	10 percent increase (decrease) in the price-to-sales ratio would result in increase (decrease) in fair value by S/2,459,000.
	Equity value		Depends on the credit risk	500 basis points increase (decrease) in the equity value would result in increase (decrease) in fair value by S/208,000.

The table below includes a reconciliation of fair value measurement of financial instruments classified by the Group into Level 3 of the valuation hierarchy:

	As of March 31, 2019			As of December 31, 2018
	S/(000)			S/(000)
Balance as of January 1		407,957			261,737
Purchases		68,384			151,231
Sales		(14,145	)		(61,328	)
Valuation recognized in the interim condensed consolidated statements of income		(15,232	)		56,317
Ending balance		446,964			407,957

F-247

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

During the three-month period ended March 31, 2019, and during the year 2018, there were no transfers of financial instruments from Level 3 to Level 1 or to Level 2. Also, during the three-month period ended March 31, 2019 and during the year 2018, there were no transfers of financial instruments between Level 1 and Level 2.

(b) Financial instruments not measured at fair value

The table below presents the disclosure of the comparison between the carrying amounts and fair values of the Group’s financial instruments that are not measured at their fair value, presented by level of fair value hierarchy:

	As of March 31, 2019										As of December 31, 2018
	Level 1		Level 2		Level 3		Fair value		Book value		Level 1		Level 2		Level 3		Fair value		Book value
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Assets
Cash and due from banks		—		9,660,613		—		9,660,613		9,660,613		—		8,380,411		—		8,380,411		8,380,411
Inter-bank funds		—		70,017		—		70,017		70,017		—		495,037		—		495,037		495,037
Investments at amortized cost		706,998		1,151,636		—		1,858,634		1,848,731		700,177		1,156,148		—		1,856,325		1,884,067
Loans, net		—		33,524,234		—		33,524,234		33,622,742		—		33,276,930		—		33,276,930		32,960,917
Due from customers on acceptances		—		89,748		—		89,748		89,748		—		132,961		—		132,961		132,961
Accounts receivables and other assets, net		—		1,149,569		—		1,149,569		1,149,569		—		1,106,659		—		1,106,659		1,106,659
Total		706,998		45,645,817		—		46,352,815		46,441,420		700,177		44,548,146		—		45,248,323		44,960,052
Liabilities
Deposits and obligations		—		34,787,155		—		34,787,155		34,790,000		—		33,699,626		—		33,699,626		33,681,950
Inter-bank funds		—		106,524		—		106,524		106,524		—		—		—		—		—
Due to banks and correspondents		—		3,730,437		—		3,730,437		3,726,119		—		4,291,346		—		4,291,346		4,293,361
Bonds, notes and other obligations		5,659,642		1,145,784		—		6,805,426		6,663,213		5,569,970		895,427		—		6,465,397		6,496,778
Due from customers on acceptances		—		89,748		—		89,748		89,748		—		132,961		—		132,961		132,961
Insurance contract liabilities		—		10,407,237		—		10,407,237		10,407,237		—		10,300,468		—		10,300,468		10,300,468
Accounts payable and other liabilities		—		1,849,940		—		1,849,940		1,849,940		—		1,367,644		—		1,367,644		1,367,644
Total		5,659,642		52,116,825		—		57,776,467		57,632,781		5,569,970		50,687,472		—		56,257,442		56,273,162

The methodologies and assumptions used to determine fair values depend on the terms and risk characteristics of each financial instruments and they include the following:

(i) Long-term fixed-rate and variable-rate loans are assessed by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the estimated losses of these loans. As of March 31, 2019 and December 31, 2018, the book value of loans, net of allowance, was not significantly different from the calculated fair values.

F-248

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Notes to the interim condensed consolidated financial statements (continued)

(ii) Instruments whose fair values approximates their book value—For financial assets and financial liabilities that are liquid or have short-term maturity (less than three months) it is assumed that the carrying amounts approximate to their fair values. This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable-rate financial instruments.

(iii) Fixed rate financial instruments—The fair value of fixed-rate financial assets and financial liabilities at amortized cost is determined by comparing market interest rates when they were first recognized with current market rates related to similar financial instruments for their remaining term to maturity. The fair value of fixed interest rate deposits is based on discounted cash flows using market interest rates for financial instruments with similar credit risk and maturity. For quoted debt issued, the fair value is determined based on quoted market prices. When quotations are not available, a discounted cash flow model is used based on the yield curve of the appropriate interest rate for the remaining term to maturity.

24. Fiduciary activities and management of funds

The Group provides custody, trustee, investment management and advisory services to third parties; therefore, the Group makes purchase and sale decisions in relation to a wide range of financial instruments. Assets that are held in trust are not included in the interim condensed consolidated financial statements. These services give rise to the risk that the Group could eventually be held responsible of poor yielding of the assets under its administration.

As of March 31, 2019 and December 31, 2018, the value of the managed off-balance sheet financial assets is as follows:

	As of March 31, 2019		As of December 31, 2018
	S/(000)		S/(000)
Investment funds		13,256,297		12,924,575
Mutual funds		4,512,724		4,668,076
Total		17,769,021		17,592,651

25. Subsequent events

Since March 31, 2019, and as of the date of this report, no significant event that could impact the interim condensed consolidated financial statements has occurred that would not have been disclosed in notes.

F-249

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Shares of Common Stock

Intercorp Financial Services Inc.

Global Coordinators and Joint Bookrunners

BofA Merrill Lynch J.P. Morgan

Through and including                 , 2019 (the 25th day after the date of this prospectus), U.S. federal securities law requires all dealers that effect transactions in our common shares, whether or not participating in this offering, to deliver a prospectus. This requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscription.

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 6. Indemnification of Directors and Officers

According to the Registrant’s Articles of Incorporation, its directors and its chief executive officer shall be indemnified by the Registrant for any reasonable expenses incurred and for any loss or damage suffered in connection with any action, lawsuit or proceeding to which they have been a party as a result of their position as director or chief executive officer, to the extent such action, lawsuit or proceeding is not attributable to them. We maintain liability insurance which insure our directors and officers against liability which he or she may incur in his or her capacity as such.

Item 7. Recent Sales of Unregistered Securities

Within the last three years the Registrant has not sold any securities other than its U.S.$300,000,000 4.125% Senior Notes due 2027 issued pursuant to the indenture, dated October 19, 2017, among the Registrant, The Bank of New York Mellon, as trustee, and The Bank of New York Mellon SA/NV, Luxembourg Branch, as Luxembourg transfer and paying agent and sold pursuant to Rule 144A/Regulation S. The Registrant believes that these sales did not require registration under the Securities Act because these securities were offered and sold outside the United States in reliance upon the exemption from the registration requirements of the Securities Act contained in Regulation S under the Securities Act or, alternatively, in transactions exempt from the registration requirements of the Securities Act pursuant to Rule 144A thereof.

Item 8. Exhibits and Financial Statement Schedules

(a) Exhibits

Exhibit Number	Description of Document
1.1*	Form of Underwriting Agreement
3.1*	Articles of Incorporation of the Registrant, as currently in effect
5.1*	Form of Opinion of Arias, Aleman & Mora regarding the validity of the common shares being registered
9.1*	Irrevocable Proxy Agreement as of June 14, 2019, by and among International Financial Holdings Group Inc., in favor of George Pastor, Carlos Rodriguez Pastor, and Anne Marie See.
10.1	IFS Indenture, dated October 19, 2017, among the Registrant, The Bank of New York Mellon, as Trustee, and The Bank of New York Mellon SA/NV, Luxembourg, as Luxembourg transfer and paying agent (relating to our U.S.$300,000,000 4.125% Senior Notes due 2027).
21.1*	Subsidiaries of the Registrant
23.1*	Consent of Paredes, Burga, & Asociados Sociedad Civil de Responsabilidad Limitada, a member firm of Ernst & Young Global Limited
24.1*	Powers of Attorney (included on signature pages in Part II to the Registration Statement)

* To be filed by amendment.

(b) Financial Statement Schedules

All schedules are omitted because the required information is included in the Registrant’s financial statements in the prospectus part of this Registration Statement.

II-1

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

Item 9. Undertakings

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 6 of this Registration Statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(4) For the purposes of Item 512(F) of Regulation S-K, the Registrant undertakes to provide the Underwriters at the closing specified in the Underwriting Agreement common shares in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.

II-2

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints each of             and             , as attorneys-in-fact, and each of them with full power of substitution, for them in any and all capacities, to do any and all acts and all things and to execute any and all instruments which said attorney and agent may deem necessary or desirable to enable the registrant to comply with the Securities Act, and any rules, regulations and requirements of the U.S. Securities and Exchange Commission thereunder, in connection with the registration under the Securities Act of common shares of the registrant, including, without limitation, the power and authority to sign the name of each of the undersigned in the capacities indicated below to any amendment or supplement to the registration statement on Form F-1, or the Registration Statement, to be filed with the U.S. Securities and Exchange Commission with respect to such common shares, whether such amendments or supplements are filed before or after the effective date of such Registration Statement, to any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act, and to any and all instruments or documents filed as part of or in connection with such Registration Statement or any and all amendments thereto, whether such amendments are filed before or after the effective date of such Registration Statement; and each of the undersigned hereby ratifies and confirms all that such attorney and agent may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities indicated on                     , 2019.

Name	Title
	Chief Executive Officer/Director
	Chief Financial Officer
	Chief Accounting Officer
	Director
	Director
	Director
	Director
	Director
	Authorized Representative in the United States

II-3

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 83

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the “Securities Act”), the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lima, Peru, on this                day of                , 2019.

Intercorp Financial Services Inc.

Name:

Title:

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons on                , 2019 in the capacities indicated.

Signature	Title
	Chief Executive Officer/Director
	Chief Financial Officer
	Chief Accounting Officer
	Director
	Director
	Director
	Director
	Director

II-4

EX-10.1

Exhibit 10.1

INTERCORP FINANCIAL SERVICES INC.

as Issuer

THE BANK OF NEW YORK MELLON

as Trustee, Registrar, Paying Agent and Transfer Agent

and

THE BANK OF NEW YORK MELLON SA/NV, LUXEMBOURG BRANCH

as Luxembourg Paying Agent and Luxembourg Transfer Agent

INDENTURE

Dated as of October 19, 2017

4.125% SENIOR NOTES DUE 2027

TABLE OF CONTENTS

		Page
	ARTICLE I
	DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1	Definitions		1
Section 1.2	Rules of Construction		13
	ARTICLE II
	THE NOTES
Section 2.1	Form and Dating		14
Section 2.2	Execution and Authentication		14
Section 2.3	Registrar, Transfer Agents and Paying Agents		15
Section 2.4	Paying Agent to Hold Money in Trust		16
Section 2.5	CUSIP, ISIN and Common Code Numbers		17
Section 2.6	Holder Lists		17
Section 2.7	Global Note Provisions		17
Section 2.8	Legends		18
Section 2.9	Transfer and Exchange		18
Section 2.10	Mutilated, Destroyed, Lost or Stolen Notes		22
Section 2.11	Temporary Notes		23
Section 2.12	Cancellation		23
Section 2.13	Defaulted Interest		23
Section 2.14	Additional Notes		24
Section 2.15	Open Market Purchases		24
	ARTICLE III
	COVENANTS
Section 3.1	Payment of Notes		25
Section 3.2	Maintenance of Office or Agency		26
Section 3.3	Corporate Existence		26
Section 3.4	Further Instruments and Acts		26
Section 3.5	Waiver of Stay, Extension or Usury Laws		26
Section 3.6	Change of Control Event		26
Section 3.7	Limitation on Liens		28
Section 3.8	Reports to Holders		29
Section 3.9	Listing		30
Section 3.10	Payment of Additional Amounts		30
Section 3.11	Use of Proceeds		32
	ARTICLE IV
	LIMITATION ON MERGER, CONSOLIDATION AND SALE OF ASSETS
Section 4.1	Merger, Consolidation and Sale of Assets		32

TABLE OF CONTENTS

(continued)

		Page
	ARTICLE V
	REDEMPTION OF NOTES
Section 5.1	Redemption		33
Section 5.2	Election to Redeem		33
Section 5.3	Notice of Redemption		33
Section 5.4	Selection of Notes to Be Redeemed in Part		34
Section 5.5	Deposit of Redemption Price		35
Section 5.6	Notes Payable on Redemption Date		35
Section 5.7	Unredeemed Portions of Partially Redeemed Note		35
	ARTICLE VI
	DEFAULTS AND REMEDIES
Section 6.1	Events of Default		35
Section 6.2	Acceleration		37
Section 6.3	Other Remedies		38
Section 6.4	Waiver of Past Defaults		38
Section 6.5	Control by Majority		38
Section 6.6	Limitation on Suits		38
Section 6.7	Rights of Holders to Receive Payment		39
Section 6.8	Collection Suit by Trustee		39
Section 6.9	Trustee May File Proofs of Claim, etc.		39
Section 6.10	Priorities		40
Section 6.11	Undertaking for Costs		40
	ARTICLE VII
	TRUSTEE
Section 7.1	Duties of Trustee		41
Section 7.2	Rights of Trustee		42
Section 7.3	Individual Rights of Trustee		44
Section 7.4	Trustee’s Disclaimer		44
Section 7.5	Notice of Defaults		45
Section 7.6	[Intentionally omitted]		45
Section 7.7	Compensation and Indemnity		45
Section 7.8	Replacement of Trustee		46
Section 7.9	Successor Trustee by Merger		46
Section 7.10	Eligibility		47
	ARTICLE VIII
	DEFEASANCE; DISCHARGE OF INDENTURE
Section 8.1	Legal Defeasance and Covenant Defeasance		47

ii

TABLE OF CONTENTS

(continued)

		Page
Section 8.2	Conditions to Defeasance		48
Section 8.3	Application of Trust Money		49
Section 8.4	Repayment to Company		49
Section 8.5	Indemnity for U.S. Government Obligations		50
Section 8.6	Reinstatement		50
Section 8.7	Satisfaction and Discharge		50
	ARTICLE IX
	AMENDMENTS
Section 9.1	Without Consent of Holders		51
Section 9.2	With Consent of Holders		52
Section 9.3	Effectiveness of Amendments, Supplements and Waivers		53
Section 9.4	Revocation and Effect of Consents and Waivers		53
Section 9.5	Notation on or Exchange of Notes		53
Section 9.6	Trustee to Sign Amendments and Supplements		54
	ARTICLE X
	MISCELLANEOUS
Section 10.1	Notices		54
Section 10.2	Certificate and Opinion as to Conditions Precedent		55
Section 10.3	Statements Required in Officers’ Certificate or Opinion of Counsel		55
Section 10.4	Rules by Trustee and Agents		56
Section 10.5	Legal Holidays		56
Section 10.6	Governing Law, etc.		56
Section 10.7	No Recourse Against Others		57
Section 10.8	Successors		57
Section 10.9	Duplicate and Counterpart Originals		57
Section 10.10	Severability		57
Section 10.11	Currency Indemnity		57
Section 10.12	Table of Contents; Headings		58

EXHIBIT A	Form of Note
EXHIBIT B	Form of Certificate for Transfer to QIB
EXHIBIT C	Form of Certificate for Transfer Pursuant to Regulation S
EXHIBIT D	Form of Certificate for Transfer Pursuant to Rule 144

iii

INDENTURE, dated as of October 19, 2017, by and among Intercorp Financial Services Inc., a corporation incorporated and existing under the laws of the Republic of Panama (the “Company”), The Bank of New York Mellon, a corporation organized under the laws of the State of New York and authorized to conduct a banking business, as trustee (the “Trustee”), paying agent, registrar and transfer agent, and The Bank of New York Mellon SA/NV, Luxembourg Branch, as Luxembourg paying agent (the “Luxembourg Paying Agent”) and Luxembourg transfer agent (the “Luxembourg Transfer Agent”).

Each party agrees as follows for the benefit of the other parties and of the Holders of the Initial Notes and any Additional Notes (in each case, as defined herein):

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1 Definitions.

“Additional Amounts” has the meaning assigned to it in Section 3.10(a).

“Additional Notes” means the Company’s 4.125% Senior Notes due 2027 issued after the Issue Date, as specified in the relevant Additional Notes Board Resolution or Additional Notes Supplemental Indenture therefor issued in accordance with this Indenture.

“Additional Notes Board Resolution” means a Board Resolution duly adopted by the Board of Directors of the Company and delivered to the Trustee in an Officers’ Certificate providing for the issuance of Additional Notes.

“Additional Notes Supplemental Indenture” means a supplement to this Indenture duly executed and delivered by the Company and the Trustee pursuant to Article IX providing for the issuance of Additional Notes.

“Affiliate” means, with respect to any specified Person, (a) any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such specified Person or (b) any other Person who is a director or officer (i) of such specified Person, (ii) of any subsidiary of such specified Person, or (iii) of any Person described in clause (a) above. For purposes of this definition, “control” of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agent Members” has the meaning assigned to it in Section 2.7(b).

“Agents” means any Paying Agent, Transfer Agent, Registrar, co-Registrar or other agent appointed by the Company pursuant to the terms of this Indenture.

“Authenticating Agent” has the meaning assigned to it in Section 2.2(d).

“Authorized Agent” has the meaning assigned to it in Section 10.6(d).

“Bail-in Powers” has the meaning assigned to it in Section 2.3(c)(i).

“Bankruptcy Law” means: (1) Title 11, United States Bankruptcy Code of 1978, as amended, or any similar U.S. federal or state law substantially relating to bankruptcy, insolvency, receivership, liquidation or the relief of debtors or (2) Peruvian bankruptcy law Peruvian Ley General del Sistema Concursal (Ley No. 27809, as amended) or (3) Panamanian insolvency law Ley que establece el Régimen de los Procesos Concursales de Insolvencia y dicta otras disposiciones (Ley No. 12 de 19 de mayo de 2016, as amended) or (4) any substantially similar laws for the relief of debtors.

“Board of Directors” means, with respect to any Person, the board of directors or similar governing body of such Person or any duly authorized committee thereof.

“Board Resolution” means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“BRRD” has the meaning assigned to it in Section 2.3(c).

“Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in Lima, Peru or New York, New York are authorized or required by law to close.

“Certificated Note” means any Note issued in fully registered certificated form (other than a Global Note), which shall be substantially in the form of Exhibit A, with appropriate legends as specified in Section 2.8 and Exhibit A.

