Press Release

Triple-S Management Corporation Reports Fourth Quarter 2019 Results

Company Release - 2/27/2020 6:00 AM ET

SAN JUAN, Puerto Rico, Feb. 27, 2020 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), a leading managed care company in Puerto Rico, today announced its fourth quarter 2019 results.

(PRNewsfoto/Triple-S Management Corporation)

Quarterly Consolidated and Other Highlights

  • Net income of $13.2 million, or $0.55 per diluted share, versus net loss of $10.9 million, or $0.48 per share, in the prior-year period;
  • Adjusted net income of $6.0 million, or $0.25 per diluted share, versus adjusted net income of $10.1 million, or $0.44 per diluted share, in the prior-year period;
  • Operating revenues of $831.2 million, a 14.9% increase from the prior-year period, primarily reflecting higher Managed Care net premiums earned;
  • Consolidated loss ratio of 81.0%, a 10 basis point increase versus the fourth quarter of 2018;
  • Medical loss ratio ("MLR") improved 10 basis points to 83.7%;
  • Consolidated operating income was $8.7 million, compared to consolidated operating income of $9.8 million in the prior-year period;
  • Under the Company's share repurchase program, during the fourth quarter of 2019, the Company repurchased 527,881 shares at an aggregate cost of approximately $10.0 million. As of February 26, 2020, $10.0 million remains available under the program.

"Our fourth quarter results concluded a strong 2019, exceeding our expectations with excellent growth in premiums earned at our core Managed Care segment," said Roberto Garcia-Rodriguez, President and Chief Executive Officer.  "We also had a solid open enrollment season in Medicare Advantage−aided by an attractive product offering, a smart brand strategy, and focused retention efforts−and continue to see gains in our fully insured Commercial membership."

"Looking ahead into 2020, we aim to further strengthen our core Managed Care products and membership rolls, particularly in Medicare Advantage and Commercial," added Mr. Garcia-Rodriguez.  "We will also undertake additional initiatives to help ensure our customers continue to receive superior service, while keeping a watchful eye on medical cost trends and operating expenses.  Overall, we remain focused on generating long-term growth by creating a unique value proposition and healthcare experience for our members in partnership with our provider community."   

Selected Consolidated Quarterly Details

  • Consolidated net premiums earned were $810.4 million, up 15.4% from the prior-year period, primarily reflecting an increase in membership and higher average premium rates within the Managed Care segment.
  • Consolidated claims incurred were $656.7 million, up 15.6% year-over-year. Consolidated loss ratio of 81.0% rose 10 basis points from the prior-year period, mostly reflecting higher loss ratios in the Company's complementary businesses.
  • Consolidated operating expenses of $165.8 million increased by $19.8 million, or 13.6%, from the prior-year period, primarily resulting from higher provision for bad debt, personnel costs and other expenses related to an increase in volume. These increases were partially offset by the waiver of the 2019 HIP Fee. The Company's operating expense ratio improved by 30 basis points year-over-year to 20.4%, primarily driven by premium growth compared to the prior-year quarter.

Selected Managed Care Segment Quarterly Details

  • Managed Care premiums earned were $741.6 million, up 15.3% year over year.
    • Medicare premiums earned of $342.3 million increased 22.7% from the prior-year period, largely due to an increase of approximately 55,000 member months and higher average premium rates, primarily reflecting a more competitive product offering and an increase in the average membership risk score.
    • Commercial premiums earned of $198.8 million increased 3.5% from the prior-year period, mainly reflecting an increase in fully insured enrollment during the quarter of approximately 37,000 member months, and partially offset by the suspension of the HIP Fee in 2019.
    • Medicaid premiums earned of $200.5 million increased 16.5% from the prior-year period, primarily reflecting higher membership of approximately 78,000 member months during the quarter and higher average premium rates, partially offset by the suspension of the HIP Fee in 2019.
  • Reported MLR of 83.7% improved 10 basis points from the prior-year period, reflective of better utilization trends in the Medicare and Commercial businesses, offset by the impact of the elimination of the 2019 HIP Fee and timing of the recognition of member acuity in Medicaid premiums.

