From left: Jorge Padilla, senior vice president of Universal Group, Roberto Martínez, vice president of Triple S, and Fermín Contreras, director of Cooperativa de Seguros Multiples de Puerto Rico during one of the panel discussions.

Despite the challenges Puerto Rico’s insurance industry has faced related to new federal health regulations and local tax changes, it remains one of the local economy’s strongest sectors, as industry members continue to develop products and services in benefit of consumers.

Late last week, more than 200 professionals of various segments of the industry — health, life and property and casualty — gathered at the Luis Miranda Casañas Foundation’s Universal University to participate in the 1^st Puerto Rico Insurance Conference, during which executives, government officials and rating agency representatives presented their vision of the future of the industry on the island.

The conference was an initiative by the Insurance Coalition, which joins the The Puerto Rico Association of Insurance Companies (known as ACODESE), the National Association of Insurance and Financial Advisors, the Insurance Agents Association, and the Association of Professional Insurance Women, to open a direct communications channel between the industry and brokers “to work together in benefit of the industry,” said Coalition Spokesman José C. Benítez, who is also president of Universal Life Insurance Co.

Puerto Rico’s insurance industry generates nearly $10.5 billion in premiums annually, executives said.

Triple-S reported Net income was $17.2 million, or $0.61 per diluted share. (Credit: © Mauricio Pascual)

Triple-S Management Corporation, a managed care company in Puerto Rico, announced Wednesday consolidated revenues of $592 million and consolidated operating income of $22.7 million for the three months ended March 31, 2013.

Net income was $17.2 million, or $0.61 per diluted share.

“We are pleased with our overall performance, and more specifically, that the measures implemented last year in the Medicare Advantage (MA) business are beginning to have a positive impact in the first quarter of 2013,” said Ramón M. Ruiz-Comas, Triple-S CEO.

Triple-S Management operates in three segments: 1) managed care, 2) life insurance, and 3) property and casualty insurance.

Managed care membership decreased by 1.7 percent year over year, reflecting lower enrollment across all sectors. Medicare membership decreased 5.2 percent year over year, to 113,821, while fully insured commercial membership and Medicaid ASO enrollment decreased 4.8 percent and 0.2 percent year over year, respectively.

At 83.1 percent, the Medicare MLR reflects an improvement of 790 basis points, resulting from lower cost and utilization trends and favorable prior-period reserve developments. The 100-basis-point improvement in the commercial MLR is due to favorable prior-period reserve developments.

“Of particular note is the substantial improvement in the Managed Care MLR, which fell by 480 basis points year over year, and with reductions in the three segments, Commercial, MA and stand-alone PDP,” he said.

“While we generated better-than-anticipated earnings in the period, as we are only one quarter into the year, we have elected to maintain our full-year guidance. We believe that this posture is prudent until we have additional data further into 2013 on utilization and other trends in our MA and commercial businesses, and feel confident that the improvement in overall performance is sustainable,” Ruiz-Comas said.

“Moreover, with Easter coming early this year, it is possible that we could see some member utilization shift into the second quarter since doctor visits and procedures are often postponed during holiday periods,” he noted.

Triple-S reported a 0.5 percent increase in consolidated premiums to $550 million during the first quarter.

Joaquín Castrillo-Garratón

Joaquín Castrillo-Garratón has been named president of MAPFRE Puerto Rico effective in January after being promoted from his current post as executive vice president, said Raúl Costilla, who currently leads the operation.

Costilla, who was president for the past eight years, has been promoted to general director of Norte, one of MAPFRE’s most important divisions based in Bilbao, Spain.

“For me it is an honor to assume the presidency of a company to which I have devoted 15 years of my career,” said Castrillo-Garratón. “But what makes me most proud is taking the reins at a time when the talent that has been developed in MAPFRE Puerto Rico will have a leading role in the development of MAPFRE in the U.S.”

The local operation will export its expertise in product development, among other things, to “enrich innovation in MAPFRE’s portfolio in the largest market in the world,” he said.

“I think it’s a real example of the high level of our people’s professionalism and knowledge,” said Castrillo-Garratón.

The newly appointed executive has worked in Puerto Rico’s insurance industry for about 35 years. His career began at the Insular Insurance Corporation and he joined PRAICO in 1997, a company that MAPFRE acquired in 1990 to enter the Puerto Rico market.

