Triple-S Management Corporation : Reports Second Quarter 2020 Results

SAN JUAN, Puerto Rico, Aug. 6, 2020 /PRNewswire/ -- Triple-S Management Corporation (NYSE:GTS), a leading managed care company in Puerto Rico, today announced its second quarter 2020 results.

"We are proud of our team's tireless efforts to provide our customers, providers and communities with quality health care services and support as we all navigate through the COVID-19 pandemic," said Roberto Garcia-Rodriguez, President and Chief Executive Officer. "Through the expansion of virtual health care consultations and home delivery of prescription drugs, food delivery to our elderly population and protective equipment to providers, as well as our focused efforts to enable the continuity of care for our most vulnerable members, we are committed to ensuring the safety and well-being of all our stakeholders in this challenging environment."

"Our second quarter results reflected lower utilization caused by the stay-at-home measures instituted by the government to combat COVID-19," added Mr. Garcia-Rodriguez. "Utilization has begun normalizing but will depend on the rate of progress containing the coronavirus and re-opening the economy.  While we anticipate demand for deferred procedures to resume during the second half of 2020, we continue to be measured and thoughtful about our business, and our focus squarely remains on ensuring current and prospective members receive quality service and a superior health care experience."

Second Quarter 2020 Consolidated Results and Other Highlights

• Net income of $43.6 million, or $1.87 per diluted share, versus net income of $30.9 million, or $1.35 per diluted share, in the prior-year period;
• Adjusted net income of $40.9 million, or $1.76 per diluted share, versus adjusted net income of $25.6 million, or $1.12 per diluted share, in the prior-year period;
• Operating revenues of $875.5 million, a 0.4% decrease from the prior-year period, primarily reflecting lower Managed Care net premiums earned;
• Consolidated loss ratio of 76.1%, a 610 basis-point decline from the second quarter of 2019, reflecting lower Managed Care utilization of services during the quarter as the result of the government-enforced lockdown related to the COVID-19 pandemic;
• Medical loss ratio ("MLR") declined 510 basis points to 79.4%;
• Consolidated operating income was $43.7 million, compared to consolidated operating income of $38.2 million in the prior-year period;
• During the second quarter of 2020, the Company repurchased 375,373 shares at an aggregate cost of approximately $6.0 million, completing its share repurchase program.

Selected Consolidated Quarterly Details

• Consolidated net premiums earned were $858.5 million, down 0.1% from the prior-year period, primarily reflecting lower Managed Care premiums.
• Consolidated claims incurred were $653.1 million, down 7.5% year-over-year. Consolidated loss ratio was 76.1%, 610 basis points lower than the prior-year period, mostly reflecting a decline in Managed Care utilization of services during the quarter as the result of the government-enforced lockdown.
• Consolidated operating expenses of $178.7 million increased by $44.6 million, or 33.3%, from the prior-year period, primarily reflecting an accrual of a potential litigation loss in the Company's Managed Care segment and the reinstatement of the HIP fee in 2020. The consolidated operating expense ratio was 20.7%, a 510 basis point increase from the prior-year quarter.

Selected Managed Care Segment Quarterly Details

• Managed Care premiums earned were $789.3 million, down 0.6% year-over-year.
• Medicare premiums earned of $372.4 million increased 1.7% from the prior-year period, largely due to an increase of approximately 19,000 member months, which primarily reflects a more competitive product offering, and an increase in the average membership risk score. This increase in premiums earned was partially offset by the recognition of estimated premium rebates due to the lower MLR resulting from the decreased utilization of services following the pandemic-related lock-down.
• Commercial premiums earned of $195.8 million decreased 2.5% from the prior-year period, mainly reflecting lower average premium rates and the recognition of estimated premium rebates due to the decreased utilization of services following the lock-down. These decreases were partially offset by an increase in fully-insured enrollment during the quarter of approximately 20,000 member months and the reinstatement of the HIP Fee pass-through in 2020.
• Medicaid premiums earned of $221.1 million decreased 2.6% from the prior-year period, primarily reflecting lower membership of approximately 15,000 member months. In addition, the 2019 quarter included retroactive premiums related to adjustments to the premium rates for high-cost high-need members as part of an ongoing reconciliation with ASES.
• Reported MLR of 79.4% improved 510 basis points from the prior-year period, primarily reflecting lower utilization of services during the quarter as the result of the lockdown.

