Triple-S Management Corporation Reports Third Quarter 2020 Results
11/06/2020 - 06:00 AM
SAN JUAN, Puerto Rico , Nov. 6, 2020 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), a leading healthcare care company in Puerto Rico , today announced its third quarter 2020 results.
"Our strong third quarter performance reflects ongoing, improved performance resulting from our operational focus and enhanced organizational capabilities," said Roberto Garcia-Rodriguez , President and Chief Executive Officer. "This has led to sustained membership momentum and premium growth in a difficult environment, particularly in the government markets sector. Continuing this momentum, we are delivering a very competitive Medicare Advantage product for this year's open enrollment period. Like most of our peer managed care companies, we have also experienced lower than planned utilization due to the impact of the ongoing pandemic.
"I am proud of our people, who continue to support our customers, providers and communities. Through their efforts, we are helping our members handle their medical needs safely and partnering with our providers and community organizations to assist our seniors and most vulnerable members during this challenging time.
"As we look to 2021 and beyond, we aim to be the preeminent healthcare company in Puerto Rico by delivering seamless holistic care through innovative models, state of the art technology and service excellence, in partnership with our providers."
Third Quarter 2020 Consolidated Results and Other Highlights
Net income of $23.6 million $1.02 per diluted share, versus net income of $13.9 million $0.58 per diluted share, in the prior-year period; Adjusted net income of $14.2 million $0.61 per diluted share, a 17.4% increase versus adjusted net income of $12.1 million $0.51 per diluted share, in the prior-year period; Operating revenues of $942.9 million 12.8% increase from the prior-year period, primarily reflecting higher Managed Care net premiums earned; Consolidated loss ratio of 82.5% , a 90 basis-point improvement from the third quarter of 2019, reflecting higher premium rates and lower utilization; Medical loss ratio ("MLR") of 84.7% , an improvement of 170 basis points over the same period last year; Consolidated operating income of $22.3 million 17.4% increase compared to $19.0 million Selected Consolidated Quarterly Details
Consolidated net premiums earned were $923.0 million 13.3% from the prior-year period, primarily reflecting higher Managed Care premiums. Consolidated claims incurred were $761.8 million 12.0% year-over-year. Consolidated loss ratio was 82.5% , 90 basis points lower than the prior-year period, reflecting higher premium rates and lower utilization in the Company's Managed Care segment. Consolidated operating expenses of $158.8 million $21.9 million 16.0% , from the prior-year period, primarily reflecting the reinstatement of the HIP fee in 2020 and expenses related to supplying much-needed assistance to our providers, communities and seniors to help them manage through the COVID-19 pandemic. The consolidated operating expense ratio was 17.1% , a 40 basis-point increase from the prior-year quarter. Selected Segment Quarterly Details
Managed Care
Managed Care premiums earned were $850.0 million 13.9% year-over-year. Medicare premiums earned of $400.7 million 9.2% from the prior-year period, largely due to an increase of approximately 20,000 member months, which primarily reflects a more competitive product offering and higher premium rates due to an increase in the premium rate benchmark and membership risk score. In addition, as utilization of services has trended to almost-normalized levels, the Company reduced the estimated MLR rebate accrual, which was originally recorded as a reduction of premiums. Medicaid premiums earned of $240.9 million 36.6% from the prior-year period, primarily reflecting higher member months of approximately 67,000, higher average premium rates following three premium rate increases effective November 1, 2019 , May 1, 2020 and July 1, 2020 , and the reinstatement of the HIP Fee pass-through in 2020. Commercial premiums earned of $208.4 million 2.6% from the prior-year period, mainly reflecting higher average premium rates, an increase of approximately 3,000 fully insured member months and the reinstatement of the HIP Fee pass-through in 2020. Reported MLR of 84.7% improved 170 basis points from the prior-year period, primarily reflecting higher average premium rates and the reinstatement of the HIP Fee in 2020, as well as lower utilization of services during the quarter as the result of the pandemic, offset in part by increased benefits in the Medicare product offering in 2020. Life Insurance Segment
Premiums earned of $50.1 million 9.4% from the prior-year period, resulting from new sales and the acquisition of a life insurance portfolio in the second quarter of 2020. Operating income was $5.7 million $6.6 million Property and Casualty Segment
Premiums earned of $23.9 million 0.8% from the prior-year period. Operating income was $4.4 million $6.6 million Updated information related to Hurricane María as of September 30, 2020 : The Company's P&C subsidiary has paid a cumulative amount of $767 million $967 million TSP closed 75 claims during the third quarter of 2020, increasing the number of claims closed to 97.5% ; 434 claims remain open. The Company has been served with process with respect to 322 of the 434 claims that remain open. 2020 Outlook
The Company is raising its full year 2020 guidance for adjusted net income per diluted share to be between $3.25 and $3.35 , compared to its previous outlook for adjusted net income per diluted share between $2.80 and $3.00 . The Company is currently assuming a weighted average diluted share count for full year 2020 of 23.4 million shares.