Meanwhile, Costilla also announced two more additions to the executive team: Alexis Sánchez as executive vice president and COO and Jaime Tamayo, as chairman of the MAPFRE Puerto Rico board. Both have moved up from other MAPFRE divisions.

David Scanavino

Looking to reinforce its local leadership, Medical Cards System Inc. CEO Jim O’Drobinak announced the promotions of David Scanavino to president of the MCS Advantage Inc. subsidiary, David P. Schaffer, to CFO of MCS Life Insurance Company and MCS Health Management Options; and José Aponte, to CFO of MCS Advantage Inc.

“These are seasoned executives who have been on board for quite a while and, thanks to their excellent performance in their respective roles, we have been able to see outstanding progress in our company,” O’Drobinank said. “Considering their combined experience, great contributions, and vast expertise in the healthcare industry I am confident that they, as part of the independent management team for each of these subsidiaries, will drive MCS through the right track to success.”

Scanavino, an experienced healthcare industry executive, originally joined MCS two years ago. Prior to joining MCS, he co-founded MMM Healthcare Inc. Puerto Rico’s first Medicare Advantage health plan. Scanavino’s background also includes stints in many health insurance companies in the U.S. mainland.

“It is a privilege and great responsibility to be appointed as President of MCS Advantage Inc. In the execution of my duties, I’ve always believed that high standards of health and wellness are not only statutory requirements and morally right, but are also good for business,” Scanavino said. “With this in mind, along with my team of dedicated professionals, I look forward to taking MCS Advantage to the next level.”

Meanwhile, Schaffer who has 24 years of experience in the accounting field, 14 of them in the insurance industry, takes over his new responsibilities seeking to play a key role in accomplishing MCS’s financial objectives, within an increasingly challenging healthcare marketplace.

Schaffer, who holds a bachelor’s degree with major in accounting and finance from the University of Puerto Rico, served as vice president of finance for 10 years at MCS, prior to his promotion at MCS Life Insurance Company and MCS Health Management Options.

On the other hand, Aponte holds a bachelor’s degree in accounting from Tulane University, along with six years of “Big Four” auditing experience in the health/life insurance line of business, and eight years of combined experience at MCS as vice president of finance and director prior to his promotion to CFO of MCS Advantage.

“David and José bring a wealth of hands-on experience to their new roles and have deep insight into the issues that impact each company’s individual performance. We’re very pleased to promote such great talent from within our management team,” O’Drobinak said.

“As we continue to grow, at MCS we will keep focusing on building strong finance capabilities throughout our individual companies so we can better serve the needs of our constituents,” he noted.

Velox24.com President Antonio Ortiz-Martí explains how the online service works as Carlos Nieves and Marcos Alemán (seated) look on.

Effective today, Puerto Rico consumers will have a new online option when it comes to buying car insurance. Velox24.com, a novel insurance agency founded by three young entrepreneurs and affiliated with underwriter QBE Optima Insurance Co., will begin offering online policy quotes and sales 24 hours a day.

During a meeting with members of the media, Velox24.com President Antonio Ortiz-Martí said the new service boils down to offering fast, simple and economical coverage.

Consumers will be able to enter their vehicle information and, in about five minutes, decide to buy their insurance policy, whenever and whereever they want, entirely via the Internet by answering simple questions, he said.

“Our goal is that consumers have a pleasant experience when visiting our website to buy auto insurance. Once they make the purchase, the consumer will receive their policy immediately via email. This direct access digital platform can represent more than 35 percent in savings to the insured customer,” he said.

He also noted that this service will be especially beneficial to new car buyers, who can opt to insure their new vehicles for cheaper.

“Thirty percent of the policies sold at the dealerships are annual full cover policies. Saavy consumers are moving away from signing up for multi-annual policies that are included in the sale price and interest charges to alternatives they can get for the protection they need during the time they need to have it,” he said.

Ortiz-Martí, along with partners Carlos Nieves and Marcos Alemán — all insurance professionals — dove into this venture based on the belief that Puerto Rican consumers are ready to buy their auto insurance policies online and benefit from discounts. The Velox24.com service works much like Geico and Progressive do in the U.S. mainland market.

