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…

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 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
































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

(787) 749-4949

(787) 792-6488

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/triple-s-management-corporation-reports-second-quarter-2020-results-301107247.html

SOURCE Triple-S Management Corporation