Triple-S Management Corporation Reports Results for Fourth Quarter and 2012

SAN JUAN, Puerto Rico, Feb. 6, 2013 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), the leading managed care company in Puerto Rico, today announced consolidated revenues of $603.0 million and consolidated operating income of $21.0 million for the three months ended December 31, 2012.  Net income was $17.8 million, or $0.63 per diluted share.

Fourth Quarter Consolidated Highlights

  • Total consolidated operating revenues were $599.3 million;
  • Consolidated operating income was $21.0 million;
  • Consolidated loss ratio was 82.9%;
  • Medical loss ratio (MLR) was 86.5%;
  • Managed Care member month enrollment increased 23.4%;
  • Medicare member month enrollment rose 9.8%.

Commenting on full-year results, Ramon M. Ruiz-Comas, President and Chief Executive Officer of Triple-S Management Corporation, said, "Overall, revenue, premiums, service fees, and membership levels met our expectations in 2012, and most of our businesses were within plan. However, we faced strong competition in our Medicare Advantage segment and higher-than-expected medical and pharmacy costs adversely affected results at our American Health (AH) subsidiary."

Mr. Ruiz-Comas added, "As a result, we implemented a number of corrective actions in 2012 to improve this division's performance. Our new PBM contract with Abarca Health, which took effect January 1, 2013, should enable us to better control these costs throughout the year. Additionally, for the 2013 benefits year, our Medicare Advantage products were redesigned for improved profitability, while considering consumer needs and market trends.  Key initiatives already underway, which should create greater efficiencies, include consolidating our Medicare Advantage leadership and streamlining operations to enhance service and quality of care. We will also strive to build upon the improvement we had last year in our Star ratings."

Ruiz-Comas concluded, "We have tremendous brand recognition, a diverse product portfolio, and the financial wherewithal to grow our business in the future. We are working diligently to turn around American Health in 2013 and possess a dedicated team of professionals to execute our strategy. Our 2013 guidance incorporates MLR improvement in the MA and Commercial segments and pharmacy savings in MA."

Selected Quarterly Details

  • Pro Forma Net Income was $15.2 million, or $0.53 Per Diluted Share.  Weighted average shares outstanding were 28.4 million.  This compares with pro forma net income of $18.9 million, or $0.66 per diluted share, in the corresponding quarter of 2011, based on weighted average shares outstanding of 28.5 million.
  • Consolidated Premiums Increased 4.5%, to $558.2 MillionThe increase was principally due to higher member month enrollment in the Medicare business, as well as increased sales in the Life insurance segment.
  • Consolidated Administrative Service Fees Rose 40.1%, to $27.6 Million.  The increase in service fees results from the inclusion of the Medicaid ASO business for the full quarter in 2012 and for only two months in 2011.  The Medicaid ASO agreement became effective November 1, 2011.
  • Managed Care Membership.  Our Managed Care membership grew by 2.2% year over year, reflecting higher enrollment in the Medicaid ASO and Medicare Advantage businesses.  Medicaid ASO enrollment increased 4.3% year over year, to 895,301, and Medicare membership rose 8.2% year over year, to 122,741.  Fully-insured Commercial membership was down 0.8% from the same period last year.
  • Managed Care MLR Increased 60 Basis Points, to 86.5%.  The higher MLR reflects higher utilization and cost trends across all sectors offset in part by the effect of prior period reserve developments and certain out-of-period adjustments.  The adjusted Managed Care MLR is 130 basis points higher than last year.  The increase in adjusted MLR reflects a 120-basis-point jump in the Commercial adjusted MLR due to higher utilization trends and continued pricing pressure, combined with a 130-basis-point increase in the Medicare adjusted MLR, primarily due to the higher utilization and cost trends, particularly in pharmacy benefits of AH's offerings.
  • Consolidated Loss Ratio Decreased 10 Basis Points, to 82.9%.  The lower consolidated loss ratio mainly reflects a more than 300-basis-point loss ratio improvement in each of the Life and Property and Casualty Insurance segments, partially offset by the 60-basis-point increase in the Managed Care MLR.
  • Consolidated Operating Expense Ratio Rose 260 Basis Points, to 19.8%.  The higher consolidated operating expense ratio is mostly due to the increase in self-insured contracts associated with our participation in the Medicaid ASO business, as well as expenses related to the reorganization of Medicare operations.
  • Consolidated Operating Income Decreased 21.3%, to $21.0 Million.  The decrease primarily reflects the effect of the increased MLR in the Managed Care segment.
  • Consolidated Operating Income Margin Was 3.5%.  The 120-basis-point decrease in the consolidated operating margin is primarily the result of the lower profitability in our Managed Care and Life Insurance segments.
  • Consolidated Effective Tax Rate Was 20.6%.  The lower effective tax rate reflects the decrease in taxable income in the Managed Care Insurance segment.  The consolidated income tax expense decreased by $1.4 million, or 23.3%, during this quarter.
  • Parent Company Information.  During this quarter, Triple-S Management bought back 98,800 shares of common stock under its current repurchase program, at an average cost per share of $16.82.

