2014

Triple-S Management Corporation Reports Third Quarter 2012 Results

SAN JUAN, Puerto Rico, Oct. 31, 2012 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), the leading managed care company in Puerto Rico, today announced consolidated revenues of $606.2 million and operating income of $15.5 million for the three months ended September 30, 2012.  Net income was $11.7 million, or $0.41 per diluted share.

September-Quarter Consolidated Highlights

  • Total consolidated operating revenues were $605.6 million;
  • Operating income was $15.5 million;
  • Consolidated loss ratio was 85.8%;
  • Medical loss ratio (MLR) was 89.7%;
  • Managed Care member month enrollment increased 111.0%;
  • Medicare member month enrollment rose 15.6%.

Ramon M. Ruiz-Comas, President and Chief Executive Officer of Triple-S Management Corporation, said, "We recorded another quarter of solid top-line growth, driven by premium increases across all our managed care segments. In our Medicare business, we maintained a healthy mid-teens gain in membership.  We did, however, experience a higher-than-normal increase in claims in the Commercial business, the result of more hospital admissions and increased surgical procedures, which had been tracking at lower levels in the first half of the year.  Nonetheless, the period's results were in line with internal expectations since the third quarter typically has the second highest utilization rate in any given year.  As we enter the fourth quarter, our seasonally strongest, we are reaffirming our 2012 outlook.

"In mid-October, CMS released Medicare Advantage Star ratings for 2013 and all of our plans demonstrated improvement.  Our sales force now has a full array of MA products to offer as we proceed through open enrollment season," continued Ruiz-Comas.

"Recently, we entered into an agreement with Abarca Health, a Puerto-Rico based provider of healthcare information technology, clinical solutions, and pharmacy benefit management services, under which it will serve as American Health's new PBM.  This agreement, effective January 1, 2013, will provide us with more favorable pricing, allowing us to better control our pharmacy costs in 2013 and beyond."

Ruiz-Comas added, "To drive better performance in the Medicare Advantage segment, Susan Rawlings-Molina has been designated to head up the entire MA division.  Susan, President and CEO of Socios Mayores en Salud, Inc. (the holding company of American Health), is an accomplished executive who has worked at several major U.S. managed care organizations during her career.  Her first task will be to restructure the MA business, streamline our operations and increase accountability, creating greater efficiency and positioning us for further improvement in our Star ratings.

"In addition, we recently appointed Juan Jose Diaz-Goitia to the position of Chief Information Officer.  Formerly Executive Vice President of Triple-S Vida, Juan Jose had previously been Chief Information Officer for Latin America and Puerto Rico at Verizon Information Services.  In his new role, he will integrate the technology function across our family of companies to improve efficiency and service to all of our constituents," Ruiz-Comas concluded.

Selected Quarterly Details

  • Pro Forma Net Income was $11.7 million, or $0.41 Per Diluted Share.  Weighted average shares outstanding were 28.5 million.  This compares with pro forma net income of $12.3 million, or $0.43 per diluted share, in the corresponding quarter of 2011, based on weighted average shares outstanding of 28.9 million.
  • Consolidated Premiums Increased 7.7%, to $565.6 MillionThe increase was principally due to higher member month enrollment in the Medicare and Commercial businesses, as well as higher average Commercial per-member, per-month premiums.
  • Consolidated Administrative Service Fees Rose 423.1%, to $27.2 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 109.8% year over year, reflecting the addition of the miSalud business, in which self-insured membership was 872,496 at the end of the quarter.  Medicare membership increased 14.8% year-over-year, to 122,925.  Fully-insured Commercial membership was up 0.5% from the same period last year.
  • Managed Care MLR Increased 200 Basis Points, to 89.7%.  The increased MLR results from higher member month enrollment in Medicare Advantage, which has a higher MLR than the Commercial business, and to greater-than-expected utilization and cost trends in the Medicare segment.  The Commercial business also experienced higher utilization and cost trends, primarily due to hospital admissions and surgical procedures.
  • Consolidated Loss Ratio Increased 160 Basis Points, to 85.8%.  The higher consolidated loss ratio mainly reflects the 200-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.
  • Consolidated Operating Expense Ratio Rose 180 Basis Points, to 17.6%.  The higher consolidated operating expense ratio is due to the increase in self-insured contracts associated with our participation in the miSalud program.
  • Consolidated Operating Income Decreased 6.6%, to $15.5 Million.  The decrease reflects the increased MLR in the Medicare business, partly offset by the contribution from the miSalud program, and the improved operating income of the Property and Casualty segment.
  • Consolidated Operating Income Margin Was 2.6%.  The 50-basis-point decrease in the consolidated operating margin is primarily the result of the lower profitability in our Managed Care and Life Insurance businesses, offset, in part, by the improved profit margin of the Property and Casualty Insurance segment.
  • Consolidated Effective Tax Rate Was 11.4%.  The lower effective tax rate reflects the decrease in taxable income in the Managed Care Insurance segment.  The consolidated income tax expense decreased by $0.4 million, or 21.1%, during this quarter.
  • Parent Company Information.  During this quarter, Triple-S Management repaid $25.0 million in long-term debt with a 6.7% interest rate, at no premium.




