Triple-S Management Corporation Reports Fourth Quarter 2020 Results

Rhea-AI Summary

Triple-S Management Corporation (NYSE:GTS) reported a strong fourth quarter 2020, achieving a net income of $26.2 million ($1.13 per diluted share), up from $13.2 million in Q4 2019. Operating revenues increased by 16.7% to $969.8 million, driven by higher Managed Care premiums. Despite challenges, the Managed Care segment's premiums rose 17.7%, with Medicare and Medicaid premiums growing significantly. The company anticipates 2021 revenues between $3.98 billion and $4.02 billion, with an adjusted net income projection of $2.95 to $3.15 per diluted share.

Positive

• Net income increased to $26.2 million, up from $13.2 million YoY.
• Operating revenues rose by 16.7% to $969.8 million.
• Managed Care premiums earned grew by 17.7% year-over-year.

Negative

• Consolidated operating loss of $3.9 million compared to an operating income of $8.7 million last year.
• Consolidated loss ratio rose to 86.2%, a 520 basis point increase from Q4 2019.
• Medical loss ratio (MLR) increased to 89.4%, reflecting higher utilization and costs.

SAN JUAN, Puerto Rico, Feb. 25, 2021 /PRNewswire/ -- Triple-S Management Corporation (NYSE:GTS), a leading healthcare company in Puerto Rico, today announced its fourth quarter 2020 results.

Roberto Garcia-Rodriguez, President and Chief Executive Officer, commented: "During the fourth quarter, our enhanced Medicare Advantage and Medicaid offerings, along with our superior service and premier brand, enabled us to further increase our membership numbers and premiums.  Our solid performance was due, in great part, to our team's outstanding efforts to provide critical support to our members, providers and communities throughout an extremely challenging year."

"In 2021 we will continue investing in informatics and clinical management capabilities that improve service and health outcomes for our members.  As we implement our integrated healthcare-delivery agenda over the next four years, we will be firmly positioned to generate sustainable and profitable growth as the preferred healthcare services company in Puerto Rico."

Fourth Quarter 2020 Consolidated Results and Other Highlights

• Net income of $26.2 million, or $1.13 per diluted share, versus net income of $13.2 million, or $0.55 per diluted share, in the prior-year period;
• Adjusted net income of $4.2 million, or $0.18 per diluted share, versus adjusted net income of $6.0 million, or $0.25 per diluted share, in the prior-year period;
• Operating revenues of $969.8 million, a 16.7% increase from the prior-year period, primarily reflecting higher Managed Care net premiums earned;
• Consolidated loss ratio of 86.2%, a 520 basis point increase from the fourth quarter of 2019, reflecting higher Managed Care utilization;
• Medical loss ratio (MLR) of 89.4%, 570 basis points higher than the same period last year;
• Consolidated operating loss of $3.9 million, compared with operating income of $8.7 million in the prior-year period.

Selected Segment Quarterly Details

Managed Care

• Managed Care premiums earned were $873.1 million, up 17.7% year-over-year.
• Medicare premiums earned of $392.5 million increased 14.7% from the prior-year period. The increase was largely due to an addition of approximately 27,000 member months, which primarily reflects a more competitive product offering and higher premium rates resulting from an increase in the premium rate benchmark and membership risk score.
• Medicaid premiums earned of $270.3 million increased 34.8% from the prior-year period, primarily reflecting higher member months of approximately 168,000; higher average premium rates following two premium rate increases in 2020; and the reinstatement of the HIP Fee pass-through in 2020.
• Commercial premiums earned of $210.3 million increased 5.8% from the prior-year period, mainly reflecting higher average premium rates, the reinstatement of the HIP Fee pass-through in 2020 and a reduction in the estimated MLR rebate accrual (which was originally recorded as a reduction of premiums) as utilization of services trended to almost-normalized levels. These increases were partially offset by a reduction of approximately 10,000 fully insured member months.
• Reported MLR of 89.4% increased 570 basis points from the prior-year period, primarily reflecting unfavorable prior period reserve development, higher non-COVID-19 utilization of services, higher costs associated with the treatment of COVID-19 and increased benefits in the Medicare product offering in 2020.
• Managed care operating expenses of $119.9 million decreased by $5.7 million, or 4.5%, from the prior-year period, primarily reflecting lower provision for bad debts and professional services, offset in part by the reinstatement of the HIP fee in 2020. The segment operating expense ratio was 13.7%, a 320 basis-point improvement from the prior-year quarter.

