2014

Triple-S Management Corporation Reports Second Quarter 2012 Results

SAN JUAN, Puerto Rico, Aug. 1, 2012 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), the leading managed care company in Puerto Rico, today announced consolidated revenues of $623.0 million and operating income of $24.2 million for the three months ended June 30, 2012.  Net income was $17.0 million, or $0.60 per diluted share, which includes an after tax net investment gain of $0.4 million, or $0.02 per share.

June-Quarter Consolidated Highlights

  • Total consolidated operating revenues were $622.7 million;
  • Operating income was $24.2 million;
  • Consolidated loss ratio was 85.2%;
  • Medical loss ratio (MLR) was 88.7%;
  • Managed Care member month enrollment increased 111.0%;
  • Medicare member month enrollment rose 16.9%.

Ramon M. Ruiz-Comas, President and Chief Executive Officer of Triple-S Management Corporation, commented, "We were pleased with our solid second quarter results, achieving membership growth in each of our three managed care businesses while maintaining control of our operating expenses.  Our Life and Property and Casualty Insurance segments also posted solid performance consistent with our expectations.

"Within our Medicare business, we are making progress in our efforts to better assess the health risk of our patient population.  Moreover, we continue working on the main issues that caused the shortfall at American Health last quarter, and a number of key initiatives are being implemented.  We are in the midst of renegotiations with American Health's PBM, and have submitted bids for the 2013 open enrollment season, which take into account the increased pharmacy utilization that we have been experiencing.  Our purchase of American Health provided us with a solid foothold in the growing Medicare Advantage business and remains an integral component of our long-term strategy.  We are committed to this market and believe that we have the brand recognition, products and physician network necessary to exploit this opportunity," continued Mr. Ruiz-Comas.

"We believe that having a strong, diversified and seasoned management team is instrumental to our long-term success.  Recently, Amílcar L. Jordan joined Triple-S Management as Vice President and Chief Financial Officer, bringing over 27 years of financial industry and risk management experience.  We look forward to his ongoing contributions as we continue to build and deliver shareholder value," concluded Mr. Ruiz-Comas.

Selected Quarterly Details

  • Pro Forma Net Income was $16.6 million, or $0.58 Per Diluted Share.  Weighted average shares outstanding were 28.5 million.  This compares with pro forma net income of $11.4 million, or $0.39 per diluted share, in the corresponding quarter of 2011, based on weighted average shares outstanding of 29.0 million.
  • Consolidated Premiums Increased 14.2%, to $582.2 MillionThe increase was principally due to a higher member month enrollment in the Medicare business and the overall increase in premiums per member per month.
  • Consolidated Administrative Service Fees Rose 297.1%, to $27.8 Million.  The significant increase in service fees was driven by the addition of the Medicaid ASO business (miSalud), effective November 1, 2011.
  • Managed Care Membership.  Our Managed Care membership grew by 112.3% year-over-year, reflecting the addition of the miSalud business, in which self-insured membership was 889,091 at the end of the quarter. Medicare membership increased 17.3%, to 122,151.  Fully insured Commercial membership was down 0.2% from the same period last year.
  • Managed Care MLR Increased 70 Basis Points, to 88.7%.  The increased MLR results from a higher MA member month enrollment, which business has an inherently higher MLR than the Commercial business, and to higher-than-expected utilization and cost trends in the Medicare business, primarily at American Health, partially offset by the higher Medicare risk score adjustments received in 2012.
  • Consolidated Loss Ratio Increased 130 Basis Points, to 85.2%.  The higher consolidated loss ratio mainly reflects the 70-basis-point increase in the Managed Care MLR and an increase in the claims incurred in the Life segment, resulting from a higher loss ratio in the Cancer business and an increase in the liability for future policy benefits. The loss ratio in the Property and Casualty Insurance segment, although lower than in the first quarter of 2012, also experienced year-over-year increases.
  • Consolidated Operating Expense Ratio Rose 20 Basis Points, to 16.8%.  The higher consolidated operating expense ratio is due to the increase in self-insured contracts associated with our participation in the miSalud business.
  • Consolidated Operating Income Increased 55.1%, to $24.2 Million.  The increase reflects the contribution from the miSalud business, the higher Medicare risk score adjustments received in 2012, and the improved operating income of the Property and Casualty segment, partly offset by the increased MLR in the Medicare business.
  • Consolidated Operating Income Margin Was 3.9%.  The 100-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 22.0%.  The consolidated income tax expense rose by $1.9 million, or 65.5%, reflecting the increased taxable income in the Managed Care segment, which operates at a higher effective rate.
  • Parent Company Information.  As of June 30, 2012, Triple-S Management had $50.7 million in parent company cash, cash equivalents, and investments.

