2014

Triple-S Management Corporation Reports Results for First Quarter 2013

SAN JUAN, Puerto Rico, May 1, 2013 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), the leading managed care company in Puerto Rico, today announced consolidated revenues of $592.0 million and consolidated operating income of $22.7 million for the three months ended March 31, 2013.  Net income was $17.2 million, or $0.61 per diluted share.

First Quarter Consolidated Highlights

  • Total consolidated operating revenues were $589.6 million;
  • Consolidated operating income was $22.7 million;
  • Consolidated loss ratio was 82.2%;
  • Medical loss ratio (MLR) was 85.7%;
  • Managed Care member month enrollment decreased 0.7%;
  • Medicare member month enrollment decreased 2.4%.

Commenting on the period's results, Ramon M. Ruiz-Comas, President and Chief Executive Officer of Triple-S Management Corporation, said, "We are pleased with our overall performance, and more specifically, that the measures implemented last year in the Medicare Advantage (MA) business are beginning to have a positive impact in the first quarter of 2013. Of particular note is the substantial improvement in the Managed Care MLR, which fell by 480 basis points year over year, and with reductions in the three segments, Commercial, MA and stand-alone PDP."

Ruiz-Comas continued, "While we generated better-than-anticipated earnings in the period, as we are only one quarter into the year, we have elected to maintain our full-year guidance. We believe that this posture is prudent until we have additional data further into 2013 on utilization and other trends in our MA and commercial businesses, and feel confident that the improvement in overall performance is sustainable. Moreover, with Easter coming early this year, it is possible that we could see some member utilization shift into the second quarter since doctor visits and procedures are often postponed during holiday periods."  

Selected Quarterly Details

  • Pro Forma Net Income was $15.6 million, or $0.55 Per Diluted Share.  Weighted average shares outstanding were 28.4 million.  This compares with pro forma net income of $6.1 million, or $0.21 per diluted share, in the corresponding quarter of 2012, based on weighted average shares outstanding of 28.5 million.
  • Consolidated Premiums Increased 0.5%, to $550.0 MillionThe increase was principally due to increased sales in the Life Insurance segment and an increase in earned premiums in the Property and Casualty segment, partially offset by lower Managed Care premiums.  The decrease in Managed Care premiums results from lower Commercial and Medicare member month enrollment.
  • Managed Care Membership.  Our Managed Care membership decreased by 1.7% year over year, reflecting lower enrollment across all sectors.  Medicare membership decreased 5.2% year over year, to 113,821.  Fully-insured Commercial membership and Medicaid ASO enrollment decreased 4.8% and 0.2% year over year, respectively. 
  • Managed Care MLR Decreased 480 Basis Points, to 85.7%.  The decreased MLR reflects lower utilization and cost trends across all sectors.  At 83.1%, the Medicare MLR reflects an improvement of 790 basis points, resulting from lower cost and utilization trends and favorable prior-period reserve developments.  The 100-basis-point improvement in the Commercial MLR is due to favorable prior-period reserve developments.
  • Consolidated Loss Ratio Decreased 470 Basis Points, to 82.2%.  The lower consolidated loss ratio mainly reflects the 480-basis-point improvement in the Managed Care MLR.  The Property and Casualty loss ratio improved by 670-basis- points, while the loss ratio of the Life Insurance segment experienced a 350-basis-point increase.
  • Consolidated Operating Expense Ratio Rose 210 Basis Points, to 19.9%.  The higher consolidated operating expense ratio is mostly due to special technology initiatives and expenses related to the reorganization of the Medicare business.
  • Consolidated Operating Income Increased 155.1%, to $22.7 Million.  The increase primarily reflects the effect of the decreased MLR in the Managed Care segment.
  • Consolidated Operating Income Margin Was 3.9%.  The 230-basis-point improvement in the consolidated operating margin is primarily the result of the increased profitability in our Managed Care and Property and Casualty Insurance segments.
  • Consolidated Effective Tax Rate Was 24.2%.  The higher effective tax rate reflects the increase in taxable income in the Managed Care segment, which operates at a higher effective tax rate.  The consolidated income tax expense increased by $3.9 million, or 243.8%, during this quarter.






