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Triple-S Management Corporation Reports First Quarter 2019 Results

SAN JUAN, Puerto Rico, May 9, 2019 /PRNewswire/ --Triple-S Management Corporation (GTS), a leading managed care company in Puerto Rico, today announced its first quarter 2019 results.

(PRNewsfoto/Triple-S Management Corporation)

Quarterly Consolidated and Other Highlights

  • Net income of $34.8 million, or $1.52 per diluted share, versus net income of $3.9 million, or $0.17 per diluted share, in the prior-year period;
  • Adjusted net income of $17.7 million, or $0.77 per diluted share, versus adjusted net income of $14.1 million, or $0.60 per diluted share;
  • Operating revenues of $787.6 million, a 2.3% increase from the prior-year period, primarily reflecting higher Managed Care premiums;
  • Consolidated loss ratio improved 120 basis points to 81.1%;
  • Medical loss ratio ("MLR") improved 140 basis points to 83.6%;
  • Consolidated operating income was $31.7 million, compared to consolidated operating income of $18.1 million in the prior-year period.

"We opened 2019 with a solid first quarter, driven by sustained improvement in our core Managed Care segment," said Roberto Garcia-Rodriguez, President and Chief Executive Officer.  "The strength of our brand, the breadth of our provider network and our competitive product offering led to double-digit sequential growth in both Medicare Advantage and Medicaid membership, while our clinical and network management initiatives continue to drive down the overall medical loss ratio.   Our Life and P&C segments are also performing quite well, and we remain adequately reserved against our P&C hurricane-related losses."

"These results reaffirm the soundness of our strategy and reflect disciplined execution by our associates," added Mr. Garcia-Rodriguez.  "Looking ahead, we will continue investing in our platforms to reduce the overall cost of care, enhance both member and provider engagement, expand our market share and build out an integrated delivery model.

Selected Consolidated Quarterly Details

  • Consolidated premiums earned were $768.0 million, up 2.1% from the prior-year period, primarily reflecting higher Medicare membership and premium rates within the Managed Care segment. The increase was partially offset by lower Medicaid membership as a result of the change in the program's model and a new entrant to the market in November 2018.

  • Consolidated claims incurred were $623.2 million, up 0.7% year-over-year. A consolidated loss ratio of 81.1% improved 120 basis points from the prior-year period, mostly due to favorable prior period reserve developments in the Managed Care segment, and offset in part by the higher target MLR of the current Medicaid contract and the suspension of the Health Insurance Providers Fee ("HIP Fee") pass-through.

  • Consolidated operating expenses of $132.7 million decreased by $0.4 million, or 0.3%, from the prior-year period, and the Company's operating expense ratio improved 40 basis points year-over-year to 17.2%. The decrease in operating expenses primarily results from the suspension in 2019 of the HIP Fee of $11.7 million, offset by higher personnel costs and commission expense, as well as an increase in the provision for doubtful accounts.

  • Consolidated income tax expense was $17.3 million, compared to $0.4 million in the prior-year period, primarily reflecting the increase in income before taxes in the Managed Care segment, which has a higher effective tax rate than the Company's other segments.

Selected Managed Care Segment Quarterly Details

  • Managed Care premiums earned were $705.5 million, up 2.7% year over year.

  • Reported MLR of 83.6% improved 140 basis points from the prior-year period, primarily reflecting favorable prior period reserve developments. Adjusting for prior period reserve developments and moving risk-score revenue to its corresponding period, Managed Care MLR for this quarter would have been 84.5%, 60 basis points above the prior-year period largely due to the suspension of the HIP fee pass-through, which accounts for approximately 50 basis points of the increase.

2019 Outlook

The Company is raising its full year 2019 guidance for consolidated operating revenue, Managed Care premiums earned, and adjusted net income per diluted share.  It is maintaining its full year 2019 guidance for its consolidated claims incurred ratio, Managed Care MLR and consolidated operating expense ratio, and adjusting its effective tax rate guidance.  More specifically:

  • The Company raised consolidated operating revenue expectations for 2019 to be between $3.11 billion and $3.15 billion, which includes Managed Care premiums earned, net between $2.78 billion and $2.82 billion. The Company's previous outlook was for consolidated operating revenue between $3.04 billion and $3.08 billion, which included Managed Care premiums earned, net between $2.71 billion and $2.75 billion;

