Triple-S Management Corporation Reports Second Quarter 2014 Results

SAN JUAN, Puerto Rico, Aug. 5, 2014 /PRNewswire/ -- Triple-S Management Corporation (NYSE:GTS), the leading managed care company in Puerto Rico, today announced consolidated revenues of $590.7 million and consolidated operating income of $34.0 million for the three months ended June 30, 2014. Net income was $27.4 million, or $1.01 per diluted share.

Quarterly Consolidated Highlights

• Total consolidated operating revenues were $586.2 million;
• Consolidated operating income was $34.0 million;
• Consolidated loss ratio was 78.8%;
• Medical loss ratio (MLR) was 82.4%;
• Managed Care member month enrollment increased 27.5% year over year.

Ramon Ruiz-Comas, President and CEO of Triple-S Management Corporation commented, "Our second-quarter earnings reflect continued progress with our operations and strategic initiatives. The Managed Care segment reported operating income of $27.9 million, driven by a 340-basis-point MLR decline, including favorable prior-period reserve developments. Moreover, the Property & Casualty and Life segments both had a strong showing, contributing $4.5 million and $5.2 million to operating income, respectively, resulting from a better loss experience."

Ruiz-Comas continued, "On the Medicaid front, we recently signed an extension of the existing contract with the Puerto Rico Health Insurance Administration (ASES) through March 31, 2015. Proposals under the new RFP, which will require services to be provided under an at-risk model, need to be submitted later this month. ASES has announced that they anticipate making a decision by the end of the third quarter."

"Through our ongoing comprehensive strategic review, we have begun garnering operating efficiencies and addressing organizational changes necessary to compete effectively in the evolving healthcare marketplace. Administrative expenses continue to decline, helping to substantially offset the increase in costs associated with the implementation of new taxes and regulatory fees, as well as the three additional Medicaid service regions. Nonetheless, we remain cautious as we look out over the next two years, reflecting the economic environment in Puerto Rico, the possible effect of previously announced spending reductions by the local government, and the final outcome of the Medicaid bid.  Management continues to evaluate the best uses of our capital and remains keenly focused on enhancing the performance of our core business," said Ruiz-Comas. 

Selected Quarterly Details

• Pro Forma Net Income Was $24.1 Million, or $0.89 Per Diluted Share.  Weighted average shares outstanding were 27.1 million. This compares with pro forma net income of $14.9 million, or $0.53 per diluted share, in the corresponding quarter of 2013, based on weighted average shares outstanding of 27.9 million.
• Managed Care Membership.  Our Managed Care membership increased by 27.1% year over year, reflecting the addition of the three new Medicaid ASO regions effective October 1, 2013. Medicaid membership (all self-funded) rose 56.9%, to 1,408,804. Medicare membership was up 5.1% year over year, to 119,830, driven primarily by the acquisition of a PDP portfolio.  Fully-insured and self-insured Commercial membership declined by 9.7% and 6.5%, respectively.
• Consolidated Premiums Fell 2.2%, to $543.7 Million.  The decrease in consolidated premiums was principally due to lower Managed Care and Property & Casualty premiums, partially offset by higher premiums in the Life Insurance segment.  The lower Managed Care premiums primarily reflect the decrease in fully-insured Commercial member month enrollment.
• Administrative Service Fees Were Up 3.1%, to $29.5 Million.  The higher service fee income reflects the addition of the three new Medicaid ASO regions offset, in part, by the lower per-member, per-month fees agreed upon in the contract that became effective July 1, 2013 and the reduction in self-funded Commercial membership described above.
• Managed Care MLR Down 340 Basis Points, to 82.4%.  The decreased MLR largely reflects favorable prior-period reserve developments, primarily in the Commercial business.  Excluding prior-period reserve developments and the effect of Medicare risk score adjustments, the MLR increased by 160 basis points, reflecting higher utilization trends in the Commercial sector.
• Consolidated Loss Ratio Down 410 Basis Points, to 78.8%.  The lower consolidated loss ratio mainly reflects the 340-basis-point reduction in the Managed Care MLR.  The Property & Casualty and Life Insurance segment loss ratios improved by 1,210 basis points and 310 basis points, respectively.
• Consolidated Operating Expense Ratio Rose 100 Basis Points, to 21.6%.  The higher consolidated operating expense ratio was largely due to the increase in expenses related to the addition of the three new Medicaid ASO regions effective October 1, 2013, premium taxes that became effective July 1, 2013, and  the health insurer fee that became effective on January 1, 2014, substantially offset by the impact of cost containment initiatives.
• Consolidated Operating Income Increased 102.4%, to $34.0 Million.  The increase in operating income primarily reflects the reduction in claims incurred in the Managed Care and Property & Casualty segments, and the higher volume of business in the Life Insurance segment, offset, in part, by a $3.4 million operating expense increase.
• Share Repurchase Program. The Corporation bought back 184,000 shares during the quarter, with $5.5 million remaining under the current repurchase authorization.

Six-Month Recap

For the six months ended June 30, 2014, consolidated operating revenues decreased 1.4%, to $1.2 billion, primarily reflecting lower member month enrollment in the Commercial business. Consolidated claims incurred for the six-month period were $877.7 million, down 3.8% year over year. The six-month consolidated loss ratio decreased 170 basis points to 80.8% and the MLR fell 130 basis points, to 84.5%.  This decline was driven by favorable prior-period reserve developments, primarily in the Commercial segment. Consolidated operating expenses for the six months ended June 30, 2014 were $249.0 million and the operating expense ratio was 21.7%. Pro forma net income for the six-month period was $31.0 million, or $1.14 per diluted share, based on weighted average shares outstanding of 27.3 million, compared with $30.5 million, or $1.08 per diluted share, based on weighted average shares outstanding of 28.1 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 & 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.  The adjusted medical loss ratio accounts for subsequent adjustments to estimates, such as MA premium adjustments and prior period reserve developments, and presents them in the corresponding period.

2014 Guidance

Mr. Ruiz-Comas concluded, "We have refrained from providing 2014 guidance in light of the uncertainties that confront us, including the impact of all recent legislation, industry regulation and taxes; continued pricing pressure in the Commercial segment stemming from heavy competition; and the unknown effect that the announced spending reductions by the Government of Puerto Rico may have on the economy and our business."

Conference Call and Webcast

Management will host a conference call and webcast on August 5, 2014 at 9:00 a.m., Eastern Time to discuss its financial results for the three months ended June 30, 2014.  To participate, callers within the U.S. and Canada should dial 1-877-723-9511, and international callers should dial 1-719-325-4777 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 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].

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. 

-FINANCIAL TABLES ATTACHED-

SOURCE Triple-S Management Corporation

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