Triple-S Management Corporation Reports Third Quarter 2015 Results

05 Nov, 2015, 06:45 ET from Triple-S Management Corporation

SAN JUAN, Puerto Rico, Nov. 5, 2015 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), the leading managed care company in Puerto Rico, today announced consolidated revenues of $765.1 million and net income of $4.2 million, or $0.16 per diluted share for the quarter ended September 30, 2015. Pro forma net income was $9.8 million, or $0.39 per diluted share, a roughly 25% year-over-year increase.

Quarterly Consolidated Highlights

  • Consolidated operating revenues were $764.4 million, a 35.6% increase from last year, reflecting the change in the Medicaid contract from an administrative services only (ASO) agreement to an at-risk model;
  • Managed Care member month enrollment declined 48.3% year over year, reflecting the reduction in Medicaid service regions from eight to two;
  • Consolidated operating income was $3.6 million;
  • Consolidated loss ratio was 85.0%;
  • Medical loss ratio (MLR) was 87.8%.

Ramon Ruiz-Comas, President and Chief Executive Officer of Triple-S Management said, "Despite a challenging environment, we posted better-than-expected third-quarter financial results. During the period, our Managed Care and Property & Casualty segments demonstrated further improvement in their ongoing operating performance. Specifically, Medicare premiums increased 13% in the period, while Property & Casualty operating income rose 13%, yielding a double-digit operating margin. We also continued to repurchase our common stock in the open market, buying back 683,000 shares this quarter."

"Within our Medicare operation, we are seeing sustained year-over-year and year-to-date improvements in our business and anticipate that the initiatives we have been pursuing will continue bearing fruit in 2016. We have also been focused on strengthening this segment's executive staff and raising the CMS Star ratings of all our plans. The strategy we have crafted for this business is designed to make our team more innovative, better equipped to foresee change, and adapt more quickly by leveraging technology and timelier reporting to increase risk scores and Star ratings, tighten compliance and ultimately boost member retention. The aforementioned Medicare strategy has already resulted in a 3.5 Star rating for one of our products in 2017."

Ruiz-Comas concluded, "We will continue to make decisions that are best for the long-term well-being of the company and remain quite positive about the outlook for our various businesses. In light of the overall economic and industry situation in Puerto Rico, we continue to refrain from providing guidance."

Selected Quarterly Details

  • Pro Forma Net Income Was $9.8 Million, or $0.39 Per Diluted Share. Weighted average shares outstanding were 25.5 million. This compares with pro forma net income of $8.5 million, or $0.31 per diluted share, in the corresponding quarter of 2014, based on weighted average shares outstanding of 27.1 million.
  • Managed Care Membership. Fully-insured and self-insured Commercial membership decreased by 8.4% and 7.0%, respectively. Medicare membership was up 3.0% year over year, to 124,004. Medicaid membership declined 70.1%, reflecting our decision, effective April 1, 2015, to participate in only two service regions when the government of Puerto Rico changed its administrative services only (ASO) model, under which we served all eight regions, to one that was "at-risk." As a result, our Managed Care membership decreased by 48.5% year over year.
  • Consolidated Premiums Earned Increased 43.4%, to $746.7 Million. The increase in consolidated premiums earned was principally due to the additional Managed Care premiums generated under the new at-risk Medicaid contract. Total Medicaid premiums during this quarter were $199.8 million.
  • Administrative Service Fees Were Down 79.5%, to $6.2 Million. The lower service fee income reflects the change in the Medicaid business model from an ASO agreement to an at-risk model beginning April 1, 2015.
  • Managed Care MLR Rose 60 Basis Points, to 87.8%. The increased MLR largely reflects the impact of the new Medicaid at-risk contract, which has a higher loss ratio, somewhat mitigated by a 300-basis-point decrease in the Medicare MLR.
  • Consolidated Loss Ratio Rose 170 Basis Points, to 85.0%. The consolidated loss ratio reflects the impact of the increased Managed Care volume associated with the change in the Medicaid contract from an ASO agreement to an at-risk model. Also, the Life Insurance segment's loss ratio increased 270 basis points, while the loss ratio of the Property and Casualty Insurance business decreased by 500 basis points.
  • Consolidated Operating Expense Ratio Decreased 530 Basis Points, to 16.7%. The lower consolidated operating expense ratio is largely due to the increase in consolidated premiums earned.
  • Consolidated Operating Income Decreased to $3.6 Million. The decline in operating income primarily reflects lower profitability in the Managed Care segment, stemming from a $4.4 million contingency accrual, and in the Life Insurance segment, resulting in a 110-basis-point decrease in the consolidated operating margin.
  • Share Repurchase Program. Triple-S Management repurchased approximately 683,000 shares during the quarter, leaving $3.7 million remaining under the current buyback authorization.