  • The Company continues to expect the consolidated claims incurred ratio for 2019 to be between 81.3% and 83.3%, and Managed Care MLR to be between 84.0% and 86.0%;

  • The Company continues to expect its consolidated operating expense ratio for 2019 to be between 17.6% and 18.6%;

  • The Company is adjusting expectations for its effective tax rate to be between 29.0% and 34.0% due to an expected increase in Managed Care operating income, which has a higher tax rate relative to the other segments. The Company's previous outlook was for effective tax rate to be between 25.0% and 30.0%; and

  • The Company raised adjusted net income per diluted share expectations for 2019 to be between $1.90 and $2.10, compared to its previous outlook for adjusted net income per diluted share between $1.85 and $2.05. Adjusted net income per diluted share guidance does not account for any share repurchase activity during 2019.

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 March 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 May 23, 2019 by calling 1-844-512-2921 or 1-412-317-6671 and entering passcode 13689843. 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 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
































March 31,
2019


December 31,
2018

Assets



















Investments


$

1,591,419


$

1,564,542

Cash and cash equivalents



95,816



117,544

Premium and other receivables, net



660,209



628,444

Deferred policy acquisition costs and value of business acquired


218,839



215,159

Property and equipment, net



81,514



81,923

Other assets



148,682



152,636













Total assets


$

2,796,479


$

2,760,248























Liabilities and Stockholders' Equity



















Policy liabilities and accruals


$

1,549,807


$

1,600,310

Accounts payable and accrued liabilities



347,428



309,747

Long-term borrowings



28,086



28,883













Total liabilities



1,925,321



1,938,940











Stockholders' equity:








Common stock



23,107



22,931


Other stockholders' equity



848,730



799,053













Total Triple-S Management Corporation stockholders' equity


871,837



821,984













Non-controlling interest in consolidated subsidiary



(679)



(676)













Total stockholders' equity



871,158



821,308













Total liabilities and stockholders' equity


$

2,796,479


$

2,760,248


 

Exhibit II

Condensed Consolidated Statements of Earnings

(dollar amounts in thousands, except per share data)

Unaudited

























For the Three Months Ended










March 31,










2019


2018


Revenues:












Premiums earned, net


$

768,002


$

752,034



Administrative service fees



2,632



3,348



Net investment income



15,376



13,755



Other operating revenues



1,577



1,071
















Total operating revenues



787,587



770,208
















Net realized investment gains on sale of securities



1,315



2,942
















Net unrealized investment gains (losses) on equity investments



19,669



(16,199)

















Other income, net



1,169



1,163
















Total revenues



809,740



758,114




























Benefits and expenses:









Claims incurred




623,190



618,989



Operating expenses



132,663



133,134
















Total operating costs



755,853



752,123

















Interest expense



1,788



1,690
















Total benefits and expenses



757,641



753,813
















Income before taxes



52,099



4,301














Income tax expense



17,316



387














Net income






34,783



3,914















Less: Net loss attributable to the non-controlling interest



3



-














Net income attributable to Triple-S Management Corporation


$

34,786


$

3,914
















Earnings per share attributable to Triple-S Management Corporation:






















Basic net income per share


$

1.53


$

0.17



Diluted net income per share


$

1.52


$

0.17

















Weighted average of common shares



22,757,794



23,277,633



Diluted weighted average of common shares



22,840,274



23,394,997


 

Exhibit III

Condensed Consolidated Statements of Cash Flows

(dollar amounts in thousands)

Unaudited





















 

For the three months ended








March 31,








2019


2018













Net cash (used in) provided by operating activities


$

(69,900)


$

130,473











Cash flows from investing activities:








Proceeds from investments sold or matured:









Securities available for sale:










Fixed maturities sold



164,997



443,419




Fixed maturities matured/called



12,267



5,368



Securities held to maturity - fixed maturities matured/called



1,154



1,048



Equity securities sold



23,123



113,863



Other invested assets sold



373



845


Acquisition of investments:









Securities available for sale - fixed maturities



(166,626)



(575,694)



Securities held to maturity - fixed maturities



(539)



(1,212)



Equity securities



(9,139)



(49,591)



Other invested assets 



(8,546)



(9,683)


Increase in other investments



(535)



(4,136)


Net change in policy loans



(309)



(185)


Net capital expenditures



(2,968)



(4,861)