Life Insurance Segment

• Premiums earned, net of $51.1 million increased 8.5% 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 $7.6 million, a 72.7% increase compared to $4.4 million in the prior-year period, primarily reflecting higher premiums in the 2020 quarter.

Property and Casualty Segment

• Premiums earned, net of $25.1 million increased 10.1% from the prior-year period.
• Operating income was $8.9 million, compared with an operating loss of $0.5 million during the prior-year period, primarily driven by lower losses and operating expenses in the 2020 quarter.
• Reserves related to Hurricane Maria were $183 million as of December 31, 2020. As of December 31, 2020, 355 of the total 17,783 Maria-related claims remained outstanding.

2021 Outlook

The Company is initiating the following full year 2021 guidance:

• Consolidated operating revenue is expected to be between $3.98 billion and $4.02 billion, which includes Managed Care premiums earned, net between $3.58 billion and $3.62 billion;
• Consolidated claims incurred ratio is expected to be between 83.0% and 84.0%, while Managed Care MLR is expected to be between 86.0% and 87.0%;
• Consolidated operating expense ratio is expected to be between 15.5% and 16.5%;
• The effective tax rate is expected to be between 29.0% and 31.0%; and
• Adjusted net income per diluted share is expected to be between $2.95 and $3.15. Adjusted net income per diluted share does not account for any potential share repurchase activity during 2021. The Company is assuming a weighted average diluted share count for full year 2021 of 23.6 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 December 31, 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 services 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 and government agencies 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
						December 31, 2020			December 31, 2019
Assets
Investments						$	1,874,024		$	1,643,637
Cash and cash equivalents							110,989			109,837
Premium and other receivables, net							488,840			567,692
Deferred policy acquisition costs and value of business acquired							248,325			234,885
Property and equipment, net							131,974			88,588
Other assets							234,266			174,187
		Total assets				$	3,088,418		$	2,818,826
Liabilities and Stockholders' Equity
Policy liabilities and accruals						$	1,550,798		$	1,425,477
Accounts payable and accrued liabilities							487,356			370,483
Short-term borrowings							30,000			54,000
Long-term borrowings							52,751			25,694
		Total liabilities					2,120,905			1,875,654
Stockholders' equity:
	Common stock						23,430			23,800
	Other stockholders' equity						944,800			920,065
		Total Triple-S Management Corporation stockholders' equity					968,230			943,865
Non-controlling interest in consolidated subsidiary							(717)			(693)
Total stockholders' equity							967,513			943,172
Total liabilities and stockholders' equity						$	3,088,418		$	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 Twelve Months Ended
								December 31,						December 31,
								2020			2019			2020			2019
Revenues:
	Premiums earned, net							$	948,084		$	810,364		$	3,605,450		$	3,252,880
	Administrative service fees								3,830			2,251			12,585			9,946
	Net investment income								15,253			16,393			57,547			62,007
	Other operating revenues								2,597			2,218			8,991			8,553
		Total operating revenues							969,764			831,226			3,684,573			3,333,386
	Net realized investment gains on sale of securities								821			1,077			641			5,843
	Net unrealized investment gains on equity investments								25,067			7,892			7,639			32,151
	Other income, net								3,368			847			9,585			4,206
		Total revenues							999,020			841,042			3,702,438			3,375,586
Benefits and expenses:
	Claims incurred								817,419			656,752			2,946,820			2,666,256
	Operating expenses								156,230			165,777			655,899			569,406
		Total operating costs							973,649			822,529			3,602,719			3,235,662
	Interest expense								2,173			1,991			7,986			7,672
		Total benefits and expenses							975,822			824,520			3,610,705			3,243,334
		Income before taxes							23,198			16,522			91,733			132,252
Income tax expense (benefit)									(2,952)			3,300			24,568			39,375
Net income									26,150			13,222			67,165			92,877
	Net loss attributable to the non-controlling interest								(4)			(7)			(24)			(17)
Net income attributable to Triple-S Management Corporation								$	26,154		$	13,229		$	67,189		$	92,894
Earnings per share attributable to Triple-S Management Corporation:
	Basic net income per share							$	1.13		$	0.55		$	2.90		$	3.98
	Diluted net income per share							$	1.13		$	0.55		$	2.88		$	3.97
	Weighted average of common shares								23,067,274			23,839,165			23,179,544			23,318,742
	Diluted weighted average of common shares								23,237,694			23,901,874			23,309,742			23,385,293