 

Pro Forma Net Income

(Unaudited)

Three months ended September 30,

Nine months ended September 30,

(dollar amounts in millions)

2015

2014

2015

2014

Net income

$  4.2

$  4.7

$38.0

$39.1

Less pro forma adjustments:

Net realized investment gains (losses), net of tax

(1.2)

2.5

12.2

5.9

Contingency accrual

(4.4)

-

(4.4)

-

Change in enacted tax rate-capital gains

-

(6.3)

-

(6.3)

Non-recurring tax benefit

-

-

3.1

-

Pro forma net income

$  9.8

$  8.5

$27.1

$39.5

Diluted pro forma net income per share

$0.39

$0.31

$1.04

$1.45

 

Nine-Month Recap

For the nine months ended September 30, 2015, consolidated operating revenues increased 21.6%, to $2.1 billion, primarily reflecting the additional Managed Care premiums generated under the new at-risk Medicaid contract that became effective April 1, 2015.  Total Medicaid premiums during this period were $405.3 million. Consolidated claims incurred for the nine-month period were $1.7 billion, up 30.0% year over year, reflecting the higher fully-insured Managed Care enrollment associated with the new Medicaid contract. The nine-month consolidated loss ratio was up 230 basis points, to 83.9%, and the MLR rose 150 basis points, to 86.9%.  This increase was mostly driven by the impact of the increased Managed Care volume associated with the change in the Medicaid contract from an ASO agreement to an at-risk model. Consolidated operating expenses for the nine months ended September 30, 2015 were $380.1 million and the operating expense ratio was 18.3%. Pro forma net income for the nine-month period was $27.1 million, or $1.04 per diluted share, based on weighted average shares outstanding of 26.0 million, compared with $39.5 million, or $1.45 per diluted share, based on weighted average shares outstanding of 27.3 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 & 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. The adjusted medical loss ratio accounts for subsequent adjustments to estimates, such as Medicare premium adjustments and prior-period reserve developments, and presents them in the corresponding period. 

(Unaudited)

Three months ended September 30,

Nine months ended September 30,

(dollar amounts in millions)

2015

2014

Percentage Change

2015

2014

Percentage Change

Premiums earned, net:

Managed Care:

Commercial

$210.6

$215.6

(2.3%)

$   634.9

$   668.3

(5.0%)

Medicare

279.4

247.6

12.8%

818.0

764.5

7.0%

Medicaid

199.8

-

100%

405.3

-

100%

Total Managed Care

689.8

463.2

48.9%

1,858.2

1,432.8

29.7%

Life Insurance

35.7

35.8

(0.3%)

109.9

105.7

4.0%

Property and Casualty

21.7

22.3

(2.7%)

67.0

69.5

(3.6%)

Other

(0.5)

(0.5)

(0.0%)

(1.7)

(1.6)

6.3%

Consolidated premiums earned, net

$746.7

$520.8

43.4%

$2,033.4

$1,606.4

26.6%

Operating revenues:

Managed Care

$698.1

$497.9

40.2%

$1,909.8

$1,536.6

24.3%

Life Insurance

41.5

41.8

(0.7%)

127.6

123.3

3.5%

Property and Casualty

23.7

24.5

(3.3%)

73.1

75.8

(3.6%)

Other

1.1

(0.4)

375.0%

(2.1)

(1.2)

(75.0%)

Consolidated operating revenues

$764.4

$563.8

35.6%

$2,108.4

$1,734.5

21.6%

Operating income:

Managed Care

$  (2.2)

$    0.9

(344.4%)

$      6.3

$     32.9

(80.9%)

Life Insurance

4.3

5.7

(24.6%)

14.4

16.1

(10.6%)

Property and Casualty

2.6

2.3

13.0%

6.6

7.5

(12.0%)