Conference Call and Webcast
Management will host a conference call and webcast today at 8:30 a.m. Eastern Time to discuss its financial results for the three months ended September 30, 2020 . To participate, callers within the U.S. and Canada should dial 1-877-300-8521 and international callers should dial 1-412-317-6026 at least ten minutes before the call.
To listen to the webcast, participants should visit the "Investor Relations" section of the Company's website 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 website, will be available about two hours after the call ends for one year. This news release, along with other information relating to the call, will be available on the "Investor Relations" section of the website.
About Triple-S Management Corporation
Triple-S Management Corporation is a healthcare company and one of the top players in the Puerto Rico healthcare industry, with over 60 years of experience as the premier brand serving more people through the most attractive provider networks on the island. We have the exclusive right to use the Blue Cross Blue Shield name and mark throughout Puerto Rico , the U.S. Virgin Islands , Costa Rica , the British Virgin Islands and Anguilla , and we offer a broad portfolio of managed care and related products in the Commercial, Medicare Advantage and Medicaid markets. Triple-S is also a well-known brand in the life insurance and property and casualty insurance markets in Puerto Rico , with strong customer relationships and a significant market share. For more information about Triple-S Management, visit www.triplesmanagement.com or contact investorrelations@ssspr.com .
Non-GAAP Financial Measures
This earnings release presents information about the Company's adjusted net income, which is a non-GAAP financial metric provided as a complement to the results provided in accordance with accounting principles generally accepted in the United States of America (GAAP). A reconciliation of adjusted net income to net income, the most comparable GAAP financial measure, is provided in the accompanying tables found at the end of this release.
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 and reserves 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 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.
Earnings Release Schedules and Supplemental Information
Condensed Consolidated Balance Sheets.................................................................................. Exhibit I
Condensed Consolidated Statements of Earnings..................................................................... Exhibit II
Condensed Consolidated Statements of Cash Flows................................................................ Exhibit III
Segment Performance Supplemental Information..................................................................... Exhibit IV
Reconciliation of Non-GAAP Financial Measures....................................................................... Exhibit V
Exhibit I
Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
Unaudited
September 30,
December 31,
Assets
Investments
$
1,874,331
$
1,643,637
Cash and cash equivalents
129,603
109,837
Premium and other receivables, net
546,959
567,692
Deferred policy acquisition costs and value of business acquired
243,663
234,885
Property and equipment, net
130,220
88,588
Other assets
195,511
174,187
Total assets
$
3,120,287
$
2,818,826
Liabilities and Stockholders' Equity
Policy liabilities and accruals
$
1,551,181
$
1,425,477
Accounts payable and accrued liabilities
423,083
370,483
Short-term borrowings
82,500
54,000
Long-term borrowings
53,836
25,694
Total liabilities
2,110,600
1,875,654
Stockholders' equity:
Common stock
23,430
23,800
Other stockholders' equity
986,970
920,065
Total Triple-S Management Corporation stockholders' equity
1,010,400
943,865
Non-controlling interest in consolidated subsidiary
(713)
(693)
Total stockholders' equity
1,009,687
943,172
Total liabilities and stockholders' equity
$
3,120,287
$
2,818,826
Exhibit II
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,
2020
2019
2020
2019
Revenues:
Premiums earned, net
$
922,934
$
815,021
$
2,657,366
$
2,442,516
Administrative service fees
3,752
2,607
8,755
7,695
Net investment income
14,168
15,176
42,294
45,614
Other operating revenues
2,052
3,167
6,394
6,335
Total operating revenues
942,906
835,971
2,714,809
2,502,160
