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Triple-S Management Corporation Reports Third Quarter 2020 Results

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

"Our strong third quarter performance reflects ongoing, improved performance resulting from our operational focus and enhanced organizational capabilities," said Roberto Garcia-Rodriguez, President and Chief Executive Officer. "This has led to sustained membership momentum and premium growth in a difficult environment, particularly in the government markets sector. Continuing this momentum, we are delivering a very competitive Medicare Advantage product for this year's open enrollment period.  Like most of our peer managed care companies, we have also experienced lower than planned utilization due to the impact of the ongoing pandemic. 

"I am proud of our people, who continue to support our customers, providers and communities. Through their efforts, we are helping our members handle their medical needs safely and partnering with our providers and community organizations to assist our seniors and most vulnerable members during this challenging time.

"As we look to 2021 and beyond, we aim to be the preeminent healthcare company in Puerto Rico by delivering seamless holistic care through innovative models, state of the art technology and service excellence, in partnership with our providers."

Third Quarter 2020 Consolidated Results and Other Highlights

  • Net income of $23.6 million, or $1.02 per diluted share, versus net income of $13.9 million, or $0.58 per diluted share, in the prior-year period;
  • Adjusted net income of $14.2 million, or $0.61 per diluted share, a 17.4% increase versus adjusted net income of $12.1 million, or $0.51 per diluted share, in the prior-year period;
  • Operating revenues of $942.9 million, a 12.8% increase from the prior-year period, primarily reflecting higher Managed Care net premiums earned;
  • Consolidated loss ratio of 82.5%, a 90 basis-point improvement from the third quarter of 2019, reflecting higher premium rates and lower utilization;
  • Medical loss ratio ("MLR") of 84.7%, an improvement of 170 basis points over the same period last year;
  • Consolidated operating income of $22.3 million, a 17.4% increase compared to $19.0 million in the prior-year period;

Selected Consolidated Quarterly Details

  • Consolidated net premiums earned were $923.0 million, up 13.3% from the prior-year period, primarily reflecting higher Managed Care premiums.
  • Consolidated claims incurred were $761.8 million, up 12.0% year-over-year. Consolidated loss ratio was 82.5%, 90 basis points lower than the prior-year period, reflecting higher premium rates and lower utilization in the Company's Managed Care segment.
  • Consolidated operating expenses of $158.8 million increased by $21.9 million, or 16.0%, from the prior-year period, primarily reflecting the reinstatement of the HIP fee in 2020 and expenses related to supplying much-needed assistance to our providers, communities and seniors to help them manage through the COVID-19 pandemic. The consolidated operating expense ratio was 17.1%, a 40 basis-point increase from the prior-year quarter.

Selected Segment Quarterly Details

Managed Care

  • Managed Care premiums earned were $850.0 million, up 13.9% year-over-year.
    • Medicare premiums earned of $400.7 million increased 9.2% from the prior-year period, largely due to an increase of approximately 20,000 member months, which primarily reflects a more competitive product offering and higher premium rates due to an increase in the premium rate benchmark and membership risk score. In addition, as utilization of services has trended to almost-normalized levels, the Company reduced the estimated MLR rebate accrual, which was originally recorded as a reduction of premiums.
    • Medicaid premiums earned of $240.9 million increased 36.6% from the prior-year period, primarily reflecting higher member months of approximately 67,000, higher average premium rates following three premium rate increases effective November 1, 2019, May 1, 2020 and July 1, 2020, and the reinstatement of the HIP Fee pass-through in 2020.
    • Commercial premiums earned of $208.4 million increased 2.6% from the prior-year period, mainly reflecting higher average premium rates, an increase of approximately 3,000 fully insured member months and the reinstatement of the HIP Fee pass-through in 2020.
  • Reported MLR of 84.7% improved 170 basis points from the prior-year period, primarily reflecting higher average premium rates and the reinstatement of the HIP Fee in 2020, as well as lower utilization of services during the quarter as the result of the pandemic, offset in part by increased benefits in the Medicare product offering in 2020.

