UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

 

 (Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to

COMMISSION FILE NUMBER:  001-33865

Triple-S Management Corporation

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes  ☐ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☑ Yes  ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

 

Explanatory Note

This amendment No. 1 on Form 10-Q/A (“Amended Filing”) amends our original Quarterly Report on Form 10-Q for the three months ended March 31, 2017 filed on May 9, 2017 (“Original Filing”). The purpose of this Amended Filing is to amend and restate management’s conclusions regarding the effectiveness of our disclosure controls and procedures and internal control over financial reporting as of March 31, 2017.  As required by Rule 12b-15, the Company’s principal executive officer and principal financial officer are providing new currently dated certifications.  Accordingly, the Company hereby amends and replaces in its entirety Item 4 in the Original Filing.

Except as described above, this Amended Filing does not amend, modify or change any items or disclosures contained in our Original Filing and does not intend to reflect any information or events subsequent to the filing date of the Original Filing. As such, the Company’s unaudited consolidated financial statements as of and for the three months ended March 31, 2017, which were included in the Original Filing, have not changed as a result of the identification of the material weakness. This Amended Filing should be read in conjunction with the Original Filing and reports filed with the U.S. Securities and Exchange Commission subsequent to the Original Filing, including any amendment to those filings.

As described in Item 4 of this Amended Filing, subsequent to our Original Filing, as the result of an inspection from the Public Company Accounting Oversight Board, our independent registered public accounting firm requested that we re-evaluate certain internal controls related to the review process of the Managed Care claims paid data input in our incurred but not reported (“IBNR”) actuarial model. Following this re-evaluation, management has concluded that disclosure controls and procedures and internal control over financial reporting were not effective as of March 31, 2017 due to a material weakness in its internal control over financial reporting identified subsequent to the issuance of the Original Filing. The Company’s unaudited consolidated financial statements as of and for the three months ended March 31, 2017, which were included in the Original Filing, have not changed as a result of the identification of the material weakness.

 

Item 4.

Controls and Procedures

In connection with the preparation of the Original Filing and, subsequently, of this Quarterly Report on Form 10-Q/A, management, under the supervision and with the participation of the chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (as such term is defined under Exchange Act Rule 13a-15(e)) of the Corporation and its subsidiaries. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility that judgments in decision-making can be faulty, and breakdowns as a result of simple errors or mistake. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on the evaluation at the time of the Original Filing, our chief executive officer and chief financial officer concluded that as of March 31, 2017, which is the period covered in this Form 10-Q, our disclosure controls and procedures were effective to a reasonable level of assurance. Subsequent to this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2017 because of the material weakness in internal control over financial reporting described below.

Notwithstanding the material weakness in our internal control over financial reporting as of March 31, 2017, management has concluded that the unaudited consolidated financial statements included in the Original Filing present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of “internal control over financial reporting,” as defined under Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s chief executive officer and chief financial officer, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”), and includes those policies and procedures that:

·

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

·

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

·

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management, under the supervision and with the participation of the chief executive officer and chief financial officer, assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2017 based on criteria described in the “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) on May 14, 2013.  Based on that assessment and those criteria, management has concluded that the Company’s internal control over financial reporting was not effective as of March 31, 2017 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in accordance with GAAP due to the material weakness described below.

Subsequent to our Original Filing, as the result of an inspection from the Public Company Accounting Oversight Board, our independent registered public accounting firm requested that we re-evaluate certain internal controls related to the review process of the Managed Care claims paid data input in our IBNR actuarial model. As the result of this re-evaluation, management determined that controls were not appropriately designed to validate that the claims paid information in the lag triangles used in the IBNR actuarial models is reviewed with enough precision to ascertain data is accurately presented by incurred date. This deficiency was determined to be a material weakness as of March 31, 2017. The Company’s unaudited consolidated financial statements as of and for the three months ended March 31, 2017, as included in the Original Filing, have not changed as a result of the identification of this material weakness.

The main factor contributing to the material weakness were changes in our actuarial department during 2016. As a consequence, the preventive control over the accuracy of the incurred date component of the Managed Care claims paid data within the claim lags ceased to be fully effective. Although we engaged an external actuarial consulting firm to support our claims reserving process, we did not ask them to do detailed testing over the incurred date component in order to ascertain the preciseness of the lag triangles. Even though this control deficiency is considered a material weakness, there is no adjustment to the previously issued financial statements.

Management has designed a remediation plan to correct the material weakness described above and improve the design of internal controls. The remedial activities put in place include the following:

·

After hiring additional personnel in the actuarial department, effective 2017 we reinforced the review process over the accuracy of the claims paid data within the claim lags.

·

In addition, we strengthened the claims paid reconciliation process to include the incurred date component within the claim lags on a monthly and historical basis.

We have completed the aforementioned activities as of the date of this amendment and believe that we have strengthened the Company’s internal control over financial reporting addressing the identified material weakness. However, control weaknesses are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively. We will continue to monitor the effectiveness of these remediation measures and we will make any changes to the design of this plan and take such other actions that we deem appropriate given the circumstances.

No changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended March 31, 2017 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 6.

Exhibits

 

All other exhibits for which provision is made in the applicable accounting regulation of the United States Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

 

*	Filed herein.

 

SIGNATURES

Pursuant to the requirements of the United States Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

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