“To offer the discounts, we had to work on developing a sophisticated model that considers factors and variables that are presently not used in local industry to determine the final premium to pay for car insurance,” said Nieves, vice president of finance. “In addition, we developed a highly efficient business model to transfer those savings to our customers when purchasing their policy.”

17 months in the making
The Velox24.com platform began to take shape in May 2010, when the trio began analyzing similar models already in use and succeeding around the globe, Ortiz-Martí said.

Velox, the new online insurance service’s mascot, is featured in the company’s $250,000 multimedia launching blitz.

Specifically, the trio looked into the systems used by London companies Direct Line and Swiftcover.com, which they believed were pioneers and incorporated the quality and knowlege they needed. It took a $2 million investment and more than two years to set up the local operation.

However, Ortiz-Martí believes the time is right now to launch this type of service, given the growing maturity of the Puerto Rican Internet user.

“We believe the Puerto Rican consumer is ready for this type of service model because Internet usage has reached 1.6 million people on the island, of which 30 percent are engaging in online transactions,” he said. “This is not a passive Internet user anymore. Studies show that about 70 percent of online shoppers have asked for an online insurance quote, and 55 percent have gone on to buy the policy.”

During a quick tour of the website that goes live today, Ortiz-Martí explained the step-by-step process to buy a policy, which can be paid in installments and with a credit card or via direct debit to a bank account. The policy is underwritten by QBE Optima Insurance Co., which is also responsible for cutting claim checks.

Meanwhile, Alemán, vice president of business development, said the platform integrates the highest levels of online security and anti-fraud mechanisms to guard against online scams.

While the service will initially be accessible only via the website — formatted also for tablet computers — early next year, Velox24 will launch an app to allow users to access the service via smartphones.

Pablo Almodóvar-Scalley

With a focus on supporting preventive medicine programs and expediting the use of electronic medical records, insurance industry veteran Pablo Almodóvar-Scalley will take over the helm of Triple-S Salud effective Oct. 1.

“My designation as president of Puerto Rico’s most important insurance company fills me with a profound sense of pride,” he said.

“Triple-S is my home, where I have grown as a professional,” said Almodóvar-Scalley, who succeeds outgoing President Socorro Rivas, who is retiring after a 10-year tenure in the position and more than 30 with the company.

Almodóvar-Scalley joined the Triple-S organization in 1990 as accounting director for Triple-S Property. From there, he continued to move up the ranks until taking over the position of executive vice president of Triple-S Salud in 2004, working alongside Rivas.

In his new job, the executive will place special importance on the federal electronic medical records mandate and the ensuing access by physicians to more comprehensive information about their patients, which he believes will facilitate the further development of prevention initiatives.

“One of the strategies we’re strongly working on is strengthening our relationships with primary care physicians, who are normally responsible for preventive medicine routines, and part of what we’re doing is designing a product focussed on stressing that practice,” he said.

That said, he hopes to launch a pilot program next year to encourage preventive medicine practices that will incorporate aspects of the so-called “Accountable Care Organization” model — which calls for reimbursing doctors for positive result metrics and reductions in the total cost of care for an assigned population of patients — as well as the “Staff Model” approach, which also offers performance-based incentives to the medical community.

“I am an optimist and though it is undeniable that changes in demographics, regulations and the business environment affecting the industry pose challenges, it is precisely these challenges that allow us to innovate. This has certainly been the key to Triple-S’ success,” he said.

Triple-S is Puerto Rico’s largest health insurer, with some 1.6 million subscribers. (Credit: © Mauricio Pascual)

E-records at heart of prevention
The success of that preventive medicine strategy will also rely heavily on the deployment and use of e-records, which by 2015 must be fully available in response to the deadline the federal goverment has given U.S. jurisdictions to move away from paper records.

“We have a very specific strategy in place regarding how we want to use e-records. That benefits the entire industry because it helps us integrate healthcare information that is now quite fragmented. Ultimately, that technology will give clinical professionals tending to a condition full access to everything that is happening with that patient,” Almodóvar-Scalley noted.

And while all patients stand to benefit from the availability of e-records, it is the aging population that will probably gain the most advantage, given the higher number of conditions that come as people get older.