Net realized investment gains (losses)
507
1,087
(180)
4,766
Net unrealized investment gains (losses) on equity investments
11,040
1,267
(17,428)
24,259
Other income, net
1,811
485
6,217
3,359
Total revenues
956,264
838,810
2,703,418
2,534,544
Benefits and expenses:
Claims incurred
761,792
680,010
2,129,401
2,009,504
Operating expenses
158,809
136,882
499,669
403,629
Total operating costs
920,601
816,892
2,629,070
2,413,133
Interest expense
2,096
2,062
5,813
5,681
Total benefits and expenses
922,697
818,954
2,634,883
2,418,814
Income before taxes
33,567
19,856
68,535
115,730
Income tax expense
9,989
5,910
27,520
36,075
Net income
23,578
13,946
41,015
79,655
Net (loss) attributable to the non-controlling interest
(3)
(2)
(20)
(10)
Net income attributable to Triple-S Management Corporation
$
23,581
$
13,948
$
41,035
$
79,665
Earnings per share attributable to Triple-S Management Corporation:
Basic net income per share
$
1.02
$
0.59
$
1.77
$
3.44
Diluted net income per share
$
1.02
$
0.58
$
1.76
$
3.43
Weighted average of common shares
23,073,511
23,830,106
23,215,840
23,143,361
Diluted weighted average of common shares
23,193,980
23,893,807
23,318,069
23,217,298
Exhibit III
Condensed Consolidated Statements of Cash Flows
(dollar amounts in thousands)
Unaudited
For the Nine Months Ended
September 30,
2020
2019
Net cash provided by (used in) operating activities
$
223,681
$
(3,455)
Cash flows from investing activities:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold
94,557
365,383
Fixed maturities matured/called
37,450
19,017
Securities held to maturity - fixed maturities matured/called
1,079
1,378
Equity investments sold
80,152
126,134
Other invested assets sold
13,231
3,379
Acquisition of investments:
Securities available for sale - fixed maturities
(206,387)
(397,956)
Securities held to maturity - fixed maturities
(1,087)
(748)
Equity investments
(201,324)
(88,945)
Other invested assets
(25,442)
(24,233)
Increase in other investments
(3,924)
(2,710)
Net change in policy loans
240
(1,097)
Net capital expenditures
(52,549)
(14,746)
Capital contribution on equity method investees
(7,083)
-
Net cash used in investing activities
(271,087)
(15,144)
Cash flows from financing activities:
Change in outstanding checks in excess of bank balances
16,814
3,808
Net change in short-term borrowings
28,500
-
Proceeds of long-term borrowings
30,841
-
Repayments of long-term borrowings
(2,760)
(2,425)
Repurchase and retirement of common stock
(14,980)
(1)
Proceeds from policyholder deposits
21,586
15,060
Surrender of policyholder deposits
(12,829)
(16,455)
Net cash provided by (used in) financing activities
67,172
(13)
Net increase (decrease) in cash and cash equivalents
19,766
(18,612)
Cash and cash equivalents, beginning of period
109,837
117,544
Cash and cash equivalents, end of period
$
129,603
$
98,932
Exhibit IV
Segment Performance Supplemental Information
(Unaudited)
Three months ended September 30,
Nine months ended September 30,
(dollar amounts in millions)
2020
2019
Percentage
2020
2019
Percentage
Premiums earned, net:
Managed Care:
Commercial
$ 208.4
$ 203.1
2.6%
$ 605.3
$ 602.4
0.5%
Medicare
400.7
367.1
9.2%
1,160.9
1,065.7
8.9%
Medicaid
240.9
176.3
36.6%
682.9
577.7
18.2%
Total Managed Care
850.0
746.5
13.9%
2,449.1
2,245.8
9.1%
Life Insurance
50.1
45.8
9.4%
144.9
135.1
7.3%
Property and Casualty
23.9
23.7
0.8%
66.9
64.9
3.1%
Other
(1.0)
(1.0)
0.0%
(3.5)
(3.3)
(6.1% )
Consolidated premiums earned, net
$ 923.0
$ 815.0
13.3%
$ 2,657.4
$ 2,442.5
8.8%
Operating revenues: 1
Managed Care
$ 858.2
$ 755.8
13.5%
$ 2,473.7
$ 2,273.7
8.8%
Life Insurance
57.0
52.5
8.6%
165.5
155.1
6.7%
Property and Casualty
26.1
26.2
(0.4% )
73.5
72.3
1.7%
Other
1.6
1.4
14.3%
2.1
1.0
110.0%
Consolidated operating revenues
$ 942.9
$ 835.9
12.8%
$ 2,714.8
$ 2,502.1
8.5%
Operating income (loss): 2
Managed Care
$ 13.0
$ 5.4
140.7%
$ 56.5
$ 56.8
(0.5% )
Life Insurance
5.7
6.6
(13.6% )
20.2
17.5
15.4%
Property and Casualty
4.4
6.6
(33.3% )
10.9
14.9
(26.8% )
Other
(0.8)
0.4
(300.0% )
(1.9)
(0.2)
(850.0% )
Consolidated operating income
$ 22.3
$ 19.0
17.4%
$ 85.7
$ 89.0
(3.7% )
Operating margin: 3
Managed Care
1.5%
0.7%
80 bp
2.3%
2.5%
-20 bp
Life Insurance
10.0%
12.6%
-260 bp
12.2%
11.3%
90 bp
Property and Casualty
16.9%
25.2%
-830 bp
14.8%
20.6%
-580 bp
Consolidated
2.4%
2.3%
10 bp
3.2%
3.6%
-40 bp
Depreciation and amortization expense
$ 3.1
$ 3.7
(16.2% )