Update on P&C Segment Reserves related to Hurricane María

As of June 30, 2020:

• Triple-S Propiedad, Inc. (TSP), the Company's P&C subsidiary, has paid a cumulative amount of $757 million in claims and expenses related to Hurricane María. Estimated gross losses remain unchanged at $967 million.
• TSP received 3 new claims and closed 150 claims during the second quarter of 2020. 505 claims remain open.
• The Company has been served with process with respect to 341 of the 505 claims that remain open.
• 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.

Liquidity

As of June 30, 2020, the Company has cash and cash equivalents of $141.1 million. Triple-S's investment portfolio stood at $1.7 billion as of June 30, of which 74% was in investment-grade fixed income securities. The Company also believes it would be able to access additional debt, if necessary, to further reinforce its liquidity. In sum, the Company believes it remains well capitalized to support its business operations throughout the pandemic and beyond.

2020 Outlook

The Company is raising its full year 2020 guidance for adjusted net income per diluted share to be between $2.80 and $3.00, compared to its previous outlook for adjusted net income per diluted share between $2.60 and $2.80.  The Company is currently assuming a weighted average diluted share count for full year 2020 of 23.4 million shares and no further share repurchases.

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 June 30, 2020. To participate, callers within the U.S. and Canada should dial 1-855-327-6837 and international callers should dial 1-631-891-4304 at least ten 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 August 20, 2020 by calling 1-844-512-2921 or 1-412-317-6671 and entering passcode 10010350. 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
							June 30, 2020			December 31, 2019
Assets
Investments							$	1,755,698		$	1,643,637
Cash and cash equivalents								141,071			109,837
Premium and other receivables, net								547,209			567,692
Deferred policy acquisition costs and value of business acquired								238,636			234,885
Property and equipment, net								126,685			88,588
Other assets								212,131			174,187
		Total assets					$	3,021,430		$	2,818,826
Liabilities and Stockholders' Equity
Policy liabilities and accruals							$	1,470,558		$	1,425,477
Accounts payable and accrued liabilities								501,397			370,483
Short-term borrowings								15,000			54,000
Long-term borrowings								54,940			25,694
		Total liabilities						2,041,895			1,875,654
Stockholders' equity:
	Common stock							23,438			23,800
	Other stockholders' equity							956,807			920,065
		Total Triple-S Management Corporation stockholders' equity						980,245			943,865
Non-controlling interest in consolidated subsidiary								(710)			(693)
Total stockholders' equity								979,535			943,172
Total liabilities and stockholders' equity							$	3,021,430		$	2,818,826

 

Exhibit II
Condensed Consolidated Statements of Earnings
(dollar amounts in thousands, except per share data)
Unaudited
								For the Three Months Ended						For the Six Months Ended
								June 30,						June 30,
								2020			2019			2020			2019
Revenues:
	Premiums earned, net							$	858,535		$	859,493		$	1,734,432		$	1,627,495
	Administrative service fees								2,809			2,456			5,003			5,088
	Net investment income								13,815			15,062			28,126			30,438
	Other operating revenues								303			1,591			4,342			3,168
		Total operating revenues							875,462			878,602			1,771,903			1,666,189
	Net realized investment (losses) gains								(221)			2,364			(687)			3,679
	Net unrealized investment gains (losses) on equity investments								28,338			3,323			(28,468)			22,992
	Other income, net								801			1,705			4,406			2,874
		Total revenues							904,380			885,994			1,747,154			1,695,734
Benefits and expenses:
	Claims incurred								653,087			706,304			1,367,609			1,329,494
	Operating expenses								178,659			134,084			340,860			266,747
		Total operating costs							831,746			840,388			1,708,469			1,596,241
	Interest expense								1,864			1,831			3,717			3,619
		Total benefits and expenses							833,610			842,219			1,712,186			1,599,860
		Income before taxes							70,770			43,775			34,968			95,874
Income tax expense									27,181			12,849			17,531			30,165
Net income									43,589			30,926			17,437			65,709
	Net loss attributable to the non-controlling interest								(10)			(5)			(17)			(8)
Net income attributable to Triple-S Management Corporation								$	43,599		$	30,931		$	17,454		$	65,717
Earnings per share attributable to Triple-S Management Corporation:
	Basic net income per share							$	1.88		$	1.35		$	0.75		$	2.88
	Diluted net income per share							$	1.87		$	1.35		$	0.75		$	2.87
	Weighted average of common shares								23,193,626			22,830,399			23,287,787			22,794,297
	Diluted weighted average of common shares								23,271,303			22,895,000			23,372,985			22,866,691