Life Insurance Segment

  • Premiums earned of $50.1 million increased 9.4% from the prior-year period, resulting from new sales and the acquisition of a life insurance portfolio in the second quarter of 2020.
  • Operating income was $5.7 million, compared with $6.6 million in the prior year period, primarily caused by a higher actuarial reserve due to the reinstatement of policies that were cancelled during the second quarter of 2020 due to the COVID-19 lockdown.

Property and Casualty Segment

  • Premiums earned of $23.9 million increased 0.8% from the prior-year period.
  • Operating income was $4.4 million, compared with $6.6 million during the same quarter last year; this decrease was primarily caused by an increase in net commission expense.
  • Updated information related to Hurricane María as of September 30, 2020:
    • The Company's P&C subsidiary has paid a cumulative amount of $767 million in claims and expenses related to Hurricane María. Estimated gross losses remain unchanged at $967 million.
    • TSP closed 75 claims during the third quarter of 2020, increasing the number of claims closed to 97.5%; 434 claims remain open.
    • The Company has been served with process with respect to 322 of the 434 claims that remain open.

2020 Outlook

The Company is raising its full year 2020 guidance for adjusted net income per diluted share to be between $3.25 and $3.35, compared to its previous outlook for adjusted net income per diluted share between $2.80 and $3.00.  The Company is currently assuming a weighted average diluted share count for full year 2020 of 23.4 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 September 30, 2020. To participate, callers within the U.S. and Canada should dial 1-877-300-8521 and international callers should dial 1-412-317-6026 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 for one year. This news release, along with other information relating to the call, will be available on the "Investor Relations" section of the website.

About Triple-S Management Corporation

Triple-S Management Corporation is a healthcare company and one of the top players in the Puerto Rico healthcare industry, with over 60 years of experience as the premier brand serving more people through the most attractive provider networks on the island.  We have the exclusive right to use the Blue Cross Blue Shield name and mark throughout Puerto Rico, the U.S. Virgin Islands, Costa Rica, the British Virgin Islands and Anguilla, and we offer a broad portfolio of managed care and related products in the Commercial, Medicare Advantage and Medicaid markets. Triple-S is also a well-known brand in the life insurance and property and casualty insurance markets in Puerto Rico, with strong customer relationships and a significant market share. 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 and reserves
  • 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
































September 30,
2020


December 31,
2019

Assets



















Investments


$

1,874,331


$

1,643,637

Cash and cash equivalents



129,603



109,837

Premium and other receivables, net



546,959



567,692

Deferred policy acquisition costs and value of business acquired


243,663



234,885

Property and equipment, net



130,220



88,588

Other assets



195,511



174,187













Total assets


$

3,120,287


$

2,818,826























Liabilities and Stockholders' Equity



















Policy liabilities and accruals


$

1,551,181


$

1,425,477

Accounts payable and accrued liabilities



423,083



370,483

Short-term borrowings



82,500



54,000

Long-term borrowings



53,836



25,694













Total liabilities



2,110,600



1,875,654











Stockholders' equity:








Common stock



23,430



23,800


Other stockholders' equity



986,970



920,065













Total Triple-S Management Corporation stockholders' equity


1,010,400



943,865













Non-controlling interest in consolidated subsidiary



(713)



(693)













Total stockholders' equity



1,009,687



943,172













Total liabilities and stockholders' equity


$

3,120,287


$

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 Nine Months Ended









September 30,


September 30,









2020


2019


2020


2019

Revenues:

















Premiums earned, net


$

922,934


$

815,021


$

2,657,366


$

2,442,516


Administrative service fees



3,752



2,607



8,755



7,695


Net investment income



14,168



15,176



42,294



45,614


Other operating revenues



2,052



3,167



6,394



6,335



Total operating revenues



942,906



835,971



2,714,809



2,502,160





















Net realized investment gains (losses)



507



1,087



(180)



4,766


Net unrealized investment gains (losses) on equity investments



11,040



1,267



(17,428)



24,259


Other income, net



1,811



485



6,217



3,359



Total revenues



956,264



838,810



2,703,418



2,534,544
















Benefits and expenses:














Claims incurred




761,792



680,010



2,129,401



2,009,504


Operating expenses



158,809



136,882



499,669



403,629



Total operating costs



920,601



816,892



2,629,070



2,413,133





















Interest expense



2,096



2,062



5,813



5,681


















Total benefits and expenses



922,697



818,954



2,634,883



2,418,814


















Income before taxes



33,567



19,856



68,535



115,730
















Income tax expense



9,989



5,910



27,520



36,075
















Net income






23,578



13,946



41,015



79,655

















Net (loss) attributable to the non-controlling interest



(3)



(2)



(20)



(10)
















Net income attributable to Triple-S Management Corporation


$

23,581


$

13,948


$

41,035


$

79,665




















Earnings per share attributable to Triple-S Management Corporation:
































Basic net income per share


$

1.02


$

0.59


$

1.77


$

3.44


Diluted net income per share


$

1.02


$

0.58


$

1.76


$

3.43





















Weighted average of common shares



23,073,511



23,830,106



23,215,840



23,143,361


Diluted weighted average of common shares



23,193,980



23,893,807



23,318,069



23,217,298

 

Exhibit III


Condensed Consolidated Statements of Cash Flows

(dollar amounts in thousands)

Unaudited









For the Nine Months Ended








September 30,








2020


2019













Net cash provided by (used in) operating activities


$

223,681


$

(3,455)











Cash flows from investing activities:








Proceeds from investments sold or matured:









Securities available for sale:










Fixed maturities sold



94,557



365,383




Fixed maturities matured/called



37,450



19,017



Securities held to maturity - fixed maturities matured/called



1,079



1,378



Equity investments sold



80,152



126,134



Other invested assets sold



13,231



3,379


Acquisition of investments:









Securities available for sale - fixed maturities



(206,387)



(397,956)



Securities held to maturity - fixed maturities



(1,087)



(748)



Equity investments



(201,324)



(88,945)



Other invested assets 



(25,442)



(24,233)


Increase in other investments



(3,924)



(2,710)


Net change in policy loans



240



(1,097)


Net capital expenditures



(52,549)



(14,746)


Capital contribution on equity method investees



(7,083)



-















Net cash used in investing activities



(271,087)



(15,144)











Cash flows from financing activities:








Change in outstanding checks in excess of bank balances



16,814



3,808


Net change in short-term borrowings



28,500



-


Proceeds of long-term borrowings



30,841



-


Repayments of long-term borrowings



(2,760)



(2,425)


Repurchase and retirement of common stock



(14,980)



(1)


Proceeds from policyholder deposits



21,586



15,060


Surrender of policyholder deposits



(12,829)



(16,455)















Net cash provided by (used in) financing activities



67,172



(13)















Net increase (decrease) in cash and cash equivalents



19,766



(18,612)













Cash and cash equivalents, beginning of period



109,837



117,544











Cash and cash equivalents, end of period


$

129,603


$

98,932

 

Exhibit IV


Segment Performance Supplemental Information


(Unaudited)


Three months ended September 30,


Nine months ended September 30,

(dollar amounts in millions)

2020

2019

Percentage
Change


2020

2019

Percentage
Change

Premiums earned, net:









Managed Care:










Commercial

$      208.4

$      203.1

2.6%


$      605.3

$      602.4

0.5%



Medicare

400.7

367.1

9.2%


1,160.9

1,065.7

8.9%



Medicaid

240.9

176.3

36.6%


682.9

577.7

18.2%




Total Managed Care

850.0

746.5

13.9%


2,449.1

2,245.8

9.1%


Life Insurance

50.1

45.8

9.4%


144.9

135.1

7.3%


Property and Casualty

23.9

23.7

0.8%


66.9

64.9

3.1%


Other



(1.0)

(1.0)

0.0%


(3.5)

(3.3)

(6.1%)





Consolidated premiums earned, net

$      923.0

$      815.0

13.3%


$   2,657.4

$   2,442.5

8.8%

Operating revenues: 1









Managed Care

$      858.2

$      755.8

13.5%


$   2,473.7

$   2,273.7

8.8%


Life Insurance

57.0

52.5

8.6%


165.5

155.1

6.7%


Property and Casualty

26.1

26.2

(0.4%)


