2014

Triple-S Management Corporation Reports First Quarter 2012 Results

SAN JUAN, Puerto Rico, May 2, 2012 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), one of the leading managed care companies in Puerto Rico, today announced consolidated revenues of $589.8 million and operating income of $8.9 million for the three months ended March 31, 2012.  Net income was $7.5 million, or $0.26 per diluted share.

First-Quarter Consolidated Highlights

  • Total consolidated operating revenues were $587.0 million;
  • Operating income was $8.9 million;
  • Consolidated loss ratio was 86.9%;
  • Medical loss ratio (MLR) was 90.5%;
  • Managed Care member month enrollment increased 107.1%;
  • Medicare member month enrollment increased 30.1%.

Ramon M. Ruiz-Comas, President and Chief Executive Officer of Triple-S Management Corporation, commented on the period's results, "Although revenues and membership exceeded our internal forecast and the Commercial MLR, Medicaid ASO contract, and operating expenses met our expectations, we experienced disappointing results in our American Health business."

Mr. Ruiz-Comas continued, "Specifically, our Medicare Advantage medical loss ratio was adversely impacted by lower-than-expected premiums and increased utilization, mostly in pharmacy, at American Health. Additionally, our Property and Casualty Insurance segment incurred unusually high claims, resulting from several large auto liability incidents."

"Although the first quarter is our seasonally weakest, the negative impact of American Health's performance in the quarter and our current expectation of continuing weakness in that division have resulted in our decision to lower our 2012 guidance. We plan to re-negotiate contracts with American Health's PBM and other providers. In addition, we have created a cross divisional task force within our Managed Care segment to re-evaluate and analyze our product designs at American Health for the 2013 bidding process. We are optimistic that our other businesses will remain on track. Furthermore, we will continue to pursue a variety of initiatives aimed at managing both medical and operating costs," concluded Mr. Ruiz-Comas.

Selected Quarterly Details

  • Pro Forma Net Income was $6.1 million, or $0.21 Per Diluted Share.  Weighted average shares outstanding were 28.5 million.  This compares with pro forma net income of $12.9 million, or $0.44 per diluted share, in the corresponding quarter of 2011, based on weighted average shares outstanding of 29.0 million.
  • Consolidated Premiums Increased 12.8%, to $547.3 MillionThe increase was principally due to the higher member month enrollment in the Medicare and Commercial businesses in our Managed Care segment.
  • Consolidated Administrative Service Fees Rose 316.7%, to $27.5 Million.  The significant increase in service fees was driven by the addition of the miSalud business, effective November 1, 2011.
  • Managed Care Membership.  Our Managed Care membership grew by 106.9% year over year, reflecting the addition of the miSalud business, in which self-insured membership was 876,230 at the end of the quarter. Medicare membership increased 15.6%, to 120,007.  Fully insured Commercial membership was 488,632, down 2.1% from the same period last year.
  • Managed Care MLR Increased 320 Basis Points, to 90.5%.  The increased MLR results from higher-than-expected utilization and cost trends in the Medicare business, primarily at American Health.
  • Consolidated Loss Ratio Increased 390 Basis Points, to 86.9%.  The higher consolidated loss ratio mainly results from the 320-basis-point increase in the Managed Care MLR. The loss ratio of the Property and Casualty and Life Insurance segments also experienced year-over-year increases.
  • Consolidated Operating Expense Ratio Rose 100 Basis Points, to 17.8%.  The higher consolidated operating expense ratio reflects the increased self-insured contracts associated with our participation in the miSalud business.
  • Consolidated Operating Income Decreased 51.6%, to $8.9 Million.   The decline mostly reflects the increased MLR in the Medicare business and unusually high claims resulting from several auto liability incidents in the Property and Casualty Insurance segment.
  • Consolidated Operating Income Margin Was 1.5%.  The consolidated operating margin declined by 220 basis points year-over-year, primarily due to lower profitability in our Managed Care and Property and Casualty Insurance segments.
  • Consolidated Effective Tax Rate Was 17.6%.  The consolidated income tax expense decreased by $8.0 million, or 83.3%, mostly because the 2011 tax expense included a one-time, $6.4 million charge, resulting from a reduction of the net deferred tax assets following the enactment of the new Puerto Rico tax reform. Effective January 2011, this legislation reduced the maximum corporate income tax rate from 39% to approximately 30%. Also contributing to the lower effective tax rate in the first quarter of 2012 is a reduction in the Managed Care segment's taxable income, which operates at a higher effective rate.
  • Parent Company Information.  As of March 31, 2012, Triple-S Management had $48.5 million in parent company cash, cash equivalents, and investments.