Update on P&C Segment Reserves related to Hurricane María

As of December 31, 2019:

  • Triple-S Propiedad, Inc. (TSP), the Company's P&C subsidiary, has paid a cumulative amount of $729 million in claims and expenses related to Hurricane María. Estimated gross losses remain unchanged at $967 million.
  • TSP received 20 new claims and closed 84 claims during the fourth quarter of 2019. 645 claims remain open.
  • Of the 645 claims that remain open, the Company has been served with process in 313 cases and identified an additional 94 lawsuits that have been filed against TSP that had not been served as required by law.
  • As is the case for all claim liabilities, the gross losses related to Hurricane Maria are based on the Company's best estimate of the ultimate expected cost of claims with the information currently on hand and are subject to change.

2020 Outlook

The Company is initiating the following full year 2020 guidance:

  • Consolidated operating revenue is expected to be between $3.62 billion and $3.66 billion, which includes Managed Care premiums earned, net between $3.25 billion and $3.29 billion;
  • Consolidated claims incurred ratio is expected to be between 81.0% and 83.0%, while the Managed Care MLR is expected to be between 83.5% and 85.5%;
  • Consolidated operating expense ratio is expected to be between 17.5% and 18.5%;
  • The effective tax rate is expected to be between 28.0% and 30.0%; and
  • Adjusted net income per diluted share is expected to be between $2.60 and $2.80. This expectation is inclusive of the impact of approximately $0.24 per diluted share of estimated losses incurred at the Company's Property and Casualty segment after the recent earthquake activity experienced in Puerto Rico during January 2020. Adjusted net income per diluted share does not account for any potential share repurchase activity during 2020. The Company is assuming a weighted average diluted share count for full year 2020 of 23.1 million shares.

Conference Call and Webcast

Management will host a conference call and webcast today at 8:30 a.m. Eastern Time to discuss its financial results for the three months ended December 31, 2019. To participate, callers within the U.S. and Canada should dial 1-877-451-6152 and international callers should dial 1-201-389-0879 at least five minutes before the call.

To listen to the webcast, participants should visit the "Investor Relations" section of the Company's website at www.triplesmanagement.com several minutes before the event is broadcast and follow the instructions provided to ensure they have the necessary audio application downloaded and installed. This program is provided at no charge to the user. An archived version of the call, also located on the "Investor Relations" section of Triple-S Management's website, will be available about two hours after the call ends and for at least the following two weeks. This news release, along with other information relating to the call, will be available on the "Investor Relations" section of the website.

In addition, a replay will be available through March 12, 2020 by calling 1-844-512-2921 or 1-412-317-6671 and entering passcode 13698869. A replay will also be available at www.triplesmanagement.com for 30 days.

About Triple-S Management Corporation

Triple-S Management Corporation is an independent licensee of the Blue Cross Blue Shield Association. It is one of the leading players in the managed care industry in Puerto Rico.  Triple-S Management has the exclusive right to use the Blue Cross Blue Shield name and mark throughout Puerto Rico, the U.S. Virgin Islands, and Costa Rica.  With over 60 years of experience in the industry, Triple-S Management offers a broad portfolio of managed care and related products in the Commercial, Medicare Advantage, and Medicaid markets under the Blue Cross Blue Shield marks.  It also provides non-Blue Cross Blue Shield branded life and property and casualty insurance in Puerto Rico. For more information about Triple-S Management, visit www.triplesmanagement.com or contact investorrelations@ssspr.com.

Non-GAAP Financial Measures

This earnings release presents information about the Company's adjusted net income, which is a non-GAAP financial metric provided as a complement to the results provided in accordance with accounting principles generally accepted in the United States of America (GAAP). A reconciliation of adjusted net income to net income, the most comparable GAAP financial measure, is provided in the accompanying tables found at the end of this release.

