Triple-S Management Corporation : Reports Fourth Quarter 2019 Results

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.

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 [e-mail].

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
[phone]	[phone]

 

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SOURCE Triple-S Management Corporation