Triple-S is Puerto Rico’s largest health insurer, with some 1.6 million subscribers. The lion’s share of that universe, or about 890,000, are patients covered by the “Mi Salud” government health plan, while another 13 percent, or 200,000 people, are 65 and older, he said.

Uninsured universe a concern
That leaves about 510,000 subscribers who are either self-employed or covered by a corporate health plan — two segments that have been “challenged” by the current economic conditions, he said.

“We’re in an economy in attrition where jobs are concerned and although there may have been an improvement, the reality is that jobs are not being created and we’re not seeing that new investment that boosts an economy. That’s a challenge we have ahead of us, because then you have an uninsured segment needing services.”

It is estimated that there are about 300,000 people in Puerto Rico lacking health insurance coverage because they either do not qualify for the government’s healthcare option or cannot afford a private plan.

“However, there are government exchange programs that seek to provide coverage to that segment and it is a possibility to reach between 40 percent and 50 percent of those insured over the next two or three years,” he said. “Although the local government has not expressed itself about it, that coverage could happen through ‘Mi Salud,’ depending on funding that may come down from the federal government.”

The acquisition represents the next phase of Hub’s expansion in Latin America with the formation of Hub International Caribbean Holdings. It is subject to customary closing conditions and is expected to wrap up next month, Hub executives said in a statement.

As a result of the deal, CLC will begin doing business as Hub International CLC, headed by founder José Carrión, his management team and staff, in San Juan and Miami.

“We’re excited to join forces with one of the largest insurance brokerages in the Americas,” said Carrión, who will report directly to Neil Morrison, chairman of Hub International Latin America. “We look forward to offering our customers many value-added services, resources and specialties available from Hub.”

Established in 2001, CLC is the largest independent brokerage firm in Puerto Rico. It offers a broad suite of insurance solutions to commercial and individual clients, including property & casualty and customized plans for high net-worth personal lines clients, and employee benefit programs.

“After our successful entry into the Latin American market last year, we have been seeking out partners to further build upon our existing presence in the region,” said Morrison. “CLC and their talented staff have all of the attributes and we look forward to serving their existing clients and growing their customer base in the markets they serve.”

CLC serves not only the Puerto Rican market, but also clients located throughout the Caribbean, Latin America and the continental United States. Its diversified client base covers many industries, with a large concentration in the financial and construction sectors.

“The acquisition of CLC represents our commitment to growing our expertise and fostering new relationships in the Caribbean,” said Martin P. Hughes, chairman and CEO of Hub International Limited. “We’re excited about the opportunities that will arise with this new regional hub and we welcome the CLC team to the Hub family.”

Triple-S has its headquarters in Guaynabo. (Credit: © Mauricio Pascual)

Triple-S Management Corporation, Puerto Rico’s largest managed care company announced Wednesday consolidated revenue of $623 million and operating income of $24.2 million for the three months ended June 30, 2012.

Net income was $17 million, or $0.60 per diluted share, which includes an after tax net investment gain of $0.4 million, or $0.02 per share.

“We were pleased with our solid second quarter results, achieving membership growth in each of our three managed care businesses while maintaining control of our operating expenses,” said Triple-S President Ramón M. Ruiz-Comas “Our Life and Property and Casualty Insurance segments also posted solid performance consistent with our expectations.”

According to the report, the company reflected a solid performance in its Medicare and Managed Care segments, with quarterly enrollment increases of 16.9 percent and 111 percent, respectively.

The jump in its Managed Care business reflects the addition of the government’s public health plan “miSalud,” in which self-insured membership was 889,091 at the end of the quarter. Medicare membership increased to 122,151. However, fully insured commercial membership was down 0.2 percent from the same period last year.

“Within our Medicare business, we are making progress in our efforts to better assess the health risk of our patient population,” he said. “Moreover, we continue working on the main issues that caused the shortfall at American Health last quarter, and a number of key initiatives are being implemented.”

Among other things, the company is in renegotiations with American Health’s PBM, and have submitted bids for the 2013 open enrollment season, which take into account the increased pharmacy utilization that we have been experiencing.

“Our purchase of American Health provided us with a solid foothold in the growing Medicare Advantage business and remains an integral component of our long-term strategy. We are committed to this market and believe that we have the brand recognition, products and physician network necessary to exploit this opportunity,” Ruiz-Comas added.