Pro Forma Net Income

(Unaudited)

Three months ended March 31,

(dollar amounts in millions)

2013

2012

Net income


$17.2

$7.5

Less pro forma adjustment:




Net realized investment gains, net of tax

1.6

1.4



Pro forma net income

$15.6

$6.1



Diluted pro forma net income per share

$0.55

$0.21

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)

2013

2012

Percentage
Change

Premiums earned, net:





Managed Care:






Commercial

$233.6

$241.6

(3.3%)



Medicare

260.3

254.2

2.4%



Total Managed Care

493.9

495.8

(0.4%)


Life Insurance

31.8

30.0

6.0%


Property and Casualty

24.9

22.2

12.2%


Other



(0.6)

(0.7)

14.3%





Consolidated premiums earned, net

$550.0

$547.3

0.5%

Operating revenues:





Managed Care

$525.9

$528.4

(0.5%)


Life Insurance

37.1

34.9

6.3%


Property and Casualty

26.9

24.4

10.2%


Other



(0.3)

(0.7)

57.1%





Consolidated operating revenues

$589.6

$587.0

0.4%

Operating income:





Managed Care

$  20.5

$    7.4

177.0%


Life Insurance

4.0

4.4

(9.1%)


Property and Casualty

0.4

(1.4)

128.6%


Other



(2.2)

(1.5)

(46.7%)





Consolidated operating income

$  22.7

$    8.9

155.1%

Operating margin:





Managed Care

3.9%

1.4%

250 bp


Life Insurance

10.8%

12.6%

-180 bp


Property and Casualty

1.5%

(5.7%)

720 bp


Consolidated

3.9%

1.5%

240 bp

Depreciation and amortization expense

$    6.3

$    5.9

6.8%

 








Managed Care Additional Data

Three months ended March 31,


(Unaudited)

2013

2012


Member months enrollment:





Commercial:





   Fully-insured

1,395,023

1,467,148



   Self-insured

667,176

659,500



     Total Commercial

2,062,199

2,126,648



Medicare:





   Medicare Advantage

322,758

329,944



   Stand-alone PDP

24,073

25,271



     Total Medicare

346,831

355,215



Medicaid -Self-insured

2,650,618

2,612,958



     Total member months

5,059,648

5,094,821


Claim liabilities (in millions)

$      282.0

$      284.8

 * 

Days claim payable

60.0

57.7

 * 

Premium PMPM:





Managed Care

$     283.55

$     272.08



 Commercial

167.45

164.90



 Medicare

750.51

715.66


Medical loss ratio

85.7%

90.5%



Commercial

88.4%

89.8%



Medicare Advantage

83.1%

91.0%



Stand-alone PDP

87.9%

92.5%


Adjusted medical loss ratio

87.2%

88.7%



Commercial

89.4%

89.0%



Medicare Advantage

85.0%

88.3%



Stand-alone PDP

87.4%

87.6%


Operating expense ratio:





Consolidated

19.9%

17.8%



Managed Care

15.8%

13.8%


* Information provided as of December 31, 2012.




 


















Managed Care Membership by Segment

As of March 31,








2013

2012


Members:






Commercial:





  Fully-insured

465,365

488,632



  Self-insured

221,341

219,136



    Total Commercial

686,706

707,768



Medicare:





  Medicare Advantage

105,691

111,531



  Stand-alone PDP

8,130

8,476



    Total Medicare

113,821

120,007



Medicaid -Self-insured

874,169

876,230



            Total members

1,674,696

1,704,005


 2013 Guidance

Triple-S Management reiterates its 2013 outlook, which is detailed below.




2013 Range

Medical enrollment fully-insured


  (member months)                          

6.9 - 7.3 million



Medical enrollment self-insured


  (member months)                        

13.0 - 13.3 million



Consolidated operating revenues


  (in billions)                                        

$2.35 - $2.45



Consolidated loss ratio                      

83.5% - 84.5%



Medical loss ratio                              

87.2% - 88.2%



Consolidated operating expense ratio          

18.5% - 18.9%



Consolidated operating income (in millions)    

$73.5 - $83.5



Pro forma earnings per share                    

$1.90 - $2.00



Weighted average of diluted shares


  outstanding (in millions)                     

28.4



Effective tax rate                       

19.5% - 20.5%

Conference Call and Webcast

Management will host a conference call and webcast on May 1, 2013 at 8:00 a.m., Eastern Time to discuss its financial results for the three months ended March 31, 2013.  To participate, callers within the U.S. and Canada should dial 1-877-941-8631, and international callers should dial 1-480-629-9643 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 marks.  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
  • Ability to maintain Federal Employer, 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.