Pro Forma Net Income

(Unaudited)

Three months ended December 31,


Twelve months ended December 31,

(dollar amounts in millions)

2012

2011


2012

2011

Net income

$  17.8

$  19.0


$  54.0

$  58.0

   Less pro forma adjustments:






   Net realized investment gains, net of tax

2.6

0.1


4.4

15.8

   Net unrealized trading investments,net of tax

-

-


-

(6.2)

   Derivative loss, net of tax

-

-


-

(0.7)

   Charge related to change in enacted tax rate

-

-


-

(6.4)

      Pro forma net income

$  15.2

$  18.9


$  49.6

$  55.5

      Diluted pro forma net income per share

$  0.53

$  0.66


$  1.74

$  1.92

Twelve-Month Recap

For the 12 months ended December 31, 2012, consolidated operating revenues increased 12.8%, to $2.4 billion, primarily reflecting higher member month enrollment in the Medicare business, the addition of the Medicaid ASO business, and the receipt of higher Medicare risk score adjustments in 2012 when compared with the prior year.  Consolidated claims incurred for the 12-month period were $1.9 billion, up 11.9% year over year.  The 12-month consolidated loss ratio increased 170 basis points to 85.2%, while the MLR rose 160 basis points, to 88.8%.  This increase was driven by higher MA member month enrollment and greater-than-expected utilization and cost trends in the Medicare business, primarily at American Health.  Consolidated operating expenses for the 12 months ended December 31, 2012 were $425.2 million and the operating expense ratio was 18.0%.  Pro forma net income for the 12-month period was $49.6 million, or $1.74 per diluted share, based on weighted average shares outstanding of 28.5 million, compared with $55.5 million, or $1.92 per diluted share, based on weighted average shares outstanding of 28.8 million at the same time last year.

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 December 31,

Year ended December 31,

(dollar amounts in millions)

2012

2011

Percentage Change

2012

2011

Percentage Change

Premiums earned, net:








Managed Care:








   Commercial

$   235.1

$   243.9

(3.6%)

$   960.0

$   947.1

1.4%


   Medicare

265.5

238.2

11.5%

1,073.5

896.6

19.7%


   Medicaid

-

-

0.0%

-

2.7

(100.0%)


     Total Managed Care

500.6

482.1

3.8%

2,033.5

1,846.4

10.1%


Life Insurance

32.2

29.3

9.9%

124.7

113.0

10.4%


Property and Casualty

26.0

23.2

12.1%

97.7

97.6

0.1%


Other

(0.6)

(0.6)

0.0%

(2.5)

(2.5)

0.0%


     Consolidated premiums earned, net

$   558.2

$   534.0

4.5%

$2,253.4

$2,054.5

9.7%

Operating revenues:








Managed Care

$   534.1

$   507.0

5.3%

$2,164.7

$1,906.9

13.5%


Life Insurance

37.7

34.3

9.9%

145.5

131.5

10.6%


Property and Casualty

28.1

25.6

9.8%

106.6

107.1

(0.5%)


Other

(0.6)

(1.5)

(60.0%)

(2.2)

(4.3)

(48.8%)


     Consolidated operating revenues

$   599.3

$   565.4

6.0%

$2,414.6

$2,141.2

12.8%

Operating income:








Managed Care

$    13.7

$    20.3

(32.5%)

$    47.0

$    53.0

(11.3%)


Life Insurance

4.2

4.6

(8.7%)

16.7

17.7

(5.6%)


Property and Casualty

2.7

2.6

3.8%

6.8

4.5

51.1%


Other

0.4

(0.8)

150.0%

(0.9)

2.1

(142.9%)


     Consolidated operating income

$    21.0

$    26.7

(21.3%)

$    69.6

$    77.3

(10.0%)

Operating margin:








Managed Care

2.6%

4.0%

-140 bp

2.2%

2.8%

-60 bp


Life Insurance

11.1%

13.4%

-230 bp

11.5%

13.5%

-200 bp


Property and Casualty

9.6%

10.2%

-60 bp

6.4%

4.2%

220 bp


Consolidated

3.5%

4.7%

-120 bp

2.9%

3.6%

-70 bp

Depreciation and amortization expense

$      6.3

$      5.6

12.5%

$    24.2

$    21.9

10.5%



Managed Care Additional Data

Three months ended

December 31,

Twelve months ended

December 31,

(Unaudited)

2012

2011

2012

2011

Member months enrollment:






Commercial:






    Fully-insured

1,441,749

1,443,224

5,817,009

5,806,053


    Self-insured

674,327

686,066

2,681,962

2,744,431


          Total Commercial

2,116,076

2,129,290

8,498,971

8,550,484


Medicare:






    Medicare Advantage

343,151

309,370

1,354,301

1,132,634


    Stand-alone PDP

25,478

26,339

101,675

105,987


        Total Medicare

368,629

335,709

1,455,976

1,238,621


Medicaid -Self-insured

2,676,176

1,718,888

10,562,571

1,718,888


    Total member months

5,160,881

4,183,887

20,517,518

11,507,993

Claim liabilities (in millions)

$     284.8

$     262.2



Days claim payable

57.7

58.2



Premium PMPM:






Managed Care

$   276.52

$   271.01

$     279.60

$     262.10


   Commercial

163.07

169.00

165.03

163.12


    Medicare


720.24

709.54

737.31

723.87

Medical loss ratio

86.5%

85.9%

88.8%

87.2%


Commercial

86.6%

80.0%

88.6%

85.6%


Medicare Advantage

86.6%

91.9%

88.9%

89.6%


Stand-alone PDP

40.4%

81.5%

74.3%

77.7%

Adjusted medical loss ratio

89.7%

88.4%

88.9%

86.9%


Commercial

89.0%

87.8%

88.0%

86.8%


Medicare Advantage

90.2%

89.0%

89.8%

87.2%


Stand-alone PDP

84.1%

75.6%

81.0%

71.0%

Operating expense ratio:






Consolidated

19.8%

17.2%

18.0%

16.6%


Managed Care

16.5%

14.4%

14.5%

12.9%








Managed Care Membership by Segment

As of December 31,







2012

2011

Members:





Commercial:




    Fully-insured

478,784

482,771


    Self-insured

224,288

228,737



Total Commercial

703,072

711,508


Medicare:




    Medicare Advantage

114,249

104,696


    Stand-alone PDP

8,492

8,735



Total Medicare

122,741

113,431


Medicaid -Self-insured

895,301

858,757



Total members

1,721,114

1,683,696

2013 Guidance

Triple-S Management issued 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 February 6, 2013 at 9:00 a.m., Eastern Time to discuss its financial results for the three months and full year ended December 31, 2012.  To participate, callers within the U.S. and Canada should dial 1-877-941-8609, and international callers should dial 1-480-629-9692 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.

