For now, the company’s decision to go public seems to have paid off. In the first-quarter results for 2009 it released on May 5, Triple-S reported a 12.4% year-over-year increase in operating revenue to $474 million, and a 13.3% boost in total revenues to $469 million, according to data provided by CapitalIQ. The total revenue number takes into account $1.7 million in net realized losses linked to securities trading and $2.5 million of net unrealized losses for the purpose of boosting reserves for unrecoverable claims and debts.
The company is apparently feeling more secure about its liquidity and perhaps its ability to collect from its creditors. In 2008, Triple-S posted net unrealized losses of $6.2 million, a bit less than two-thirds more than the $2.5 million it feels it needs in this quarter.
In March, CFO.com met with Román in New York to talk about how the company is dealing with a sagging economy, capital raising, and accounting issues. Following is an edited version of the CFO.com interview with Román.
Taking a non-profit company public is an unusual undertaking. How did the shareholders react to the idea?
At the time, the average age of the majority of our shareholders was over 70. They were the original founders of the company, the original doctors and dentists, and they were ready to cash out.
And the staff, how did they react?
The changeover [may look] quick and easy. But there was a lot of preparation that went into making it happen, a lot of cultural changes. For example, we [will] start paying taxes, so tax strategy became a new focus of the finance department. Then we had to prepare and file financial results with the Securities and Exchange Commission. So we needed to get up to speed on SEC reporting regulations really quickly. We also expanded the finance staff from 98 in 2002, when I became CFO, to 132 in 2009. We have separate groups for our managed care, P&C, and life insurance groups. Each group has a controller that reports up to me. At the holding- company level we have about five people in finance that manage all the SEC reporting, the consolidation of all the entities, taxes, investment and strategy. And we guide the budget process.
When Triple-S restructured to become a for-profit company you paid the Puerto Rican government $52 million. What was that payment based on, and what effect did making it have on your company?
We made a calculation as to how much we should have paid [in taxes] for all those years [since 1979]. It wasn’t back taxes or a fee. It was a very simple calculation. The government said: “Whatever your statutory net income was for all these years, multiply it by the top tax rate” – which in Puerto Rico is 39%. Without any deduction, just statutory net income by 39%, that’s what you have to pay to get out of tax exemption and of the requirement to operate as a non-profit entity. The net income was based on our statutory filings. The $52 million was significant, considering our capital was $350 million at the time.