Triple-S Management Corporation Reports Fourth Quarter 2010 Results

News provided by

Triple-S Management Corporation

Feb 09, 2011, 07:00 ET

SAN JUAN, Puerto Rico, Feb. 9, 2011 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), one of the leading managed care companies in Puerto Rico, today announced consolidated revenues of $431.6 million and operating income of $21.7 million for the three months ended December 31, 2010.  Net income of $20.0 million, or $0.69 per diluted share, includes an after tax net gain of $6.5 million, or $0.22 per diluted share, related to net realized and unrealized gains on investments and derivatives.  Pro forma net income was $13.5 million, or $0.47 per diluted share.

Fourth-Quarter Consolidated Highlights

  • Total consolidated operating revenues were $423.6 million;
  • Operating income was $21.7 million;
  • Excluding net realized and unrealized gains and losses on investments and derivatives, net income was $13.5 million, or $0.47 per diluted share;
  • Consolidated loss ratio was 79.6% and the medical loss ratio (MLR) was 84.0%;
  • Commercial fully-insured member month enrollment rose 1.2%.

"The period's results were in line with expectations, including a 4.6% increase in our Commercial premiums and lower adjusted MLR," said Ramon M. Ruiz-Comas, President and Chief Executive Officer.  "Our results for this quarter demonstrate the stability of our continuing businesses despite losing the Medicaid revenue stream. Since August, we have moved quickly to identify opportunities to grow our business and absorb the G&A impact of closing this business.  Our capital resources are being redeployed into our Medicare and Commercial businesses, which we believe have the most significant potential going forward."

Ruiz-Comas continued, "The recently completed acquisition of American Health reflects our ongoing commitment to identify strategically appropriate acquisition opportunities within Puerto Rico where we can capitalize on the strength of our physician networks, brand leadership, and ability to grow market share.  This transaction, which will be immediately accretive, positions us for continued expansion in the Medicare Advantage segment.  We also anticipate that the premium revenue and efficiencies associated with this acquisition will compensate for the impact of future CMS rate adjustments."

"As we enter 2011, we are excited about our growth prospects.  We are pleased with our steadily improving corporate performance, our disciplined operating cost management, the success of our medical management initiatives, and our diversified and growing business base.  Our strategic focus on Medicare Advantage and our well established presence in the Commercial market, along with improving cash flow and greater corporate efficiencies, should position us well for the remainder of this year and beyond," concluded Ruiz-Comas.

Selected Quarterly Details

  • Pro Forma Net Income was $13.5 million, or $0.47 Per Diluted Share.  Weighted average shares outstanding were 29.1 million.  This compares with pro forma net income of $24.4 million, or $0.83 per diluted share, in the corresponding quarter of 2009, based on weighted average shares outstanding of 29.3 million.
  • Consolidated Premiums Fell 14.8% to $407.6 million.  The decline is principally due to the termination of the Medicaid contracts.  Consolidated premiums, excluding Medicaid, posted a 2.1% year-over-year increase, largely the result of higher rates and increased Commercial member month enrollment.  
  • Consolidated Administrative Service Fees Declined 74.7% to $4.7 million.  The significant decrease primarily reflects the termination of the Medicaid contracts and a performance incentive recorded in the 2009 period as the result of the savings achieved in the Metro-North region.
  • Managed Care Membership.  Fully insured Commercial membership was 484,163, up 0.7% from last year.  Medicare membership declined 8.7%, to 63,553, mostly in the dual-eligible product.  Medicaid fully insured membership was 340,453 at the end of 2009.
  • Consolidated Loss Ratio Fell By 500 Basis Points.  Consolidated claims incurred were $324.6 million, 19.8% below a year ago, principally due to the termination of the Medicaid contracts.  The lower consolidated loss ratio reflects the lost Medicaid business, which had an MLR of 97.2% in 2009.
  • Managed Care MLR Declined By 470 Basis Points to 84.0%.  Excluding the effect of the lost Medicaid contracts, the ratio increased 100 basis points, reflecting a higher Medicare Advantage MLR offset by a 40-basis-point reduction in the Commercial MLR.
  • Consolidated Operating Expense Ratio Was 18.7%.  The consolidated operating expense ratio rose 440 basis points from the prior year mainly due to the termination of the Medicaid contracts.  Consolidated operating expenses increased by $6.0 million, or 8.4%, from a year ago, primarily attributable to increased IT costs related to our new managed care electronic data processing system, higher intangible asset amortization, and marketing and advertising expenses.
  • Consolidated Operating Income Declined 36.5% to $21.7 Million.  The decrease reflects the termination of the Medicaid contracts, higher consolidated operating expenses and a higher performance incentive recorded in the 2009 period.
  • Consolidated Operating Income Margin Was 5.1%. The consolidated operating margin narrowed by 160 basis points year-over -year due to lower revenue and increased operating expenses.
  • Parent Company Information.  As of December 31, 2010, Triple-S Management had $62.8 million in parent company cash, cash equivalents, and investments.