“Change of Control” means the occurrence of any of the following events:

(1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Person (including any “person” or “group” (as such terms are used in Sections 13(d)(3) and 14(d) of the Exchange Act or any successor provisions to any of the foregoing)) other than to one or more Permitted Holders; or

(2) the consummation of any transaction (including without limitation, any merger or consolidation) the result of which is that the Permitted Holders cease to be the “beneficial owners” (as defined in Rules 13d 3 and 13d 5 under the Exchange Act), directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or

(3) the adoption of a plan relating to the liquidation or dissolution of the Company.

“Change of Control Event” means the occurrence of both a Change of Control and a Ratings Decline in respect thereof.

2

“Change of Control Event Notice” means notice of a Change of Control Offer made pursuant to Section 3.6, which shall be given to each record Holder in accordance with Section 10.1 within thirty (30) days following the date upon which a Change of Control Event occurred, with a copy to the Trustee, which such notice shall govern the terms of the Change of Control Offer and shall state:

(1) that a Change of Control Offer is being made pursuant to Section 3.6, and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for purchase by the Company at a purchase price in cash equal to 101% of the principal amount of such notes plus accrued and unpaid interest, and Additional Amounts, if any, to, but excluding, the date of purchase;

(2) the purchase date (which shall be no earlier than 10 days nor later than 60 days from the date such notice is given) (the “Change of Control Payment Date”);

(3) the procedures determined by the Company, consistent with this Indenture, that a Holder must follow in order to have its notes repurchased; and

(4) any other information necessary to enable any Holder to tender Notes and to have such Notes purchased pursuant to Section 3.6.

“Change of Control Offer” has the meaning assigned to it in Section 3.6(a).

“Change of Control Payment” has the meaning assigned to it in Section 3.6(a).

“Change of Control Payment Date” has the meaning assigned to it in the definition of “Change of Control Event Notice.”

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Company” means the party named as such in the introductory paragraph to this Indenture and its successors and assigns, including any Surviving Entity.

“Company Order” has the meaning assigned to it in Section 2.2(c).

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to July 19, 2027 that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities with a maturity comparable to July 19, 2027.

“Comparable Treasury Price” means, with respect to the Redemption Date, (1) the average of the Reference Treasury Dealer Quotations for the Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations or (2) if the Independent Investment Banker obtains fewer than five (5) such Reference Treasury Dealer Quotations, the average of all such quotations.

“Consolidated Net Tangible Assets” means, as of any date of determination, as shown on the most recent balance sheet of the Company provided to the Trustee pursuant to Section 3.8 (or required to be provided thereunder), (a) the Total Assets of the Company and its consolidated Subsidiaries, less (b)

3

the amount thereof constituting goodwill and Intangible Assets, as calculated in accordance with GAAP, less (c) all current liabilities of the Company and its consolidated Subsidiaries after eliminating (i) all intercompany items between the Company and any Subsidiary or between Subsidiaries and (ii) all current maturities of long-term Debt; provided that in the event that the Company or any of its consolidated Subsidiaries assumes liabilities or acquires any assets in connection with the acquisition by the Company or any of its consolidated Subsidiaries of another Person subsequent to the commencement of the period for which the Consolidated Net Tangible Assets is being calculated but prior to the event for which the calculation of the Consolidated Net Tangible Assets is made, then the Consolidated Net Tangible Assets shall be calculated giving pro forma effect to such assumption of liabilities or acquisition of assets, as if the same had occurred at the beginning of the applicable period.

“Corporate Trust Office” means the office of the Trustee at which at any time its corporate trust business shall be principally administered, which office at the date hereof is located at The Bank of New York Mellon, 101 Barclay Street, Floor 7 East, New York, New York 10286 or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company).

“Covenant Defeasance” has the meaning assigned to it in Section 8.1(c).

“Debt” means, with respect to any Person, without duplication:

(1) indebtedness for money borrowed and premium, if any, and accrued interest in respect thereof;

(2) liabilities under or in respect of any acceptance or credit;

(3) the principal and premium, if any, and any accrued and unpaid interest in respect of any bonds, notes, debentures, certificates of deposit or other securities (whether issued for cash or in whole or in part for consideration other than cash);

(4) all obligations issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable in the ordinary course of business);

(5) all obligations of such Person for the reimbursement of any obligor or any letter of credit, banker’s acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (4) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit);

(6) all obligations of the type referred to in clauses (1) through (5) above of other Persons and all dividends of other Persons for the payments of which, in either case, such Person is responsible, or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any guarantee (other than obligations of other Persons that are customers or suppliers of such Person for which such Person is or becomes responsible or liable in the ordinary course of business to (but only to) the extent that such Person does not, or is not required to, make payment thereof);

4

(7) the net obligations under Hedging Obligations;

(8) guarantees and other contingent obligations in respect of Debt referred to in clauses (1) through (7) above; and

(9) any other obligations of such Person that are required to be, or are in such Person’s financial statements, recorded or treated as indebtedness under GAAP.

“Default” means any event that is, or after notice or passage of time or both would be, an Event of Default.

“Defaulted Interest” has the meaning assigned to it in paragraph 1 of the Form of Reverse Side of Note contained in Exhibit A.

“Depositary” means DTC, Clearstream Banking, société anonyme or Euroclear S.A./N.V., as operator of the Euroclear System, or any other depositary institution appointed by the Company that is a clearing agency registered under the Exchange Act. The initial Depositary for the Global Notes is DTC.

“Distribution Compliance Period” means, with respect to any Regulation S Global Note, the forty (40) consecutive days beginning on and including the later of (a) the day on which any Notes represented thereby are offered to Persons other than distributors (as defined in Regulation S) pursuant to Regulation S and (b) the issue date for such Notes, as notified by the Company to the Trustee in writing.

“DTC” means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depositary institution hereinafter appointed by the Company that is a clearing agency registered under the Exchange Act.

“Event of Default” has the meaning assigned to it in Section 6.1(a).

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.

“Fitch” means Fitch Inc. and its successors.

“G-20” means the Group of Twenty (G-20) Finance Ministers and Central Bank Governors.

“GAAP” means IFRS applied on a consistent basis.

“Global Note” means any Note issued in fully registered, global, certificated form to the Depositary (or its nominee), as depositary for the beneficial owners thereof, which shall be substantially in the form of Exhibit A, with appropriate legends as specified in Section 2.8 and Exhibit A.

5

“Global Note Legend” has the meaning assigned to it in Section 2.8(a).

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person:

(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise); or

(2) entered into for purposes of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “guarantee” will not include endorsements for collection or deposit in the ordinary course of business.

The term “guarantee” used as a verb has a corresponding meaning.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person pursuant to any interest rate swap agreement, foreign currency exchange agreement, interest rate collar agreement, option, forward or futures contract or other similar agreement or arrangement designed to protect such Person against changes in interest rates or foreign exchange rates.

“Holder” means the Person in whose name a Note is registered in the Note Register.

“Holding Company” means any entity of which 90% or more of its assets are comprised of, or 90% or more of its revenues are derived from, holding securities in any other Persons.

“Holding Subsidiary” means any Holding Company beneficially owned, directly or indirectly, by the Company that, individually or together with other Holding Companies, owns or controls, directly or indirectly, Share Capital of any other Person.

“IFRS” means the International Financial Reporting Standards as adopted by the International Accounting Standards Board which are in effect from time to time.

“Indenture” means this Indenture, as amended or supplemented from time to time, including the Exhibits hereto.

“Independent Investment Banker” means one of the Reference Treasury Dealers reasonably designated by the Company.

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“Initial Notes” means any of the Company’s 4.125% Senior Notes due 2027 issued on the Issue Date, and any replacement Notes issued therefor in accordance with this Indenture.

“Intangible Assets” means, with respect to the Company and its consolidated Subsidiaries, unamortized deferred charges, patents, trademarks, service marks, trade names, copyrights, write-ups of assets over their carrying value at the end of each fiscal year, and all other items that would be treated as intangibles on a consolidated statement of financial position of the Company and its consolidated Subsidiaries in accordance with GAAP (except unamortized debt discount and expense).

“Interest Payment Date” means the stated due date of an installment of interest on the Notes as specified in the Form of Face of Note contained in Exhibit A.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s Investors Service, Inc., BBB- (or the equivalent) by Fitch, and BBB- (or the equivalent) by Standard & Poor’s Ratings Group, Inc., or any equivalent rating by any Rating Agency, in each case, with a stable or better outlook.

“Issue Date” means the first date of issuance of Notes under this Indenture.

“Legal Defeasance” has the meaning assigned to it in Section 8.1(b).

“Lien” means any mortgage, pledge, security interest, movable guaranty (garantía mobiliaria), security trust, conditional sale or other title retention agreement or other similar lien.

“Luxembourg” means the Grand Duchy of Luxembourg.

“Luxembourg Paying Agent” means the party named as such in the introductory paragraph of this Indenture until such party resigns or is removed by the Company from such role; provided that, if such party is replaced by a successor in accordance with the terms of this Indenture, “Luxembourg Paying Agent” shall thereafter mean such successor.

“Luxembourg Transfer Agent” means the party named as such in the introductory paragraph of this Indenture until such party resigns or is removed by the Company from such role; provided that, if such party is replaced by a successor in accordance with the terms of this Indenture, “Luxembourg Transfer Agent” shall thereafter mean such successor.

“Material Subsidiary” means any Subsidiary that represented 10% or more of the Company’s consolidated Total Assets or consolidated operating revenues in the preceding fiscal year.

“Maturity Date” means, when used with respect to any Note, the date on which the principal of such Note becomes due and payable as therein or herein provided, whether at Stated Maturity or by declaration of acceleration, call for redemption, exercise of any repurchase right or otherwise.

“Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.

“Non-U.S. Person” means a person who is not a U.S. person, as defined in Regulation S.

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“Note Custodian” means the custodian with respect to any Global Note appointed by the Depositary, or any successor Person thereto, and shall initially be the Trustee.

“Note Register” has the meaning assigned to it in Section 2.3(a).

“Notes” means, collectively, the Initial Notes and any Additional Notes issued under this Indenture.

“Obligations” means, with respect to any Debt, any principal, interest (including, without limitation, Post-Petition Interest), premium, Additional Amounts, penalties, fees, indemnifications, reimbursements, damages, and other liabilities payable under the documentation governing such Debt, including in the case of the Notes, this Indenture.

“Offering Memorandum” means the Company’s offering memorandum dated October 12, 2017, used in connection with the Original Offering of Notes.

“Officer” means, with respect to any Person, the chief executive officer or chief financial officer of such Person, any other executive or senior officer performing similar decision making functions for such Person, any member of the Board of Directors of such Person, or any attorney-in-fact of such Person.

“Officers’ Certificate” means, in connection with any action to be taken by the Company, a certificate signed by two Officers of such Person, in accordance and compliance with the terms of this Indenture, that is delivered to the Trustee.

“Opinion of Counsel” means a written opinion from legal counsel, who shall be reasonably acceptable to the Trustee.

“Original Offering of Notes” means the original private offering of the Initial Notes, which were issued on the Issue Date.

“Outstanding” means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:

(1) Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

(2) Notes, or portions thereof, which money in the necessary amount has been thereto for deposited with the Trustee or any Paying Agent (other than the Company, any Subsidiary or any of their respective Affiliates) in trust or set aside and segregated in trust by the Company, any Subsidiary or any of their respective Affiliates (if the Company, any Subsidiary or any of their respective Affiliates is acting as Paying Agent) for the payment redemption or, in the case of a Change of Control Offer, purchase thereof; provided that, if Notes (or portions thereof) are to be redeemed or purchased, notice of such redemption or purchase has been duly given pursuant to this Indenture or provision therefor reasonably satisfactory to the Trustee has been made;

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(3) Notes which have been surrendered pursuant to Section 2.10 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a protected purchaser in whose hands such Notes are valid obligations of the Company; and

(4) solely to the extent provided in Article VIII, Notes which are subject to Legal Defeasance or Covenant Defeasance as provided in Article VIII;

provided, however, that in determining whether the Holders of the requisite aggregate principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company, any Subsidiary or any other obligor under the Notes or any Affiliate of the Company, such Subsidiary or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Trust Officer of the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Company, any Subsidiary or any other obligor upon the Notes or any of their respective Affiliates.

“Paying Agent” has the meaning assigned to it in Section 2.3(a).

“Permitted Holders” means one or more of the following (i) members of the Rodriguez-Pastor family, (ii) any spouse, descendant, heirs or estate of the individuals referred to in the preceding clause (i), and (iii) any non-natural Person that is a direct or indirect Affiliate of any of the Persons referred to in the preceding clauses (i) and (ii) and with respect to which any Person or Persons listed in the preceding clauses (i) and (ii) owns the majority of the aggregate of the total voting power of the Voting Stock in such non-natural Person, on a fully diluted basis.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“Post-Petition Interest” means all interest accrued or accruing after the commencement of any insolvency or liquidation proceeding (and interest that would accrue but for the commencement of any insolvency or liquidation proceeding) in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing any Debt, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such insolvency or liquidation proceeding.

“Primary Treasury Dealer” has the meaning assigned to it in the definition of “Reference Treasury Dealer.”

“Private Placement Legend” has the meaning assigned to it in Section 2.8(b).

“QIB” means any “qualified institutional buyer” (as defined in Rule 144A).

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“Rating Agencies” means each of S&P, Fitch and Moody’s or, if S&P, Fitch or Moody’s or the three of them shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (as certified by a resolution of the Board of Directors) which shall be substituted for S&P, Fitch or Moody’s or the three of them, as the case may be.

“Ratings Date” means in connection with a Change of Control Event, the date that is 90 days prior to the earlier of (i) the occurrence of a Change of Control or (ii) public notice of the occurrence of a Change of Control or of the intention of the Company or any other Person or Persons to effect a Change of Control.

“Ratings Decline” means in connection with a Change of Control, the occurrence, on or within 180 days after the earlier to occur of public notice of (i) the occurrence of a Change of Control and (ii) the intention by the Company or any other Person or Persons to effect a Change of Control (which period will be extended for so long as any of the Rating Agencies has publicly announced that it is considering a possible ratings change as a result of a Change of Control), of any of the events listed below, in each case expressly as a result of such Change of Control:

(a) in the event the Notes have an Investment Grade Rating by any two or more Rating Agencies on the Rating Date, the rating of the Notes by any such Rating Agency will be changed to below an Investment Grade Rating;

(b) in the event the Notes have an Investment Grade Rating by any, but not two or more, of the Rating Agencies on the Rating Date, the rating of the Notes by such Rating Agency will be changed to below an Investment Grade Rating; or

(c) in the event the Notes are rated below an Investment Grade Rating by any two or more Rating Agencies on the Rating Date, the rating of the Notes by any such Rating Agency will be decreased by one or more gradations (including gradations within rating categories as well as between rating categories).

“Record Date” has the meaning assigned to it in the Form of Face of Note contained in Exhibit A.

“Redemption Date” means, with respect to any redemption of Notes, the date fixed for such redemption pursuant to this Indenture and the Notes.

“Reference Treasury Dealer” means Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC or their Affiliates that are primary United States government securities dealers in New York City (each, a “Primary Treasury Dealer”) and not less than three other leading Primary Treasury Dealers in New York City reasonably designated by the Company; provided that if any of the former cease to be a Primary Treasury Dealer, the Company will substitute therefor another Primary Treasury Dealer.

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and a Redemption Date, the average, as determined by the Independent Investment Banker, of the bid and ask prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at or about 3:30 p.m. (New York City time) on the third Business Day preceding such Redemption Date.

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“Registrar” has the meaning assigned to it in Section 2.3(a).

“Regulation S” means Regulation S under the Securities Act or any successor regulation.

“Regulation S Global Note” has the meaning assigned to it in Section 2.1(e).

“Relevant Resolution Authority” has the meaning assigned to it in Section 2.3(c)(i).

“Resale Restriction Termination Date” means, with respect to any Rule 144A Global Note (or beneficial interest therein), the date that is one year (or such other period specified in Rule 144) from the Issue Date or, if any Additional Notes that are Rule 144A Global Notes have been issued before the Resale Restriction Termination Date for any Rule 144A Global Notes, from the latest such original issue date of such Additional Notes, as notified by the Company to the Trustee in writing.

“Restricted Note” means any Initial Note (or beneficial interest therein) or any Additional Note (or beneficial interest therein), until such time as:

(1) such Note is a Rule 144A Global Note and the Resale Restriction Termination Date therefor has passed;

(2) such Note is a Regulation S Global Note and the Distribution Compliance Period therefor has terminated; or

(3) the Private Placement Legend therefor has otherwise been removed pursuant to Section 2.9(e) or, in the case of a beneficial interest in a Global Note, such beneficial interest has been exchanged for an interest in a Global Note not bearing a Private Placement Legend.

“Rule 144” means Rule 144 under the Securities Act (or any successor rule).

“Rule 144A” means Rule 144A under the Securities Act (or any successor rule).

“Rule 144A Global Note” has the meaning assigned to it in Section 2.1(d).

“S&P” means Standard & Poor’s Rating Service or any successor thereto.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Share Capital” means, with respect to any Person, any and all shares of capital stock, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated, whether voting or non-voting), such Person’s equity including any preferred stock, but excluding any debt securities convertible into or exchangeable for such equity.

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“Special Record Date” has the meaning assigned to it in Section 2.13(a).

“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which any principal of such security is due and payable, including pursuant to any mandatory redemption or purchase provision (but excluding any provision providing for the purchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred).

“Subsidiary” means any Person of which more than 50% of the total voting power of shares of Share Capital or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (a) the Company, (b) the Company and one or more Subsidiaries or (c) one or more Subsidiaries. Unless otherwise specified, a Subsidiary shall be deemed to be a Subsidiary of the Company.

“Surviving Entity” has the meaning assigned to it in Section 4.1(a)(iii).

“Taxes” means all taxes, withholdings, duties, assessments or governmental charges in the nature of a tax imposed or levied by or on behalf of Panama or the jurisdiction of incorporation of any successor entity to the Company or the jurisdiction through which the Company or any Paying Agent acting on behalf of the Company makes any payments with respect to the Notes or, in each case, any political subdivision thereof or any authority or agency therein or thereof having power to tax (each, a “Taxing Jurisdiction”).

“Taxing Jurisdiction” has the meaning assigned to it in the definition of “Taxes.”

“Total Assets” means, as of any date of determination, the total assets shown on the consolidated balance sheet of the Company as of the most recent date for which financial statements have been provided to the Trustee, determined in accordance with GAAP.

“Transfer Agent” has the meaning assigned to it in Section 2.3(a).

“Transparency Directive” has the meaning assigned to it in Section 3.9(a).