Pro Forma Net Income


(Unaudited)

Three months
ended June 30,


Six months
ended June 30,

(dollar amounts in millions)

2012

2011


2012

2011

Net income


$  17.0

$  17.1


$  24.5

$  27.4

Less pro forma adjustments:







Net realized investment gains, net of tax

0.4

5.9


1.8

10.9


Net unrealized trading investments,net of tax

-

(0.1)


-

(1.1)


Derivative loss, net of tax

-

(0.1)


-

(0.3)


Charge related to change in enacted tax rate

-

-


-

(6.4)


     Pro forma net income

$  16.6

$  11.4


$  22.7

$  24.3


     Diluted pro forma net income per share

$  0.58

$  0.39


$  0.80

$  0.84










Six-Month Recap

For the six months ended June 30, 2012, consolidated operating revenues increased 17.1%, to $1.21 billion, primarily reflecting higher member month enrollment in the Medicare and Commercial segments, the addition of the miSalud business, and the receipt of higher Medicare risk score adjustments in 2012 when compared with the prior year.  Consolidated claims incurred for the six-month period were $971.9 million, up 17.0% year-over-year.  The six-month consolidated loss ratio increased 250 basis points to 86.0%, while the MLR rose 190 basis points, to 89.6%.  This increase was driven by a higher MA member month enrollment and higher-than-expected utilization and cost trends in the Medicare business, primarily at American Health.  Consolidated operating expenses for the six months ended June 30, 2012 were $204.8 million and the operating expense ratio was 17.3%.  Pro forma net income for the six-month period was $22.7 million, or $0.80 per diluted share, based on weighted average shares outstanding of 28.5 million, compared with $24.3 million, or $0.84 per diluted share, based on weighted average shares outstanding of 29.0 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 June 30,


Six months ended June 30,

(dollar amounts in millions)

2012

2011

Percentage Change


2012

2011

Percentage Change

Premiums earned, net:









Managed Care:










Commercial

$ 242.8

$ 232.4

4.5%


$   484.4

$   468.8

3.3%



Medicare

285.7

226.4

26.2%


539.9

420.5

28.4%



Medicaid

-

(0.1)

(100.0%)


-

2.7

(100.0%)



    Total Managed Care

528.5

458.7

15.2%


1,024.3

892.0

14.8%


Life Insurance

30.7

27.9

10.0%


60.7

54.9

10.6%


Property and Casualty

23.6

23.9

(1.3%)


45.8

49.5

(7.5%)


Other

(0.6)

(0.7)

(14.3%)


(1.3)

(1.3)

0.0%




Consolidated premiums earned, net

$ 582.2

$ 509.8

14.2%


$1,129.5

$   995.1

13.5%

Operating revenues:









Managed Care

$ 561.3

$ 471.5

19.0%


$1,089.7

$   916.6

18.9%


Life Insurance

35.9

32.4

10.8%


70.8

63.8

11.0%


Property and Casualty

25.9

26.2

(1.1%)


50.3

54.1

(7.0%)


Other

(0.4)

(0.7)

(42.9%)


(1.1)

(1.4)

(21.4%)




Consolidated operating revenues

$ 622.7

$ 529.4

17.6%


$1,209.7

$1,033.1

17.1%

Operating income:









Managed Care

$  18.6

$     9.0

106.7%


$    26.0

$    21.4

21.5%


Life Insurance

4.0

3.6

11.1%


8.4

7.9

6.3%


Property and Casualty

3.5

2.0

75.0%


2.1

3.0

(30.0%)


Other

(1.9)

1.0

(290.0%)


(3.4)

1.7

(300.0%)




 Consolidated operating income

$   24.2

$   15.6

55.1%


$    33.1

$    34.0

(2.6%)

Operating margin:









Managed Care

3.3%

1.9%

140 bp


2.4%

2.3%

10 bp


Life Insurance

11.1%

11.1%

0 bp


11.9%

12.4%

-50 bp


Property and Casualty

13.5%

7.6%

590 bp


4.2%

5.5%

-130 bp


Consolidated

3.9%

2.9%

100 bp


2.7%

3.3%

-60 bp

Depreciation and amortization expense

$   5.9

$   5.4

9.3%


$    11.8

$    10.6

11.3%

 

Managed Care Additional Data


Three months ended June 30,


Six months ended June 30,

(Unaudited)


2012

2011


2012

2011

Member months enrollment:








Commercial:









Fully-insured


1,459,127

1,459,055


2,926,275

2,922,436



Self-insured


672,128

664,056


1,331,628

1,388,215



 Total Commercial



2,131,255

2,123,111


4,257,903

4,310,651


Medicare:









Medicare Advantage


339,026

285,168


668,970

531,636



Stand-alone PDP


25,424

26,637


50,695

53,204



    Total Medicare


364,450

311,805


719,665

584,840


Medicaid -Self-insured


2,641,905

-


5,254,863

-



Total member months


5,137,610

2,434,916


10,232,431

4,895,491

Claim liabilities (in millions)


$      292.3

$     262.2

 * 



Days claim payable


58.0

59.4

 * 



Premium PMPM:








Managed Care


$    289.82

$    259.03


$     280.94

$    254.33


   Commercial


166.40

159.28


165.53

160.41


   Medicare


783.92

726.09


750.21

719.00

Medical loss ratio


88.7%

88.0%


89.6%

87.7%


Commercial


88.4%

84.9%


88.9%

87.8%


Medicare Advantage


88.7%

90.5%


89.8%

88.8%


Stand-alone PDP


81.9%

70.6%


87.3%

78.3%

Adjusted medical loss ratio


90.5%

87.2%


90.0%

86.9%


Commercial


86.3%

86.6%


88.2%

86.5%


Medicare Advantage


94.4%

87.9%


91.6%

87.2%


Stand-alone PDP


84.1%

70.1%


86.9%

78.4%

Operating expense ratio:








Consolidated


16.8%

16.6%


17.3%

16.7%


Managed Care


13.2%

12.6%


13.5%

12.5%

* Information provided as of December 31, 2011.

 

Managed Care Membership by Segment

As of June 30,




2012

2011

Members:





Commercial:





      Fully-insured


485,013

486,138


      Self-insured


225,102

220,521


        Total Commercial


710,115

706,659


Medicare:





   Medicare Advantage


113,669

95,351


   Stand-alone PDP


8,482

8,808


        Total Medicare


122,151

104,159


Medicaid -Self-insured


889,091

-


           Total members


1,721,357

810,818

2012 Guidance

The company's full-year outlook, remains unchanged, except for the consolidated effective tax rate, which was lowered from 25% - 26% to 23% - 24%.


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

23%-24%

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 August 1, 2012 at 9:00 a.m., Eastern Time to discuss its financial results for the three months ended June 30, 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
  • Ability to maintain Federal Employee Program, 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
June 30,
2012


December 31,
2011

Assets
















Investments


$

1,207,303


$

1,153,293

Cash and cash equivalents



164,958



71,834

Premium and other receivables, net



322,032



287,184

Deferred policy acquisition costs and value of business acquired



161,724



155,788

Property and equipment, net



97,476



81,872

Other assets



130,220



130,606










Total assets


$

2,083,713


$

1,880,577

















Liabilities and Stockholders' Equity
















Policy liabilities and accruals


$

977,869


$

836,029

Accounts payable and accrued liabilities



250,712



253,202

Short-term borrowings



2,855



-

Long-term borrowings



127,250



114,387










Total liabilities



1,358,686



1,203,618








Stockholders' equity:








Common stock



28,397



28,365


Other stockholders equity



696,291



648,594










Total Triple-S Management Corporation stockholders' equity



724,688



676,959










Noncontrolling interest in consolidated subsididary



339



-










Total stockholders' equity



725,027



676,959










Total liabilities and stockholders' equity


$

2,083,713


$

1,880,577

Condensed Consolidated Statements of Earnings

(Dollar amounts in thousands, except per share data)


















For the Three Months Ended June 30,


For the Six Months Ended

June 30,










Unaudited
2012


Unaudited
2011


Unaudited
2012


Unaudited
2011

Revenues:














Premiums earned, net


$

582,246


$

509,843


$

1,129,550


$

995,114


Administrative service fees



27,768



6,962



55,292



13,557


Net investment income



11,562



12,654



22,754



24,452


Other operating revenues



1,105



-



2,152



-












    Total operating revenues



622,681



529,459



1,209,748



1,033,123
















Net realized investment gains



458



6,995



2,136



12,888


Net unrealized investment loss on trading securities



-



(119)



-



(1,260)


Other income, net



(154)



466



916



480












   Total revenues



622,985



536,801



1,212,800



1,045,231

























Benefits and expenses:














Claims incurred



496,249



427,941



971,893



830,514


Operating expenses



102,268



85,882



204,774



168,593












     Total operating costs



598,517



513,823



1,176,667



999,107
















Interest expense



2,667



2,957



5,225



6,084












     Total benefits and expenses



601,184



516,780



1,181,892



1,005,191












     Income before taxes



21,801



20,021



30,908



40,040











Income tax expense



4,785



2,935



6,392



12,584











Net income



17,016



17,086



24,516



27,456











    Less: Net loss attributable to the
noncontrolling interest



19



-



33



-











Net income attributable to TSM


$

17,035


$

17,086


$

24,549


$

27,456















Earnings per share attributable to TSM:



























Basic net income per share


$

0.60


$

0.59


$

0.87


$

0.95

Diluted earnings per share


$

0.60


$

0.59


$

0.86


$

0.95















 

Condensed Consolidated Statements of Cash Flows

(Dollar amounts in thousands, except per share data)















For the Six Months Ended



June 30,



Unaudited
2012


Unaudited
2011








Net cash provided by operating activities


$

125,485


$

77,983








Cash flows from investing activities:








Proceeds from investments sold or matured:









Securities available for sale:










Fixed maturities sold



55,080



101,326




Fixed maturities matured/called



64,292



51,443




Equity securities



29,217



14,425



Securities held to maturity:










Fixed maturities matured/called



10,580



1,440


      Acquisition of investments:









Securities available for sale:










Fixed maturities



(114,064)



(140,417)




Equity securities



(76,134)



(35,334)



Securities held to maturity:










Fixed maturities



(560)



(255)



Other investments



(246)



-


Net inflows (outflows) from policy loans



140



(215)


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



(5,680)



(8,460)










Net cash used in investing activities



(40,060)



(70,105)








Cash flows from financing activities:








Change in outstanding checks in excess of bank balances



(10,135)



(13,008)


Proceeds from short-term borrowings, net



2,855



42,740


Repayments of long-term borrowings



(976)



(25,820)


Repurchase and retirement of common stock



(637)



(1,557)


Cash settlements of stock options



-



(2,420)


Proceeds from exercise of stock options



316



189


Proceeds from policyholder deposits



19,587



7,679


Surrenders of policyholder deposits



(3,311)



(3,330)










Net cash provided by financing activities



7,699



4,473










Net increase in cash and cash equivalents



93,124



12,351








Cash and cash equivalents, beginning of period



71,834



45,021








Cash and cash equivalents, end of period


$

164,958


$

57,372

SOURCE Triple-S Management Corporation



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