Net cash provided by (used in) investing activities



13,252



(80,819)











Cash flows from financing activities:








Change in outstanding checks in excess of bank balances



36,682



(19,992)


Repayments of long-term borrowings



(808)



(810)


Proceeds from revolving line of credit



-



-


Repurchase and retirement of common stock



(1)



(14,259)


Proceeds from policyholder deposits



3,607



6,237


Surrender of policyholder deposits



(4,560)



(7,161)














Net cash provided by (used in) financing activities



34,920



(35,985)














Net (decrease) increase in cash and cash equivalents



(21,728)



13,669













Cash and cash equivalents, beginning of period



117,544



198,941











Cash and cash equivalents, end of period


$

95,816


$

212,610


Exhibit IV

Segment Performance Supplemental Information



(Unaudited)


Three months ended March 31,


(dollar amounts in millions)

2019

2018

Percentage
Change


Premiums earned, net:






Managed Care:







Commercial

$     198.5

$     198.7

(0.1%)




Medicare

332.7

287.9

15.6%




Medicaid

174.3

200.3

(13.0%)





Total Managed Care

705.5

686.9

2.7%



Life Insurance

44.2

41.5

6.5%



Property and Casualty

19.4

24.2

(19.8%)



Other



(1.1)

(0.6)

(83.3%)






Consolidated premiums earned, net

$     768.0

$     752.0

2.1%


Operating revenues (loss): 1






Managed Care

$     715.0

$     696.1

2.7%



Life Insurance

50.8

47.5

6.9%



Property and Casualty

21.9

26.6

(17.7%)



Other



(0.1)

-

0.0%






Consolidated operating revenues

$     787.6

$     770.2

2.3%


Operating income: 2






Managed Care

$       22.1

$       10.6

108.5%



Life Insurance

5.6

3.6

55.6%



Property and Casualty

3.6

3.1

16.1%



Other



0.4

0.8

(50.0%)






Consolidated operating income

$       31.7

$       18.1

75.1%


Operating margin: 3






Managed Care

3.1%

1.5%

160 bp



Life Insurance

11.0%

7.6%

340 bp



Property and Casualty

16.4%

11.7%

470 bp



Consolidated

4.0%

2.4%

160 bp


Depreciation and amortization expense

$         3.5

$         3.4

 

2.9%













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 March 31,

(Unaudited)


2019

2018

Member months enrollment:




Commercial:





Fully-insured

953,052

961,290



Self-insured

362,490

449,778




Total Commercial

1,315,542

1,411,068


Medicare Advantage




383,608

338,340


Medicaid


1,029,736

1,171,345





Total member months

2,728,886

2,920,753

Claim liabilities (in millions)

$         397.3

$      402.4

Days claim payable

61

62

Premium PMPM:




Managed Care

$       298.13

$      277.99



Commercial

208.28

206.70



Medicare Advantage

867.29

850.92



Medicaid 

169.27

171.00

Medical loss ratio:

83.6%

85.0%


Commercial

82.9%

81.3%


Medicare Advantage

80.6%

84.6%


Medicaid 


90.3%

89.2%

Adjusted medical loss ratio: 1

84.5%

83.9%


Commercial

83.6%

82.7%


Medicare Advantage

82.0%

82.1%


Medicaid 


90.4%

87.5%

Operating expense ratio:




Consolidated

17.2%

17.6%


Managed Care

14.5%

14.7%

 

1 

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

 

Managed Care Membership by Segment


As of March 31,



2019

2018

Members:





Commercial:





     Fully-insured


318,523

319,208


     Self-insured


118,677

148,688


          Total Commercial


437,200

467,896


Medicare Advantage






128,090

112,080


Medicaid



355,694

394,454


               Total members


920,984

974,430

 


Exhibit V

Reconciliation of Non-GAAP Financial Measures







Adjusted Net Income (Loss)

(Unaudited)


Three months ended
March 31,

(dollar amounts in millions)

2019

2018


Net income


$         34.8

$          3.9


Less adjustments:





Net realized investment gains, net of tax

1.1

2.3



Unrealized gains (losses) on equity investments

15.7

(13.0)



Private equity investment income, net of tax

0.3

0.5




Adjusted net income

$         17.7

$         14.1




Diluted adjusted net income per share

$         0.77

$         0.60












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 do not consider all of 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

Cision

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