Other

(1.1)

-

(100.0%)

(4.2)

(3.6)

(16.7%)

Consolidated operating income

$    3.6

$    8.9

(59.6%)

$     23.1

$     52.9

(56.3%)

Operating margin:

Managed Care

(0.3%)

0.2%

-50 bp

0.3%

2.1%

-180 bp

Life Insurance

10.4%

13.6%

-320 bp

11.3%

13.1%

-180 bp

Property and Casualty

11.0%

9.4%

160 bp

9.0%

9.9%

-90 bp

Consolidated

0.5%

1.6%

-110 bp

1.1%

3.0%

-190 bp

Depreciation and amortization expense

$    3.9

$    5.4

(27.8%)

$     12.0

$     16.0

(25.0%)

 

Managed Care Additional Data

Three months ended September 30,

Nine months ended September 30,

(Unaudited)

2015

2014

2015

2014

Member months enrollment:

Commercial:

Fully-insured

1,119,344

1,223,825

3,388,436

3,816,561

Self-insured

544,881

591,835

1,680,435

1,828,121

Total Commercial

1,664,225

1,815,660

5,068,871

5,644,682

Medicare:

Medicare Advantage

370,702

320,102

1,073,726

957,618

Stand-alone PDP

-

40,739

-

123,484

Total Medicare

370,702

360,841

1,073,726

1,081,102

Medicaid:

Fully-insured

1,279,692

-

2,583,204

-

Self-insured

-

4,231,233

4,229,082

12,626,015

Total Medicaid

1,279,692

4,231,233

6,812,286

12,626,015

Total member months

3,314,619

6,407,734

12,954,883

19,351,799

Claim liabilities (in millions)

$        333.2

$        249.3

Days claim payable

56

56

Premium PMPM:

Managed Care

$    249.05

$    292.30

$      263.75

$      292.55

Commercial

188.15

176.17

187.37

175.11

Medicare Advantage

753.71

686.17

761.83

707.15

Stand-alone PDP

-

100.64

-

106.90

Medicaid 

156.13

-

156.90

-

Medical loss ratio:

87.8%

87.2%

86.9%

85.4%

Commercial

84.8%

84.6%

84.4%

85.6%

Medicare Advantage

86.4%

89.4%

86.3%

84.8%

Stand-alone PDP

-

89.7%

-

97.4%

Medicaid 

92.5%

-

91.5%

-

Adjusted medical loss ratio:

89.8%

86.9%

87.3%

86.4%

Commercial

86.1%

85.6%

86.1%

86.5%

Medicare Advantage

90.0%

87.9%

86.9%

86.0%

Stand-alone PDP

-

90.5%

-

97.0%

Medicaid 

90.6%

-

89.8%

-

Operating expense ratio:

Consolidated

16.7%

22.0%

18.3%

21.8%

Managed Care

13.6%

18.8%

15.2%

18.4%

* Information provided as of December 31, 2014.

 

Managed Care Membership by Segment

As of September 30,

2015

2014

Members:

Commercial:

Fully-insured

371,426

405,584

Self-insured

181,045

194,703

Total Commercial

552,471

600,287

Medicare:

Medicare Advantage

124,004

106,828

Stand-alone PDP

-

13,539

Total Medicare

124,004

120,367

Medicaid:

Fully-insured

423,944

-

Self-insured

-

1,416,390

Total Medicaid

423,944

1,416,390

Total members

1,100,419

2,137,044

Conference Call and Webcast

Management will host a conference call and webcast on November 5, 2015 at 9:00 a.m., Eastern Time to discuss its financial results for the three months and nine months ended September 30, 2015. To participate, callers within the U.S. and Canada should dial 1-855-327-6837, and international callers should dial 1-631-891-4304 about five minutes before the call.