  







Pro Forma Net
Income

(Unaudited)


Three months
ended March 31,

(dollar amounts in millions)


2012

2011

Net income


$  7.5

$10.4

Less pro forma adjustments:




   Net realized investment gains, net of tax


1.4

5.0

   Net unrealized trading investments,net of tax


-

(1.0)

   Derivative loss, net of tax


-

(0.1)

   Charge related to change in enacted tax rate


-

(6.4)

      Pro forma net income


$  6.1

$12.9

      Diluted pro forma net income per share


$0.21

$0.44





 

Segment Performance

Triple-S Management operates in three segments: 1) Managed Care, 2) Life Insurance, and 3) Property and Casualty Insurance.  Management evaluates performance based primarily on the operating revenues and operating income of each segment.  Operating revenues include premiums earned, net administrative service fees and net investment income.  Operating costs include claims incurred and operating expenses.  The Company calculates operating income or loss as operating revenues minus operating expenses.  Operating margin is defined as operating income or loss divided by operating revenues.

  

















(Unaudited)


Three months ended March 31,


(dollar amounts in millions)


2012

2011

Percentage
Change








Premiums earned, net:






   Managed Care:






      Commercial


$241.6

$236.4

2.2%


      Medicare


254.2

194.1

31.0%


      Medicaid


-

2.8

(100.0%)


         Total Managed Care


495.8

433.3

14.4%


   Life Insurance


30.0

27.0

11.1%


   Property and Casualty


22.2

25.7

(13.6%)


   Other


(0.7)

(0.7)

0.0%


            Consolidated premiums earned, net


$547.3

$485.3

12.8%








Operating revenues:






   Managed Care


$528.4

$445.1

18.7%


   Life Insurance


34.9

31.4

11.1%


   Property and Casualty


24.4

27.9

(12.5%)


   Other


(0.7)

(0.7)

0.0%


            Consolidated operating revenues


$587.0

$503.7

16.5%








Operating income:






   Managed Care


$    7.4

$  12.4

(40.3%)


   Life Insurance


4.4

4.2

4.8%


   Property and Casualty


(1.4)

1.0

(240.0%)


   Other


(1.5)

0.8

(287.5%)


            Consolidated operating income


$    8.9

$  18.4

(51.6%)








Operating margin:






   Managed Care


1.4%

2.8%

-140 bp


   Life Insurance


12.6%

13.4%

-80 bp


   Property and Casualty


(5.7%)

3.6%

-930 bp


   Consolidated


1.5%

3.7%

-220 bp








Depreciation and amortization expense


$    5.9

$    5.2

13.5%








  

  




Managed Care Additional Data


Three months ended
March 31,


(Unaudited)


2012

2011







Member months enrollment:





   Commercial:





      Fully-insured


1,467,148

1,463,381


      Self-insured


659,500

724,159


         Total Commercial


2,126,648

2,187,540







   Medicare:





      Medicare Advantage


329,944

246,468


      Stand-alone PDP


25,271

26,567


         Total Medicare


355,215

273,035







   Medicaid:





      Fully-insured


-

-


      Self-insured


2,612,958

-


         Total Medicaid


2,612,958

-


            Total member months


5,094,821

2,460,575







Claim liabilities (in millions)