(Unaudited)

Pro Forma Net Income

Three months ended


Year ended

(dollar amounts in millions)

December 31,

December 31,




2010

2009

2010

2009









Pro forma net income:





Net income

$20.0

$28.1

$66.8

$68.8

Net realized investment gains, net of tax

(2.3)

(1.5)

(2.2)

(0.5)

Net unrealized trading investments gains, net of tax

(4.1)

(2.1)

(4.6)

(8.9)

Derivative loss (gain), net of tax

(0.1)

(0.1)

0.8

-


Pro forma net income

$13.5

$24.4

$60.8

$59.4









Diluted pro forma net income per share

$0.47

$0.83

$2.08

$2.01









Year-End Recap

For the year ended December 31, 2010, consolidated operating revenues rose 1.0%, to $1.99 billion, primarily reflecting growth in the Managed Care segment.  Consolidated claims incurred were $1.60 billion, down 0.6% year-over- year.  The consolidated loss ratio and MLR for the year ended December 31, 2010 decreased 190 basis points and 180 basis points, respectively.  Accounting for reserve developments, loss adjustment expenses associated with exiting the Medicaid business, and premium adjustments, the MLR decreased 100 basis points.  The MLR improvement in the year is mostly the result of the new risk-sharing agreement with our providers in the Medicare Advantage dual eligible product and lower Commercial utilization trends.  Consolidated operating expenses for the twelve months ended December 31, 2010, were $305.0 million and the operating expense ratio was 15.7%.  Pro forma net income for the year ended December 31, 2010, was $60.8 million, or $2.08 per diluted share, based on weighted average shares outstanding of 29.2 million, compared with $59.4 million, or $2.01 per diluted share, based on weighted average shares outstanding of 29.6 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 gain or loss divided by operating revenues.

(Unaudited)

Three months ended

December 31,

Year ended December 31,

(dollar amounts in millions)

Percentage


Percentage




2010

2009

Change

2010

2009

Change











Premiums earned, net:







Managed Care:








Commercial

$232.1

$221.9

4.6%

$947.1

$822.1

15.2%


Medicaid

11.7

90.4

(87.1%)

284.8

348.1

(18.2%)


Medicare

113.7

118.3

(3.9%)

468.4

506.9

(7.6%)



Total managed care

357.5

430.6

(17.0%)

1,700.3

1,677.1

1.4%

Life Insurance

27.1

25.6

5.9%

105.8

100.1

5.7%

Property and Casualty

24.0

23.2

3.4%

99.2

96.2

3.1%

Other

(1.0)

(1.1)

(9.1%)

(4.2)

(4.3)

(2.3%)


Total premiums earned

$407.6

$478.3

(14.8%)

$1,901.1

$1,869.1

1.7%











Operating revenues:







Managed Care

$368.2

$455.6

(19.2%)

$1,763.3

$1,750.0

0.8%

Life Insurance

31.3

29.9

4.7%

122.9

116.9

5.1%

Property and Casualty

25.9

26.1

(0.8%)

109.3

107.9

1.3%

Other

(1.8)

(1.4)

28.6%

(5.7)

(5.0)

14.0%


Total operating revenues

$423.6

$510.2

(17.0%)

$1,989.8

$1,969.8

1.0%











Operating income:







Managed Care

$16.3

$25.1

(35.1%)

$63.8

$57.2

11.5%

Life Insurance

4.3

3.6

19.4%

17.3

14.6

18.5%

Property and Casualty

0.3

4.4

(93.2%)

3.6

8.8

(59.1%)

Other

0.8

1.1

(27.3%)

3.3

4.0

(17.5%)


Total operating income

$21.7

$34.2

(36.5%)

$88.0

$84.6

4.0%











Operating margin:







Managed Care

4.4%

5.5%

-110 bp

3.6%

3.3%

30 bp

Life Insurance

13.7%

12.0%

170 bp

14.1%

12.5%

160 bp

Property and Casualty

1.2%

16.9%

-1570 bp

3.3%

8.2%

-490 bp

Consolidated

5.1%

6.7%

-160 bp

4.4%

4.3%

10 bp











Depreciation









and amortization expense

$3.8

$3.3

15.2%

$14.4

$9.6

50.0%



Three months ended


Year ended



December 31,

December 31,

Managed Care Additional Data

2010

2009

2010

2009

(dollar amounts in millions)







Member months enrollment







Commercial:







   Fully-insured

1,461,006

1,443,808

5,982,094

5,421,586

   Self-funded

726,747

771,039

2,966,291

2,726,036

      Total Commercial

2,187,753

2,214,847

8,948,385

8,147,622











Medicaid:







   Fully-insured

0

1,018,532

3,078,288

4,016,332

   Self-funded

0

597,576

1,782,426

2,321,144

      Total Medicaid

0

1,616,108

4,860,714

6,337,476










Medicare:







   Medicare Advantage

163,628

177,227

670,250

742,666

   Stand-alone PDP

27,902

29,399

112,297

117,700

      Total Medicare

191,530

206,626

782,547

860,366

      Total member months

2,379,283

4,037,581

14,591,646

15,345,464










Claim liabilities

$236.2

$236.4













Days claim payable




58.0

57.0










Premium PMPM:








Managed care

$216.35

$161.32

$172.74

$162.85

   Commercial

$158.83

$153.67

$158.31

$151.64

   Medicaid

-

$88.74

$92.52

$86.67

   Medicare

$593.89

$572.46

$598.56

$589.09










Consolidated loss ratio

79.6%

84.6%

84.0%

85.9%









Medical loss ratio

84.0%

88.7%

88.1%

89.9%

   Commercial

88.7%

89.1%

89.7%

90.4%

   Medicaid

-

97.2%

89.5%

91.8%

   Medicare Advantage

85.6%

81.7%

84.3%

88.0%

   Medicare Part D

59.6%

68.4%

71.7%

85.4%










Adjusted Medical Loss Ratio

87.1%

89.2%

88.1%

89.1%

Commercial

87.5%

89.8%

89.3%

90.3%

Medicaid

-

93.8%

92.3%

91.0%

Medicare Advantage

84.8%

84.8%

83.7%

86.0%

Medicare Part D

60.5%

72.4%

71.2%

86.9%










Consolidated operating







  expense ratio

18.7%

14.3%

15.7%

14.6%








Managed Care Operating









expense ratio

14.2%

10.8%

11.6%

10.7%

Managed Care

As of December 31,

Membership by Segment

2010

2009






Members:




Commercial:



Fully-insured

484,163

480,671


Self-insured

241,165

256,615



Total Commercial

725,328

737,286







Medicare:




Medicare Advantage

54,276

59,825


PDP

9,277

9,780



Total Medicare

63,553

69,605







Medicaid:




Fully-insured

-

340,453


Self-insured

-

199,689



Total Medicaid

-

540,142









Total members

788,881

1,347,033

2011 Guidance

Ruiz-Comas said, "Entering 2011, we have remained focused on driving organic growth with new marketing initiatives and our expanded agent network, as well as reducing our MLR, which will further boost margins. Our guidance for this year includes the recent acquisition of American Health."

2011 Range

Medical enrollment fully-insured

 (member months)

7.1-7.3 million


Medical enrollment self-insured

 (member months)

2.5-2.6 million


Consolidated operating revenues

 (in billions)

$2.0-$2.2


Consolidated loss ratio

83.0%-84.0%


Medical loss ratio

87.0%-88.0%


Consolidated operating expense


 Ratio

15.3%-15.8%


Consolidated operating income (in


 millions)

$89.0-$95.0


Consolidated effective tax rate

21.5%-23.5%


Pro forma earnings per share

$2.13-$2.23


Weighted average of diluted shares

 outstanding (in millions)

29.1

Conference Call and Webcast

Management will host a conference call and webcast Wednesday, February 9 at 9:00 a.m. Eastern Time to discuss its financial results for the fourth quarter and year ended December 31, 2010, as well as expectations for future earnings.  To participate, callers within the U.S. and Canada should dial 1-877-941-2928, and international callers should dial 1-480-629-9725 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 one of the leading players 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 offer 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 [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.