-FINANCIAL TABLES ATTACHED-

 

Condensed Consolidated Balance Sheets

(Dollar amounts in thousands, except per share data)












































Unaudited
March 31,
2013


December 31,
2012

Assets



















Investments


$

1,341,174


$

1,280,644

Cash and cash equivalents



62,595



89,564

Premium and other receivables, net



292,003



292,197

Deferred policy acquisition costs and value of business acquired



167,783



168,657

Property and equipment, net



94,781



92,423

Other assets



129,994



135,859











Total assets


$

2,088,330


$

2,059,344























Liabilities and Stockholders' Equity



















Policy liabilities and accruals


$

915,910


$

922,393

Accounts payable and accrued liabilities



275,322



243,533

Short-term borrowings



8,500



30,000

Long-term borrowings



100,778



101,271











Total liabilities



1,300,510



1,297,197











Stockholders' equity:








Common stock



28,442



28,365


Other stockholders' equity



759,193



733,542











Total Triple-S Management Corporation stockholders' equity



787,635



761,907













Non-controlling interest in consolidated subsididary



185



240













Total stockholders' equity



787,820



762,147













Total liabilities and stockholders' equity


$

2,088,330


$

2,059,344











 

Condensed Consolidated Statements of Earnings

(Dollar amounts in thousands, except per share data)


































 

 

For the Three Months Ended









March 31,









Unaudited
2013


Unaudited
2012


Revenues:









Premiums earned, net


$

549,961


$

547,304



Administrative service fees



27,110



27,524



Net investment income



11,367



11,192



Other operating revenues



1,187



1,047














 

Total operating revenues



589,625



587,067
















Net realized investment gains



1,888



1,678



Other income, net



481



1,070














 

Total revenues



591,994



589,815


























Benefits and expenses:









Claims incurred



452,000



475,644



Operating expenses



114,865



102,506














 

Total operating costs



566,865



578,150
















Interest expense



2,384



2,558














 

Total benefits and expenses



569,249



580,708














 

Income before taxes



22,745



9,107













Income tax expense



5,562



1,607













Net income







17,183



7,500














Less: Net loss attributable to the non-controlling interest


55



14













Net income attributable to TSM



$

17,238


$

7,514















Earnings per share attributable to TSM:





















Basic net income per share


$

0.61


$

0.27


Diluted earnings per share


$

0.61


$

0.26


 

 

 

Condensed Consolidated Statements of Cash Flows

(Dollar amounts in thousands, except per share data)
































For the Three Months Ended








March 31,








Unaudited
2013


Unaudited
2012













Net cash provided by operating activities


$

31,165


$

74,161











Cash flows from investing activities:








Proceeds from investments sold or matured:









Securities available for sale:









  Fixed maturities sold



15,904



29,843



  Fixed maturities matured/called



29,775



35,482



  Equity securities sold



9,246



22,649



Securities held to maturity:









  Fixed maturities matured/called



-



300


Acquisition of investments:









Securities available for sale:









  Fixed maturities



(31,023)



(62,487)



  Equity securities



(76,095)



(40,652)



Securities held to maturity:









  Fixed maturities



-



(300)



Other investments



(106)



-


Net inflows (outflows) from policy loans



(97)



69


Acquisition of business, net of cash acquired of $816 in the

three months ended March 31, 2012










-



(2,685)


Net capital expenditures



(6,130)



(2,783)













Net cash used in investing activities



(58,526)



(20,564)











Cash flows from financing activities:








Change in outstanding checks in excess of bank balances



20,521



5,539


Net change in short-term borrowings



(21,500)



-


Repayments of long-term borrowings



(493)



(490)


Proceeds from exercise of stock options



-



316


Proceeds from policyholder deposits



3,020



6,492


Surrenders of policyholder deposits



(1,156)



(1,727)













Net cash provided by financing activities



392



10,130













Net (decrease) increase in cash and cash equivalents



(26,969)



63,727













Cash and cash equivalents, beginning of period



89,564



71,834











Cash and cash equivalents, end of period


$

62,595


$

135,561

 

SOURCE Triple-S Management Corporation



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