Pro Forma Net Income




(Unaudited)


Three months ended September 30,


Nine months ended September 30,

(dollar amounts in millions)


2012

2011


2012

2011

Net income


$11.7

$11.6


$36.3

$39.1

Less pro forma adjustments:








Net realized investment gains, net of tax


-

4.7


1.8

15.7


Net unrealized trading investments,net of tax


-

(5.1)


-

(6.2)


Derivative loss, net of tax


-

(0.3)


-

(0.6)


Charge related to change in enacted tax rate


-

-


-

(6.4)



Pro forma net income


$11.7

$12.3


$34.5

$36.6



Diluted pro forma net income per share


$0.41

$0.43


$1.21

$1.26

Nine-Month Recap

For the nine months ended September 30, 2012, consolidated operating revenues increased 15.2%, to $1.8 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 nine-month period were $1.5 billion, up 14.5% year over year.  The nine-month consolidated loss ratio increased 230 basis points to 86.0%, while the MLR rose 190 basis points, to 89.6%.  This increase was driven by higher MA member month enrollment, which has an inherently higher MLR than the Commercial business, and higher-than-expected utilization and cost trends in the Medicare business, primarily at American Health.  Consolidated operating expenses for the nine months ended September 30, 2012 were $309.4 million and the operating expense ratio was 17.4%.  Pro forma net income for the nine-month period was $34.5 million, or $1.21 per diluted share, based on weighted average shares outstanding of 28.5 million, compared with $36.6 million, or $1.26 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 September 30,


Nine months ended September 30,

(dollar amounts in millions)


2012

2011

Percentage Change


2012

2011

Percentage Change

Premiums earned, net:










Managed Care:











Commercial


$240.5

$234.4

2.6%


$   724.9

$   703.2

3.1%



Medicare


268.0

238.0

12.6%


807.9

658.5

22.7%



Medicaid


-

-



-

2.7

(100.0%)




Total Managed Care


508.5

472.4

7.6%


1,532.8

1,364.4

12.3%


Life Insurance


31.8

28.8

10.4%


92.5

83.7

10.5%


Property and Casualty


25.9

24.9

4.0%


71.7

74.5

(3.8%)


Other


(0.6)

(0.7)

(14.3%)


(1.8)

(2.1)

(14.3%)





Consolidated premiums earned, net


$565.6

$525.4

7.7%


$1,695.2

$1,520.5

11.5%

Operating revenues:










Managed Care


$540.8

$483.3

11.9%


$1,630.5

$1,399.9

16.5%


Life Insurance


37.0

33.4

10.8%


107.8

97.2

10.9%


Property and Casualty


28.1

27.4

2.6%


78.4

81.6

(3.9%)


Other


(0.3)

(1.5)

(80.0%)


(1.4)

(2.9)

(51.7%)





Consolidated operating revenues


$605.6

$542.6

11.6%


$1,815.3

$1,575.8

15.2%

Operating income:










Managed Care


$    7.3

$  11.2

(34.8%)


$     33.3

$     32.6

2.1%


Life Insurance


4.1

5.3

(22.6%)


12.5

13.2

(5.3%)


Property and Casualty


1.9

(1.1)

272.7%


4.1

2.0

105.0%


Other


2.2

1.2

83.3%


(1.4)

2.9

(148.3%)





Consolidated operating income


$  15.5

$  16.6

(6.6%)


$     48.5

$     50.7

(4.3%)

Operating margin:










Managed Care


1.3%

2.3%

-100 bp


2.0%

2.3%

-30 bp


Life Insurance


11.1%

15.9%

-480 bp


11.6%

13.6%

-200 bp


Property and Casualty


6.8%

(4.0%)

1,080 bp


5.2%

2.5%

270 bp


Consolidated


2.6%

3.1%

-50 bp


2.7%

3.2%

-50 bp

Depreciation and amortization expense


$    6.2

$    5.9

5.1%


$     18.0

$     16.4

9.8%

Managed Care Additional Data


Three months ended September 30,


Nine months ended September 30,

(Unaudited)


2012

2011


2012

2011

Member months enrollment:








Commercial:









Fully-insured


1,448,985

1,440,393


4,375,260

4,362,829



Self-insured


676,007

670,150


2,007,635

2,058,365




Total Commercial


2,124,992

2,110,543


6,382,895

6,421,194


Medicare:









Medicare Advantage


342,180

291,628


1,011,150

823,264



Stand-alone PDP


25,502

26,444


76,197

79,648




Total Medicare


367,682

318,072


1,087,347

902,912


Medicaid -Self-insured


2,631,532

-


7,886,395

-





Total member months


5,124,206

2,428,615


15,356,637

7,324,106

Claim liabilities (in millions)


$     297.2

$     262.2

 * 



Days claim payable


60.0

59.4

 * 



Premium PMPM:








Managed Care


$   279.91

$   268.64


$     280.60

$   259.11



Commercial


165.98

162.73


165.68

161.18



Medicare


728.89

748.26


743.00

729.31

Medical loss ratio


89.7%

87.7%


89.6%

87.7%


Commercial


89.8%

87.3%


89.2%

87.6%


Medicare Advantage


89.5%

88.6%


89.7%

88.7%


Stand-alone PDP


75.9%

73.2%


83.8%

76.5%

Adjusted medical loss ratio


90.4%

86.1%


89.6%

86.6%


Commercial


88.6%

86.2%


88.5%

86.4%


Medicare Advantage


92.1%

86.0%


90.5%

86.8%


Stand-alone PDP


75.1%

73.5%


82.7%

76.8%

Operating expense ratio:








Consolidated


17.6%

15.8%


17.4%

16.4%


Managed Care


14.4%

12.1%


13.8%

12.3%

* Information provided as of December 31, 2011.







 

Managed Care Membership by Segment

As of September 30,







2012

2011

Members:





Commercial:






Fully-insured


483,103

476,329



Self-insured


225,540

228,663




Total Commercial


708,643

704,992


Medicare:






Medicare Advantage


114,419

98,231



Stand-alone PDP


8,506

8,822




Total Medicare


122,925

107,053


Medicaid -Self-insured


872,496

-





Total members


1,704,064

812,045

2012 Guidance

The company's full-year outlook, which remains unchanged, is detailed below.


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 October 31, 2012 at 9:30 a.m., Eastern Time to discuss its financial results for the three months ended September 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 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

September 30,

2012


December 31,

2011

Assets















Investments


$

1,308,700


$

1,153,293

Cash and cash equivalents



68,750



71,834

Premium and other receivables, net



283,349



287,184

Deferred policy acquisition costs and value of business acquired



164,128



155,788

Property and equipment, net



96,818



81,872

Other assets



129,393



130,606










Total assets


$

2,051,138


$

1,880,577

















Liabilities and Stockholders' Equity















Policy liabilities and accruals


$

916,437


$

836,029

Accounts payable and accrued liabilities



268,905



253,202

Short-term borrowings



11,200



-

Long-term borrowings



101,762



114,387










Total liabilities



1,298,304



1,203,618








Stockholders' equity:








Common stock



28,461



28,365


Other stockholders equity



724,066



648,594










Total Triple-S Management Corporation stockholders' equity



752,527



676,959










Noncontrolling interest in consolidated subsidiary



307



-










Total stockholders' equity



752,834



676,959










Total liabilities and stockholders' equity


$

2,051,138


$

1,880,577



Condensed Consolidated Statements of Earnings

(Dollar amounts in thousands, except per share data)




















For the Three Months Ended



For the Nine Months Ended





September 30,


September 30,





Unaudited

2012


Unaudited

2011


Unaudited

2012


Unaudited

2011

Revenues:














Premiums earned, net


$

565,607


$

525,371


$

1,695,157


$

1,520,485


Administrative service fees



27,181



5,210



82,473



18,767


Net investment income



11,595



12,061



34,349



36,513


Other operating revenues



1,206



-



3,358



-














Total operating revenues



605,589



542,642



1,815,337



1,575,765

















Net realized investment gains



21



5,569



2,157



18,457


Net unrealized investment loss on trading securities



-



(6,007)



-



(7,267)


Other income (expenses), net



598



(169)



1,514



311














Total revenues



606,208



542,035



1,819,008



1,587,266



























Benefits and expenses:














Claims incurred



485,495



442,399



1,457,388



1,272,913


Operating expenses



104,604



83,623



309,378



252,216














Total operating costs



590,099



526,022



1,766,766



1,525,129

















Interest expense



2,956



2,499



8,181



8,583














Total benefits and expenses



593,055



528,521



1,774,947



1,533,712














Income before taxes



13,153



13,514



44,061



53,554












Income tax expense



1,470



1,901



7,862



14,485












Net income



11,683



11,613



36,199



39,069













Less: Net loss attributable to the noncontrolling interest



32



-



65



-












Net income attributable to TSM


$

11,715


$

11,613


$

36,264


$

39,069
















Earnings per share attributable to TSM:




























Basic net income per share


$

0.41


$

0.40


$

1.28


$

1.36

Diluted earnings per share


$

0.41


$

0.40


$

1.27


$

1.35



Condensed Consolidated Statements of Cash Flows

(Dollar amounts in thousands, except per share data)


















For the Nine Months Ended







September 30,







Unaudited

2012


Unaudited

2011












Net cash provided by operating activities


$

112,094


$

216,909










Cash flows from investing activities:







Proceeds from investments sold or matured:









Securities available for sale:










Fixed maturities sold



67,943



225,060




Fixed maturities matured/called



115,649



76,786




Equity securities



50,016



31,253



Securities held to maturity:










Fixed maturities matured/called



11,080



1,941


Acquisition of investments:









Securities available for sale:










Fixed maturities



(278,533)



(212,358)




Equity securities



(78,135)



(111,770)



Securities held to maturity:










Fixed maturities



(1,067)



(755)



Other investments



18



-


Net inflows (outflows) from policy loans



84



(392)


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









nine months ended September 31, 2012 and 2011, respectively



(2,685)



(54,058)


Net capital expenditures



(8,756)



(12,000)














Net cash used in investing activities



(124,386)



(56,293)










Cash flows from financing activities:







Change in outstanding checks in excess of bank balances



(3,332)



(9,275)


Net change in short-term borrowings



11,200



(15,575)


Repayments of long-term borrowings



(26,464)



(51,230)


Repurchase and retirement of common stock



(637)



(7,554)


Cash settlements of stock options



-



(2,420)


Proceeds from exercise of stock options



316



189


Proceeds from policyholder deposits



32,946



20,725


Surrenders of policyholder deposits



(4,821)



(4,580)














Net cash provided by (used in) financing activities



9,208



(69,720)














Net (decrease) increase in cash and cash equivalents



(3,084)



90,896












Cash and cash equivalents, beginning of period


71,834



45,021










Cash and cash equivalents, end of period

$

68,750


$

135,917

SOURCE Triple-S Management Corporation



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