“Treasury Rate” means, with respect to a Redemption Date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day-count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the Redemption Date.

“Trust Officer” means, when used with respect to the Trustee, any officer within the corporate trust department (or any successor group of the Trustee) of the Trustee, having direct responsibility for the administration of this Indenture or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject.

“Trustee” means the party named as such in the introductory paragraph of this Indenture until a successor replaces it in accordance with the terms of this Indenture and, thereafter, means the successor.

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“U.S. Dollars” or “U.S.$” means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

“U.S. Government Obligations” means direct obligations of, or guaranteed by (or certificates representing an ownership interest in such obligations) the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer’s option.

“Voting Stock” means, with respect to any Person as of any date, the Share Capital of such Person that is at the time entitled to vote generally in the election of the Board of Directors of such Person and in respect of other matters presented at the shareholders’ meeting of such Person.

Section 1.2 Rules of Construction. Unless the context otherwise requires:

(a) a term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(c) “or” is not exclusive;

(d) “including” and “includes” means including or includes, as the case may be, without limitation;

(e) words in the singular include the plural and words in the plural include the singular;

(f) references to the payment of principal of the Notes shall include applicable premium, if any;

(g) references to payments on the Notes shall include Additional Amounts payable on the Notes, if any;

(h) all references to Sections or Articles refer to Sections or Articles of this Indenture;

(i) references to any law are to be construed as including all statutory and regulatory provisions or rules consolidating, amending, replacing, supplementing or implementing such law; and

(j) the term “obligor,” when used with respect to the Notes, means the Company and any other obligor as of the date of this Indenture.

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ARTICLE II

THE NOTES

Section 2.1 Form and Dating.

(a) The Initial Notes are being originally issued by the Company on the Issue Date. The Notes shall be issued in fully registered certificated global form without interest coupons, and in minimum denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes and the certificate of authentication shall be substantially in the form of Exhibit A.

(b) The terms and provisions of the Notes, the form of which is in Exhibit A, shall constitute, and are hereby expressly made, a part of this Indenture, and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Except as otherwise expressly permitted in this Indenture, all Notes shall be identical in all respects. Notwithstanding any differences among them, all Notes issued under this Indenture shall vote and consent together on all matters as one class.

(c) The Notes may have notations, legends or endorsements as specified in Section 2.8 or as otherwise required by law, stock exchange rule or Depositary rule or usage. The Company shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its authentication.

(d) Notes originally offered and sold to QIBs in reliance on Rule 144A shall be represented by a single permanent global certificate (which may be subdivided) without interest coupons (each, a “Rule 144A Global Note”).

(e) Notes originally offered and sold outside the United States of America in reliance on Regulation S shall be represented by a single permanent global certificate (which may be subdivided) without interest coupons (each, a “Regulation S Global Note”).

Section 2.2 Execution and Authentication.

(a) An Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

(b) A Note shall not be valid until an authorized signatory of the Trustee manually authenticates the Note. The signature of the Trustee on the certificate of authentication on a Note shall be conclusive evidence that such Note has been duly and validly authenticated and issued under this Indenture.

(c) At any time and from time to time after the execution and delivery of this Indenture, the Trustee shall authenticate and make available for delivery Notes upon a written order of the Company signed by an Officer of the Company (the “Company Order”). A Company Order shall specify the amount of the Notes to be authenticated and the date on which such issue of Notes is to be authenticated.

(d) The Trustee may appoint an agent (the “Authenticating Agent”) reasonably acceptable to the Company to authenticate the Notes. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent.

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(e) In case a Surviving Entity has executed an indenture supplemental hereto with the Trustee pursuant to Article IV, any of the Notes authenticated or delivered prior to such transaction may, from time to time, at the request of the Surviving Entity, be exchanged for other Notes executed in the name of the Surviving Entity with such changes in phraseology and form as may be appropriate, but otherwise identical to the Notes surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the Surviving Entity, shall authenticate and deliver Notes as specified in such order for the purpose of such exchange. If Notes shall at any time be authenticated and delivered in any new name of a Surviving Entity pursuant to this Section 2.2 in exchange or substitution for or upon registration of transfer of any Notes, such Surviving Entity, at the option of the Holders but without expense to them, shall provide for the exchange of all Notes at the time Outstanding for Notes authenticated and delivered in such new name.

Section 2.3 Registrar, Transfer Agents and Paying Agents.

(a) The Company shall maintain an office or agency in the Borough of Manhattan, City of New York, and, as long as the Notes are listed on the Luxembourg Stock Exchange for trading on the Euro MTF Market, in Luxembourg (which office or agency may be an office of the Trustee or an Affiliate of the Trustee), where Notes may be presented or surrendered for transfer or for exchange (the “Transfer Agent”) and where Notes may be presented for payment (the “Paying Agent”). The Company shall also maintain or cause to be maintained an office or agency in the Borough of Manhattan, City of New York where Notes may be presented or surrendered for registration of transfer or exchange (the “Registrar”). The Registrar shall keep a register of the Notes and of their transfer and exchange (the “Note Register”). The Company may have one or more co-Registrars and one or more additional Paying Agents or Transfer Agents. The term “Paying Agent” includes the Luxembourg Paying Agent and any additional paying agent, and the term “Transfer Agent” includes the Luxembourg Transfer Agent and any additional transfer agent.

(b) The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Transfer Agent or co-Registrar that is not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of each such Agent. If the Company fails to maintain a Registrar or Paying Agent and it and its Subsidiaries refuse to act as such Agent(s) in accordance with the following sentence, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. The Company or any of its Subsidiaries may act as Paying Agent, Registrar, co-Registrar or Transfer Agent.

(c) The Company initially appoints the Trustee as Registrar, Paying Agent and Transfer Agent (and the Trustee hereby accepts such appointment), until such time as another Person is appointed as such. The Company initially appoints The Bank of New York Mellon SA/NV, Luxembourg Branch as Luxembourg Paying Agent and Luxembourg Transfer Agent (and The Bank of New York Mellon SA/NV, Luxembourg Branch hereby accepts such appointment), until such time as another person is appointed as such. In respect of the foregoing appointment of The Bank of New York Mellon SA/NV, Luxembourg Branch, as Luxembourg Paying Agent and Luxembourg Transfer Agent for the Notes, reference is hereby made to (i) the Bank Recovery and Resolution Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms (the “BRRD”), and (ii) in relation to a Member State of the European Economic Area which has implemented, or which at any time implements, the BRRD, the relevant implementing law, regulation, rule or requirement as

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described in the document described as the EU Bail-in Legislation Schedule then in effect, and published by the Loan Market Association (or any successor person) from time to time at http://www.lma.eu.com/ (the “Bail-in Legislation”). As used herein, the term “BRRD Liability” shall be deemed to have the same meaning as in such laws, regulations, rules or requirements implementing the BRRD under the applicable Bail-in Legislation. Notwithstanding any other term of this Indenture or any other agreements, arrangements, or understanding between the parties, the Company acknowledges, accepts, and agrees to be bound by:

(i) the effect of the exercise of any “Write-down” and “Conversion Powers” (as defined in relation to the relevant Bail-in Legislation) (“Bail-in Powers”) by the resolution authority with the ability to exercise any Bail-in Powers in relation to The Bank of New York Mellon SA/NV, Luxembourg Branch (the “Relevant Resolution Authority”) in relation to any BRRD Liability of The Bank of New York Mellon SA/NV, Luxembourg Branch under this Indenture, that (without limitation) may include and result in any of the following, or some combination thereof: (1) the reduction of all, or a portion, of the BRRD Liability or outstanding amounts due thereon; (2) the conversion of all, or a portion, of the BRRD Liability into shares, other securities or other obligations of The Bank of New York Mellon SA/NV, Luxembourg Branch or another person (and the issue to or conferral on it of such shares, securities or obligations); (3) the cancellation of the BRRD Liability; and/or (4) the amendment or alteration of the amounts due in relation to the BRRD Liability, including any interest, if applicable, thereon, the maturity or the dates on which any payments are due, including by suspending payment for a temporary period; and

(ii) the variation of the terms of this Indenture, as applicable, as deemed necessary by the Relevant Resolution Authority, to give effect to the exercise of Bail-in Powers by the Relevant Resolution Authority.

(d) The Company may change any Agent without notice to Holders.

Section 2.4 Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent (other than the Trustee or any other Paying Agent appointed as of the date hereof pursuant to this Indenture) to agree that such Paying Agent shall hold in trust, for the benefit of Holders or the Trustee, all money held by such Paying Agent for the payment of principal of or interest on the Notes (whether such money has been distributed to it by the Company or any other obligor under the Notes) in accordance with the terms of this Indenture and shall notify the Trustee in writing of any Default by the Company (or any other obligor under the Notes) in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section 2.4, the Paying Agent (if other than the Company) shall have no further liability for the money delivered to the Trustee. Upon any proceeding under any Bankruptcy Law with respect to the Company or any Affiliate of the Company, if the Company or such Affiliate is then acting as Paying Agent, the Trustee shall replace the Company or such Affiliate as Paying Agent.

The receipt by the Paying Agent or the Trustee from the Company of each payment of principal, interest and/or other amounts due in respect of the Notes in the manner specified herein and on the date on which such amount of principal, interest and/or other amounts are then due, shall satisfy the

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obligations of the Company herein and under the Notes to make such payment to the Holders on the due date thereof; provided, however, that the liability of any Paying Agent hereunder shall not exceed any amounts paid to it by the Company, or held by it, on behalf of the Holders under this Indenture. Notwithstanding the preceding sentence or any other provision of this Indenture to the contrary, the Company shall indemnify the Holders in the event that there is subsequent failure by the Trustee or any Paying Agent to pay any amount due in respect of the Notes in accordance with the Notes and this Indenture as shall result in the receipt by the Holders of such amounts as would have been received by them had no such failure occurred.

Section 2.5 CUSIP, ISIN and Common Code Numbers. In issuing the Notes, the Company may use CUSIP, ISIN and Common Code numbers and, if so, the Trustee shall use CUSIP, ISIN and Common Code numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee in writing of any initial CUSIP, ISIN and/or Common Code numbers and any change in the CUSIP, ISIN or Common Code numbers.

Section 2.6 Holder Lists. The Registrar shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may reasonably request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.

Section 2.7 Global Note Provisions.

(a) Each Global Note initially shall: (i) be registered in the name of the Depositary or the nominee of the Depositary; (ii) be delivered to the Note Custodian; and (iii) bear the appropriate legend, as set forth in Section 2.8 and Exhibit A. Any Global Note may be represented by more than one certificate. The aggregate principal amount of each Global Note may from time to time be increased or decreased by adjustments made on the records of the Note Custodian, as provided in this Indenture.

(b) Members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Note Custodian under such Global Note, and the Depositary or its nominee may be treated by the Company, the Trustee, each Agent and any of their respective agents as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, any Agent or any of their respective agents from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of the customary procedures of the Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. The registered Holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and Persons that may hold interests through Agent Members, to take any action that a Holder is entitled to take under this Indenture or the Notes.

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(c) Except as provided below, owners of beneficial interests in Global Notes shall not be entitled to receive Certificated Notes. Global Notes shall be exchangeable for Certificated Notes only in the following limited circumstances:

(i) the Depositary notifies the Company that it is unwilling or unable to continue as depositary for such Global Note or the Depositary ceases to be a clearing agency registered under the Exchange Act, at a time when the Depositary is required to be so registered in order to act as depositary, and in each case a successor depositary is not appointed by the Company within ninety (90) days of such notice;

(ii) any of the Notes has become immediately due and payable in accordance with Section 6.2 of this Indenture; or

(iii) the Company, in its sole discretion, executes and delivers to the Trustee and the Registrar an Officers’ Certificate stating that such Global Note shall be so exchangeable.

In connection with the exchange of an entire Global Note for Certificated Notes pursuant to this Section 2.7(c), such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and

the Company shall execute, and upon Company Order the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such Global Note, an equal aggregate principal amount of Certificated Notes of authorized denominations.

Section 2.8 Legends.

(a) Each Global Note shall bear the restrictive legend specified therefor in Exhibit A on the face thereof (the “Global Note Legend”).

(b) Each Restricted Note shall bear the applicable private placement legend specified therefor in Exhibit A on the face thereof (the “Private Placement Legend”).

Section 2.9 Transfer and Exchange.

The following provisions shall apply with respect to any proposed transfer of an interest in a Rule 144A Global Note that is a Restricted Note:

(a) If (1) the owner of a beneficial interest in a Rule 144A Global Note wishes to transfer such interest (or portion thereof) to a Non-U.S. Person pursuant to Regulation S and (2) such Non-U.S. Person wishes to hold its interest in the Notes through a beneficial interest in the Regulation S Global Note, subject to the rules and procedures of the Depositary, upon receipt by the Note Custodian and Registrar of:

(i) instructions from the Holder of the Rule 144A Global Note directing the Note Custodian and Registrar to credit or cause to be credited a beneficial interest in the Regulation S Global Note equal to the principal amount of the beneficial interest in the Rule 144A Global Note to be transferred; and

(ii) a certificate in the form of Exhibit C duly executed by the transferor,

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the Note Custodian and Registrar shall increase the Regulation S Global Note and decrease the Rule 144A Global Note by such amount in accordance with the foregoing.

(b) If the owner of a beneficial interest in a Regulation S Global Note wishes to transfer such interest (or any portion thereof) to a QIB pursuant to Rule 144A prior to the expiration of the Distribution Compliance Period therefor, subject to the rules and procedures of the Depositary, upon receipt by the Note Custodian and Registrar of:

(i) instructions from the Holder of the Regulation S Global Note directing the Note Custodian and Registrar to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the principal amount of the beneficial interest in the Regulation S Global Note to be transferred; and

(ii) a certificate in the form of Exhibit B duly executed by the transferor,

the Note Custodian and Registrar shall increase the Rule 144A Global Note and decrease the Regulation S Global Note by such amount in accordance with the foregoing.

(c) Other Transfers. Any transfer of Restricted Notes not described in this Section 2.9 (other than a transfer of a beneficial interest in a Global Note that does not involve an exchange of such interest for a Certificated Note or a beneficial interest in another Global Note, which must be effected in accordance with applicable law and the rules and procedures of the Depositary, but is not subject to any procedure required by this Indenture) shall be made only upon receipt by the Company, the Trustee and the Registrar of such Opinions of Counsel, certificates and/or other information reasonably required by and satisfactory to the Company in order to ensure compliance with the Securities Act or in accordance with Section 2.9(e).

(d) Certificated Notes Transfers. Certificated Notes may be exchanged or transferred in whole or in part in the principal amount of authorized denominations by surrendering such Certificated Notes at the Corporate Trust Office, the office of the Trustee or the office of any Transfer Agent with a written instrument of transfer as provided in the assignment form attached to the form of Notes in Exhibit A hereto duly executed by the Holder thereof or his attorney duly authorized in writing. The provisions of Section 2.9(a) for transfer of an interest in a Rule 144A Global Note to an interest in a Regulation S Global Note and the provisions of Section 2.9(b) for transfer of an interest in a Regulation S Global Note to an interest in a Rule 144A Global Note shall also apply for the same types of transfers with respect to Certificated Notes.

In exchange for any Certificated Note properly presented for transfer, the Trustee shall promptly authenticate and deliver or cause to be authenticated and delivered at the Corporate Trust Office, to the transferee, or send by mail, within three Business Days of the receipt of a form of transfer, (at the risk of the transferee) to such address as the transferee may request, a Certificated Note or Notes, as the case may require, registered in the name of such transferee, for the same aggregate principal amount as was transferred. In the case of the transfer of any Certificated Note in part, the Trustee shall also promptly authenticate and deliver or cause to be authenticated and delivered at the Corporate Trust Office, to the transferor, or send by mail, within three Business Days of the receipt of a form of transfer (at the risk of the transferor), to such address as the transferor may request, a Certificated Note or Notes, as the case may require, registered in the name of such transferor, for the aggregate principal amount that

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was not transferred. No transfer of any Notes shall be made unless the request for such transfer is made by the registered Holder or his attorney duly authorized in writing at the Corporate Trust Office and is accompanied by a completed instrument of transfer in the form of assignment form attached to the form of Notes in Exhibit A hereto.

(e) Use and Removal of Private Placement Legends. Upon the registration of transfer, exchange or replacement of Notes (or beneficial interests in a Global Note) not bearing (or not required to bear upon such registration of transfer, exchange or replacement) a Private Placement Legend, the Company shall direct the Note Custodian and Registrar to exchange such Notes (or beneficial interests) for beneficial interests in a Global Note (or Certificated Notes, if they have been issued pursuant to Section 2.7(c)) that does not bear a Private Placement Legend. Upon the transfer, exchange or replacement of Notes (or beneficial interests in a Global Note) bearing a Private Placement Legend, the Note Custodian and Registrar shall deliver only Notes (or beneficial interests in a Global Note) that bear a Private Placement Legend unless:

(i) such Notes (or beneficial interests) are transferred pursuant to Rule 144 upon delivery to the Registrar of a certificate duly executed by the transferor in the form of Exhibit D and an opinion of counsel reasonably satisfactory to the Company;

(ii) such Notes (or beneficial interests) are Rule 144A Global Notes and are transferred, replaced or exchanged after the Resale Restriction Termination Date therefor or such Notes (or beneficial interests) are Regulation S Global Notes and are transferred, replaced or exchanged after the termination of the Distribution Compliance Period therefor;

(iii) a transfer of such Notes is made pursuant to an effective registration statement filed with the SEC, in which case the Private Placement Legend shall be removed from such Note so transferred at the request of the Holder; or

(iv) in connection with such registration of transfer, exchange or replacement the Registrar shall have received an Opinion of Counsel addressed to the Company and the Trustee and other evidence reasonably satisfactory to the Company to the effect that neither such Private Placement Legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act.

The Holder of a Global Note may exchange an interest therein for an equivalent interest in a Global Note not bearing a Private Placement Legend upon transfer of such interest pursuant to any of clauses (i) through (iv) of this Section 2.9(e).

(f) Consolidation of Global Notes. Nothing in this Indenture shall provide for the consolidation of any Notes with any other Notes unless they constitute, as determined pursuant to an Opinion of Counsel, the same classes of securities for U.S. federal income tax purposes.

(g) Retention of Documents. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to this Article II in accordance with its customary retention procedures. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar.

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(h) Execution, Authentication of Notes, etc.