Forward-Looking Statements

This document contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information about possible or assumed future sales, results of operations, developments, regulatory approvals or other circumstances. Sentences that include "believe", "expect", "plan", "intend", "estimate", "anticipate", "project", "may", "will", "shall", "should" and similar expressions, whether in the positive or negative, are intended to identify forward-looking statements.

All forward-looking statements in this news release reflect management's current views about future events and are based on assumptions and subject to risks and uncertainties. Consequently, actual results may differ materially from those expressed here as a result of various factors, including all the risks discussed and identified in public filings with the U.S. Securities and Exchange Commission (SEC).

In addition, the Company operates in a highly competitive, constantly changing environment, influenced by very large organizations that have resulted from business combinations, aggressive marketing and pricing practices of competitors, and regulatory oversight. The following factors, if markedly different from the Company's planning assumptions (either individually or in combination), could cause Triple-S Management's results to differ materially from those expressed in any forward-looking statements shared here:

  • Trends in health care costs and utilization rates
  • Ability to secure sufficient premium rate increases
  • Competitor pricing below market trends of increasing costs
  • Re-estimates of policy and contract liabilities
  • Changes in government laws and regulations of managed care, life insurance or property and casualty insurance
  • Significant acquisitions or divestitures by major competitors
  • Introduction and use of new prescription drugs and technologies
  • A downgrade in the Company's financial strength ratings
  • Litigation or legislation targeted at managed care, life insurance or property and casualty insurance companies
  • Ability to contract with providers consistent with past practice
  • Ability to successfully implement the Company's disease management, utilization management and Star ratings programs
  • Ability to maintain Federal Employees, Medicare and Medicaid contracts
  • Volatility in the securities markets and investment losses and defaults
  • General economic downturns, major disasters, and epidemics

This list is not exhaustive. Management believes the forward-looking statements in this release are reasonable. However, there is no assurance that the actions, events or results anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on the Company's results of operations or financial condition. In view of these uncertainties, investors should not place undue reliance on any forward-looking statements, which are based on current expectations. In addition, forward-looking statements are based on information available the day they are made, and (other than as required by applicable law, including the securities laws of the United States) the Company does not intend to update or revise any of them in light of new information or future events.

Readers are advised to carefully review and consider the various disclosures in the Company's SEC reports.

Earnings Release Schedules and Supplemental Information

Condensed Consolidated Balance Sheets................................................................................. Exhibit I


Condensed Consolidated Statements of Earnings..................................................................... Exhibit II


Condensed Consolidated Statements of Cash Flows................................................................ Exhibit III


Segment Performance Supplemental Information..................................................................... Exhibit IV


Reconciliation of Non-GAAP Financial Measures...................................................................... Exhibit V

 

Exhibit I


Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

Unaudited
































December 31,
2019


December 31,
2018

Assets



















Investments


$

1,643,637


$

1,564,542

Cash and cash equivalents



109,837



117,544

Premium and other receivables, net



567,692



628,444

Deferred policy acquisition costs and value of business acquired


234,885



215,159

Property and equipment, net



88,588



81,923

Other assets



174,187



152,636











          Total assets


$

2,818,826


$

2,760,248























Liabilities and Stockholders' Equity



















Policy liabilities and accruals


$

1,425,477


$

1,600,310

Accounts payable and accrued liabilities



370,483



309,747

Short-term borrowings



54,000



-

Long-term borrowings



25,694



28,883











          Total liabilities



1,875,654



1,938,940











Stockholders' equity:







     Common stock



23,800



22,931

     Other stockholders' equity



920,065



799,053











          Total Triple-S Management Corporation stockholders' equity


943,865



821,984













Non-controlling interest in consolidated subsidiary



(693)



(676)













Total stockholders' equity



943,172



821,308













Total liabilities and stockholders' equity


$

2,818,826


$

2,760,248

 

Exhibit II


Condensed Consolidated Statements of Earnings

(dollar amounts in thousands, except per share data)