$     275.2

$     262.2


Days claim payable


55.8

58.2







Premium PMPM:





   Managed Care


$   272.08

$   249.53


      Commercial


164.90

161.56


      Medicare


715.66

710.97







Medical loss ratio


90.5%

87.3%


   Commercial


89.5%

90.6%


   Medicare Advantage


91.0%

86.8%


   Stand-alone PDP


92.5%

86.8%







Adjusted medical loss ratio


89.8%

87.3%


   Commercial


87.1%

86.5%


   Medicare Advantage


92.5%

88.3%


   Stand-alone PDP


90.3%

89.9%







Operating expense ratio:





   Consolidated


17.8%

16.8%


   Managed Care


13.8%

12.3%


* Information provided as of December 31, 2011.










  





Managed Care Membership by Segment


As of March 31,




2012

2011







Members:





   Commercial:





      Fully-insured


488,632

498,909


      Self-insured


219,136

221,073


         Total Commercial


707,768

719,982


Medicare:





      Medicare Advantage


111,531

94,884


      Stand-alone PDP


8,476

8,910


         Total Medicare


120,007

103,794


Medicaid -Self-insured


876,230

-


            Total members


1,704,005

823,776







 

2012 Guidance

Mr. Ruiz-Comas stated, "Due to the lackluster performance in the quarter and challenges we face with American Health, including our revised projections for this subsidiary for the remainder of the year, we are changing our full-year guidance. We are increasing our MLR and Consolidated Loss Ratio to 88.8% – 89.8% and 85.0% - 86.0%, respectively, and reducing our earnings per share to $1.80 to $1.85."

 


2012 Range

Medical enrollment fully-insured


  (member months)                              

7.2-7.4 million



Medical enrollment self-insured


  (member months)                               

12.7-13.0 million



Consolidated operating revenues


  (in billions)                                          

$2.3-$2.4



Consolidated loss ratio                            

85.0%-86.0%



Medical loss ratio                                     

88.8%-89.8%



Consolidated operating expense ratio              

17.2%-18.2%



Consolidated operating income (in millions)       

$67.0-$77.0



Consolidated effective tax rate                           

25%-26%



Pro forma earnings per share                              

$1.80-$1.85



Weighted average of diluted shares


  outstanding (in millions)                                     

28.5





 

Conference Call and Webcast

Management will host a conference call and webcast on May 2, 2012 at 10:00 a.m., Eastern Time to discuss its financial results for the three months ended March 31, 2012.  To participate, callers within the U.S. and Canada should dial 1-877-941-0844, and international callers should dial 1-480-629-9835 about five minutes before the presentation. 

To listen to the webcast, participants should visit the "Investor Relations" section of the Company's Web site 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 Web site, 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 Web site.

About Triple-S Management Corporation

Triple-S Management Corporation is an independent licensee of the Blue Cross Blue Shield Association.  It is the leading player in the managed care industry in Puerto Rico.  Triple-S Management also has the exclusive right to use the Blue Cross Blue Shield name and mark throughout Puerto Rico and the U.S. Virgin Islands.  With more than 50 years of experience in the industry, Triple-S Management offers a broad portfolio of managed care and related products in the Commercial and Medicare Advantage markets under the Blue Cross Blue Shield brand through its subsidiary Triple-S Salud, Inc. and effective February 2011, also offers non-branded Medicare products through American Health Inc.  In addition to its managed care business, Triple-S Management 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 kwaller@allwayscommunicate.com.

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
  • 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.