-FINANCIAL TABLES ATTACHED-

Condensed Consolidated Balance Sheets

(Dollar amounts in thousands, except per share data)











































Unaudited
December 31,
2010

December 31,
2009

Assets

















Investments

$

1,105,926

$

1,049,309

Cash and cash equivalents

45,021

40,376

Premium and other receivables, net

325,780

272,932

Deferred policy acquisition costs and value of business acquired

146,086

139,917

Property and equipment, net

76,745

68,803

Other assets

60,121

77,367












Total assets

$

1,759,679

$

1,648,704






















Liabilities and Stockholders’ Equity

















Policy liabilities and accruals

$

760,028

$

738,970

Accounts payable and accrued liabilities

241,352

204,295

Long-term borrowings

141,027

167,667












Total liabilities

1,142,407

1,110,932










Stockholders’ equity:






Common stock

28,816

29,153

Other stockholders equity

588,456

508,619












Total stockholders’ equity

617,272

537,772














Total liabilities and stockholders’ equity

$

1,759,679

$

1,648,704

Condensed Consolidated Statements of Earnings

(Dollar amounts in thousands, except per share data)











































For the Three Months Ended

For the Year Ended







December 31,

December 31,







Unaudited
2010

Historical
2009

Unaudited
2010

Historical
2009

Revenues:













Premiums earned, net

$

407,651

$

478,306

$

1,901,100

$

1,869,086

Administrative service fees

4,687

18,661

39,546

48,643

Net investment income

11,257

13,280

49,145

52,136
















Total operating revenues

423,595

510,247

1,989,791

1,969,865



















Net realized investment gains (losses):













Total other-than-temporary impairment losses on securities

(64)

(1,165)

(2,997)

(7,118)


Net realized gains, excluding other-than-temporary














impairment losses on securities

2,855

2,981

5,529

7,732





















Total net realized investment gains



2,791

1,816

2,532

614



















Net unrealized investment gain on trading securities

4,802

2,461

5,433

10,497

Other income, net

485

845

889

1,237
















Total revenues

431,673

515,369

1,998,645

1,982,213
































Benefits and expenses:












Claims incurred

324,609

404,724

1,596,789

1,605,874

Operating expenses

77,293

71,358

304,995

279,418

















Total operating costs

401,902

476,082

1,901,784

1,885,292



















Interest expense

3,032

3,311

12,658

13,270
















Total benefits and expenses

404,934

479,393

1,914,442

1,898,562
















Income before taxes

26,739

35,976

84,203

83,651














Income tax expense

6,675

7,872

17,402

14,871
















Net income

$

20,064

$

28,104

$

66,801

$

68,780














Basic net income per share

$

0.69

$

0.96

$

2.30

$

2.33


















Diluted earnings per share

$

0.69

$

0.96

$

2.28

$

2.33

Condensed Consolidated Statements of Cash Flows

(Dollar amounts in thousands, except per share data)































For the Year Ended







December 31,







Unaudited
2010

Historical
2009












Net cash provided by operating activities

$

37,063

$

72,585










Cash flows from investing activities:






Proceeds from investments sold or matured:







Securities available for sale:








Fixed maturities sold

121,968

241,368



Fixed maturities matured

175,483

189,144



Equity securities

41,802

9,877


Securities held to maturity:








Fixed maturities matured

2,587

7,819

Acquisition of investments:







Securities available for sale:








Fixed maturities

(337,569)

(459,705)



Equity securities

(26,957)

(3,684)


Fixed maturity securities held to maturity

(1,050)

(1,502)

Net inflows / (outflows) for policy loans

53

(489)

Net capital expenditures

(19,222)

(18,706)














Net cash used in investing activities

(42,905)

(35,878)










Cash flows from financing activities:






Change in outstanding checks in excess of bank balances

281

(5,645)

Proceeds from short-term borrowings, net

40,575

-

Repayments of long-term borrowings

(26,367)

(1,640)

Repurchase and retirement of common stock

(5,642)

(32,355)

Proceeds from policyholder deposits

10,691

4,307

Surrenders of policyholder deposits

(9,051)

(7,093)














Net cash provided by / (used in) financing activities

10,487

(42,426)














Net increase / (decrease) in cash and cash equivalents

4,645

(5,719)












Cash and cash equivalents, beginning of period

40,376

46,095










Cash and cash equivalents, end of period

$

45,021

$

40,376

SOURCE Triple-S Management Corporation

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

icon3
440k+
Newsrooms &
Influencers
icon1
9k+
Digital Media
Outlets
icon2
270k+
Journalists
Opted In
GET STARTED