(i) Subject to the other provisions of this Section 2.9, when Notes are presented to the Registrar or a co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided that any Notes presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and to the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges and subject to the other terms and conditions of this Article II, the Company shall execute, and upon Company Order the Trustee shall authenticate, Certificated Notes and Global Notes at the Registrar’s or co-Registrar’s request.

(ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company, the Registrar or the Trustee may require payment of a sum sufficient to cover any transfer tax, assessment or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charges payable upon exchange or transfer pursuant to Section 3.6).

(iii) The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Note for a period beginning: (1) fifteen (15) days before a notice of an offer to repurchase or redeem Notes is given and ending at the close of business on the day of such notice; or (2) fifteen (15) days before an Interest Payment Date and ending on such Interest Payment Date.

(iv) Prior to the due presentation for registration of transfer of any Note, the Company, the Trustee, and any Agent may (subject to the right of the Holders as of any Record Date to receive payments of interest on the related Interest Payment Date) deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and (subject to Section 2.13) none of the Company, the Trustee or any Agent shall be affected by notice to the contrary.

(v) All Notes issued upon any registration of transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such registration of transfer or exchange.

(vi) The Registrar shall be entitled to request such evidence reasonably satisfactory to it documenting the identity and/or signatures of the transferor and the transferee.

(i) No Obligation of the Trustee or any Agent.

(i) Neither the Trustee nor any Agent shall have any responsibility or obligation to any beneficial owner of an interest in a Global Note, a member of, or a participant in, the Depositary or other Person with respect to the accuracy of the records of the Depositary or

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its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption) or the payment of any amount or delivery of any Notes (or other security or property) under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee and the Agents may conclusively rely and shall be fully protected in conclusively relying upon information furnished by the Depositary with respect to its members and participants and any beneficial owners of Global Notes.

(ii) None of the Trustee or any Agent shall have any obligation or duty to monitor, determine or inquire as to compliance with any tax or securities laws with respect to any restrictions on transfer or exchange imposed under this Indenture or under applicable law with respect to any transfer or exchange of any interest in any Note (including any transfers between or among the Depositary participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the express terms of this Indenture, to examine the same to determine if it substantially complies on its face as to form with the express requirements hereof.

Section 2.10 Mutilated, Destroyed, Lost or Stolen Notes.

(a) If a mutilated or defaced Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or stolen and if the Company shall certify in an Officers’ Certificate that the requirements of Section 8-405 of the Uniform Commercial Code of the State of New York are met, the Company shall execute, and upon Company Order the Trustee shall authenticate, a replacement Note if the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish satisfactory evidence of the destruction, loss or theft and security or indemnity sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, and the Agents from any loss that any of them may suffer if a Note is replaced, and, in the absence of notice to the Company or a Trust Officer of the Trustee that such Note has been acquired by a protected purchaser (as defined in Section 8-303 of the Uniform Commercial Code of the State of New York), the Company shall execute, and upon Company Order the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated or defaced Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and equal principal amount, registered in the same manner, and bearing interest from the date to which interest has been paid on such Note, in exchange and substitution for such Note (upon surrender and cancellation thereof in the case of a mutilated or defaced Note) or in lieu of and substitution for such Note bearing a number not contemporaneously Outstanding.

(b) Upon the issuance of any new Note under this Section 2.10, the Company, the Trustee and the Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Company’s counsel, the Trustee, the Registrar and their respective counsel) in connection therewith.

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(c) In case any mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company may, in its discretion, pay such Notes instead of issuing a new Note in replacement thereof.

(d) Every new Note issued pursuant to this Section 2.10 in exchange for any mutilated Note, or in lieu of any destroyed, lost or stolen Note, shall constitute an original additional contractual obligation of the Company and any other obligor upon the Notes, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

(e) The provisions of this Section 2.10 shall be exclusive and shall be in lieu of, to the fullest extent permitted by applicable law, all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

Section 2.11 Temporary Notes. Until definitive Notes are ready for delivery, the Company may execute and upon Company Order the Trustee shall authenticate and make available for delivery temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and execute and upon Company Order the Trustee shall authenticate and make available for delivery definitive Notes. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company shall execute and upon Company Order the Trustee shall authenticate and make available for delivery in exchange therefor one or more definitive Notes representing an equal principal amount of Notes. Until so exchanged, the Holder of temporary Notes shall in all respects be entitled to the same benefits under this Indenture as a Holder of definitive Notes.

Section 2.12 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Agents shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and dispose of cancelled Notes in accordance with its customary procedures or return to the Company all Notes surrendered for registration of transfer, exchange, payment or cancellation. Subject to Section 2.10, the Company may not issue new Notes to replace Notes it has paid or delivered to the Trustee for cancellation for any reason other than in connection with a transfer or exchange upon Company Order.

Section 2.13 Defaulted Interest. When any installment of interest becomes Defaulted Interest, such installment shall forthwith cease to be payable to the Holders in whose names the Notes were registered on the Record Date applicable to such installment of interest. Defaulted Interest (including any interest on such Defaulted Interest) may be paid by the Company, at its election, as provided in Section 2.13(a) or Section 2.13(b).

(a) The Company may elect to make payment of any Defaulted Interest (including any interest on such Defaulted Interest) to the Holders in whose names the Notes are registered at the close of business on a special record date for the payment of such Defaulted Interest (a “Special Record

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Date”), which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Holders entitled to such Defaulted Interest as provided in this Section 2.13(a). Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest, which shall be not more than fifteen (15) calendar days and not less than ten (10) calendar days prior to the date of the proposed payment and not less than ten (10) calendar days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given to each Holder in accordance with Section 10.1, not less than ten (10) calendar days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been given as aforesaid, such Defaulted Interest shall be paid to the Holders in whose names the Notes are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to Section 2.13(b).

(b) Alternatively, the Company may make payment of any Defaulted Interest (including any interest on such Defaulted Interest) in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Section 2.13(b) such manner of payment shall be deemed practicable by the Trustee.

Section 2.14 Additional Notes. The Company may, from time to time, subject to compliance with any other applicable provisions of this Indenture, without the consent of the Holders, create and issue an unlimited principal amount of Additional Notes pursuant to this Indenture by delivering an Additional Notes Board Resolution or entering into an Additional Notes Supplemental Indenture. Such Additional Notes shall have terms and conditions set forth in Exhibit A substantially identical to those of the Initial Notes, except that Additional Notes:

(a) may have a different issue price, issue date and, if applicable, initial Interest Payment Date;

(b) may have terms specified in the Additional Notes Board Resolution or Additional Notes Supplemental Indenture for such Additional Notes making appropriate adjustments to this Article II and Exhibit A (and related definitions) applicable to such Additional Notes in order to conform to and ensure compliance with the Securities Act (or other applicable securities laws); and

(c) any Additional Notes shall be issued under a separate CUSIP or ISIN number unless the Additional Notes are issued pursuant to a “qualified reopening” of, or are otherwise fungible with, the Notes sold in this offering for U.S. federal income tax purposes.

Section 2.15 Open Market Purchases. The Company and any of its Subsidiaries or Affiliates may, subject to applicable laws and regulations, at any time purchase Notes in open-market transactions, tender offers or otherwise at any price, which Notes may be delivered to the Trustee for prompt cancellation. Any such Note not delivered to the Trustee to be cancelled may be resold only in compliance with applicable laws and regulations.

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ARTICLE III

COVENANTS

Section 3.1 Payment of Notes.

(a) The Company shall pay the principal of and interest (including Defaulted Interest) on the Notes in U.S. Dollars on the dates and in the manner provided in the Notes and in this Indenture. Prior to 11:00 a.m. (New York City time) on the Business Day prior to each Interest Payment Date and Maturity Date, the Company shall deposit with the Paying Agent in immediately available funds U.S. Dollars sufficient to make cash payments due on such Interest Payment Date or Maturity Date, as the case may be. If the Company or an Affiliate of the Company is acting as Paying Agent, the Company or such Affiliate shall, prior to 11:00 a.m. (New York City time) on the Business Day prior to each Interest Payment Date and Maturity Date, segregate and hold in trust U.S. Dollars sufficient to make cash payments due on such Interest Payment Date or Maturity Date, as the case may be. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent (other than the Company or an Affiliate of the Company) holds in accordance with this Indenture U.S. Dollars designated for and sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture. All payments on the Certificated Notes will be made at the office or agency of the Paying Agent in New York City unless the Company elects to make interest payments by check mailed to the registered Holders at their registered addresses. Payments on Global Notes shall be made to the Depositary in accordance with its applicable procedures.

(b) Notwithstanding the foregoing, if a Holder of a Certificated Note in an aggregate principal amount of at least U.S.$1,000,000 has given wire transfer instructions involving payment to a U.S. Dollar account maintained by the payee with a bank in the City of New York to the Company and the Trustee at least 15 (fifteen) days prior to the relevant payment date, the Paying Agent shall make all principal, premium, if any, and interest payments on those Notes in accordance with such instructions.

(c) Notwithstanding anything to the contrary contained in this Indenture, the Company and any Paying Agent may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder without any liability therefor. The Trustee shall be entitled to receive from the Company and each Holder forms W-9 or W-8, as applicable.

(d) In order to comply with applicable tax laws (inclusive of rules, regulations and interpretations promulgated by competent authorities) related to this Indenture and the Notes in effect from time to time (“Applicable Law”) that a foreign financial institution, issuer, trustee, paying agent or other party is or has agreed to be subject to, the Company agrees (i) to provide the Trustee and each Paying Agent sufficient information about the parties and/or transactions (including any modification to the terms of such transactions) so the Trustee and each Paying Agent can determine whether it has tax related obligations under Applicable Law, and (ii) to hold harmless the Trustee and each Paying Agent for any losses it may suffer due to the actions it takes to comply with Applicable Law. The terms of this section shall survive the termination of this Indenture.

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Section 3.2 Maintenance of Office or Agency.

(a) The Company shall maintain each office or agency required under Section 2.3 where Notes may be presented or surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture (other than notices of the type contemplated by Section 10.6) may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of any such office or agency.

(b) The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York or, so long as the Notes are listed on the Luxembourg Stock Exchange for trading on the Euro MTF Market, a Transfer Agent and a Paying Agent in Luxembourg for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency.

Section 3.3 Corporate Existence. Subject to Article IV, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

Section 3.4 Further Instruments and Acts. The Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper or as may be required by applicable law to carry out more effectively the purpose of this Indenture.

Section 3.5 Waiver of Stay, Extension or Usury Laws. The Company covenants (to the fullest extent permitted by applicable law) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture. The Company hereby expressly waives (to the fullest extent permitted by applicable law) all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

Section 3.6 Change of Control Event.

(a) If a Change of Control Event occurs, unless the Company has exercised its right to redeem all of the Notes as described in Article V prior to the Change of Control Event, the Company will make an offer to purchase all of the Notes (the “Change of Control Offer”) at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, and Additional Amounts, if any, to, but excluding, the date of purchase (the “Change of Control Payment”).

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(b) Within thirty (30) days following any Change of Control Event, unless the Company has exercised its right to redeem all of the Notes as described in Article V prior to the Change of Control Event, the Company will deliver a Change of Control Event Notice to each Holder or otherwise give notice thereof in accordance with the applicable procedures of the Depositary.

(c) On the Business Day immediately preceding the Change of Control Payment Date, the Company will, to the extent lawful, deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes so tendered.

(d) On the Change of Control Payment Date the Company will, to the extent lawful:

(i) accept for payment all Notes or portions of notes (of U.S.$200,000 or larger integral multiples of U.S.$1,000 in excess thereof) properly tendered pursuant to the Change of Control Offer; and

(ii) deliver or cause to be delivered to the Trustee for cancellation the notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company in accordance with the terms of this covenant.

(e) The Paying Agent will promptly deliver to each Holder of Notes so tendered the Change of Control Payment for such Notes, and, if only a portion of the Notes is purchased pursuant to a Change of Control Offer, the Trustee will promptly authenticate and deliver (or cause to be transferred by book-entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered upon cancellation of the original Note (or appropriate adjustments to the amount and beneficial interest in a Global Note will be made, as appropriate); provided that each such new Note will be in a principal amount of U.S.$200,000 or integral multiples of U.S.$1,000 in excess thereof.

(f) In the event that the Holders of not less than 90% of the aggregate principal amount of Outstanding Notes accept the Change of Control Offer and the Company or a third party purchases all the Notes held by such Holders, the Company will have the right, on not less than ten (10) nor more than sixty (60) days’ prior notice, given not more than thirty (30) days following the Change of Control Payment Date, to redeem all of the Notes that remain outstanding following such purchase at the purchase price equal to that in the Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest and Additional Amounts, if any, on the Notes that remain Outstanding, to, but excluding, the date of redemption.

(g) If the Change of Control Payment Date is on or after a Record Date and on or before the related interest payment date, any accrued and unpaid interest to the Change of Control Payment Date will be paid on the relevant interest payment date to the Person in whose name a Note is registered at the close of business on such Record Date.

(h) The Company shall not be required to make a Change of Control Offer upon a Change of Control Event if: (x) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not validly withdrawn under such Change of Control Offer or (y) prior to the date the Change of Control Offer is required to be made, the Company has given notice of redemption in respect of all of the Outstanding Notes in accordance with this Indenture, unless and until there is a default in payment of the applicable redemption price.

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(i) The Company shall comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations in connection with the purchase of Notes in connection with a Change of Control Offer. To the extent that the provisions of any applicable securities laws or regulations conflict with the provisions of this Indenture, the Company shall comply with such securities laws and regulations and shall not be deemed to have breached its obligations under this Indenture by doing so.

(j) The provisions of this Section 3.6 shall be applicable whether or not any other provisions of this Indenture are applicable. The obligation of the Company to make a Change of Control Offer as a result of the occurrence of a Change of Control Event may be waived or modified at any time prior to the occurrence of such Change of Control Event, with the written consent of Holders of a majority in principal amount of the Outsanding Notes.

Section 3.7 Limitation on Liens. The Company will not, nor will it permit any Holding Subsidiary to, create, incur or suffer to exist any Lien upon all or any portion of any Share Capital now owned or hereafter acquired by the Company or such Holding Subsidiary securing any Debt of any Person unless simultaneously therewith effective provision is made to secure the notes equally and ratably with such obligation for so long as such obligation is so secured. The preceding sentence will not, however, require the Company or any such Holding Subsidiaries to equally and ratably secure the notes if the Lien consists of the following:

(a) any Lien on any Share Capital of any Person (a) existing at the time of acquisition thereof which (x) is not created as a result of or in connection with or in anticipation of such acquisition and (y) does not attach to any other Share Capital other than the Share Capital so acquired, or (b) acquired by the Company or any Holding Subsidiary (individually or together with other Persons) after the date of the indenture, to the extent such Lien is created, incurred or assumed contemporaneously with, or within 360 days after such acquisition in order to secure or provide for the payment of all or any part of the purchase price or other consideration of such Share Capital or the other costs of such acquisition (including costs such as financing and refinancing costs);

(b) any extension, renewal or replacement of any Lien referred to in clause (a) above; provided that the total amount of Debt so secured is not increased, other than any increase reflecting premiums, fees and expenses in connection with such extension, renewal or replacement;

(c) any Lien on any Share Capital of InRetail Peru Corp. directly or indirectly owned by the Company on the date of this Indenture; and

(d) in addition to the foregoing Liens set forth in clauses (a) through (c) above, Liens securing Debt of the Company, or any of its Holding Subsidiaries or any of their respective Subsidiaries not to exceed in aggregate principal amount, at any time of determination, an amount equal to 15% of the Company’s Consolidated Net Tangible Assets.

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Section 3.8 Reports to Holders.

(a) The Company shall furnish or cause to be furnished to the Holders of the Notes and to the Trustee (for distribution to the Holders of Notes upon their written request), copies of (or written notice of a password protected URL address providing access to) the following items:

(i) in English (or accompanied by an English translation thereof) as soon as available and in any case within forty-five (45) days after the end of each fiscal quarter (other than the fourth quarter), its interim unaudited quarterly consolidated financial statements prepared in accordance with GAAP (containing a consolidated statement of financial position and consolidated statements of income, comprehensive income, changes to shareholders’ equity and cash flows, and notes thereto, as of the end of and for the interim period covered thereby and the comparable interim period in the immediately preceding fiscal year); and

(ii) in English (or accompanied by an English translation thereof) as soon as available and in any case within ninety (90) days after the end of each fiscal year ending on December 31st, its annual audited consolidated financial statements prepared in accordance with GAAP (containing a statement of financial position and consolidated statements of income, comprehensive income, changes to shareholders’ equity and cash flows, and notes thereto, as of the end of and for such fiscal year and the immediately preceding fiscal year with a report thereon by an internationally recognized outside firm of certified public accountants).

(b) For as long as the Notes are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Company will furnish to any Holder of Notes issued under Rule 144A, or to any prospective purchaser designated by such Holder of Notes, upon request of such Holder of Notes, financial and other information described in paragraph (d)(4) of Rule 144A with respect to the Company to the extent required in order to permit such Holder of Notes to comply with Rule 144A with respect to any resale of its Note, unless during that time the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or is exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act and no such information about the Company is otherwise required pursuant to Rule 144A.

(c) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such reports shall not constitute actual or constructive notice of any information contained therein or determinable from information contained therein, including the Company’s or any other Person’s compliance with any of its covenants under this Indenture and the Notes (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

(d) The Trustee shall not be obligated to monitor or confirm, on a continuing basis or otherwise, the Company’s or any other Person’s compliance with the obligations under this Section 3.8 or with respect to any reports or other documents filed under this Indenture; provided, however, that nothing herein shall relieve the Trustee of any obligations to monitor the Company’s timely delivery of all reports described in Section 3.8(a).

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Section 3.9 Listing.

(a) In the event that the Notes are listed on the Luxembourg Stock Exchange for trading on the Euro MTF Market, the Company shall use its commercially reasonable efforts to maintain such listing; provided that if, as a result of the European Union regulated market amended Directive 2001/34/EC (the “Transparency Directive”) or any legislation implementing the Transparency Directive or other directives or legislation, the Company could be required to publish financial information either more regularly than it otherwise would be required to or according to accounting principles which are materially different from the accounting principles which the Company would otherwise use to prepare its published financial information, the Company may delist the Notes from the Luxembourg Stock Exchange in accordance with the rules of the exchange and seek an alternative admission to listing, trading and/or quotation for the Notes on a different section of the Luxembourg Stock Exchange or by such other listing authority, stock exchange and/or quotation system inside or outside the European Union as the Company’s Board of Directors may decide.