Unaudited




























For the Three Months Ended


For the Twelve Months Ended









December 31,


December 31,









2019


2018


2019


2018

Revenues:

















Premiums earned, net


$

810,364


$

702,342


$

3,252,880


$

2,938,591


Administrative service fees



2,251



3,485



9,946



14,701


Net investment income



16,393



16,279



62,007



61,909


Other operating revenues



2,218



1,560



8,553



5,794


     Total operating revenues



831,226



723,666



3,333,386



3,020,995





















Net realized investment gains (losses) on sale of securities



1,077



(767)



5,843



298


Net unrealized investment gains (losses) on equity investments



7,892



(25,203)



32,151



(36,546)


Other income, net



847



7,712



4,206



11,312


     Total revenues



841,042



705,408



3,375,586



2,996,059
















Benefits and expenses:














Claims incurred




656,752



567,906



2,666,256



2,527,613


Operating expenses



165,777



145,943



569,406



554,715


     Total operating costs



822,529



713,849



3,235,662



3,082,328





















Interest expense



1,991



1,388



7,672



6,903

















     Total benefits and expenses



824,520



715,237



3,243,334



3,089,231

















     Income (loss) before taxes



16,522



(9,829)



132,252



(93,172)
















Income tax expense (benefit)



3,300



1,078



39,375



(29,866)
















Net income (loss)




13,222



(10,907)



92,877



(63,306)

















Net loss attributable to the non-controlling interest



(7)



(5)



(17)



(4)
















Net income (loss) attributable to Triple-S Management Corporation

$

13,229


$

(10,902)


$

92,894


$

(63,302)




















Earnings per share attributable to Triple-S Management Corporation:
































Basic net income (loss) per share


$

0.55


$

(0.48)


$

3.98


$

(2.76)


Diluted net income (loss) per share


$

0.55


$

(0.48)


$

3.97


$

(2.76)





















Weighted average of common shares



23,839,165



22,727,997



23,318,742



22,975,385


Diluted weighted average of common shares



23,901,874



22,727,997



23,385,293



22,975,385

 

Exhibit III


Condensed Consolidated Statements of Cash Flows

(dollar amounts in thousands)

Unaudited




















For the Twelve Months Ended








December 31,








2019


2018













Net cash (used in) provided by operating activities


$

(17,451)


$

7,459











Cash flows from investing activities:







     Proceeds from investments sold or matured:







          Securities available for sale:







               Fixed maturities sold



426,688



1,302,810

               Fixed maturities matured/called



18,808



24,945

          Securities held to maturity - fixed maturities matured/called



1,708



8,182

          Equity investments sold



169,153



203,841

          Other invested assets sold



4,554



3,714

     Acquisition of investments:







          Securities available for sale - fixed maturities



(449,043)



(1,343,346)

          Securities held to maturity - fixed maturities



(1,078)



(8,356)

          Equity investments



(143,972)



(156,486)

          Other invested assets 



(28,501)



(47,221)

     Increase in other investments



(2,981)



(705)

     Net change in policy loans



(1,392)



(392)

     Net capital expenditures



(20,194)



(19,840)

     Capital contribution to equity method investees



(11,418)



-











          Net cash used in investing activities



(37,668)



(32,854)











Cash flows from financing activities:







     Change in outstanding checks in excess of bank balances



(2,384)



(22,243)

     Net change in short-term borrowings



54,000



-

     Repayments of long-term borrowings



(3,236)



(3,236)

     Repurchase and retirement of common stock



(9,989)



(22,377)

     Dividends paid



(11)



-

     Proceeds from policyholder deposits



28,879



18,531

     Surrender of policyholder deposits



(19,847)



(26,677)











          Net cash provided by (used in) financing activities



47,412



(56,002)











          Net decrease in cash and cash equivalents



(7,707)



(81,397)













Cash and cash equivalents, beginning of period



117,544



198,941











Cash and cash equivalents, end of period


$

109,837


$

117,544

 