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 one of the leading players in the managed care industry in Puerto Rico. Triple-S Management has the exclusive right to use the Blue Cross Blue Shield name and mark throughout Puerto Rico, the U.S. Virgin Islands, and Costa Rica. 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
  • A downgrade in the Government of Puerto Rico's debt
  • 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 Employees, 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)

Unaudited

September 30, 2015

December 31, 2014

Assets

Investments

$

1,327,606

$

1,323,859

Cash and cash equivalents

194,457

110,037

Premium and other receivables, net

282,758

315,622

Deferred policy acquisition costs and value of business acquired

187,028

184,100

Property and equipment, net

73,849

78,343

Other assets

149,117

133,775

Total assets

$

2,214,815

$

2,145,736

Liabilities and Stockholders' Equity

Policy liabilities and accruals

$

1,037,410

$

935,613

Accounts payable and accrued liabilities

284,104

277,630

Long-term borrowings

62,237

74,467

Total liabilities

1,383,751

1,287,710

Stockholders' equity:

25,348

27,032

806,333

831,526

Total Triple-S Management Corporation stockholders' equity

831,681

858,558

Non-controlling interest in consolidated subsidiary

(617)

(532)

Total stockholders' equity

831,064

858,026

Total liabilities and stockholders' equity

$

2,214,815

$

2,145,736

 

Condensed Consolidated Statements of Earnings

(Dollar amounts in thousands, except per share data)

Unaudited

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Revenues:

Premiums earned, net

$

746,718

520,766

$

2,033,383

1,606,353

Administrative service fees

6,163

30,253

39,835

89,509

Net investment income

10,618

11,816

32,534

35,314

Other operating revenues

862

939

2,656

3,283

Total operating revenues

764,361

563,774

2,108,408

1,734,459

Net realized investment gains (losses):

Total other-than-temporary impairment losses on securities

(1,627)

-

(4,489)

(462)

Net realized gains, excluding other-than-temporary impairment losses on securities

66

3,108

19,748

7,624

Total net realized investment gains (losses)

(1,561)

3,108

15,259

7,162

Other income, net

2,289

367

5,131

1,188

Total revenues

765,089

567,249

2,128,798

1,742,809

Benefits and expenses:

Claims incurred

634,909

433,853

1,705,237

1,311,601

Operating expenses

125,887

121,036

380,086

369,992

Total operating costs

760,796

554,889

2,085,323

1,681,593

Interest expense

1,979

2,273

6,235

6,974

Total benefits and expenses

762,775

557,162

2,091,558

1,688,567

Income before taxes

2,314

10,087

37,240

54,242

Income tax expense (benefit)

(1,850)

5,432

(631)

15,205

Net income 

4,164

4,655

37,871

39,037

Less: Net loss attributable to the non-controlling interest

30

68

85

117

Net income attributable to Triple-S Management Corporation

$

4,194

$

4,723

$

37,956

$

39,154

Earnings per share attributable to Triple-S Management Corporation:

Basic net income per share

$

0.17

$

0.17

$

1.46

$

1.44

Diluted earnings per share

$

0.16

$

0.17

$

1.46

$

1.44

 

Condensed Consolidated Statements of Cash Flows

(Dollar amounts in thousands)

Unaudited

For the Nine Months Ended

September 30,

2015

2014

Net cash provided by operating activities

$

171,470

$

60,805

Cash flows from investing activities:

Proceeds from investments sold or matured:

Securities available for sale:

Fixed maturities sold

307,545

150,049

Fixed maturities matured/called

38,323

27,892

Equity securities sold

81,176

70,803

Securities held to maturity - fixed maturities matured/called

639

2,929

Other investments

-

8,925

Acquisition of investments:

Securities available for sale:

Fixed maturities

(360,588)

(211,129)

Equity securities

(81,901)

(23,731)

Securities held to maturity - fixed maturities

(623)

(865)

Other investments

(2,139)

(583)

Net outflows from policy loans

(498)

(352)

Net capital expenditures

(5,628)

(3,801)

Net cash provided by (used in) investing activities

(23,694)

20,137

Cash flows from financing activities:

Change in outstanding checks in excess of bank balances

(5,262)

(6,754)

Repayments of long-term borrowings

(12,230)

(1,486)

Repurchase and retirement of common stock

(40,983)

(5,995)

Proceeds from policyholder deposits

5,587

6,413

Surrenders of policyholder deposits

(10,468)

(6,436)

Net cash used in financing activities

(63,356)

(14,258)

Net increase in cash and cash equivalents

84,420

66,684

Cash and cash equivalents, beginning of period

110,037

74,356

Cash and cash equivalents, end of period

$

194,457

$

141,040

 

SOURCE Triple-S Management Corporation



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