(b) From and after the date the Notes are listed on the Luxembourg Stock Exchange for trading on the Euro MTF Market, and so long as it is required by the rules of such Exchange, all notices to the Holders shall be published in English in accordance with Section 10.1(c).

(c) The Company agrees to promptly notify the Trustee whenever the Notes become listed on any other stock exchange and of any delisting thereof.

Section 3.10 Payment of Additional Amounts.

(a) All payments by the Company in respect of the Notes will be made free and clear of and without any withholding or deduction for or on account of any present or future Taxes, unless the withholding or deduction of such Taxes is required by law or the official interpretation thereof, or by the administration thereof. If the Company shall be required by any law of any Taxing Jurisdiction to withhold or deduct any Taxes from or in respect of any sum payable under the Notes, the Company will (a) pay such additional amounts (“Additional Amounts”) as may be necessary in order that the net amounts receivable by Holders of any Notes after such withholding or deduction equals the respective amounts that would have been receivable by such Holders in the absence of such withholding or deduction, (b) make such withholding or deduction, and (c) pay the full amount withheld or deducted to the relevant tax or other authority in accordance with applicable law, except that no such Additional Amounts will be payable in respect of any Note:

(i) to the extent that such Taxes are imposed or levied by reason of such Holder (or the beneficial owner) having some present or former connection with the Taxing Jurisdiction other than the mere holding (or beneficial ownership) of such Note or receiving principal or interest payments on the Note (including but not limited to citizenship, nationality, residence, domicile, or existence of a business, permanent establishment, a dependent agent, a place of business or a place of management present or deemed present in the Taxing Jurisdiction);

(ii) to the extent that any Tax is imposed other than by deduction or withholding from payments of principal of or premium, if any, or interest with respect to the Notes;

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(iii) in the event that the Holder (or beneficial owner) fails to comply with any certification, identification or other reporting requirement concerning nationality, residence, identity or connection with the Taxing Jurisdiction if (A) compliance is required by applicable law, regulation, administrative practice or treaty as a precondition to exemption from all or part of the Taxes, (B) the Holder (or beneficial owner) is able to comply with these requirements without undue hardship and (C) the Company has given the Holders (or beneficial owners) at least thirty (30) days prior notice that they will be required to comply with such requirement;

(iv) in the event that the Holder fails to surrender (where surrender is required) the Note for payment within thirty (30) days after the Company has made available a payment of principal or interest; provided that the Company will pay Additional Amounts to which a Holder would have been entitled had the Note been surrendered on the last day of such thirty (30) day period;

(v) to the extent that such Taxes are imposed by reason of an estate, inheritance, gift, personal property, value added, use or sales tax or any similar taxes, assessments or other governmental charges;

(vi) any Taxes or equivalent thereof imposed pursuant to Sections 1471 through 1474 of the Code as of the Issue Date, any current or future regulations promulgated thereunder or other official administrative interpretations thereof and any agreements entered into pursuant to current Section 1471(b)(1) of the Code as of the Issue Date (or any amended or successor version described above), and including (for the avoidance of doubt) any intergovernmental agreements (and any law, regulation, rule or practice implementing any such intergovernmental agreement) in respect of the foregoing; or

(vii) any combination of items (i) through (vi) above.

(b) No Additional Amounts shall be paid to a Holder that is a fiduciary or a partnership or not the sole beneficial owner of such payment to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such partnership or such beneficial owner would not have been entitled to receive the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the Holder.

(c) The Company shall provide the Trustee with the official acknowledgment of the relevant Taxing Jurisdiction (or, if such acknowledgment is not available, other reasonable documentation) evidencing any payment of any Taxes in respect of which the Company has paid any Additional Amounts. Copies of such documentation shall be made available to the Holders of the Notes or the Paying Agents, as applicable, upon request therefor.

(d) The Company will also pay any present or future stamp, court or documentary taxes or any excise or property taxes, charges or similar levies that arise in any jurisdiction from the execution, delivery, registration or the making of payments in respect of the Notes, excluding any such taxes, charges or similar levies imposed by any jurisdiction outside of a Taxing Jurisdiction other than those resulting from, or required to be paid in connection with, the enforcement of the Notes following the occurrence of any Default or Event of Default.

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(e) All references in this Indenture to principal of and premium, if any, and interest on the Notes shall include any Additional Amounts payable by the Company in respect of such principal, premium, if any, and interest.

Section 3.11 Use of Proceeds. The Company will use the net proceeds of the offering of the Initial Notes as described under “Use of Proceeds” in the Offering Memorandum.

ARTICLE IV

LIMITATION ON MERGER, CONSOLIDATION AND SALE OF ASSETS

Section 4.1 Merger, Consolidation and Sale of Assets.

(a) The Company may not consolidate with or merge into any other Person or sell, lease, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries, taken as a whole, in one or more related transactions, to any Person, unless (1) the Company receives the consent of Holders of at least majority in aggregate principal amount of the Outstanding Notes or (2) the following conditions are satisfied:

(i) the Company obtains any and all regulatory approvals in connection therewith, as applicable;

(ii) the Person formed by or surviving any such consolidation or merger or the Person to which such sale, lease, assignment, transfer, conveyance or other disposition has been made (if other than the Company), shall be a Person organized and existing under the laws of (A) Panama, (B) Peru, (C) the United States of America or any state thereof, or (D) any country member of the Organization for Economic Co-operation and Development or the G-20 and any state thereof (to the extent applicable) and (x) shall expressly assume by a supplemental indenture to this Indenture, delivered to and in a form satisfactory to the Trustee, the due and punctual payment of the principal of, premium, if any and interest on all the Outstanding Notes and the performance of all of the Company’s Obligations under this Indenture and the Notes and (y) shall agree to modify the provisions described under Section 3.10 and that Taxing Jurisdiction will be defined to include any jurisdiction in which such Person is resident for tax purposes;

(iii) immediately after giving effect to such transaction (and treating any Debt that becomes an obligation of the Surviving Entity (as defined below) or any Subsidiary of the Surviving Entity as a result of such transaction as having been incurred by (x) the Company, (y) the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, lease, assignment, transfer, conveyance or other disposition has been made (the Company or such Person, as the case may be, the “Surviving Entity”) or (z) such Subsidiary at the time of such transaction), no Default under this Indenture or the Notes, and no Event of Default under this Indenture or the Notes, shall have happened and be continuing; and

(iv) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance or transfer, if applicable, and such supplemental indenture (if required) comply with the foregoing provisions relating to such transaction and all conditions precedent in this Indenture relating to such transaction and the execution of such supplemental indenture (if required) have been complied with.

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(b) This Section 4.1 shall not apply to any consolidation or merger, or any sale, assignment, transfer, conveyance, lease or other disposition of assets from a Subsidiary to the Company.

(c) For purposes of this Section 4.1, the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

(d) The Surviving Entity will succeed to and be substituted for the Company as obligor on the Notes and under this Indenture with the same effect as if it had been named as the obligor in this Indenture and issued the Notes. Upon the assumption of its obligations by any such Surviving Entity in such circumstances, the Company will be discharged from all Obligations under the Notes and this Indenture.

(e) For purposes of this Section 4.1, the Trustee will be entitled to rely exclusively on and will accept the Officers’ Certificate and Opinion of Counsel delivered pursuant to Section 4.1(a)(iv) as sufficient evidence of the satisfaction of the conditions precedent set forth in this covenant, in which event it will be conclusive and binding on the Holders.

ARTICLE V

REDEMPTION OF NOTES

Section 5.1 Redemption. The Company may or shall redeem the Notes, as a whole or from time to time in part, subject to the conditions and at the redemption prices specified in the Form of Notes in Exhibit A.

Section 5.2 Election to Redeem. In the case of an optional redemption, the Company shall evidence its election to redeem any Notes pursuant to Section 5.1 by an Officers’ Certificate.

Section 5.3 Notice of Redemption.

(a) The Company shall give or cause the Trustee to give notice of redemption, in the manner provided for in Section 10.1, not less than ten (10) nor more than sixty (60) days prior to the Redemption Date to each Holder of Notes to be redeemed; provided, however, that the Company shall give notice of redemption to the Trustee no later than five (5) Business Days prior to the date such notice is to be given to the Holders of the Notes (unless the Trustee is satisfied with a shorter period). If the Company itself gives the notice, it shall also deliver a copy to the Trustee.

(b) If either (i) the Company is not redeeming all Outstanding Notes, and/or (ii) the Company elects to have the Trustee give notice of redemption, then the Company shall deliver to the Trustee, at least forty-five (45) days prior to the Redemption Date (unless the Trustee is satisfied with a shorter period), an Officers’ Certificate requesting that the Trustee request that the Depositary (in the case

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of Global Notes) select the Notes to be redeemed or the Trustee (in the case of Certificated Notes) select the method of the selection of the Notes to be redeemed in accordance with Section 5.4 and/or give notice of redemption and setting forth the information required by Section 5.3(c) (with the exception of the identification of the particular Notes, or portions of the particular Notes, to be redeemed in the case of a partial redemption). If the Company elects to have the Trustee give notice of redemption, the Trustee shall give the notice in the name of the Company in such form as the Company shall provide and at the Company’s expense.

(c) All notices of redemption shall state:

(i) the Redemption Date;

(ii) the redemption price and the amount of any accrued interest payable as provided in Section 5.6;

(iii) whether or not the Company is redeeming all Outstanding Notes;

(iv) if the Company is not redeeming all Outstanding Notes, the aggregate principal amount of Notes that the Company is redeeming and the aggregate principal amount of Notes that shall be Outstanding after the partial redemption, as well as the identification of the particular Notes, or portions of the particular Notes, that the Company is redeeming;

(v) if the Company is redeeming only part of a Note, the notice that relates to that Note shall state that on and after the Redemption Date, upon surrender of that Note, the Holder shall receive, without charge, a new Note or Notes of authorized denominations for the principal amount of the Note remaining unredeemed;

(vi) that on the Redemption Date the redemption price and any accrued interest payable to the Redemption Date as provided in Section 5.6 shall become due and payable in respect of each Note, or the portion of each Note, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on each Note, or the portion of each Note, to be redeemed, shall cease to accrue on and after the Redemption Date;

(vii) the place or places where a Holder must surrender the Holder’s Notes for payment of the redemption price; and

(viii) the CUSIP or ISIN number, if any, listed in the notice or printed on the Notes, and that no representation is made as to the accuracy or correctness of such CUSIP or ISIN number.

Section 5.4 Selection of Notes to Be Redeemed in Part.

(a) If fewer than all of the Notes are being redeemed, the Notes to be redeemed shall be selected as follows: (1) if the Notes are listed on an exchange, in compliance with the requirements of such exchange or (2) on a pro rata basis to the extent practicable, or, if the pro rata basis is not practicable for any reason, by lot or by such other method as most nearly approximates a pro rata basis, in each case as long as the Notes are in global form, subject to the Depositary’s customary procedures (in integral multiples of U.S.$1,000; provided that the remaining principal amount of such Holder’s Note will not be less than U.S.$200,000).

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(b) For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of that Note which has been or is to be redeemed.

Section 5.5 Deposit of Redemption Price. Prior to 11:00 a.m. New York City time on the Business Day prior to the relevant Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as Paying Agent, segregate and hold in trust as provided in Section 2.4) an amount of money in immediately available funds sufficient to pay the redemption price of, and accrued interest on, all the Notes that the Company is redeeming on the Redemption Date.

Section 5.6 Notes Payable on Redemption Date. If the Company, or the Trustee on behalf of the Company, gives notice of redemption in accordance with this Article V, the Notes, or the portions of Notes, called for redemption, shall, on the Redemption Date, become due and payable at the redemption price specified in the notice (together with accrued interest, if any, to the Redemption Date), and from and after the Redemption Date (unless the Company shall default in the payment of the redemption price and accrued interest) the Notes or the portions of Notes shall cease to bear interest. Upon surrender of any Note for redemption in accordance with the notice, the Company shall pay the Notes at the redemption price, together with accrued interest, if any, to the Redemption Date and the Trustee shall cancel such redeemed Note. If the Company shall fail to pay any Note called for redemption upon its surrender for redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate borne by the Notes.

Section 5.7 Unredeemed Portions of Partially Redeemed Note. Upon surrender of a Note that is to be redeemed in part, the Company shall execute, and the Trustee upon receipt of a Company Order shall authenticate and make available for delivery to the Holder of the Note at the expense of the Company, a new Note or Notes, of any authorized denomination as requested by the Holder, in an aggregate principal amount equal to, and in exchange for, the unredeemed portion of the principal of the Note surrendered (or make appropriate adjustments to the aggregate principal amount of any Global Note); provided that each new Note shall be in a principal amount of U.S.$200,000 or integral multiples of U.S.$1,000 in excess thereof.

ARTICLE VI

DEFAULTS AND REMEDIES

Section 6.1 Events of Default.

(a) Each of the following is an “Event of Default” under this Indenture (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to, or as a result of any failure to obtain, any authorization, order, rule, regulation, judgment or decree of any governmental or administrative body or court):

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(i) the Company defaults on any payment of interest (including any related Additional Amounts) on any Note when the same becomes due and payable, and such Default continues for a period of thirty (30) days;

(ii) the Company defaults on any payment of principal (including premium, if any, and any related Additional Amounts) of any Note when the same becomes due and payable upon its Stated Maturity, upon redemption, or otherwise;

(iii) the Company fails to comply with any of its covenants or agreements in this Indenture or the Notes (other than those referred to in clauses (i) and (ii) above), and such failure continues for sixty (60) days after the notice specified below;

(iv) the Company or any of the Company’s Subsidiaries defaults with respect to any of its Debt (whether such Debt now exists or is created after the date of this Indenture), which default (1) is caused by failure to pay principal of or premium, if any, or interest on such Debt after giving effect to any grace period provided in such Debt on the date of such default (“Payment Default”) or (2) results in the acceleration of such Debt prior to its Stated Maturity and, in each case, the principal amount of any such Debt, together with the principal amount of any other such Debt under which there has been a Payment Default or the maturity of which has been so accelerated, totals U.S.$20,000,000 or more in the aggregate (or the equivalent thereof at the time of determination);

(v) one or more final judgments or decrees for the payment of money of U.S.$20,000,000 or more in the aggregate (or the equivalent thereof at the time of determination) are rendered against the Company or any of the Company’s Subsidiaries and are not paid (whether in full or in installments in accordance with the terms of the judgment) or otherwise discharged and, in the case of each such judgment or decree, either (1) an enforcement proceeding has been commenced by any creditor upon such judgment or decree and is not dismissed within thirty (30) days following commencement of such enforcement proceedings or (2) there is a period of sixty (60) days following such judgment during which such judgment or decree is not discharged, waived or the execution thereof stayed;

(vi) any Governmental Authority condemns, nationalizes, seizes, or otherwise expropriates all or any substantial portion of the Company’s assets or property or the Share Capital of any of the Company’s Material Subsidiaries, or assumes custody or control of such assets or property or of the business or operations or Share Capital of any such Material Subsidiaries or takes any action that would prevent the Company or any such Material Subsidiaries or their respective officers from carrying on a substantial portion of the business or operations of the Company or any such Material Subsidiaries for a period longer than sixty (60) days and the result of any such action materially prejudices the Company’s ability to perform its obligations under this Indenture and the Notes;

(vii) the Company or any of the Company’s Material Subsidiaries, or any Governmental Authority, declares a general suspension of payment or a moratorium on the payment of the Company’s indebtedness, or any indebtedness of such Material Subsidiaries;

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(viii) a resolution is passed or adopted by the Board of Directors or shareholders of the Company, or any of the Company’s Material Subsidiaries, by applicable Governmental Authority in its respective jurisdiction of incorporation, or a judgment of a court of competent jurisdiction in, its respective jurisdiction of incorporation, is made, that the Company or any such Material Subsidiaries be wound up or dissolved (otherwise than for the purposes of, or pursuant to, or in connection with, a consolidation or merger or other transaction in accordance with Article IV);

(ix) any proceeding is instituted by or against the Company, or any of the Company’s Material Subsidiaries, seeking to adjudicate the Company or any such Material Subsidiary bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of any Debt under any Bankruptcy Law or any other law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for the Company or any such Material Subsidiaries or for any substantial part of the property of the Company or any of such Material Subsidiaries and, in the case of any of the foregoing actions, such proceeding or action is not dismissed or discharged and remains in effect for 60 days; or the Company, or any such Material Subsidiaries, takes corporate action to authorize any of the actions set forth above in this clause (ix); or

(x) any material provision of this Indenture or the Notes ceases to be in full force and effect or binding and enforceable against the Company, it becomes unlawful for the Company to perform any material obligation under this Indenture or the Notes, or the Company contests the enforceability of any of this Indenture or the Notes, or denies that it has liability under this Indenture or the Notes.

(b) A Default under Section 6.1(a)(iii) above shall not constitute an Event of Default until the Trustee or the Holders of at least 25% in principal amount of Outstanding Notes notify the Company of the Default the Company does not cure such Default within the time specified after receipt of such notice.

Section 6.2 Acceleration.

(a) If an Event of Default (other than an Event of Default specified in clauses (vii), (viii) and (ix) of Section 6.1(a)) occurs and is continuing, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Notes may declare all unpaid principal of and premium, if any, and accrued interest on all Notes to be due and payable immediately, by a notice in writing to the Company, with a copy to the Trustee, if the Notice is given by the Holders, stating that such notice is an “Acceleration Notice,” and upon any such declaration such amounts shall become due and payable immediately. If an Event of Default specified in clauses (vii), (viii), and (ix) of Section 6.1(a) occurs and is continuing, then the principal of and premium, if any, and accrued interest on all Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

(b) At any time after a declaration of acceleration with respect to the Notes as described in Section 6.2(a), the Holders of a majority in principal amount of the Outstanding Notes may rescind and cancel such declaration and its consequences:

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(i) if the rescission would not conflict with any judgment or decree;

(ii) if all existing Events of Default have been cured or waived, except nonpayment of principal or interest that has become due solely because of the acceleration;

(iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; and

(iv) if the Company has paid the Trustee its compensation and reimbursed the Trustee for its expenses, disbursements and advances (including without limitation, reasonable and documented counsel fees and expenses) outstanding at that time.

(c) No such rescission shall affect any subsequent Default or Event of Default or impair any right consequent thereto.

Section 6.3 Other Remedies.

(a) If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

(b) The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law.

Section 6.4 Waiver of Past Defaults. The Holders of a majority in principal amount of the Outstanding Notes may waive any existing Default or Event of Default under this Indenture, and its consequences, except a Default in the payment of the principal of, premium, if any, or the interest on any Notes.