 

Exhibit III
Condensed Consolidated Statements of Cash Flows
(dollar amounts in thousands)
Unaudited
						For the Twelve Months Ended
						December 31,
						2020			2019
Net cash provided by (used in) operating activities						$	257,845		$	(16,826)
Cash flows from investing activities:
	Proceeds from investments sold or matured:
		Securities available for sale:
		Fixed maturities sold					149,265			424,239
		Fixed maturities matured/called					84,416			21,258
		Securities held to maturity - fixed maturities matured/called					1,079			1,708
		Equity investments sold					134,926			169,153
		Other invested assets sold					17,013			4,554
	Acquisition of investments:
		Securities available for sale - fixed maturities					(287,998)			(449,043)
		Securities held to maturity - fixed maturities					(1,088)			(1,078)
		Equity investments					(248,123)			(143,972)
		Other invested assets					(30,178)			(28,501)
	Increase in other investments						(5,683)			(2,981)
	Net change in policy loans						402			(1,392)
	Net capital expenditures						(57,873)			(20,820)
	Capital contribution to equity method investees						(8,184)			(11,418)
		Net cash used in investing activities					(252,026)			(38,293)
Cash flows from financing activities:
	Change in outstanding checks in excess of bank balances						(3,249)			(2,384)
	Net change in short-term borrowings						(24,000)			54,000
	Proceeds of long-term borrowings						30,841			-
	Repayments of long-term borrowings						(3,883)			(3,236)
	Repurchase and retirement of common stock						(14,982)			(9,989)
	Dividends paid						-			(11)
	Proceeds from policyholder deposits						25,740			28,879
	Surrender of policyholder deposits						(15,134)			(19,847)
		Net cash (used in) provided by financing activities					(4,667)			47,412
		Net increase (decrease) in cash and cash equivalents					1,152			(7,707)
Cash and cash equivalents, beginning of period							109,837			117,544
Cash and cash equivalents, end of period						$	110,989		$	109,837

 

Exhibit IV
Segment Performance Supplemental Information
(Unaudited)						Three months ended December 31,				Twelve months ended December 31,
(dollar amounts in millions)						2020	2019	Percentage Change		2020	2019	Percentage Change
Premiums earned, net:
	Managed Care:
		Commercial				$ 210.3	$ 198.8	5.8%		$    815.6	$    801.2	1.8%
		Medicare				392.5	342.3	14.7%		1,553.5	1,408.0	10.3%
		Medicaid				270.3	200.5	34.8%		953.2	778.3	22.5%
			Total Managed Care			873.1	741.6	17.7%		3,322.3	2,987.5	11.2%
	Life Insurance					51.1	47.1	8.5%		196.0	182.2	7.6%
	Property and Casualty					25.1	22.8	10.1%		92.0	87.7	4.9%
	Other					(1.2)	(1.1)	(9.1%)		(4.8)	(4.5)	(6.7%)
				Consolidated premiums earned, net		$ 948.1	$ 810.4	17.0%		$ 3,605.5	$ 3,252.9	10.8%
Operating revenues: 1
	Managed Care					$ 882.3	$ 751.5	17.4%		$ 3,356.1	$ 3,025.3	10.9%
	Life Insurance					57.8	54.4	6.3%		223.3	209.5	6.6%
	Property and Casualty					27.5	25.1	9.6%		101.0	97.5	3.6%
	Other					2.2	0.2	1000.0%		4.2	1.1	281.8%
				Consolidated operating revenues		$ 969.8	$ 831.2	16.7%		$ 3,684.6	$ 3,333.4	10.5%
Operating income (loss): 2
	Managed Care					$  (18.2)	$     5.1	(456.9%)		$      38.3	$      61.9	(38.1%)
	Life Insurance					7.6	4.4	72.7%		27.8	21.9	26.9%
	Property and Casualty					8.9	(0.5)	1880.0%		19.9	14.5	37.2%
	Other					(2.2)	(0.3)	633.3%		(4.1)	(0.6)	583.3%
				Consolidated operating (loss) income		$    (3.9)	$     8.7	(144.8%)		$      81.9	$      97.7	(16.2%)
Operating margin: 3
	Managed Care					(2.1%)	0.7%	-280 bp		1.1%	2.0%	-90 bp
	Life Insurance					13.1%	8.1%	500 bp		12.4%	10.5%	190 bp
	Property and Casualty					32.4%	(2.0%)	3,440 bp		19.7%	14.9%	480 bp
	Consolidated					(0.4%)	1.0%	-140 bp		2.2%	2.9%	-70 bp
Depreciation and amortization expense						$     3.5	$     3.9	(10.3%)		$      14.4	$      14.6	(1.4%)