Exhibit IV


Segment Performance Supplemental Information












(Unaudited)


Three months ended December 31,


Twelve months ended December 31,

(dollar amounts in millions)

2019

2018

Percentage
Change


2019

2018

Percentage
Change

Premiums earned, net:









Managed Care:










Commercial

$      198.8

$      192.0

3.5%


$      801.2

$      782.8

2.4%



Medicare

342.3

279.0

22.7%


1,408.0

1,130.3

24.6%



Medicaid

200.5

172.1

16.5%


778.3

776.0

0.3%




Total Managed Care

741.6

643.1

15.3%


2,987.5

2,689.1

11.1%


Life Insurance

47.1

43.4

8.5%


182.2

168.6

8.1%


Property and Casualty

22.8

16.4

38.8%


87.7

83.5

5.0%


Other



(1.1)

(0.6)

(83.7%)


(4.5)

(2.6)

(73.7%)





Consolidated premiums earned, net

$      810.4

$      702.3

15.4%


$    3,252.9

$    2,938.6

10.7%

Operating revenues: 1









Managed Care

$      751.5

$      654.2

14.9%


$    3,025.3

$    2,732.0

10.7%


Life Insurance

54.4

50.0

8.9%


209.5

194.2

7.9%


Property and Casualty

25.1

19.5

28.7%


97.5

94.3

3.3%


Other



0.2

-

100.0%


1.1

0.4

146.1%





Consolidated operating revenues

$      831.2

$      723.6

14.9%


$    3,333.4

$    3,021.0

10.3%

Operating income (loss): 2









Managed Care

$          5.1

$          0.2

2400.0%


$        61.9

$        26.5

133.9%


Life Insurance

4.4

5.3

(16.4%)


21.9

19.9

10.0%


Property and Casualty

(0.5)

4.7

(110.6%)


14.5

(110.1)

113.2%


Other



(0.3)

(0.4)

14.8%


(0.6)

2.4

(124.8%)





Consolidated operating income (loss)

$          8.7

$          9.8

(11.4%)


$        97.7

$       (61.3)

259.3%

Operating margin: 3









Managed Care

0.7%

0.0%

70 bp


2.0%

1.0%

100 bp


Life Insurance

8.1%

10.5%

-240 bp


10.5%

10.2%

30 bp


Property and Casualty

(2.0%)

24.1%

-2,610 bp


14.9%

(116.7%)

13,160 bp


Consolidated

1.0%

1.4%

-40 bp


2.9%

(2.0%)

490 bp

Depreciation and amortization expense

$          3.9

$          3.6

8.3%


$        14.6

$        13.5

7.9%


1 Operating revenues include premiums earned, net, administrative service fees and net investment income.

2 Operating income or loss include operating revenues minus operating costs. Operating costs include claims incurred and operating expenses.

3 Operating margin is defined as operating income or loss divided by operating revenues.

 










Managed Care Additional Data

Three months ended
December 31,


Twelve months ended

December 31,

(Unaudited)


2019

2018


2019

2018

Member months enrollment:







Commercial:







     Fully-insured

971,270

934,557


3,844,106

3,775,441


     Self-insured

353,843

414,975


1,426,353

1,732,219


          Total Commercial

1,325,113

1,349,532


5,270,459

5,507,660


Medicare Advantage




384,038

328,998


1,540,476

1,337,061


Medicaid


1,069,428

990,933


4,257,181

4,555,702


               Total member months

2,778,579

2,669,463


11,068,116

11,400,423

Claim liabilities (in millions)




$            341.3

$            394.2

Days claim payable




49

63

Premium PMPM:







Managed Care

$       305.85

$      285.26


$          309.85

$          278.14


     Commercial

204.68

205.47


208.42

207.34


     Medicare Advantage

891.32

847.89


914.00

845.36


     Medicaid 

187.48

173.71


182.82

170.34

Medical loss ratio:

83.7%

83.8%


84.6%

84.5%


Commercial

81.3%

83.6%


82.4%

82.4%


Medicare Advantage

75.0%

79.7%


79.8%

83.2%


Medicaid 


100.9%

90.7%


95.4%

88.5%

Adjusted medical loss ratio: 1


85.0%

83.8%


85.3%

83.7%


Commercial


80.3%

81.6%


82.5%

82.8%


Medicare Advantage


79.4%

85.2%


80.3%

82.7%


Medicaid 


100.2%

84.0%


97.4%

86.1%

Operating expense ratio:







Consolidated

20.4%

20.7%


17.5%

18.8%


Managed Care

16.9%

17.8%


14.5%

16.0%


1 The adjusted medical loss ratio accounts for subsequent adjustments to estimates, such as prior-period reserve developments and Medicare premium adjustments, and presents them in their corresponding period.

 

Managed Care Membership by Segment

As of December 31,







2019

2018

Members:






Commercial:




     Fully-insured

322,973

311,222


     Self-insured

117,696

137,825


          Total Commercial

440,669

449,047


Medicare Advantage





127,789

108,605


Medicaid


355,465

318,616


               Total members

923,923

876,268

 

Exhibit V


Reconciliation of Non-GAAP Financial Measures







Adjusted Net Income (Loss)

(Unaudited)


Three months ended
December 31,

Twelve months ended
December 31,

(dollar amounts in millions)

2019

2018


2019

2018

Net income (loss)

$         13.2

$        (10.9)


$       92.9

$      (63.3)

Less adjustments:







Net realized investment gains (losses), net of tax

0.8

(0.6)


4.7

0.2


Unrealized gains (losses) on equity investments

6.3

(20.2)


25.7

(29.2)


Private equity investment income (loss), net of tax

0.1

(0.2)


1.0

1.0


     Adjusted net income (loss)

$          6.0

$         10.1


$       61.5

$      (35.3)


     Diluted adjusted net income (loss) per share

$         0.25

$         0.44


$       2.63

$      (1.54)





























Adjusted Net Income (Loss) and Operating Income
(Loss) Excluding Hurricane Maria Impact







(Unaudited)


Three months ended
December 31,

Twelve months ended 
December 31,

(dollar amounts in millions)

2019

2018


2019

2018

Adjusted net income (loss)

$          6.0

$         10.1


$       61.5

$      (35.3)

Less Hurricane Maria impact:







Property and Casualty prior period reserve development, net of tax

-

-


-

85.5


Net of tax impact of retroactive reinsurance agreement and







     hurricane related tax adjustment

-

7.7


-

7.7


     Adjusted net income excluding Hurricane Maria impact

$          6.0

$         17.8


$       61.5

$       57.9


     Diluted adjusted net income per share excluding 







          Hurricane Maria impact

$         0.25

$         0.78


$       2.63

$       2.52












Operating income (loss)


$          8.7

$          9.8


$       97.7

$      (61.3)

Less Hurricane Maria impact:








Property and Casualty prior period reserve development

-

-


-

128.7


Impact of retroactive reinsurance agreement

-

5.0


-

5.0


     Operating income excluding Huricane Maria impact

$          8.7

$         14.8


$       97.7

$       72.4

Adjusted net income is a non-GAAP financial metric and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP.  Management believes that the use of this adjusted net income and adjusted net income per share provides investors and management useful information about the earnings impact of realized and unrealized investment gains or losses, as well as other non-recurring items impacting the Company's results of operations.  This non-GAAP metric does not consider all the items associated with the Company's operations as determined in accordance with GAAP.  As a result, one should not consider these measures in isolation.

FOR FURTHER INFORMATION:




AT THE COMPANY:                                                     

INVESTOR RELATIONS:

Juan José Román-Jiménez                                           

Mr. Garrett Edson

EVP and Chief Financial Officer                                    

ICR

(787) 749-4949                                                              

(787) 792-6488

 

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SOURCE Triple-S Management Corporation