 

-FINANCIAL TABLES ATTACHED-



Condensed Consolidated Balance Sheets

(Dollar amounts in thousands, except per share data)

















Unaudited
March 31,
2012


 

December 31,
2011

Assets














Investments


$

1,194,531


$

1,153,293

Cash and cash equivalents



135,561



71,834

Premium and other receivables, net



307,463



287,184

Deferred policy acquisition costs and value of business acquired



158,166



155,788

Property and equipment, net



97,924



81,872

Other assets



135,937



130,606






 

      Total assets


$

2,029,582


$

1,880,577













Liabilities and Stockholders' Equity














Policy liabilities and accruals


$

928,741


$

836,029

Accounts payable and accrued liabilities



272,432



253,202

Long-term borrowings



127,736



114,387






 

      Total liabilities



1,328,909



1,203,618






Stockholders' equity:







 

   Common stock



28,433



28,365

 

   Other stockholders equity



671,882



648,594






 

      Total Triple-S Management Corporation stockholders' equity



700,315



676,959








Noncontrolling interest in consolidated subsididary



358



-








Total stockholders' equity



700,673



676,959








Total liabilities and stockholders' equity


$

2,029,582


$

1,880,577


 

Condensed Consolidated Statements of Earnings

(Dollar amounts in thousands, except per share data)










For the Three Months Ended




March 31,




Unaudited
2012



Historical
2011


Revenues:








   Premiums earned, net


$

547,304


$

485,271


   Administrative service fees



27,524



6,595


   Net investment income



11,192



11,798


   Other operating revenues



1,047



-









      Total operating revenues



587,067



503,664










   Net realized investment gains



1,678



5,893

   Net unrealized investment loss on trading securities



-



(1,141)

   Other income (expense), net



1,070



14








      Total revenues



589,815



508,430
















Benefits and expenses:







   Claims incurred



475,644



402,573

   Operating expenses



102,506



82,711








      Total operating costs



578,150



485,284









   Interest expense



2,558



3,127








      Total benefits and expenses



580,708



488,411








      Income before taxes



9,107



20,019








Income tax expense



1,607



9,649








Net income


$

7,500


$

10,370









   Less: Net loss attributable to the noncontrolling interest



14



-










Net income attributable to Triple-S Management Corporation


$

7,514


$

10,370










Basic net income per share


$

0.27


$

0.36









Diluted earnings per share


$

0.26


$

0.36








 

Condensed Consolidated Statements of Cash Flows

(Dollar amounts in thousands, except per share data)
































For the Three Months Ended








March 31,








Unaudited
2012


Historical
2011













Net cash provided by operating activities


$

74,161


$

101,387











Cash flows from investing activities:







   Proceeds from investments sold or matured:







      Securities available for sale:







         Fixed maturities sold



29,843



14,986

         Fixed maturities matured/called



35,482



33,964

         Equity securities



22,649



9,458

      Securities held to maturity:







         Fixed maturities matured/called



300



181

   Acquisition of investments:







      Securities available for sale:







         Fixed maturities



(62,487)



(32,224)

         Equity securities



(40,652)



(29,134)

      Securities held to maturity:







         Fixed maturities



(300)



-

   Net inflows / (outflows) for policy loans



69



(11)

   Acquisition of business, net of cash acquired of $816 and $29,370 in the






      three months ended March 31, 2012 and 2011, respectively



(2,685)



(54,058)

   Net capital expenditures



(2,783)



(3,977)











            Net cash used in investing activities



(20,564)



(60,815)











Cash flows from financing activities:







   Change in outstanding checks in excess of bank balances



5,539



3,454

   Payments of short-term borrowings, net



-



(15,575)

   Repayments of long-term borrowings



(490)



(410)

   Repurchase and retirement of common stock



-



(1,557)

   Proceeds from policyholder deposits



6,492



1,824

   Cash settlements of stock options



-



(1,259)

   Proceeds from exercise of stock options



316



94

   Surrenders of policyholder deposits



(1,727)



(1,776)











            Net cash used in financing activities



10,130



(15,205)











            Net increase in cash and cash equivalents



63,727



25,367













Cash and cash equivalents, beginning of period



71,834



45,021











Cash and cash equivalents, end of period


$

135,561


$

70,388

SOURCE Triple-S Management Corporation



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