 

Exhibit III
Condensed Consolidated Statements of Cash Flows
(dollar amounts in thousands)
Unaudited
							For the Six Months Ended
							June 30,
							2020			2019
Net cash provided by operating activities							$	170,282		$	26,305
Cash flows from investing activities:
	Proceeds from investments sold or matured:
		Securities available for sale:
			Fixed maturities sold					66,316			315,495
			Fixed maturities matured/called					18,752			14,420
		Securities held to maturity - fixed maturities matured/called						339			1,178
		Equity investments sold						72,775			70,054
		Other invested assets sold						11,814			2,096
	Acquisition of investments:
		Securities available for sale - fixed maturities						(91,930)			(291,533)
		Securities held to maturity - fixed maturities						(340)			(539)
		Equity investments						(160,104)			(67,560)
		Other invested assets						(20,799)			(15,424)
	Increase in other investments							(2,400)			(2,692)
	Net change in policy loans							(97)			(771)
	Net capital expenditures							(45,927)			(10,659)
	Capital contribution on equity method investees							(4,933)			-
			Net cash (used in) provided by investing activities					(156,534)			14,065
Cash flows from financing activities:
	Change in outstanding checks in excess of bank balances							34,024			13,189
	Repayments of short-term borrowings							(39,000)			-
	Proceeds from long-term borrowings							30,841			-
	Repayments of long-term borrowings							(1,618)			(1,613)
	Repurchase and retirement of common stock							(14,982)			(1)
	Proceeds from policyholder deposits							16,421			8,204
	Surrender of policyholder deposits							(8,200)			(11,421)
			Net cash provided by financing activities					17,486			8,358
			Net increase in cash and cash equivalents					31,234			48,728
Cash and cash equivalents, beginning of period								109,837			117,544
Cash and cash equivalents, end of period							$	141,071		$	166,272

 

