VideoJuan Jose Román, the finance chief of Triple-S Management Corp., has been steeped in the insurance business since he was an auditor working in KPMG's San Juan, Puerto Rico office in the late 1980s. While with the Big Four firm, Román specialized in audits of insurance industry clients. Then in 1996, after eight years in public accounting, he made a logical jump. He moved to Triple-S Inc., where he became the vice president of finance for a division known as Triple-C, the company's Medicaid unit.
Triple-C was launched only six months before Román, now 43, joined the company. "I spent a lot of times with our actuaries, developing the formulas and schedules and [claims] reserve for the group," noted Román. That operational experience paid off. He eventually was tapped to run Triple-C, and then, in 2002, was named CFO of Triple-S Management Corp., the holding company that comprises Triple-S Inc., life insurer Triple-S Vida, and Triple-S Propiedad, a property and casualty (P&C) carrier. With operations based in Puerto Rico, Triple-S generates $1.7 billion in revenues for the fiscal year ending December 31, 2008.
Triple-S was started in 1959 by a group of physicians and dentists who wanted to offer patients another choice in their insurance plans. Before Triple-S, most insurance programs in Puerto Rico focused on hospital visits, rather than the treatment received by doctors and dentists. "The doctors wanted to create a market for their services," Román said recently.
Despite being formed as a profit-making venture, Triple-S shareholder-owners at first operated the insurer as if it were a non-profit. Increased access to care by doctors and dentists, rather than earnings, was its primary goal. In 1965, the company officially declared its intention to become a non-profit, a prerequisite for becoming the Blue Shield licensee it eventually became in that year.
Still, it wasn't until 1979 that Triple-S was granted tax-exempt status. Then in 1997, it restructured, creating a for-profit holding company. In 2003, it negotiated with the Puerto Rican government to terminate its tax-exempt status, resulting in a $52 million payment. The payment was part of a settlement with the commonwealth's Treasury Department involving the accumulated statutory income that was distributed by Triple-S Inc. to the holding company, Triple-S Management. The holding company went public in December 2007.
Román's route to the C-suite has been what many would call typical. But the company's last six years have been anything but ordinary. As finance chief, Román guided Triple-S through a transformation that converted a closely-held, non-profit organization via an initial public offering into a New York Stock Exchange-traded insurance powerhouse that serves 30% of the population of Puerto Rico with its managed-care services.
- "OTTI is probably one of the biggest challenges any CFO has to deal with because the rules are not specific regarding what is meant by 'other than temporary.'"
Triple-S Management CFO
Juan-Jose Román
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.
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