Recapitalization seen key to Caritas staying financially healthy
(Second of a series)
Amid allegations of financial challenges besetting one of the country’s biggest health maintenance organizations (HMOs), the management of Caritas Health Shield Inc. yesterday reassured the public that it was capable of paying the benefits of some 600,000 policyholders nationwide.
In a statement to the Inquirer, company president Ronnie Collado said the healthcare firm has “billions” to meet the higher capitalization requirement imposed recently by the Insurance Commission.
However, this capital infusion has yet to happen and the Caritas Health Shield chief claimed that efforts to recapitalize the company were being sabotaged by two of its former officials.
“Jumamil and Martinez blocked our resolution to increase our capitalization because they want to paralyze us and hope that the Insurance Commission will suspend our license to operate,” he claimed, referring to the company’s former presidents Teodoro Jumamil and Geoffrey Martinez.
Indeed, efforts to recapitalize the company have failed at least twice because the board of directors was unable to secure the approval of a majority of its stockholders, which included Jumamil, who still owns a little over 20 percent of the company’s stock.
Asset sale
The company is pinning its recapitalization hopes on the sale of some of its real estate assets, including one of its most valuable: Two floors of the Petron Megaplaza building along Sen. Gil Puyat Avenue in Makati City, worth at least P270 million—an act that needed the approval of shareholders.
Jumamil, a lawyer and San Beda law professor, said it was his right to withhold his approval for any capitalization increase because he wanted to make an informed decision after he reviewed Caritas Health Shield’s most current actuarial valuation report and its audited financial statements.
The Inquirer checked with the Insurance Commission and its officials confirmed that Caritas Health Shield missed the deadline for submitting these two key pieces of financial information for the 2016 fiscal year and has yet to submit them almost nine months into the current year.
Insurance regulators showed the Inquirer a one-page unaudited balance sheet submitted to them by Caritas Health Shield detailing what, on the surface, appeared to be healthy numbers, including total assets worth P8.2 billion and P7.2 billion in reserves.
The broad numbers contained no fine print, which tackled the allegations made by Jumamil in his earlier letters to regulators accusing the company’s management of irregularities, including a withdrawal of P143 million from its “reserve funds” to pay for employees’ salaries and commissions, P383 million in payables (some of which have been due for six months), and negative equity of P15 million at the end of October 2016.
Instead, Insurance Commissioner Dennis Funa told the Inquirer that, for now, the firm —whose flagship product is a popular hybrid health and pre-need plan—was able to meet its obligations as these fell due and looked financially healthy, based on the information it submitted to regulators.
Independent audit
But these numbers have yet to be validated by independent auditors—something Collado said the company was working on.
“We’re doing it now,” he told the Inquirer in an interview, explaining that the firm was racing to comply with the tighter reporting requirements a year after the supervision of HMOs was transferred to the Insurance Commission from the Department of Health. “We’re not used to all this. You have to give us time.”
Collado insisted that Jumamil had an agenda in exposing alleged weaknesses of the firm he used to run.
“We ousted the Jumamils from Caritas Health Shield for serious loss of trust and confidence,” he said, referring to the firm’s former president and his wife who also served as a company official until December 2016. “The Jumamils will continue to destroy our public image. They could not bear to live their entire life for the shame and disgrace they inflicted upon themselves.”
Whatever the nature of the dispute is—whether it is an exposé on what Jumamil discovered during his term as Caritas Health Shield chief or simply a case of corporate vendetta for having been removed from his post—the Insurance Commission wanted to make sure that the company’s 600,000 policyholders were protected.
The question is “how”?
“We only assumed regulatory responsibility for HMOs last year,” Funa said, adding that the industry had operated for many years without the strict prudential standards normally imposed on life insurance firms. “We’re only now starting to see the problems in the industry.”
(To be concluded)