73.5

72.3

1.7%


Other



1.6

1.4

14.3%


2.1

1.0

110.0%





Consolidated operating revenues

$      942.9

$      835.9

12.8%


$   2,714.8

$   2,502.1

8.5%

Operating income (loss): 2









Managed Care

$        13.0

$         5.4

140.7%


$        56.5

$        56.8

(0.5%)


Life Insurance

5.7

6.6

(13.6%)


20.2

17.5

15.4%


Property and Casualty

4.4

6.6

(33.3%)


10.9

14.9

(26.8%)


Other



(0.8)

0.4

(300.0%)


(1.9)

(0.2)

(850.0%)





Consolidated operating income

$        22.3

$        19.0

17.4%


$        85.7

$        89.0

(3.7%)

Operating margin: 3









Managed Care

1.5%

0.7%

80 bp


2.3%

2.5%

-20 bp


Life Insurance

10.0%

12.6%

-260 bp


12.2%

11.3%

90 bp


Property and Casualty

16.9%

25.2%

-830 bp


14.8%

20.6%

-580 bp


Consolidated

2.4%

2.3%

10 bp


3.2%

3.6%

-40 bp

Depreciation and amortization expense

$         3.1

$         3.7

(16.2%)


$        10.9

$        10.7

1.9%


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
September 30,


Nine months ended
September 30,

(Unaudited)


2020

2019


2020

2019

Member months enrollment:







Commercial:








Fully-insured

966,906

964,321


2,920,460

2,872,836



Self-insured

324,372

356,059


981,634

1,072,510




Total Commercial

1,291,278

1,320,380


3,902,094

3,945,346


Medicare Advantage




407,170

386,995


1,220,280

1,156,438


Medicaid


1,132,626

1,065,885


3,278,098

3,187,753





Total member months

2,831,074

2,773,260


8,400,472

8,289,537

Claim liabilities (in millions)




$            420.6

$            390.3

Days claim payable




57

56

Premium PMPM:







Managed Care

$       339.09

$      308.83


$          330.12

$          311.18



Commercial

215.53

210.61


207.26

209.69



Medicare Advantage

984.11

948.59


951.34

921.54



Medicaid 

212.69

165.40


208.32

181.22

Medical loss ratio:

84.7%

86.4%


82.7%

84.9%


Commercial

81.9%

84.7%


76.1%

82.8%


Medicare Advantage

80.6%

81.1%


80.2%

81.4%


Medicaid 


94.0%

99.6%


92.7%

93.4%

Adjusted medical loss ratio: 1

82.1%

89.4%


81.3%

86.5%


Commercial

78.3%

88.5%


74.9%

85.1%


Medicare Advantage

78.4%

81.6%


78.9%

80.9%


Medicaid 


91.7%

104.9%


91.0%

97.2%

Operating expense ratio:







Consolidated

17.1%

16.7%


18.7%

16.5%


Managed Care

14.6%

14.0%


15.9%

13.8%


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


Managed Care Membership by Segment

As of September 30,


2020

2019

Members:



     Commercial:



          Fully-insured

321,673

322,992

          Self-insured

107,830

119,077

               Total Commercial

429,503

442,069

     Medicare Advantage

136,135

128,660

     Medicaid

385,344

354,230

                    Total members

950,982

924,959

 

Exhibit V


Reconciliation of Non-GAAP Financial Measures



Adjusted Net Income

(Unaudited)


Three months ended
September 30,

Nine months ended 
September 30,

(dollar amounts in millions, except per share data)

2020

2019


2020

2019

Net income


$         23.6

$         13.9


$       41.0

$       79.7

Less adjustments, net of taxes:







Net realized investment gains (losses)

0.4

0.9


(0.1)

3.8


Unrealized gains (losses) on equity investments

8.8

1.0


(13.9)

19.4


Contingency accrual

-

-


(20.0)

-


Private equity investment income (loss)

0.2

(0.1)


2.4

1.0



Adjusted net income

$         14.2

$         12.1


$       72.6

$       55.6



Diluted adjusted net income per share

$         0.61

$         0.51


$       3.12

$       2.39

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-third-quarter-2020-results-301167673.html

SOURCE Triple-S Management Corporation

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