Exhibit IV
Segment Performance Supplemental Information
(Unaudited)						Three months ended June 30,				Six months ended June 30,
(dollar amounts in millions)						2020	2019	Percentage Change		2020	2019	Percentage Change
Premiums earned, net:
	Managed Care:
		Commercial				$     195.8	$     200.8	(2.5%)		$     396.9	$     399.3	(0.6%)
		Medicare				372.4	366.0	1.7%		760.2	698.6	8.8%
		Medicaid				221.1	227.0	(2.6%)		442.0	401.4	10.1%
			Total Managed Care			789.3	793.8	(0.6%)		1,599.1	1,499.3	6.7%
	Life Insurance					48.1	45.0	6.9%		94.8	89.2	6.3%
	Property and Casualty					22.4	21.8	2.8%		43.0	41.1	4.6%
	Other					(1.3)	(1.1)	(18.2%)		(2.5)	(2.1)	(19.0%)
				Consolidated premiums earned, net		$     858.5	$     859.5	(0.1%)		$   1,734.4	$   1,627.5	6.6%
Operating revenues (losses): 1
	Managed Care					$     797.4	$     802.9	(0.7%)		$   1,615.5	$   1,518.0	6.4%
	Life Insurance					54.9	51.8	6.0%		108.5	102.6	5.8%
	Property and Casualty					24.7	24.1	2.5%		47.4	46.0	3.0%
	Other					(1.5)	(0.2)	(650.0%)		0.5	(0.4)	225.0%
				Consolidated operating revenues		$     875.5	$     878.6	(0.4%)		$   1,771.9	$   1,666.2	6.3%
Operating income (loss): 2
	Managed Care					$       29.3	$       29.3	0.0%		$       43.5	$       51.4	(15.4%)
	Life Insurance					9.5	5.2	82.7%		14.5	10.9	33.0%
	Property and Casualty					6.7	4.8	39.6%		6.5	8.3	(21.7%)
	Other					(1.8)	(1.1)	(63.6%)		(1.1)	(0.6)	(83.3%)
				Consolidated operating income		$       43.7	$       38.2	14.4%		$       63.4	$       70.0	(9.4%)
Operating margin: 3
	Managed Care					3.7%	3.6%	10 bp		2.7%	3.4%	-70 bp
	Life Insurance					17.3%	10.0%	730 bp		13.4%	10.6%	280 bp
	Property and Casualty					27.1%	19.9%	720 bp		13.7%	18.0%	-430 bp
	Consolidated					5.0%	4.3%	70 bp		3.6%	4.2%	-60 bp
Depreciation and amortization expense						$         3.8	$         3.5	8.6%		$         7.7	$         7.0	10.0%
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 June 30,			Six months ended June 30,
(Unaudited)						2020	2019		2020	2019
Member months enrollment:
	Commercial:
		Fully-insured				975,212	955,463		1,953,554	1,908,515
		Self-insured				327,030	353,961		657,262	716,451
			Total Commercial			1,302,242	1,309,424		2,610,816	2,624,966
	Medicare Advantage					405,203	385,835		813,110	769,443
	Medicaid					1,077,456	1,092,132		2,145,472	2,121,868
				Total member months		2,784,901	2,787,391		5,569,398	5,516,277
Claim liabilities (in millions)									$            349.1	$            423.1
Days claim payable									49	61
Premium PMPM:
	Managed Care					$      321.13	$      326.21		$          325.54	$          312.37
		Commercial				200.78	210.16		203.17	209.22
		Medicare Advantage				919.05	948.59		934.93	907.93
		Medicaid				205.21	207.85		206.02	189.17
Medical loss ratio:						79.4%	84.5%		81.6%	84.1%
	Commercial					67.5%	80.9%		73.0%	81.9%
	Medicare Advantage					77.2%	82.4%		80.0%	81.5%
	Medicaid					93.7%	91.1%		92.0%	90.7%
Adjusted medical loss ratio: 1						76.9%	85.7%		80.5%	85.5%
	Commercial					67.5%	83.6%		72.8%	83.4%
	Medicare Advantage					74.6%	82.9%		78.1%	81.3%
	Medicaid					89.3%	92.2%		92.0%	94.2%
Operating expense ratio:
	Consolidated					20.7%	15.6%		19.6%	16.3%
	Managed Care					17.8%	12.9%		16.6%	13.7%
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 June 30,
						2020	2019
Members:
	Commercial:
		Fully-insured				324,489	318,429
		Self-insured				108,982	117,978
			Total Commercial			433,471	436,407
	Medicare Advantage					134,601	128,670
	Medicaid					364,157	364,495
				Total members		932,229	929,572

 

Exhibit V
Reconciliation of Non-GAAP Financial Measures
						Adjusted Net Income
(Unaudited)						Three months ended June 30,			Six months ended June 30,
(dollar amounts in millions)						2020	2019		2020	2019
Net income						$         43.6	$         30.9		$       17.4	$       65.7
Less adjustments:
	Net realized investment (losses) gains, net of tax					(0.2)	1.9		(0.6)	2.9
	Unrealized gains (losses) on equity investments					22.7	2.7		(22.8)	18.4
	Contingency accrual					(20.0)	-		(20.0)	-
	Private equity investment income, net of tax					0.2	0.7		2.3	1.0
		Adjusted net income				$         40.9	$         25.6		$       58.5	$       43.4
		Diluted adjusted net income per share				$         1.76	$         1.12		$       2.50	$       1.90

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