Triple-S Management Corporation Reports First Quarter 2010 Results

SAN JUAN, Puerto Rico, May 5 /PRNewswire-FirstCall/ -- Triple-S Management Corporation (NYSE: GTS), the largest managed care company in Puerto Rico, today announced consolidated operating revenues of $519.1 million and operating income of $16.4 million for the three months ended March 31, 2010.  Net income of $11.2 million, or $0.38 per diluted share, includes an after tax net gain of $0.4 million, or $0.01 per share, in net realized and unrealized gains on investments and derivatives.

March-Quarter Consolidated Highlights

• Total consolidated operating revenues increased 9.8% year over year to $519.1 million;
• Operating income was $16.4 million;
• Excluding net realized and unrealized gains and losses on investments and a derivatives loss; included within other income (expenses), net income was $10.8 million, or $0.37 per diluted share;
• Consolidated loss ratio was 86.2% and the medical loss ratio (MLR) was 90.0%;
• Consolidated operating expense ratio increased 40 basis points to 15.2%;
• Commercial member months enrollment, including ASO membership, increased 23.6%.

Ramon M. Ruiz-Comas, President and Chief Executive Officer, stated "We are pleased to report that our first-quarter performance provided us with an excellent start to 2010.  For the period, we recorded solid revenue growth, reflecting very strong gains in our Commercial business and we are extremely proud of the approximately 98% membership retention rate achieved. The improvement in our overall MLR was in line with our expectations and operating profitability in the Managed Care segment nearly doubled from the prior year. We are reaffirming our 2010 earnings-per-share guidance of $2.05-$2.15."

"In March 2010, health care reform was enacted in the United States, significantly broadening the scope of coverage to a larger majority of the population. While there is still uncertainty surrounding many of the legislation's specifics, because our business is concentrated in Puerto Rico, our initial assessment is that for the next two years key components will not affect us in the same way as our U.S. peers.  Moreover, additional funding is anticipated for Medicaid, which would be of significant benefit to our population. We are awaiting further clarification on the regulation.  We remain confident that our business model, which enables us to diversify risk and diminish the variability that can occur in each of our segments, along with ongoing opportunities for expansion, will allow us to sustain our growth," concluded Ruiz-Comas.

Selected Quarterly Details

• Consolidated Premiums Increased 9.5%.  Consolidated premiums were $494.2 million, up 9.5% from a year ago, principally due to increased volume and higher rates in the Managed Care business.  Reported Managed Care net premiums increased to $443.8 million, driven by a 23.2% year-over-year rise in the Commercial business.  The increase resulted primarily from growth in Commercial membership, reflecting new groups acquired during the period and the La Cruz Azul (LCA) acquisition, as well as higher premium rates across all businesses.
• Consolidated Administrative Service Fees Rose 40.4%.  Consolidated administrative service fees increased $3.6 million, to $12.5 million, reflecting the LCA acquisition, which added approximately 70,000 members, and organic growth.
• Managed Care Membership Increased 12.9%.  Total Commercial membership was 763,885, up 24.5% from the prior year, primarily reflecting the addition of LCA members and organic growth.  Reform membership rose 2.4%, to 534,225, and Medicare membership declined 10.0%, to 66,771.
• Consolidated Claims Incurred Rose 8.2%.  Consolidated claims incurred were $425.8 million, an 8.2% increase from a year ago, principally due to more claims in the Managed Care segment resulting from higher enrollment and the addition of LCA's members.  The consolidated loss ratio decreased by 100 basis points, to 86.2%, as premium increases in our Managed Care segment outstripped costs, particularly in the Commercial and Medicare businesses.
• Managed Care MLR Improved 150 Basis Points Year-Over-Year, to 90.0%.  The year-over-year improvement was driven by a decrease in the Medicare MLR, offset by increases in the Reform MLR, and to a lesser degree, in the Commercial MLR.
• Consolidated Operating Expense Ratio Rose 40 Basis Points, to 15.2%.  Consolidated operating expenses increased by $8.7 million, or 12.8%, from the prior year, primarily attributable to a higher volume of business, particularly in the Managed Care segment.
• Consolidated Operating Margins Improved to 3.2%. Driven largely by a 130-basis-point improvement in Managed Care profitability, consolidated operating margins widened by 90 basis points, to 3.2%.  A 210-basis-point expansion in the Life Insurance segment's operating margin also contributed to the increase.  Offsetting these improvements was an 830-basis-point, year-over-year decline in the Property and Casualty business.
• Adjusted Net Income Rose to $10.8 million, or $0.37 Per Diluted Share.  This compares with $8.2 million, or $0.27 per diluted share, in the corresponding quarter of 2009.  Weighted average shares outstanding were 29.2 million and 30.3 million in 2010 and 2009, respectively.
• Parent Company Information.  As of March 31, 2010, Triple-S Management had $44.4 million in parent company cash, cash equivalents, and investments.

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 gain or loss divided by operating revenues.

Conference Call and Webcast

Management will host a conference call and webcast Wednesday, May 5 at 9:00 a.m. Eastern Time to discuss its financial results for the first quarter of 2010, as well as expectations for future earnings.  To participate, callers within the U.S. and Canada should dial 877-941-8631, and international callers should dial 480-629-9822 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 largest managed care company in Puerto Rico, serving approximately 1.3 million members.  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, Medicare, and Reform markets under the Blue Cross Blue Shield brand. 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.  The Company is the largest provider of life, accident, and health insurance and the fourth largest provider of property and casualty insurance in its market.

For more information about Triple-S Management, visit www.triplesmanagement.com or contact [email protected].

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 and utilization management programs

• 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.

SOURCE Triple-S Management Corporation

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