Meanwhile, the company’s results also showed a consolidated loss ratio of 85.2 percent and a medical loss ratio of 88.7 percent. The company’s consolidated premiums increased by 14.2 percent to $582.2 million during the quarter.

Multinational Insurance Company’s Hato Rey headquarters. (Credit: © Mauricio Pascual)

Eight months after entering the Puerto Rico market, Multinational Insurance Company has received a favorable review from prestigious credit ratings agency A.M. Best Co.

On Tuesday, A.M. Best announced it has upgraded Multinational Life Insurance Company’s financial strength rating to B+ (Good) from C++ (Marginal) and issuer credit rating to “bbb-” from “b.” Concurrently, the firm assigned an FSR of B++ (Good) and an ICR of “bbb+” to Multinational Insurance Company. The outlook assigned to both ratings is stable.

In its analysis, A.M. Best said its rating actions reflect Multinational Life Insurance Company’s new ownership structure under Multinational Insurance Company, a wholly owned subsidiary of Panama-based Aseguradora Ancon S.A. The company entered the Puerto Rico market late last year, when it took over the assets of the defunct National Insurance Corp.

“Following a capital infusion from the new owner in the form of preferred stock, Multinational Life’s capitalization has increased to adequate levels,” A.M. Best said. “A number of management initiatives has been put into place, including meaningful cost savings, which have resulted in positive operating results thus far in 2012.”

A.M. Best said it believes the company will continue to generate positive operating earnings that are expected to be retained in support of the current rating.

“These ratings represent a great achievement for our companies,” said Tobías Carrero-Nácar, chairman of the board of both companies. “In the case of Multinational Life Insurance, it’s an even greater achievement that we’ve obtained such ratings given that when we bought the company last November, it had a deficient rating (C++) with a negative outlook.”

Since taking over, Multinational has established a new board of directors, strengthen its management team, reduced operating expenses and established adequate capitalization levels to carry the company forward, CEO Luis Pimentel said.

“This A.M. Best rating further increases the level of confidence of our customers and gives us the opportunity to develop new business relationships that were previously limited by the absence of a rating by A.M. Best,” Pimentel said.

In its report, A.M. best noted that the company’s strengths are partially offset by a history of unprofitable results, declining premium trends and challenges associated with rebuilding a brand and generating sustained profitable premium growth in Multinational Life’s core Puerto Rico marketplace.

In both instances, the credit ratings agency has placed Cosvi’s performance under review with negative implications, meaning that the rating may change in the near term, possibly within six months. This is the second time this year that A.M. Best has revised Cosvi’s credit ratings.

“The ‘under review with negative implications’ status reflects A.M. Best’s concerns with Cosvi’s ability to stabilize its risk-adjusted capitalization in the near term,” the agency said. “During the ‘under review’ period, A.M. Best will evaluate the effective execution of existing plans to mitigate these losses as well as for improving its capital position.”

The rating downgrades reflect the drop in the surplus Cosvi reported through year-end 2011, which according to numbers gathered from the Insurance Commissioners Office dropped to $13.8 million last year, from $21.2 million the prior year.

In its analysis, A.M. Best noted Cosvi recorded an operating loss of $2.9 million in 2011 due to a “reduction in its third party administrative fees and weak results for its interest sensitive products” as well as investment-related losses, which Cosvi’s annual report pegged at about $1.7 million.

Last year’s operating results represented a 340 percent loss in comparison to 2010’s net revenue of $1.2 million, representing the third consecutive year for which Cosvi has been reporting losses. Furthermore, operating expenses have been on the rise in the past two years, with increases of 21 percent and 24 percent, respectively.

Capital also was negatively impacted by the need for additional real estate-related valuation reserves and the correction of an error. In the 2011 annual report, Cosvi confirmed it had corrected the beginning balance of unassigned surplus for approximately $2.7 million due to an overstatement of accrued investment income and investment in bonds during 2010.

‘Uncertainty’ in generating positive earnings
“Thus, A.M. Best believes there is uncertainty surrounding Cosvi’s ability to generate consistent and sustainable positive earnings from its core lines of business,” the agency said.

In its annual report, Cosvi stated its total liabilities capital and surplus at $377.7 million, down 7 percent from the $406.6 million reported for 2010.