Condensed Consolidated Balance Sheets

(Dollar amounts in thousands, except per share data)












Unaudited
December 31,
2012


December 31,
2011

Assets














Investments

$

1,280,644


$

1,154,148

Cash and cash equivalents


89,564



70,979

Premium and other receivables, net


292,197



287,184

Deferred policy acquisition costs and value of business acquired


168,657



155,788

Property and equipment, net


92,423



81,872

Other assets


135,859



130,606









Total assets

$

2,059,344


$

1,880,577















Liabilities and Stockholders' Equity














Policy liabilities and accruals

$

922,393


$

836,029

Accounts payable and accrued liabilities


243,533



253,202

Short-term borrowings


30,000



-

Long-term borrowings


101,271



114,387









Total liabilities


1,297,197



1,203,618







Stockholders' equity:







Common stock


28,365



28,365


Other stockholders' equity


733,542



648,594









Total Triple-S Management Corporation stockholders' equity


761,907



676,959









Non-controlling interest in consolidated subsidiary


240



-









Total stockholders' equity


762,147



676,959









Total liabilities and stockholders' equity

$

2,059,344


$

1,880,577

 

Condensed Consolidated Statements of Earnings

(Dollar amounts in thousands, except per share data)








For the Three Months Ended


For the Year Ended



December 31,


December 31,



Unaudited
2012


Unaudited
2011


Unaudited
2012


2011

Revenues:









   Premiums earned, net


$558,197


$533,983


$2,253,354


$2,054,468

   Administrative service fees


27,637


19,692


110,110


38,459

   Net investment income


12,441


11,713


46,790


48,226

   Other operating revenues


998


-


4,356


-










      Total operating revenues


599,273


565,388


2,414,610


2,141,153










   Net realized investment gains


3,040


140


5,197


18,597

   Net unrealized investment loss on trading securities


 

-


 

-


-


(7,267)

   Other income, net


682


406


2,196


716










 

      Total revenues


602,995


565,934


2,422,003


2,153,199



















Benefits and expenses:









   Claims incurred


462,471


443,341


1,919,859


1,716,254

   Operating expenses


115,795


95,374


425,173


347,590










      Total operating costs


578,266


538,715


2,345,032


2,063,844










   Interest expense


2,418


2,285


10,599


10,855










      Total benefits and expenses


580,684


541,000


2,355,631


2,074,699










      Income before taxes


22,311


24,934


66,372


78,500










Income tax expense


4,610


5,979


12,472


20,464










Net income


17,701


18,955


53,900


58,036










   Less: Net loss attributable to the non-controlling interest


67


 

-


132


 

-










Net income attributable to TSM


$17,768


$18,955


$54,032


$58,036










Earnings per share attributable to TSM:


















Basic net income per share


$0.63


$0.67


$1.90


$2.02

Diluted earnings per share


$0.63


$0.67


$1.89


$2.01

 

                                              

Condensed Consolidated Statements of Cash Flows

(Dollar amounts in thousands, except per share data)


























For the Year Ended






December 31,






Unaudited
2012


2011











Net cash provided by operating activities

$

109,720


$

162,527









Cash flows from investing activities:







Proceeds from investments sold or matured:








Securities available for sale:









Fixed maturities sold


116,718



240,034




Fixed maturities matured/called


141,266



104,728




Equity securities


53,120



38,022



Securities held to maturity:









Fixed maturities matured/called


11,635



2,191


Acquisition of investments:








Securities available for sale:









Fixed maturities


(313,188)



(265,356)




Equity securities


(98,095)



(129,328)



Securities held to maturity:









Fixed maturities


(1,639)



(1,610)



Other investments


(206)



(2,500)


Net inflows (outflows) from policy loans


146



(420)


Acquisition of business, net of cash acquired of $816 and $29,370 in the twelve months ended December 31, 2012 and 2011, respectively


(2,685)



(54,680)


Net capital expenditures


(12,078)



(16,337)













Net cash used in investing activities


(105,006)



(85,256)









Cash flows from financing activities:







Change in outstanding checks in excess of bank balances


(19,841)



4,409


Net change in short-term borrowings


30,000



(15,575)


Repayments of long-term borrowings


(26,955)



(51,640)


Repurchase and retirement of common stock


(2,299)



(11,289)


Cash settlements of stock options


-



(2,420)


Proceeds from exercise of stock options


316



189


Proceeds from policyholder deposits


39,709



31,809


Surrenders of policyholder deposits


(7,059)



(6,546)













Net cash provided by (used in) financing activities


13,871



(51,063)













Net increase in cash and cash equivalents


18,585



26,208











Cash and cash equivalents, beginning of period


70,979



44,771









Cash and cash equivalents, end of period

$

89,564


$

70,979

SOURCE Triple-S Management Corporation



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