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
Managed Care Additional Data						Three months ended December 31,			Twelve months ended December 31,
(Unaudited)						2020	2019		2020	2019
Member months enrollment:
	Commercial:
		Fully-insured				961,725	971,270		3,882,185	3,844,106
		Self-insured				303,732	353,843		1,285,366	1,426,353
			Total Commercial			1,265,457	1,325,113		5,167,551	5,270,459
	Medicare Advantage					410,779	384,038		1,631,059	1,540,476
	Medicaid					1,237,098	1,069,428		4,515,196	4,257,181
				Total member months		2,913,334	2,778,579		11,313,806	11,068,116
Claim liabilities (in millions)									$        445.7	$        341.3
Days claim payable									58	49
Premium PMPM:
	Managed Care					$    334.57	$    305.85		$      331.29	$      309.85
		Commercial				218.67	204.68		210.09	208.42
		Medicare Advantage				955.50	891.32		952.45	914.00
		Medicaid				218.50	187.48		211.11	182.82
Medical loss ratio:						89.4%	83.7%		84.5%	84.6%
	Commercial					87.8%	81.3%		79.1%	82.4%
	Medicare Advantage					82.7%	75.0%		80.9%	79.8%
	Medicaid					100.3%	100.9%		94.9%	95.4%
Adjusted medical loss ratio: 1						87.1%	85.7%		83.5%	86.1%
	Commercial					82.8%	80.6%		78.0%	84.0%
	Medicare Advantage					82.8%	81.9%		79.9%	81.4%
	Medicaid					96.7%	97.1%		94.1%	96.8%
Operating expense ratio:
	Consolidated					16.4%	20.4%		18.1%	17.5%
	Managed Care					13.7%	16.9%		15.4%	14.5%

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 December 31,
						2020	2019
Members:
	Commercial:
		Fully-insured				320,180	322,973
		Self-insured				99,478	117,696
			Total Commercial			419,658	440,669
	Medicare Advantage					137,092	127,789
	Medicaid					422,023	355,465
				Total members		978,773	923,923

 

Exhibit V
Reconciliation of Non-GAAP Financial Measures
						Adjusted Net Income
(Unaudited)						Three months ended December 31,			Twelve months ended December 31,
(dollar amounts in millions)						2020	2019		2020	2019
Net income						$26.2	$13.2		$67.2	$92.9
Less adjustments:
	Net realized investment gains, net of tax					0.7	0.8		0.5	4.7
	Unrealized gains on equity investments					20.1	6.3		6.1	25.7
	Private equity investment income, net of tax					1.2	0.1		3.7	1.0
	Contingency accrual					-	-		(20.0)	-
		Adjusted net income				$  4.2	$  6.0		$76.9	$61.5
		Diluted adjusted net income per share				$0.18	$0.25		$3.30	$2.63

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