Partially offsetting Cosvi’s rating factors are: “the improvement in the quality of its statutory capital and surplus with the conversion of most of the remaining surplus notes into common stock capital; its well-established presence in the cooperative and life insurance marketplace in Puerto Rico; diversified product offerings; and continuing business and cost-restructuring initiatives to improve its marketing platform,” A.M. Best said.

In addition, the ratings acknowledged Cosvi members’ commitment to support the entity’s financial flexibility.

However, News is my Business has learned that the cooperative movement that participates in Cosvi’s finances through dividend payments is concerned about the fact that the company had a $40 million unassigned surplus shortfall in 2011.

Cosvi cannot pay dividends when its unassigned surplus is negative.

Luis Pimentel (Credit: © Mauricio Pascual)

Five months after entering Puerto Rico’s insurance market, Multinacional de Seguros is laying the groundwork to establish itself as a contender in the highly competitive $8 billion economic sector.

In an exclusive interview with News is my Business, Luis Pimentel, executive president of the Venezuelan company’s local subsidiary, Multinational Insurance Company, said the strategy calls for offering customers the best bang for their buck and launching new products and services catering to current needs and economic reality.

“We’re in a very competitive market and we have an obligation to properly orient clients so that they’re certain that their investment is right and fits their needs,” said Pimentel, who has 30 years of local insurance industry experience under his belt.

That said, he did not hesitate to note the newcomer’s aggressive plans to take advantage of the niches available and launch new products accordingly to compete head-on with the established players.

For instance, Pimentel said opportunities are ripe in the areas of life and disability insurance; individual and group health plans, including cancer coverage; and auto insurance. In this latter category, Multinational is looking to launch a product with no depreciation, which is currently unavailable in the market.

“The truth is that the industry in general lost about $180 million last year when compared to the prior year and everybody is looking to reduce costs and expenses. But, if we’re able to develop products that show real value, we’ll be hitting niches and opportunities that will generate business,” Pimentel said.

In the not-so-distant future, Multinational may also jump into the compulsory auto insurance business — currently served by just two companies — as well as the government’s public health coverage plan.

“Competition is always good if done the right way. The arrival of new insurance companies and new products to Puerto Rico helps to stabilize costs and prices,” he said.

Multinacional de Seguros C.A., entered the local market in November 2011, after bidding for the assets of the failed National Insurance Corp., which until then had been a mainstay of the island’s insurance industry. Through a court-assisted transaction, the Venezuelan firm picked up NIC’s life insurance business, adding it to its network of about 50 branches throughout Venezuela, Panama and Aruba.

Puerto Rico is the first U.S. territory where the company is doing business, a step that it had been considering taking for some time, Pimentel said.

“The group has an extraordinary relationship with the U.S. reinsurance market, so when it got word that there was an opportunity becoming available in Puerto Rico, it carried out the transaction through its partner Ancon in Panama,” he said. “This transaction combined foreign capital with local talent with vast experience in this market.”

During its first year, Multinational Insurance is looking to grow its acquired life insurance business by about 13 percent, to $85 million in 2012, from the $75 million subscribers it had on record in 2011. Meanwhile, the property and casualty division — which is a completely new operation — should originate $35 million in policies this year, Pimentel said.

“We’re very results-driven. And given that we’re living in a very tough economy, we have to be very smart about how we do business to achieve positive results,” he said.

Multinational Insurance Company's Hato Rey headquarters. (Credit: © Mauricio Pascual)

Getting up close and personal with customers
One of the main challenges that the company faced upon arriving to Puerto Rico was offering continuity of service to NIC’s customer base. While there were glitches along the way, Pimentel said things have leveled off.

“The feedback we’ve received in recent months from customers is that they’ve seen a change in service and response time. We notice that positive change in the reports we get. While our goal is to resolve miscellaneous claims in 48 hours, our life insurance policy claims should be resolved within 15 days,” he said.

To expedite processing, Multinational Insurance established a local call center to handle customer interaction, and also opened a hotline in February to serve Option Health Care policyholders, which it inherited through the NIC transaction.

That personal contact will also be offered through the opening of five branches throughout the island this year and early next, entailing an investment of about $100,000, he said. Offices in Mayagüez, Arecibo and Humacao will open before year’s end, while Caguas and Humacao branches will open in 2013.