Section 6.5 Control by Majority. Subject to the provisions of this Indenture and applicable law, the Holders of a majority in aggregate principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.

Section 6.6 Limitation on Suits.

(a) No Holder of any Notes shall have any right to institute any proceeding with respect hereto or for any remedy hereunder, unless:

(i) such Holder gives to the Trustee written notice of a continuing Event of Default;

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(ii) Holders of at least 25% in principal amount of the Outstanding Notes make a written request to the Trustee to pursue the remedy;

(iii) such Holder or Holders have offered and provided to the Trustee security or indemnity reasonably satisfactory to the Trustee against any cost, loss, liability or expense to be incurred in compliance with such request;

(iv) the Trustee does not comply with the request within sixty (60) days after receipt of the request and the offer and provision of security or indemnity; and

(v) during such sixty (60)-day period the Holders of a majority in principal amount of the then Outstanding Notes do not give the Trustee a written direction which, in the opinion of the Trustee, is inconsistent with the request;

provided that a Holder of a Note may institute suit for enforcement of payment of the principal of and premium, if any, or interest on such Note on or after the respective due dates expressed in such Note.

(b) Notwithstanding any provision of this Indenture to the contrary, no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb, or prejudice the rights of any other of such Holders (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders).

Section 6.7 Rights of Holders to Receive Payment. Notwithstanding any other provision hereof (including, without limitation, Section 6.6), the right of any Holder to receive payment of principal of or interest on the Notes held by such Holder, on or after the respective due dates, Redemption Dates or repurchase date expressed herein or the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 6.8 Collection Suit by Trustee.

(a) If an Event of Default specified in Section 6.1(a)(i) and Section 6.1(a)(ii) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with applicable interest on any overdue principal and, to the extent lawful, interest on overdue interest) and the amounts provided for in Section 7.7. Subject to all conditions and provisions hereof and applicable law, the Holders of a majority in aggregate principal amount of the then Outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.

Section 6.9 Trustee May File Proofs of Claim, etc.

(a) In case of any judicial proceeding relative to the Company (or any other obligor upon the Notes), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under applicable law in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee may (irrespective of whether the principal of the Notes is then due):

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(i) file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders under this Indenture and the Notes allowed in any bankruptcy, insolvency, liquidation or other judicial proceedings relative to the Company or any Subsidiary of the Company or their respective creditors or properties; and

(ii) collect and receive any moneys or other property payable or deliverable in respect of any such claims and distribute them in accordance with this Indenture.

Any receiver, trustee, liquidator, sequestrator (or other similar official) in any such proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee pursuant to Section 7.7.

(b) Nothing in this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10 Priorities. If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order:

FIRST: to the Trustee and the Agents for amounts due under Section 7.7;

SECOND: to Holders for amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and

THIRD: to the Company.

The Trustee may, upon notice to the Company, fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.

Section 6.11 Undertaking for Costs. All parties agree, and each Holder by its acceptance of its Notes shall be deemed to have agreed, that in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in principal amount of Outstanding Notes.

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ARTICLE VII

TRUSTEE

Section 7.1 Duties of Trustee.

(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b) Except during the continuance of an Event of Default:

(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture (it being understood that the Trustee need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(c) The Trustee may not be relieved from liability for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct, except that:

(i) this Section 7.1(c) does not limit the effect of Section 7.1(b);

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was grossly negligent in ascertaining the pertinent facts; and

(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.2, Section 6.5 or Section 6.8 or any other provision of this Indenture.

(d) The Trustee shall not be liable for interest on or the investment of any money received or held by it except as the Trustee may agree in writing with the Company.

(e) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

(f) No provision hereof shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

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(g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article VII.

(h) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

(i) Notwithstanding any provision herein to the contrary, the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders unless such Holders shall have offered to the Trustee indemnity and/or security reasonably satisfactory to the Trustee against the costs, expenses (including reasonable attorneys’ fees and expenses) and liabilities that might be incurred by it in compliance with such request or direction.

Section 7.2 Rights of Trustee.

(a) The Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any document, instrument, opinion, direction, order, notice, certificate or request reasonably believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in such document, instrument, opinion, direction, order, notice, certificate or request.

(b) Before the Trustee acts or refrains from acting at the direction of the Company, it may require an Officers’ Certificate, advice of counsel and/or an Opinion of Counsel, and such Officers’ Certificate, advice and/or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted to be taken by it hereunder. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officers’ Certificate, advice of counsel and/or Opinion of Counsel.

(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers.

(e) The Trustee may consult with counsel of its selection, and the advice or Opinion of Counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

(f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon notice to the Company, to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

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(g) In the absence of receipt by a Trust Officer of the Trustee of an Officers’ Certificate regarding any such notice of Default or Event of Default from the Company or written notice from any Holder of such Default or Event of Default, the Trustee shall not be deemed to have notice or be charged with knowledge of any Default or Event of Default. For purposes of determining the Trustee’s responsibility and liability hereunder, whenever reference is made in this Indenture to a Default or Event of Default, such reference shall be construed to refer only to such Default or Event of Default for which the Trustee is deemed to have notice pursuant to this Section 7.2(g).

(h) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, each Agent and to each agent, custodian and other Person employed to act hereunder.

(i) In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, without limitation, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(j) The Trustee may request that the Company delivers an Officers’ Certificate setting forth the names of individuals and/or titles of Officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any Person authorized to sign an Officers’ Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.

(k) The permissive rights of the Trustee enumerated herein shall not be construed as duties.

(l) The Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fires; floods; wars; terrorism; civil or military disturbances; sabotage; epidemics; riots; interruptions, loss or malfunctions of utilities, computer (hardware or software) or communications service, accidents; labor disputes; acts of civil or military authority or governmental actions (it being understood that the Trustee shall use its best efforts to resume performance as soon as practicable under the circumstances).

(m) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys.

(n) To the extent permitted by applicable law, the Trustee shall not be required to give any bond or surety in respect of the execution of this Indenture or otherwise.

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(o) To help fight the funding of terrorism and money laundering activities, the Trustee may obtain, verify, and record information that identifies individuals or entities that establish a relationship or open an account with the Trustee. The Trustee may ask for the name, address, tax identification number and other information that shall allow the Trustee to identify the individual or entity who is establishing the relationship or opening the account. The Trustee may also ask for formation documents such as articles of incorporation, an offering memorandum, or other identifying documents to be provided. The Company shall provide any information requested by the Trustee pursuant to this Section 7.2(o).

(p) In respect of this Indenture, the Trustee shall not have any duty or obligation to verify or confirm that the Person sending instructions, directions, reports, notices or other communications or information by electronic transmission is, in fact, a Person authorized to give such instructions, directions, reports, notices or other communications or information on behalf of the party purporting to send such electronic transmission; and the Trustee shall not have any liability for any losses, liabilities, costs or expenses incurred or sustained by any party as a result of such reliance upon or compliance with such instructions, directions, reports, notices or other communications or information. Each other party agrees to assume all risks arising out of the use of electronic methods to submit instructions, directions, reports, notices or other communications or information to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, notices, reports or other communications or information, and the risk of interception and misuse by third parties.

(q) To secure the obligations owed to the Trustee hereunder, the Trustee shall have a lien prior on all money or property held or collected by it in its capacity as Trustee, and may withhold or set-off any amounts due and owing to it under this Indenture from any money or property held or collected by it in its capacity as Trustee.

(r) The Trustee shall have no obligation or duty to ensure compliance with the securities laws of any country or state except to request such certificates or other documents required to be obtained by the Trustee or any Agent hereunder in connection with any exchange or transfer pursuant to the terms hereof.

(s) The Trustee shall not have any liability or responsibility with respect to, or obligation or duty to monitor, determine or inquire (i) as to the Company’s or any Subsidiary’s compliance with any covenant under this Indenture (other than payment of the Notes), or (ii) as to whether or not any of Fitch, Moody’s or S&P has adjusted the rating of the Notes.

Section 7.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any of its Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Section 7.9.

Section 7.4 Trustee’s Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture, the Offering Memorandum or in any other document issued in connection with the sale of the Notes or in the Notes other than the Trustee’s certificate of authentication, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder.

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Section 7.5 Notice of Defaults. If a Default or Event of Default shall have occurred and is continuing of which the Trustee has notice in accordance with Section 7.2(g), the Trustee shall give to each Holder, with a copy to the Company, notice of the Default or Event of Default within forty-five (45) days after the Trustee received written notice thereof. Except in the case of a Default or Event of Default in the payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as it determines in good faith that withholding the notice is in the interests of the Holders.

Section 7.6 [Intentionally omitted].

Section 7.7 Compensation and Indemnity.

(a) The Company shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the Company and the Trustee shall from time to time agree in writing. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it in connection with the performance of its duties and/or the exercise of its rights under this Indenture, except for any such expense as may arise from the Trustee’s gross negligence, willful misconduct or bad faith. Such expenses shall include the reasonable fees and expenses of the Trustee’s agents and counsel.

(b) The Company shall indemnify the Trustee and its officers, directors, employees and agents and hold each of them harmless for, from and against any and all loss, damage, claim, liability or expense (including reasonable attorneys’ fees and expenses) incurred by it without gross negligence, willful misconduct or bad faith on its part in connection with the acceptance or administration of this trust, the performance of its duties hereunder and/or the exercise of its rights hereunder including the costs and expenses of defending itself (including reasonable attorney’s fees and costs) against any claim or liability related to the exercise or performance of any of its powers, rights or duties hereunder and under any other agreement or instrument related thereto. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company need not pay for any settlement made without its written consent.

(c) To secure the Company’s payment obligations of the Company in this Section 7.7, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Notes. The Trustee’s right to receive payment of any amounts due under this Section 7.7 shall not be subordinate to any other liability or Debt of the Company.

(d) The payment obligations of the Company pursuant to this Section 7.7 shall survive the discharge of this Indenture, payment of the Notes and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of an Event of Default of the type described in clauses (vii), (viii) and (ix) of Section 6.1(a), the expenses are intended to constitute expenses of administration under any Bankruptcy Law; provided, however, that this shall not affect the Trustee’s rights as set forth in this Section 7.7 or Section 6.10.

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Section 7.8 Replacement of Trustee.

(a) The Trustee may resign at any time by so notifying the Company. In addition, the Holders of a majority in aggregate principal amount of the Outstanding Notes may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. Moreover, if the Trustee is no longer eligible pursuant to Section 7.10 or does not have a corporate trust office in the City of New York, New York, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. The Company shall remove the Trustee if:

(i) the Trustee fails to comply with Section 7.10;

(ii) the Trustee is adjudged bankrupt or insolvent;

(iii) a receiver or other public officer takes charge of the Trustee or its property; or

(iv) the Trustee otherwise becomes incapable of acting.

(b) If the Trustee resigns or is removed by the Company or by the Holders of a majority in principal amount of the Outstanding Notes and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of the Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.

(c) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall give a notice of its succession to Holders as described in Section 10.1. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.7.

(d) If a successor Trustee does not take office within thirty (30) days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Outstanding Notes may itself or themselves appoint a successor Trustee or may petition, at the Company’s expense, any court of competent jurisdiction for the appointment of a successor Trustee.

(e) Notwithstanding the replacement of the Trustee pursuant to this Section 7.8, the Company’s obligations under Section 7.7 shall continue for the benefit of the retiring Trustee.

Section 7.9 Successor Trustee by Merger.

(a) If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business (including in connection with this Indenture) or assets to, another corporation or national banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee; provided that such Persons shall be otherwise qualified and eligible under this Article VII.

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(b) In case at the time such successor or successors to the Trustee by merger, conversion or consolidation shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee by merger, conversion or consolidation may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have.

Section 7.10 Eligibility. The Trustee shall have a combined capital and surplus of at least U.S.$50,000,000 as set forth in its most recent published annual report of condition.

ARTICLE VIII

DEFEASANCE; DISCHARGE OF INDENTURE

Section 8.1 Legal Defeasance and Covenant Defeasance.

(a) The Company may, at its option, at any time, upon compliance with the conditions set forth in Section 8.2, elect to have either Section 8.1(b) or Section 8.1(c) applied to its obligations with respect to all Outstanding Notes.

(b) Upon the Company’s exercise under Section 8.1(a) of the option under this Section 8.1(b), the Company shall, subject to the satisfaction of the conditions set forth in Section 8.2, be deemed to have paid and discharged the entire Debt represented by the Outstanding Notes on the ninety first (91^st) day after the deposit specified in Section 8.2(a) (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Debt represented by the Outstanding Notes, which shall thereafter be deemed to be Outstanding only for the purposes of the sections of this Indenture referred to in clause (i) or (ii) of this Section 8.1(b), and the Company shall have been deemed to have satisfied all its other obligations under such Notes and hereunder (and the Trustee, on demand of and at the expense of the Company, shall execute instruments acknowledging the same), except for the following provisions, which shall survive until otherwise terminated or discharged hereunder:

(i) the rights of Holders to receive solely from the trust described in Section 8.2(a) below, as more fully set forth in such section, payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due,

(ii) the Company’s obligations with respect to such Notes concerning issuing temporary Notes, registration of transfer and exchange Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments,

(iii) the rights, powers, trusts, duties, immunities and indemnities of the Trustee as described in Article VII and hereunder and the obligations of the Company in connection therewith, and

(iv) this Section 8.1.

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Subject to compliance with this Article VIII, the Company may exercise its option under this Section 8.1(b) notwithstanding the prior exercise of its option under Section 8.1(c).

(c) Upon the Company’s exercise under Section 8.1(a) of the option under this Section 8.1(c), the Company shall be, subject to the satisfaction of the applicable conditions set forth in Section 8.2, released and discharged from their obligations under Section 3.6, Section 3.7 and Section 3.8 and thereafter any failure to comply with such obligations will not constitute a Default or Event of Default (“Covenant Defeasance”), and the Notes shall thereafter be deemed not Outstanding for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be Outstanding for all other purposes hereunder (it being understood that such Notes shall not be deemed Outstanding for accounting purposes). For this purpose, such Covenant Defeasance means that, with respect to the Outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event or Default under Section 6.1(a)(iii), (iv) and (v) (but only to the extent applicable to any Subsidiary), but, except as specified above, the remainder hereof and such Notes shall be unaffected thereby.

Section 8.2 Conditions to Defeasance. The Company may exercise its Legal Defeasance option or its Covenant Defeasance option only if:

(a) the Company has irrevocably deposited with the Trustee, in trust, for the benefit of the Holders (i) cash in U.S. Dollars, (ii) U.S. Government Obligations, or (iii) a combination thereof, in such amounts as shall be sufficient without reinvestment (in the written opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants delivered to the Trustee; provided, however, that such written opinion will not be required if the Company has irrevocably deposited with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars in an amount sufficient without reinvestment), to pay the principal of, premium, if any, and interest (including Additional Amounts) on the Notes on the stated date for payment thereof or on the applicable Redemption Date, as the case may be;

(b) in the case of Legal Defeasance, the Company has delivered to the Trustee an Opinion of Counsel from U.S. counsel reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) independent of the Company to the effect that:

(i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or

(ii) since the Issue Date, there has been a change in the applicable U.S. federal income tax law;

in either case to the effect that, and based thereon such Opinion of Counsel shall state that, the Holders shall not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and shall be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

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(c) in the case of Covenant Defeasance, the Company has delivered to the Trustee an Opinion of Counsel from U.S. counsel reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) and independent of the Company to the effect that the Holders shall not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and shall be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(d) no Default or Event of Default has occurred and is continuing on the date of the deposit pursuant to Section 8.2(a);

(e) the Company has delivered to the Trustee an Officers’ Certificate stating that such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(f) the Company has delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or any Subsidiary of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others;

(g) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel from U.S. counsel reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) and independent of the Company, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and

(h) the Company has delivered to the Trustee an Opinion of Counsel from U.S. counsel reasonably acceptable to the Trustee (subject to customary qualifications and exclusions) to the effect that the trust resulting from the deposit does not constitute, or is not qualified as, a regulated investment company under the Investment Company Act of 1940.

Section 8.3 Application of Trust Money. The Trustee shall hold in trust U.S. Dollars and/or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the U.S. Dollars from U.S. Government Obligations, together with earnings thereon, through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Notes. Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the Company’s request any U.S. Dollars or U.S. Government Obligations held by it as provided in this Section 8.3 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.4 Repayment to Company.

(a) The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them upon payment of all the Obligations under this Indenture and the Notes.

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(b) Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal of or interest on the Notes that remains unclaimed for two years, and, thereafter, Holders entitled to the money must look to the Company for payment as general creditors.

Section 8.5 Indemnity for U.S. Government Obligations. The Company shall pay and shall indemnify the Trustee and each Agent against any tax, fee or other charge imposed on or assessed against U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations deposited with the Trustee pursuant to this Article VIII.

Section 8.6 Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. Dollars and/or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Company under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Dollars and/or U.S. Government Obligations in accordance with this Article VIII; provided, however, that, if the Company has made any payment of principal of or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the U.S. Dollars and/or U.S. Government Obligations held by the Trustee or Paying Agent.

Section 8.7 Satisfaction and Discharge. This Indenture shall be discharged and shall cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes and the rights, powers, trusts, duties, immunities and indemnities of the Trustee and the obligations of the Company in connection therewith, as expressly provided for herein) as to all Outstanding Notes, and the Trustee, on written demand of and at the expense of the Company, shall execute instruments acknowledging satisfaction and discharge of this Indenture, when:

(a) either:

(i) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation; or

(ii) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable or will become due and payable or are to be called for redemption within one year, and the Company has irrevocably deposited or caused to be deposited with the Trustee (A) cash in U.S. Dollars or (B) U.S. Government Obligations or (C) a combination thereof in such amounts as shall be sufficient, without reinvestment (in the written opinion of a nationally recognized investment bank, appraisal firm or firm of independent accountants delivered to the Trustee; provided, however, that such written opinion will not be required if the Company has irrevocably deposited or caused to be deposited with the Trustee cash in U.S. dollars in an amount sufficient without reinvestment) to pay and discharge the entire Debt on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit (in the case of Notes that have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be, together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment;

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(b) the Company has paid all other sums payable by it under this Indenture and the Notes; and

(c) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with.

ARTICLE IX

AMENDMENTS

Section 9.1 Without Consent of Holders.

