Triple-S Management Corporation Reports Second Quarter 2012 Results

SAN JUAN, Puerto Rico, Aug. 1, 2012 /PRNewswire/ -- Triple-S Management Corporation (NYSE:GTS), the leading managed care company in Puerto Rico, today announced consolidated revenues of $623.0 million and operating income of $24.2 million for the three months ended June 30, 2012.  Net income was $17.0 million, or $0.60 per diluted share, which includes an after tax net investment gain of $0.4 million, or $0.02 per share.

June-Quarter Consolidated Highlights

• Total consolidated operating revenues were $622.7 million;
• Operating income was $24.2 million;
• Consolidated loss ratio was 85.2%;
• Medical loss ratio (MLR) was 88.7%;
• Managed Care member month enrollment increased 111.0%;
• Medicare member month enrollment rose 16.9%.

Ramon M. Ruiz-Comas, President and Chief Executive Officer of Triple-S Management Corporation, commented, "We were pleased with our solid second quarter results, achieving membership growth in each of our three managed care businesses while maintaining control of our operating expenses.  Our Life and Property and Casualty Insurance segments also posted solid performance consistent with our expectations.

"Within our Medicare business, we are making progress in our efforts to better assess the health risk of our patient population.  Moreover, we continue working on the main issues that caused the shortfall at American Health last quarter, and a number of key initiatives are being implemented.  We are in the midst of renegotiations with American Health's PBM, and have submitted bids for the 2013 open enrollment season, which take into account the increased pharmacy utilization that we have been experiencing.  Our purchase of American Health provided us with a solid foothold in the growing Medicare Advantage business and remains an integral component of our long-term strategy.  We are committed to this market and believe that we have the brand recognition, products and physician network necessary to exploit this opportunity," continued Mr. Ruiz-Comas.

"We believe that having a strong, diversified and seasoned management team is instrumental to our long-term success.  Recently, Amílcar L. Jordan joined Triple-S Management as Vice President and Chief Financial Officer, bringing over 27 years of financial industry and risk management experience.  We look forward to his ongoing contributions as we continue to build and deliver shareholder value," concluded Mr. Ruiz-Comas.

Selected Quarterly Details

• Pro Forma Net Income was $16.6 million, or $0.58 Per Diluted Share.  Weighted average shares outstanding were 28.5 million.  This compares with pro forma net income of $11.4 million, or $0.39 per diluted share, in the corresponding quarter of 2011, based on weighted average shares outstanding of 29.0 million.
• Consolidated Premiums Increased 14.2%, to $582.2 Million.  The increase was principally due to a higher member month enrollment in the Medicare business and the overall increase in premiums per member per month.
• Consolidated Administrative Service Fees Rose 297.1%, to $27.8 Million.  The significant increase in service fees was driven by the addition of the Medicaid ASO business (miSalud), effective November 1, 2011.
• Managed Care Membership.  Our Managed Care membership grew by 112.3% year-over-year, reflecting the addition of the miSalud business, in which self-insured membership was 889,091 at the end of the quarter. Medicare membership increased 17.3%, to 122,151.  Fully insured Commercial membership was down 0.2% from the same period last year.
• Managed Care MLR Increased 70 Basis Points, to 88.7%.  The increased MLR results from a higher MA member month enrollment, which business has an inherently higher MLR than the Commercial business, and to higher-than-expected utilization and cost trends in the Medicare business, primarily at American Health, partially offset by the higher Medicare risk score adjustments received in 2012.
• Consolidated Loss Ratio Increased 130 Basis Points, to 85.2%.  The higher consolidated loss ratio mainly reflects the 70-basis-point increase in the Managed Care MLR and an increase in the claims incurred in the Life segment, resulting from a higher loss ratio in the Cancer business and an increase in the liability for future policy benefits. The loss ratio in the Property and Casualty Insurance segment, although lower than in the first quarter of 2012, also experienced year-over-year increases.
• Consolidated Operating Expense Ratio Rose 20 Basis Points, to 16.8%.  The higher consolidated operating expense ratio is due to the increase in self-insured contracts associated with our participation in the miSalud business.
• Consolidated Operating Income Increased 55.1%, to $24.2 Million.  The increase reflects the contribution from the miSalud business, the higher Medicare risk score adjustments received in 2012, and the improved operating income of the Property and Casualty segment, partly offset by the increased MLR in the Medicare business.
• Consolidated Operating Income Margin Was 3.9%.  The 100-basis-point improvement in the consolidated operating margin is primarily the result of the increased profitability in our Managed Care and Property and Casualty Insurance segments.
• Consolidated Effective Tax Rate Was 22.0%.  The consolidated income tax expense rose by $1.9 million, or 65.5%, reflecting the increased taxable income in the Managed Care segment, which operates at a higher effective rate.
• Parent Company Information.  As of June 30, 2012, Triple-S Management had $50.7 million in parent company cash, cash equivalents, and investments.

Six-Month Recap

For the six months ended June 30, 2012, consolidated operating revenues increased 17.1%, to $1.21 billion, primarily reflecting higher member month enrollment in the Medicare and Commercial segments, the addition of the miSalud business, and the receipt of higher Medicare risk score adjustments in 2012 when compared with the prior year.  Consolidated claims incurred for the six-month period were $971.9 million, up 17.0% year-over-year.  The six-month consolidated loss ratio increased 250 basis points to 86.0%, while the MLR rose 190 basis points, to 89.6%.  This increase was driven by a higher MA member month enrollment and higher-than-expected utilization and cost trends in the Medicare business, primarily at American Health.  Consolidated operating expenses for the six months ended June 30, 2012 were $204.8 million and the operating expense ratio was 17.3%.  Pro forma net income for the six-month period was $22.7 million, or $0.80 per diluted share, based on weighted average shares outstanding of 28.5 million, compared with $24.3 million, or $0.84 per diluted share, based on weighted average shares outstanding of 29.0 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 income or loss divided by operating revenues.

2012 Guidance

The company's full-year outlook, remains unchanged, except for the consolidated effective tax rate, which was lowered from 25% - 26% to 23% - 24%.

Conference Call and Webcast

Management will host a conference call and webcast on August 1, 2012 at 9:00 a.m., Eastern Time to discuss its financial results for the three months ended June 30, 2012.  To participate, callers within the U.S. and Canada should dial 1-877-941-0844, and international callers should dial 1-480-629-9835 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 leading player 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 offers 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, utilization management and Star ratings programs
• Ability to maintain Federal Employee Program, 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-

SOURCE Triple-S Management Corporation

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