Triple-S Management Corporation Reports First Quarter 2016 Results

SAN JUAN, Puerto Rico, May 5, 2016 /PRNewswire/ -- Triple-S Management Corporation (NYSE:GTS), a leading managed care company in Puerto Rico, today announced consolidated revenues of $756.7 million and pro forma net income of $3.4 million, or $0.14 per diluted share, for the quarter ended March 31, 2016, versus $9 million, or 34 cents per share, a year ago.

Quarterly Consolidated Highlights

• Consolidated operating revenues were $755.8 million, a 31.7% increase from last year, reflecting the change in the Medicaid contract from an administrative services only agreement to an at-risk model;
• Consolidated operating income was $6.1 million;
• Consolidated loss ratio was 84.9%;
• Medical loss ratio (MLR) was 87.9%;
• Net income was $3.4 million, or $0.14 per diluted share.

Roberto García-Rodríguez, President and Chief Executive Officer of Triple-S Management, said, "We are pleased with the steady operational improvement we have made in what remains a challenging Puerto Rico economy. In Medicare Advantage, we continue implementing strategies to address scheduled rate reductions and improve our Star ratings. On the Commercial front, our underwriting discipline has continued to serve us well, resulting in a further MLR decline. Medicaid is performing in line with our expectations and we are beginning rate negotiations for the upcoming contract year, which will become effective July 1."

"We have made significant progress on the first phase of our multi-year strategic transformation. With our redesigned and unified leadership, we are now integrating our three Managed Care businesses and implementing our new clinical strategy to provide our members with access to high value, integrated care."

Garcia-Rodriguez concluded, "Over the next two to three years, the lion's share of our corporate resources will be funneled toward the growth of our core managed care business. Our management team is keenly focused on making disciplined capital allocation decisions that create significant long-term value for our shareholders. As we continue to gain better visibility of Puerto Rico's fiscal and economic issues, we should be better positioned to resume providing guidance next year."

Selected Consolidated Quarterly Details

• Pro-forma net income was $3.4 million, or $0.14 per diluted share, decreasing 62.2% year over year, reflecting a higher Managed Care MLR.
• Consolidated premiums earned were $738.5 million, up 38.7% from last year. The increase was principally due to the additional Managed Care premiums generated by the change in the Medicaid contract from an ASO to an at-risk model, which was effective April 1, 2015.
• Administrative service fees fell 82.5% year over year, to $5.1 million, reflecting the change in the Medicaid delivery model mentioned above.
• The consolidated loss ratio of 84.9% was up 370 basis points from a year ago. The increase reflects a higher Managed Care MLR, offset by respective declines of 400 basis points and 200 basis points in the loss ratio of the Property and Casualty and Life Insurance segments.
• The consolidated operating expense ratio of 16.5% was 620 basis points lower than last year, largely due to the increase in consolidated premiums earned and the reduction in the number of regions in the Medicaid business from eight to two when the contract changed from an ASO to an at-risk model.
• Triple-S Management repurchased 367,101 shares during the quarter. As of March 31, 2016, the Company has approximately $14.1 million remaining under the buyback program authorized in November 2015.

Selected Managed Care Segment Quarterly Details

• Managed Care premiums earned were $678.7 million, up $206.2 million, or 43.6%, year over year, largely reflecting an increase in fully-insured membership.
  • Total Medicaid premiums were up $202.2 million as a result of the change to the new at-risk contract.
  • Commercial premiums were up 1.4% from a year ago, to $215.5 million, reflecting higher average premium rates, offset in part by a 4.6% decline in fully-insured member month enrollment.
  • Medicare premiums of $261.0 million grew 0.4% year over year, resulting from a 5% member month enrollment increase, offset by lower average premium rates reflecting the reduction in Medicare reimbursement.
• Administrative service fees were down 79.1% year over year, to $6.3 million, reflecting the change in the Medicaid contract from an ASO to an at-risk model. Self-insured Commercial member month enrollment decreased 5% year over year.
• Managed Care MLR of 87.9% was up 320 basis points from a year ago. The higher MLR largely reflects the following:
  • An increase in the Medicare MLR, due to the 2016 reimbursement rate decrease of approximately 5% and an additional $6 million in claims and related service costs related to a higher completion rate of HRAs compared with the first quarter last year.
  • The impact of the new Medicaid at-risk contract, which has a higher loss ratio.
  • A 40 basis point decrease in the Commercial MLR which includes, the impact of prior period favorable reserve developments.

Excluding the impact of prior-period reserve developments and other claim and premium adjustments, the Managed Care MLR increased 60 basis points.

Conference Call and Webcast

Management will host a conference call and webcast on May 5, 2016 at 9:00 a.m. Eastern Time to discuss its financial results for the three months ended March 31, 2016. 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, Medicare Advantage, and Medicaid 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 [email protected].

Non-GAAP Financial Measures

This earnings release presents information about the Company's pro-forma 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 pro-forma 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
• 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.

Earnings Release Schedules and Supplementary Information

Exhibit I

Exhibit II

Exhibit III

Exhibit IV

Segment Performance Supplemental Information

Exhibit V

Reconciliation of Non-GAAP Financial Measures

Pro-forma 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 pro-forma net income and pro-forma net income per share provides investors and management useful information about the earnings impact of realized investment gains and other non-recurring items impacting the Company's results of operations.  This non-GAAP metric does not consider all of 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.

¹ The pro-forma net income for 2015 was modified to exclude income generated from private equity investments not under management's control.

SOURCE Triple-S Management Corporation

Related Links

http://www.triplesmanagement.com