The Company and the Trustee may amend, modify or supplement this Indenture and the Notes without notice to or consent of any Holder:

(i) to cure any ambiguity, defect or inconsistency (including, without limitation, any inconsistency between the text of this Indenture or the Notes and the description of this Indenture and the Notes contained in the “Description of the Notes” section of the Offering Memorandum);

(ii) to comply with Article IV;

(iii) to add guarantees or collateral with respect to the Notes;

(iv) to add to the covenants of the Company for the benefit of Holders of the Notes;

(v) to surrender any right herein conferred upon the Company;

(vi) to evidence and provide for the acceptance of an appointment by a successor Trustee;

(vii) to provide for the issuance of Additional Notes; or

(viii) to make any other change that does not materially and adversely affect the rights of any Holder;

provided that, in each case above, the Company has delivered to the Trustee an Opinion of Counsel and an Officers’ Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.1.

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Upon the written request of the Company, accompanied by a copy of a Board Resolution authorizing the execution of any supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.6, the Trustee shall join with the Company in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects its own rights, duties or immunities under this Indenture or otherwise.

After an amendment under this Section 9.1 becomes effective, the Company shall give Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.1.

Section 9.2 With Consent of Holders. Modifications to, amendments of, and supplements to, this Indenture or the Notes not set forth under Section 9.1 may be made with the consent of the Holders of a majority in principal amount of the Outstanding Notes, except that, without the consent of each Holder affected thereby, no amendment may:

(i) reduce the rate of or extend the time for payment of interest on any Note (for the avoidance of doubt, changing the period provided for any notice under this Indenture and the Notes is not limited by this clause);

(ii) reduce the principal of or change the Stated Maturity of any Note;

(iii) reduce the amount payable upon the redemption of any Note or change the time at which any Note may be redeemed (for the avoidance of doubt, changing the period provided for any notice under this Indenture and the Notes is not limited by this clause (iii));

(iv) change the currency for payment of principal of or premium, if any, or interest on any Note;

(v) impair the right to institute suit for the enforcement of any payment on or with respect to any Note;

(vi) waive a Default or Event of Default in the payment of principal of and premium, if any, and interest on the Notes;

(vii) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in respect of a Change of Control Event that has occurred;

(viii) reduce the principal amount of Outstanding Notes whose Holders must consent to any amendment, supplement or waiver; or

(ix) make any change in this first paragraph of this Section 9.2.

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Upon the written request of the Company, accompanied by a copy of a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.6, the Trustee shall join with the Company in the execution of such supplemental indenture but the Trustee shall not be obligated to enter into any such supplemental indenture which affects its own rights, duties or immunities under this Indenture or otherwise.

The Company shall give the Holders of the Notes prior notice as described under Section 10.1 of any proposed amendment to this Indenture or the Notes described in this Section 9.2.

It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.

After an amendment under this Section 9.2 becomes effective, the Company shall give Holders a notice of effectiveness, briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.2.

Section 9.3 Effectiveness of Amendments, Supplements and Waivers. An amendment, supplement or waiver shall become effective upon the (i) receipt by the Company or the Trustee of consents by the Holders of the requisite principal amount of Outstanding Notes, (ii) satisfaction of conditions to effectiveness as set forth in this Indenture and any supplemental indenture hereto containing such amendment, supplement or waiver, as the case may be and (iii) execution of such amendment, supplement or waiver by the Company and the Trustee.

Section 9.4 Revocation and Effect of Consents and Waivers.

(a) A consent to an amendment, supplement or waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent or waiver is not made on the Note. After an amendment, supplement or waiver becomes effective, it shall bind every Holder, except as otherwise provided in this Article IX.

(b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding Section 9.3(a), those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than ninety (90) days after such record date.

Section 9.5 Notation on or Exchange of Notes. If an amendment or supplement changes the terms of a Note, the Company may place an appropriate notation on each Outstanding Note surrendered to it for such purpose regarding the changed terms and return it to the Holder. Alternatively, if the Company so determines, the Company in exchange for the Note shall execute and upon Company Order the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment or supplement.

53

Section 9.6 Trustee to Sign Amendments and Supplements. The Trustee shall sign any amendment or supplement authorized pursuant to this Article IX if the amendment or supplement does not adversely affect the rights, duties, liabilities, protections, benefits, indemnities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment or supplement the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and be fully protected in conclusively relying upon, such evidence as it deems appropriate, including, without limitation, the documents required by Section 10.2 and solely on an Opinion of Counsel and Officers’ Certificate, each stating that such amendment or supplement is authorized or permitted hereby.

ARTICLE X

MISCELLANEOUS

Section 10.1 Notices.

(a) Any notice, request, instruction, document, or communication shall be in English and in writing and delivered in Person, by facsimile, electronic transmission, overnight courier or mailed by first-class mail, postage prepaid, addressed as follows:

if to the Company, to:

Juan Antonio Castro

Intercorp Financial Services Inc.

Av. Carlos Villarán 140, Piso 17, La Victoria

Lima 13 – Peru

Facsimile: +51-1-219-2193

Email: jcastro@intercorp.com.pe

with a copy to:

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022

Attention: Antonia Stolper

Facsimile: 646-848-5009

if to the Trustee, to:

The Bank of New York Mellon

101 Barclay Street, Floor 7 East

New York, New York 10286

Attention: Global Corporate Trust

The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

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(b) Notices to Holders of Certificated Notes will be mailed to them at their registered addresses. Any notice or communication mailed to a registered Holder shall be mailed to the Holder at the Holder’s address as it appears on the Note Register maintained by of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Notices to Holders of Global Notes will be given to the Depositary in accordance with its applicable procedures.

(c) From and after the date the Notes are listed on the Luxembourg Stock Exchange for trading on the Euro MTF Market, and so long as it is required by the rules of such exchange, all notices to Holders of Notes shall be published in English:

(i) in a leading newspaper having a general circulation in Luxembourg; or

(ii) on the website of the Luxembourg Stock Exchange at www.bourse.lu.

(d) Notices to the Holders shall be deemed to have been given on the date of delivery to the Depositary or mailing, as applicable, as provided in Section 10.1(b) or of publication as provided in Section 10.1(c) or, if published on different dates, on the date of the first such publication.

(e) Failure to give notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is given in the manner provided above, it is duly given, whether or not the addressee receives it.

Section 10.2 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:

(a) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

Section 10.3 Statements Required in Officers’ Certificate or Opinion of Counsel. Each certificate or opinion, including each Officers’ Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture, shall include:

(a) a statement substantially to the effect that the individual making such certificate or opinion has read such covenant or condition;

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(c) a statement substantially to the effect that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

55

(d) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

In giving an Opinion of Counsel, counsel may rely as to factual matters on an Officers’ Certificate or on certificates of public officials.

Section 10.4 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Agents may make reasonable rules for their functions.

Section 10.5 Legal Holidays. If a payment date is not a Business Day, payment shall be made on the next succeeding day that is a Business Day, and no interest shall accrue for the intervening period. If a regular Record Date is not a Business Day, the Record Date shall not be affected.

Section 10.6 Governing Law, etc.

(a) THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

(b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(c) Each of the parties hereto:

(i) agrees that any suit, action or proceeding against it arising out of or relating to this Indenture or the Notes, as the case may be, may be instituted in any U.S. federal or New York state court sitting in the Borough of Manhattan, The City of New York, New York,

(ii) irrevocably submits to the jurisdiction of such courts in any suit, action or proceeding,

(iii) waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, any claim that any suit, action or proceeding in such a court has been brought in an inconvenient forum and any right to the jurisdiction of any other courts to which it may be entitled on account of place of residence or domicile, and

(iv) agrees that final judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding and may be enforced in the courts of the jurisdiction of which it is subject by a suit upon judgment.

(d) The Company has appointed Corporation Service Company, New York, New York, as its authorized agent (the “Authorized Agent”) upon whom all writs, process and summonses may be served in any suit, action or proceeding arising out of or based upon this Indenture or the Notes which may be instituted in any New York state or U.S. federal court in The City of New York, New York. The Company represents and warrants that the Authorized Agent has accepted such appointment and has

56

agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents, that may be necessary to continue each such appointment in full force and effect as aforesaid so long as the Notes remain Outstanding. The Company agrees that the appointment of the Authorized Agent shall be irrevocable so long as any of the Notes remain Outstanding or until the irrevocable appointment by the Company of a successor agent in The City of New York, New York as their authorized agent for such purpose and the acceptance of such appointment by such successor. Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon the Company.

(e) To the extent that the Company has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment in aid or otherwise) with respect to itself or any of its property, the Company hereby irrevocably waives and agrees not to plead or claim such immunity in respect of its obligations under this Indenture or the Notes.

(f) Nothing in this Section 10.6 shall affect the right of the Trustee, any Holder of the Notes or any other Person to serve process in any other manner permitted by law.

Section 10.7 No Recourse Against Others. No past, present or future incorporator, director, officer, employee, shareholder or controlling person, as such, of the Company shall have any liability for any obligations of the Company under the Notes or this Indenture or for any claims based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. This waiver and release are part of the consideration for issuance of the Notes.

Section 10.8 Successors. All agreements of the Company in this Indenture and the Notes shall bind its respective successors. All agreements of the Trustee in this Indenture shall bind its successors.

Section 10.9 Duplicate and Counterpart Originals. The parties may sign any number of copies of this Indenture. One signed copy is enough to prove this Indenture. This Indenture may be executed in any number of counterparts, each of which so executed shall be an original, but all of them together represent the same agreement.

Section 10.10 Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 10.11 Currency Indemnity.

(a) U.S. Dollars are the sole currency of account and payment for all sums payable by the Company under or in connection with this Indenture and the Notes, including damages relating thereto. Any amount received or recovered in a currency other than U.S. Dollars (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution of Company or otherwise) by the Trustee or any Holder of a Note in respect of any sum expressed to be due to it from the Company shall only constitute a discharge of Company, to the extent of the U.S. Dollar amount which the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so). If that U.S. Dollar amount is less than the U.S. Dollar amount expressed to be due to the recipient under this Indenture or any Note, the Company shall indemnify such recipient against any loss sustained by it as a result. In any event, the Company shall indemnify the recipient against the cost of making any such purchase.

57

(b) For the purposes of Section 10.11(a), it shall be sufficient for the Trustee or the Holder of a Note, as applicable, to certify in a satisfactory manner (indicating the sources of information used) that it would have suffered a loss had an actual purchase of U.S. Dollars been made with the amount so received in that other currency on the date of receipt or recovery (or, if a purchase of U.S. Dollars on such date had not been practicable, on the first date on which it would have been practicable, it being required that the need for a change of date be certified in the manner mentioned above). These indemnities constitute a separate and independent obligation from the other obligations of the Company shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Trustee or any Holder of a Note and shall continue in full force and effect despite any other judgment, order, claim or proof for a liquidated amount in respect of any sum due under this Indenture or any Note.

Section 10.12 Table of Contents; Headings. The table of contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

58

IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

INTERCORP FINANCIAL SERVICES INC.
By:	/s/ Luis Felipe Castellanos Lopez-Torres
	Name: Luis Felipe Castellanos Lopez-Torres
	Title: Chief Executive Officer
By:	/s/ Michela Casassa Ramat
	Name: Michela Casassa Ramat
	Title: Chief Financial Officer

[Signature Page to the Indenture]

THE BANK OF NEW YORK MELLON,
as Trustee, Registrar, Paying Agent and Transfer Agent
By:	/s/ Teresa Wyszomierski
	Name: Teresa Wyszomierski
	Title: Vice President

[Signature Page to Indenture]

THE BANK OF NEW YORK MELLON SA/NV, LUXEMBOURG BRANCH,
as Luxembourg Paying Agent and Luxembourg Transfer Agent
By:	/s/ Teresa Wyszomierski
	Name: TERESA WYSZOMIERSKI
	Title: ATTORNEY-IN-FACT

[Signature Page to Indenture]

EXHIBIT A

FORM OF NOTE

[Include the following Global Note Legend on all Global Notes:] THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Include the following Private Placement Legend on all Rule 144A Global Notes:] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE OR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO US, (2) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A) IN ACCORDANCE WITH RULE 144A, (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND IN EACH OF SUCH CASES IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER APPLICABLE JURISDICTION. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, REPRESENTS AND AGREES THAT IT WILL NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.

THIS LEGEND MAY BE REMOVED SOLELY IN THE DISCRETION AND AT THE DIRECTION OF THE ISSUER.

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH PARAGRAPH (4) ABOVE, THE ISSUER RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS, OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

A-1

[Include the following Private Placement Legend on all Regulation S Global Notes:] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY U.S. STATE SECURITIES LAWS OR ANY OTHER SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION, AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY OTHER APPLICABLE JURISDICTION.

THE FOREGOING LEGEND MAY BE REMOVED FROM THIS NOTE AFTER 40 DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DATE ON WHICH THE NOTES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) AND (B) THE ORIGINAL ISSUE DATE OF THIS NOTE.

A-2

FORM OF FACE OF NOTE

INTERCORP FINANCIAL SERVICES INC.

4.125% SENIOR NOTES DUE 2027

No.	Principal Amount U.S.$[     ]
	[If the Note is a Global Note include the following two
	lines: as revised by the Schedule of Increases
	and Decreases in Global Note attached hereto]
	[If the Note is a Rule 144A
	Global Note, insert:
	CUSIP NO. 45866EAA5
	ISIN NO. US45866EAA55
	COMMON CODE: 166226945]
	[If the Note is a Regulation S
	Global Note, insert:
	CUSIP NO. P5626FAA0
	ISIN NO. USP5626FAA05
	COMMON CODE: 166226422]

Intercorp Financial Services Inc., a corporation incorporated and existing under the laws of the Republic of Panama, promises to pay to Cede & Co., the nominee for The Depository Trust Company, or registered assigns, the principal sum of                          U.S. Dollars (U.S.$[        ]) [If the Note is a Global Note, add the following: , as revised by the Schedule of Increases and Decreases in Global Note attached hereto], on October 19, 2027.

Interest Rate:	4.125%
Interest Payment Dates:	April 19 and October 19 of each year, commencing on April 19, 2018
Record Dates:	April 4 and October 4 (whether or not a Business Day)

Additional provisions of this Note are set forth on the other side of this Note.

A-3

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

INTERCORP FINANCIAL SERVICES INC.
By:
	Name:
	Title:
By:
	Name:
	Title:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION
The Bank of New York Mellon, as Trustee, certifies that this is one of the Notes referred to in the Indenture.
By:		Date:
	Name:
	Title:

A-4

FORM OF REVERSE SIDE OF NOTE

1. Interest

Intercorp Financial Services Inc., a corporation incorporated and existing under the laws of the Republic of Panama (including its successors and assigns under the Indenture, the “Company”), promises to pay interest on the principal amount of this Note at the rate per annum shown above.

The Company shall pay interest semi-annually in arrears on each Interest Payment Date of each year, commencing on April 19, 2018. Interest on the Notes shall accrue from the most recent date to which interest has been paid on the Notes or, if no interest has been paid, from October 19, 2017. The Company shall pay interest on overdue principal (plus interest on such interest to the extent lawful), at the rate borne by the Notes to the extent lawful. Interest shall be computed on the basis of a three hundred sixty (360)-day year of twelve (12) thirty (30)-day months.

The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and, to the extent such payments are lawful, interest on overdue installments of interest (“Defaulted Interest”) without regard to any applicable grace periods at the interest rate shown on this Note, as provided in the Indenture.

All payments by the Company in respect of the Notes will be made free and clear of and without any withholding or deduction for or on account of any present or future Taxes, unless the withholding or deduction of such Taxes is required by law or the official interpretation thereof, or by the administration thereof. If the Company shall be required by any law of any Taxing Jurisdiction to withhold or deduct any Taxes from or in respect of any sum payable under the Notes, the Company shall pay to each Holder of the Notes Additional Amounts as provided in the Indenture subject to the limitations set forth in the Indenture.

2. Method of Payment

Prior to 11:00 a.m. (New York City time) on the Business Day prior to the date on which any principal of or interest on any Note is due and payable, the Company shall irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay such principal and/or interest. The Company shall pay interest (except Defaulted Interest) to the Persons who are registered Holders of Notes at the close of business on the Record Date preceding the Interest Payment Date even if Notes are canceled, repurchased or redeemed after the Record Date and on or before the relevant Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal and interest in U.S. Dollars.

All payments on the Certificated Notes will be made at the office or agency of the Paying Agent in New York City unless the Company elects to make interest payments by check mailed to the registered Holders at their registered addresses. Payments on Global Notes shall be made to the DTC, Clearstream Banking, société anonyme or Euroclear S.A./N.V., as operator of the Euroclear System, or any other depositary institution appointed by the Company that is a clearing agency registered under the Exchange Act (collectively, the “Depositary”) in accordance with the Depositary’s applicable procedures. Notwithstanding the foregoing, if a Holder of a Certificated Note in an aggregate principal amount of at least U.S.$1,000,000 has given wire transfer instructions involving payment to a U.S. Dollar account maintained by the payee with a bank in the City of New York to the Company and the Trustee at least fifteen (15) days prior to the relevant payment date, the Paying Agent shall make all principal, premium, if any, and interest payments on those Notes in accordance with such instructions.

A-5

3. Trustee and Agents

Initially, The Bank of New York Mellon (the “Trustee”), shall act as Trustee, Paying Agent, Transfer Agent and Registrar. The Company may appoint and change any Agent without notice to any Holder. Initially, The Bank of New York Mellon SA/NV, Luxembourg Branch shall act as the Luxembourg Paying Agent and the Luxembourg Transfer Agent. The Company may act as Agent.

4. Indenture

The Company originally issued the Notes under an Indenture, dated as of October 19, 2017 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the “Indenture”), by and among the Company, the Trustee and The Bank of New York Mellon SA/NV, Luxembourg Branch. The terms of the Notes include those stated in the Indenture. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture for a statement of those terms. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as amended or supplemented from time to time.

The Notes are senior unsecured obligations of the Company. Subject to the conditions set forth in the Indenture and without the consent of the Holders, the Company may issue Additional Notes. All Notes shall be treated as a single class of securities under the Indenture.

The Indenture imposes certain limitations, subject to certain exceptions, on, among other things, the ability of the Company and its Subsidiaries to incur Liens or consolidate or merge or transfer or convey all or substantially all of the Company’s assets.