$ 10.9
$ 10.7
1.9%
1 Operating revenues include premiums earned, net, administrative service fees and net investment income.
2 Operating income or loss include operating revenues minus operating costs. Operating costs include claims incurred and operating expenses.
3 Operating margin is defined as operating income or loss divided by operating revenues.
Managed Care Additional Data
Three months ended
Nine months ended
(Unaudited)
2020
2019
2020
2019
Member months enrollment:
Commercial:
Fully-insured
966,906
964,321
2,920,460
2,872,836
Self-insured
324,372
356,059
981,634
1,072,510
Total Commercial
1,291,278
1,320,380
3,902,094
3,945,346
Medicare Advantage
407,170
386,995
1,220,280
1,156,438
Medicaid
1,132,626
1,065,885
3,278,098
3,187,753
Total member months
2,831,074
2,773,260
8,400,472
8,289,537
Claim liabilities (in millions)
$ 420.6
$ 390.3
Days claim payable
57
56
Premium PMPM:
Managed Care
$ 339.09
$ 308.83
$ 330.12
$ 311.18
Commercial
215.53
210.61
207.26
209.69
Medicare Advantage
984.11
948.59
951.34
921.54
Medicaid
212.69
165.40
208.32
181.22
Medical loss ratio:
84.7%
86.4%
82.7%
84.9%
Commercial
81.9%
84.7%
76.1%
82.8%
Medicare Advantage
80.6%
81.1%
80.2%
81.4%
Medicaid
94.0%
99.6%
92.7%
93.4%
Adjusted medical loss ratio: 1
82.1%
89.4%
81.3%
86.5%
Commercial
78.3%
88.5%
74.9%
85.1%
Medicare Advantage
78.4%
81.6%
78.9%
80.9%
Medicaid
91.7%
104.9%
91.0%
97.2%
Operating expense ratio:
Consolidated
17.1%
16.7%
18.7%
16.5%
Managed Care
14.6%
14.0%
15.9%
13.8%
1 The adjusted medical loss ratio accounts for subsequent adjustments to estimates, such as prior-period reserve developments and Medicare premium adjustments, and presents them in their corresponding period.
Managed Care Membership by Segment
Managed Care Membership by Segment
As of September 30,
2020
2019
Members:
Commercial:
Fully-insured
321,673
322,992
Self-insured
107,830
119,077
Total Commercial
429,503
442,069
Medicare Advantage
136,135
128,660
Medicaid
385,344
354,230
Total members
950,982
924,959
Exhibit V
Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income
(Unaudited)
Three months ended
Nine months ended
(dollar amounts in millions, except per share data)
2020
2019
2020
2019
Net income
$ 23.6
$ 13.9
$ 41.0
$ 79.7
Less adjustments, net of taxes:
Net realized investment gains (losses)
0.4
0.9
(0.1)
3.8
Unrealized gains (losses) on equity investments
8.8
1.0
(13.9)
19.4
Contingency accrual
-
-
(20.0)
-
Private equity investment income (loss)
0.2
(0.1)
2.4
1.0
Adjusted net income
$ 14.2
$ 12.1
$ 72.6
$ 55.6
Diluted adjusted net income per share
$ 0.61
$ 0.51
$ 3.12
$ 2.39
Adjusted net income is a non-GAAP financial metric and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. Management believes that the use of this adjusted net income and adjusted net income per share provides investors and management useful information about the earnings impact of realized and unrealized investment gains or losses, as well as other non-recurring items impacting the Company's results of operations. This non-GAAP metric does not consider all the items associated with the Company's operations as determined in accordance with GAAP. As a result, one should not consider these measures in isolation.
FOR FURTHER INFORMATION:
AT THE COMPANY:
INVESTOR RELATIONS:
Juan José Román-Jiménez
Mr. Garrett Edson
EVP and Chief Financial Officer
ICR
(787) 749-4949
(787) 792-6488
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SOURCE Triple-S Management Corporation