“We basically want to make our customer’s lives easier. The regional offices will have the ability to process policies and claims and disburse checks, so that a client in Mayagüez, for example, will have no need to come to San Juan to solve their issues,” he said, adding a website is also in the works.

Getting ‘in’ with ratings agencies
While Multinational has been multi-tasking — reaching out to customers and studying the market to see which new products are needed — it has also been working on getting its accreditation from the industry’s most important credit rating agency, A.M. Best.

The global firm’s credit affirmations and comprehensive analysis of a company’s finances and circumstances will pretty much make or break an operation, as was NIC’s case in the end. A.M. Best keeps close tabs on the local insurance market, which Pimentel said will soon include Multinational Insurance.

“We’re finalizing our qualification paperwork and we hope to have our A.M. Best classification by May,” he said. “Our parent Ancon is solid and very profitable, and we’re hoping that it will soon become classified, which is extremely important for us in our relationships with banks and insurance brokers.”

COSVI, as the cooperative life insurance company is known, is owned by cooperative organizations in Puerto Rico and has been in business for 50 years.

“The revised outlook reflects COSVI’s negative statutory operating results in 2011, lower than expected risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio and high, albeit decreasing, exposure to common stocks, real-estate and mortgages relative to capital,” A.M. Best said in a release issued Wednesday.

However, the ratings agency also acknowledged that a number of initiatives that COSVI is implemented geared toward administrative efficiencies should stabilize operating results in the medium term.

“While improved, the balance sheet strength remains a challenge for COSVI due to leverage represented by borrowed money and a capital structure, which despite restructuring, retains a small amount of surplus notes,” A.M. Best said.

“Partially offsetting these negative rating factors are COSVI’s improved quality of capital, mostly due to a program that converts the high level of surplus notes to common equity, a decrease in investment risk due to changes in the company’s investment strategy and a well established presence in the cooperative and life insurance marketplace in Puerto Rico, where it offers a diversified product portfolio,” the company said.

During 2011, COSVI was able to convert almost 70 percent of its interest bearing surplus notes to common stock capital. A.M. Best expects the remaining scheduled conversion to be completed in the near future. In addition, COSVI has the commitment of its members to support the entity’s financial flexibility.

Key rating factors that could result in a positive rating action include a measurable track record of sustained profitability, growth in risk-adjusted and absolute capital, reduced volatility in operating results and continued reduction in COSVI’s investment margin balances.

On the other hand, A.M. Best noted that key rating factors that could result in a negative rating action include further deterioration of COSVI’s operating results, erosion in capital or changes to investment strategy that result in increases in margin investing or additional investment losses.

The transaction includes Colonial Insurance Agency, a managing general agent on the island; Optima Insurance Company, a property and casualty insurer, and New Century Financial Corp., which provides financing for Optima and Colonial clients.

The transaction is expected to close in March 2012 and is subject to regulatory approval by the Puerto Rico Insurance Commissioner’s Office.

QBE Latin America Chief Executive Officer José Sojo said the acquisition supports QBE’s commitment to growing the business through product and geographical diversification and new distribution channels. It also strengthens its position as a leading insurer in the region.

QBE Insurance Group Limited is one of the top 20 insurers and reinsurers worldwide. Headquartered in Sydney, Australia, QBE operates out of 52 countries around the globe, with a presence in every key insurance market.

The Americas Division, headquartered in New York, conducts business through various property and casualty insurance subsidiaries in 10 countries. QBE’s Americas Division produced $5.2 billion in gross written premium in 2010 and an 89.7 percent combined operating ratio. QBE Insurance companies are rated “A” (Excellent) by A.M. Best and “A+” by Standard and Poor’s.

Optima Insurance Group focuses on small and mid-size selected property and casualty commercial risks and personal lines. Insurance is distributed through a wide network of independent brokers and agents, along with diverse agreements with local financial entities.

Sojo said this acquisition will complement QBE’s business in the region.

“Optima’s team has a deep knowledge of their business and of the Puerto Rico insurance market,” Sojo said. “With this acquisition, we reinforce our strategy to keep growing in Latin America through acquisition of companies that produce solid underwriting profits.”