5. Optional Redemption

(a) Make-Whole Redemption. The Notes will be redeemable, at the option of the Company, in whole or in part, at any time and from time to time prior to July 19, 2027 (the date that is three months prior to the Maturity Date) (the “Par Call Date”) at a redemption price, as calculated by an Independent Investment Banker, equal to the greater of (1) 100% of the outstanding principal amount of the Notes to be redeemed and (2) the sum of the present values of the remaining payments on the Notes through the Par Call Date, as if the Notes were redeemed on the Par Call Date, discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Rate plus 30 basis points, in each case plus accrued and unpaid interest to the Redemption Date and any Additional Amounts (as defined below).

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to July 19, 2027 that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities with a maturity comparable to July 19, 2027.

A-6

“Comparable Treasury Price” means, with respect to the Redemption Date, (1) the average of the Reference Treasury Dealer Quotations for the Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations or (2) if the Independent Investment Banker obtains fewer than five (5) such Reference Treasury Dealer Quotations, the average of all such quotations.

“Independent Investment Banker” means one of the Reference Treasury Dealers reasonably designated by the Company.

“Reference Treasury Dealer” means Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC or their Affiliates that are primary United States government securities dealers in New York City (each, a “Primary Treasury Dealer”) and not less than three other leading Primary Treasury Dealers in New York City reasonably designated by the Company; provided that if any of the former cease to be a Primary Treasury Dealer, the Company will substitute therefor another Primary Treasury Dealer.

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and a Redemption Date, the average, as determined by the Independent Investment Banker, of the bid and ask prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at or about 3:30 p.m. (New York City time) on the third Business Day preceding such Redemption Date.

“Treasury Rate” means, with respect to a Redemption Date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day-count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the Redemption Date.

(b) Par Redemption. The Notes will be redeemable, at the option of the Company, in whole or in part, at any time and from time to time on and after the Par Call Date at a redemption price equal to 100% of the Outstanding principal amount of the Notes to be redeemed plus accrued and unpaid interest to the Redemption Date and any Additional Amounts.

(c) Optional Redemption Upon Tax Event. The Notes will be redeemable, at the option of the Company, in whole but not in part, at 100% of the Outstanding principal amount of the Notes to be redeemed, plus accrued and unpaid interest to the Redemption Date and any Additional Amounts payable with respect thereto, only if:

(i) the Company would be obligated to pay any Additional Amounts as a result of any change in, or amendment to, the laws or regulations of any Taxing Jurisdiction, or any change in, or a pronouncement by competent authorities of any Taxing Jurisdiction with respect to, the official application or official interpretation of such laws or regulations, which change, amendment or pronouncement occurs (a) in the case of Taxes that are imposed by or on behalf of Panama or Peru (or any political subdivision or authority or agency therein or thereof), after the date of the Indenture (or, in the case of any Taxes (as defined below) imposed by the jurisdiction of a Paying Agent, after the date of appointment of such Paying Agent) or (b) in the case that the Company merges with or into, or conveys, transfers or leases all or substantially all of its assets to, another Person and any Taxes are imposed or levied by or on behalf of the Taxing Jurisdiction (other than Panama or Peru) in which such successor entity is incorporated, after the date of such merger, conveyance, transfer or lease; and

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(ii) such obligation cannot be avoided by the Company taking reasonable measures available to it; provided that, for this purpose, reasonable measures shall not include any change in the Company’s jurisdiction of organization or locations of principal executive office, or the incurrence of material out-of-pocket expenses by the Company. (For the avoidance of doubt, reasonable measures may include a change in the jurisdiction of a Paying Agent; provided, however, that such change shall not require the Company to incur material additional costs or legal or regulatory burdens.)

provided, further, that (1) no notice of redemption for tax reasons may be given earlier than sixty (60) days prior to the earliest date on which the Company would be obligated to pay these Additional Amounts if a payment on the Notes were then due, and (2) at the time such notice of redemption is given such obligation to pay such Additional Amounts remains in effect.

Prior to the giving of any notice of redemption pursuant to this provision, the Company must deliver to the Trustee:

(i) an Officers’ Certificate stating that the Company is entitled to effect the redemption and setting forth a statement of facts showing that the conditions precedent to the Company’s right to redeem have occurred (including that the Company cannot avoid the obligation to pay such Additional Amounts by taking reasonable measures available); and

(ii) an Opinion of Counsel stating that the Company would be obligated to pay such Additional Amounts due to the changes in tax laws or regulations or changes in, or pronouncements with respect to, the official application or official interpretation of such laws or regulations.

The Trustee may conclusively rely upon and will accept such Officers’ Certificate and Opinion of Counsel as sufficient evidence of the satisfaction of the conditions precedent described above. The notice of redemption, once delivered by the Company or on behalf of the Company to the Holders, shall be irrevocable.

(d) Optional Redemption Procedures. Notice of any redemption shall be given at least ten (10) but not more than sixty (60) days before the Redemption Date to Holders of Notes to be redeemed as provided under Section 10.1 of the Indenture.

Notes called for redemption will become due on the Redemption Date. The Company will pay the redemption price for the Notes together with accrued and unpaid interest thereon to, but excluding, the Redemption Date (subject to the rights of the relevant Holders as of the Record Date to receive payments of interest on the related Interest Payment Date). On and after the Redemption Date, interest will cease to accrue on the Notes as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price together with accrued and unpaid interest thereon pursuant to the Indenture. Upon redemption of the Notes by the Company, the redeemed Notes will be cancelled and cannot be reissued.

If fewer than all of the Notes are being redeemed, the Notes to be redeemed shall be selected as follows: (1) if the Notes are listed on an exchange, in compliance with the requirements of such exchange or (2) on a pro rata basis to the extent practicable, or, if the pro rata basis is not practicable for any reason, by lot or by such other method as most nearly approximates a pro rata basis, in each case as long as the Notes are in global form, subject to the Depositary’s customary procedures (in integral

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multiples of U.S.$1,000; provided that the remaining principal amount of such Holder’s Note will not be less than U.S.$200,000). Upon surrender of any Note redeemed in part, the Holder will receive a new Note equal in principal amount to the unredeemed portion of the surrendered Note. Once notice of redemption is sent to the Holders, Notes called for redemption become due and payable at the redemption price on the Redemption Date, and, commencing on the Redemption Date, Notes redeemed will cease to accrue interest (unless the Company defaults in the payment of the redemption price).

In addition to the Company’s right to redeem the Notes as set forth above, the Company may purchase the Notes in open-market transactions, tender offers or otherwise at any price, in compliance with applicable securities laws. Any Note so purchased by the Company may be surrendered to the Trustee for cancellation.

6. Change Of Control Offer

Upon the occurrence of a Change of Control Event, each Holder of Notes shall have the right to require that the Company purchase all or a portion (in integral multiples of U.S.$1,000, provided that the remaining principal amount of such Holder’s Note shall not be less than U.S.$200,000) of the Holder’s Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the Change of Control Payment Date. Within thirty (30) days following the date upon which a Change of Control Event occurs, the Company shall provide a notice to each Holder pursuant to Section 10.1 of the Indenture, with a copy to the Trustee, offering to purchase Notes. As more fully described in the Indenture under Section 3.6, the notice shall state, among other things, the Change of Control Payment Date which must be no earlier than ten (10) days nor later than sixty (60) days from the date the notice is given, other than as may be required by applicable law.

7. Denominations; Transfer; Exchange

The Notes are in fully registered form without coupons, and only in minimum denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar shall be entitled to request such evidence reasonably satisfactory to it documenting the identity and/or signatures of the transferor and the transferee. The Registrar need not register the transfer of or exchange (i) any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) for a period beginning fifteen (15) days before the giving of a notice of Notes to be redeemed and ending on the date of such notice or (ii) any Notes for a period beginning fifteen (15) days before an Interest Payment Date and ending on such Interest Payment Date.

8. Persons Deemed Owners

The registered Holder of this Note shall be treated as the owner of it for all purposes.

9. Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

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10. Discharge Prior to Redemption or Maturity

Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Notes and the Indenture if the Company deposits with the Trustee U.S. Dollars and/or U.S. Government Obligations for the payment of principal of and interest on the Notes to redemption or maturity, as the case may be.

11. Amendment, Waiver

(a) Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company and the Trustee may, among other things, amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency (including, without limitation, any inconsistency between the text of the Indenture or the Notes and the description of the Indenture and the Notes contained in the “Description of the Notes” section of the Offering Memorandum); to comply with Article IV of the Indenture; to add guarantees or collateral with respect to the Notes; to add to the covenants of the Company for the benefit of Holders of the Notes; to surrender any right in the Indenture conferred upon the Company; to evidence and provide for the acceptance of an appointment by a successor Trustee; to provide for the issuance of Additional Notes; or to make any other change that does not materially and adversely affect the rights of any Holder.

(b) Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in principal amount of the then Outstanding Notes and (ii) any Default or Event of Default under the Indenture (except a Default in the payment of the principal of, premium, if any, or interest on any Notes) may be waived with the written consent of the Holders of a majority in aggregate principal amount of the then Outstanding Notes. However, without the consent of each Holder affected thereby, no amendment may, among other things, reduce the rate of or extend the time for payment of interest on any Note (for the avoidance of doubt, changing the period provided for any notice under the Indenture and the Notes is not limited by this clause); reduce the principal of or change the Stated Maturity of any Note; reduce the amount payable upon the redemption of any Note or change the time at which any Note may be redeemed (for the avoidance of doubt, changing the period provided for any notice under the Indenture and the Notes is not limited by this clause); change the currency for payment of principal of or premium, if any, or interest on any Note; impair the right to institute suit for the enforcement of any payment on or with respect to any Note; waive a Default or Event of Default in the payment of principal of and premium, if any, and interest on the Notes; amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in respect of a Change of Control Event that has occurred; reduce the principal amount of Outstanding Notes whose Holders must consent to any amendment, supplement or waiver; or make any change in the amendment or waiver provisions that require each Holder’s consent.

12. Defaults and Remedies

If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then Outstanding Notes may declare all the Notes to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default, which shall result in the Notes being due and payable immediately upon the occurrence of such Events of Default.

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Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless it receives indemnity or security reasonably satisfactory to it. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal or interest) if it determines that withholding notice is in their interest.

13. Trustee Dealings with the Company

Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

14. No Recourse Against Others

No past, present or future incorporator, director, officer, employee, shareholder or controlling person, as such, of the Company shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claims based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. This waiver and release are part of the consideration for issuance of the Notes.

15. Authentication

This Note shall not be valid until an authorized signatory of the Trustee (or an Authenticating Agent acting on its behalf) manually signs the certificate of authentication on the other side of this Note.

16. Abbreviations

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).

17. CUSIP, ISIN or Common Code Numbers

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP, ISIN or Common Code numbers to be printed on the Notes and has directed the Trustee to use CUSIP, ISIN or Common Code numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

18. Governing Law

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

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19. Currency of Account; Conversion of Currency

U.S. Dollars is the sole currency of account and payment for all sums payable by the Company under or in connection with the Notes or the Indenture. The Company shall indemnify the Holders and the Trustee as provided in respect of the conversion of currency relating to the Notes and the Indenture.

20. Agent for Service; Submission to Jurisdiction; Waiver of Immunities

The parties to the Indenture have agreed that any suit, action or proceeding arising out of or based upon the Indenture and the Notes may be instituted in any New York state or U.S. federal court in The City of New York, New York. The parties to the Indenture have irrevocably submitted to the jurisdiction of such courts for such purpose and waived, to the fullest extent permitted by law, trial by jury, any objection they may now or hereafter have to the laying of venue of any such proceeding, and any claim they may now or hereafter have that any proceeding in any such court is brought in an inconvenient forum and any right to the jurisdiction of any other courts to which any of them may be entitled, on account of place of residence or domicile. The Company has appointed Corporation Service Company, New York, New York as its authorized agent upon whom all writs, process and summonses may be served in any suit, action or proceeding arising out of or based upon the Indenture or the Notes which may be instituted in any New York state or U.S. federal court in The City of New York, New York. To the extent that the Company has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment in aid or otherwise) with respect to it or any of their property, the Company has irrevocably waived and agreed not to plead or claim such immunity in respect of its obligations under the Indenture or the Notes.

Nothing in the preceding paragraph shall affect the right of the Trustee, any Holder of the Notes or any other Person to serve process in any other manner permitted by law.

The Company shall furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Note in larger type.

Requests may be made to:

Intercorp Financial Services Inc.

Av. Carlos Villarán 140, Piso 17, La Victoria

Lima 13 – Peru

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:

(Print or type assignee’s name, address and zip code)

(Insert assignee’s Social Security or Tax I.D. Number)

and irrevocably appoint __________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:_______________Your Signature: ________________________________________ (Sign exactly as your name appears on the other side of this Note.)

Signature Guarantee: ______________________________

(Signature must be guaranteed)

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-15.

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[To be attached to Global Notes only]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

The initial principal amount of this Global Note is U.S.$[•]. The following increases or decreases in this Global Note have been made:

Date of Increase or Decrease Amount of decrease
in Principal Amount
of this Global Note Amount of increase
in Principal Amount
of this Global Note Principal Amount
of this Global Note
following such
decrease or increase Signature of
authorized
signatory of Trustee
or Note Custodian

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Company pursuant to Section 3.6 or of the Indenture, check the box:

☐

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 3.6 of the Indenture, state the principal amount (which must be an integral multiple of U.S.$1,000 in excess of U.S.$200,000) that you want to have purchased by the Company: U.S.$

Date: __________ Your Signature ____________________________

                               (Sign exactly as your name appears on the

other side of the Note)

Tax Identification No.:________________________

Signature Guarantee: _______________________________________

(Signature must be guaranteed)

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-15.

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EXHIBIT B

FORM OF CERTIFICATE FOR TRANSFER TO QIB

[Date]

The Bank of New York Mellon

101 Barclay Street, Floor 7 East

New York, New York 10286

Attention: Global Corporate Trust

Re: 4.125% Senior Notes due 2027

of Intercorp Financial Services Inc. (the “Company”)

Ladies and Gentlemen:

Reference is hereby made to the Indenture, dated as of October 19, 2017 (as amended and supplemented from time to time, the “Indenture”), by and among the Company, The Bank of New York Mellon, as Trustee, and The Bank of New York Mellon SA/NV, Luxembourg Branch. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture.

This letter relates to U.S.$             aggregate principal amount of the Company’s 4.125% Senior Notes due 2027 (the “Notes”) which represents an interest in a Regulation S Global Note (CUSIP: P5626FAA0/ISIN: USP5626FAA05/COMMON CODE: 166226422) beneficially owned by the undersigned (the “Transferor”) in connection with the proposed transfer of such Notes in exchange for an equivalent beneficial interest in the Rule 144A Global Note (CUSIP: 45866EAA5 /ISIN: US45866EAA55/COMMON CODE: 166226945).

In connection with such request, and with respect to such Notes, the Transferor does hereby certify that such Notes are being transferred in accordance with Rule 144A under the U.S. Securities Act of 1933, as amended (“Rule 144A”), to a transferee that the Transferor reasonably believes is purchasing the Notes for its own account or an account with respect to which the transferee exercises sole investment discretion, and the transferee, as well as any such account, is a “qualified institutional buyer” within the meaning of Rule 144A, in a transaction meeting the requirements of

Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction.

You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

Very truly yours,

[Name of Transferor]

By:

Authorized Signature

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EXHIBIT C

FORM OF CERTIFICATE FOR TRANSFER

PURSUANT TO REGULATION S

[Date]

The Bank of New York Mellon

101 Barclay Street, Floor 7 East

New York, New York 10286

Attention: Global Corporate Trust

Re: 4.125% Senior Notes due 2027

of Intercorp Financial Services Inc. (the “Company”)

Ladies and Gentlemen:

Reference is hereby made to the Indenture, dated as of October 19, 2017 (as amended and supplemented from time to time, the “Indenture”), by and among the Company, The Bank of New York Mellon, as Trustee, and The Bank of New York Mellon SA/NV, Luxembourg Branch. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture.

This letter relates to U.S.$             aggregate principal amount of the Company’s 4.125% Senior Notes due 2027 (the “Notes”) which represents an interest in a Rule 144A Global Note (CUSIP: 45866EAA5 /ISIN: US45866EAA55/COMMON CODE: 166226945) beneficially owned by the undersigned (“Transferor”) in connection with the proposed transfer of such Notes in exchange for an equivalent beneficial interest in the Regulation S Global Note (CUSIP: P5626FAA0/ISIN: USP5626FAA05/COMMON CODE: 166226422).

In connection with such request, the Transferor confirms that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor represents that:

(a) the offer of the Notes was not made to a person in the United States;

(b) either (i) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on the Transferor’s behalf reasonably believed that the transferee was outside the United States or (ii) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither the Transferor nor any person acting on the Transferor’s behalf knows that the transaction has been pre-arranged with a buyer in the United States;

(c) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable;

(d) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and

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(e) the Transferor is the beneficial owner of the principal amount of Notes being transferred.

In addition, if the sale is made during a Distribution Compliance Period and the provisions of Rule 904(b)(1) or Rule 904(b)(2) of Regulation S are applicable thereto, the Transferor confirms that such sale has been made in accordance with the applicable provisions of Rule 904(b)(1) or Rule 904(b)(2), as the case may be.

You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

Very truly yours,

[Name of Transferor]

By:

Authorized Signature

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EXHIBIT D

FORM OF CERTIFICATE FOR TRANSFER

PURSUANT TO RULE 144

[Date]

The Bank of New York Mellon

101 Barclay Street, Floor 7 East

New York, New York 10286

Attention: Global Corporate Trust

Re: 4.125% Senior Notes due 2027

of Intercorp Financial Services Inc. (the “Company”)

Ladies and Gentlemen:

Reference is hereby made to the Indenture, dated as of October 19, 2017 (as amended and supplemented from time to time, the “Indenture”), by and among the Company, The Bank of New York Mellon, as Trustee, and The Bank of New York Mellon SA/NV, Luxembourg Branch. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture.

This letter relates to Company’s 4.125% Senior Notes due 2027 (the “Notes”) which represents an interest in a U.S.$             aggregate principal amount of a Rule 144A Global Note (CUSIP: 45866EAA5 /ISIN: US45866EAA55/COMMON CODE: 166226945) beneficially owned by the undersigned (“Transferor”) in connection with the proposed transfer of such Notes in exchange for an equivalent beneficial interest in a Note that does not bear the Private Placement Legend (CUSIP: P5626FAA0/ISIN: USP5626FAA05/COMMON CODE: 166226422). In connection with such request, the Transferor confirms that such sale has been effected pursuant to and in accordance with Rule 144 under the U.S. Securities Act of 1933, as amended.

You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

Very truly yours,

[Name of Transferor]

By:

Authorized Signature

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