Meanwhile Antonio Ortíz, Optima Insurance Group CEO and founder, said, “a shareholder like QBE will provide Optima with access to exceptional financial strength, better products and enhanced reinsurance capacity, which we will leverage to provide a superior offering to our customers, producers and employees.”

Ortíz will retain his CEO position as QBE´s top executive in Puerto Rico.

The New Jersey-based watchdog placed Spanish MAPFRE PRAICO Group’s financial strength rating of A (Excellent) and issuer credit ratings of “a+,” including wholly owned subsidiary MAPFRE PRAICO Insurance Company (PRAICO), MAPFRE Preferred Risk Insurance Company (PRICO), and an affiliate, MAPFRE Pan American Insurance Company (PAICO), whose businesses are significantly reinsured by PRAICO. All the above companies are headquartered on the island.

These rating actions follow a downgrading of the ratings by A.M. Best Europe of MAPFRE RE, Compañía de Reaseguros, S.A., a key subsidiary of MAPFRE S.A. in Spain, due to their exposure to investments in several peripheral eurozone economies, in particular Spain and Portugal.

“This is compounded by MAPFRE SA.’s exposure to commercial property in Spain through its investment holdings. A.M. Best’s rating actions on MAPFRE RE and other European (re)insurers reflect their exposure to the continued deterioration of the sovereign creditworthiness of several eurozone countries and the negative economic outlook for the region,” A.M. Best said.

“The rationale for taking rating action at this point is largely attributable to the current heightened level of credit and liquidity risk for insurers operating within the eurozone countries—most notably Italy and Spain,” the agency further noted. “The perceived strain on the economies of these countries and companies operating within their borders is growing rapidly with very little evidence of a solution being formulated to address near-term concerns.”

MAPFRE PRAICO Group and its members will remain under review with negative implications while A.M. Best examines these companies’ exposure to a prolonged adverse economic environment within the eurozone.

“Of particular concern to A.M. Best is the exposure to Italy and Spain’s sovereign bonds and the potential for contagion into other asset classes; particularly holdings of European bank securities. In addition, A.M. Best will assess the likely impact of a prolonged financial crisis and recessionary environment on these carriers’ market position and ongoing business operations,” the agency said, adding upward rating actions are unlikely at this point.

Three high-ranking MCS executives are no longer with the company. (Credit: © Mauricio Pascual)

Three high-ranking executives — President Julio Juliá, Chief Executive Officer Mark Rishell and Provider Network Vice President Javier Magriná — have been ousted from Medical Card Systems Inc., the company’s board of directors announced Tuesday.

No reasons were given for the abrupt departures, but it is widely known that the company is under investigation by local and stateside authorities over the management of Medicare plans.

Upon announcing the changes, the board announced the appointment of an interim management team, headed by Jim O’Drobinak who will serve as Chief Executive Officer, to lead the company in a strategy of strengthened member and provider services.  Fred Dodson will serve as the president of MCS Advantage and Craig Lyon will serve as vice president of provider relations.

“I’m very impressed with the MCS product offering and the recent performance in open enrollment for Medicare Advantage,” O’Drobinak said. “We look forward to working with the entire MCS team and its network of 10,000+ providers to serve the 300,000 residents of Puerto Rico who have trusted their health to this proud organization.”

All three are experienced health plan executives affiliated with Gorman Health Group, a consulting firm specializing in hands-on support for performance improvement in the health care industry.

In its statement announcing the moves, the MCS Board said, “MCS has a proud 28-year heritage of service to the health of Puerto Rico. Our goal is to re-energize and expand upon our historic commitment to compliance and exemplary member and provider service.”

“We have talented and dedicated people and an impressive variety of commercial and government-sponsored products,” the board said, noting it “is fully committed to ensuring that MCS has the resources and support necessary for MCS to be an admired leader in Puerto Rico’s health care community.”

MCS has had a rough year after taking on the contract to provide health coverage to the government’s Mi Salud program, from which it withdrew in the summer. While MCS claimed the government was not following through with payments, Gov. Luis Fortuño’s administration announced it would be cancelling the agreement over breach of contract.

While the interim management team will focus on developing and executing strategies to strengthen the company’s continuing businesses, including MCS Life (large and small business and individual accounts) and MCS Advantage (Medicare), the Board will continue its search for a permanent CEO who can take the company to an even higher level of member and provider service, and growth, the company said.