Triple-S Management Corporation Reports Second Quarter 2021 Results

Rhea-AI Summary

Triple-S Management Corporation (NYSE:GTS) reported solid second quarter 2021 results amid normalized utilization trends. Net income fell to $23.6 million ($1.00 per diluted share) from $43.6 million ($1.87 per diluted share) year-over-year. Operating revenue rose 15.1% to $1.0 billion, driven by Managed Care premiums, which totaled $909.8 million, a 15.3% increase. The overall loss ratio increased to 85.4%. The company maintains its full-year guidance, expecting consolidated operating revenue of $3.98 billion to $4.02 billion. This includes anticipated Managed Care premiums of $3.58 billion to $3.62 billion.

Positive

• Operating revenue increased by 15.1% year-over-year to $1.0 billion.
• Managed Care premiums earned rose 15.3% to $909.8 million.
• The company maintains its full-year guidance for a consolidated revenue range of $3.98 billion to $4.02 billion.

Negative

• Net income decreased significantly from $43.6 million to $23.6 million year-over-year.
• The adjusted net income fell to $10.5 million from $40.9 million in the prior year.
• Consolidated loss ratio increased by 930 basis points to 85.4%.

SAN JUAN, Puerto Rico, Aug. 5, 2021 /PRNewswire/ -- Triple-S Management Corporation (NYSE:GTS), a leading healthcare services company in Puerto Rico, today announced its second quarter 2021 results.

Roberto Garcia-Rodriguez, President and Chief Executive Officer, commented: "We had another solid quarter and are pleased with our overall performance for the first half of 2021 as utilization trends fully normalize. We once again generated double-digit revenue growth year-over-year driven by our Medicaid offering and bolstered by another quarter of solid growth at our Life and P&C segments.  We are also making steady progress on our integrated healthcare strategy, with plans to introduce team-based, integrated chronic care management programs in the next few months. We remain confident in our expectations for the full year and continue to deliver attractive products, high-quality care and superior service to our members."

Second Quarter 2021 Consolidated Results and Other Highlights

• Net income of $23.6 million, or $1.00 per diluted share, compared with $43.6 million, or $1.87 per diluted share, in the prior year period.
• Adjusted net income of $10.5 million, or $0.44 per diluted share, versus $40.9 million, or $1.76 per diluted share, in the prior-year period.
• Operating revenue of $1.0 billion, a 15.1% increase from the prior-year period, primarily reflecting higher Managed Care net premiums earned;
• Consolidated loss ratio of 85.4%, an increase of 930 basis points compared with the second quarter of 2020, reflecting normalized Managed Care utilization patterns in the second quarter of 2021.
• Medical loss ratio (MLR) of 88.4%, 900 basis points higher than the same period last year.
• Consolidated operating income of $12.1 million, compared with $43.7 million in the prior-year period.
  

Selected Segment Quarterly Details

Managed Care

• Managed Care premiums earned were $909.8 million, up 15.3% year-over-year.
• Medicare premiums earned were $408.4 million, an increase of 9.7% from the prior-year period. The increase was largely due to higher premium rates resulting from a rise in the premium rate benchmark and membership risk score.  Member months increased slightly compared with the prior-year period.
• Medicaid premiums earned were $291.8 million, an increase of 32.0% from the prior-year period, primarily reflecting higher member months of approximately 256,000 and higher average premium rates following the premium rate increase effective July 2020; these increases were partially offset by the elimination of the HIP fee pass-through in 2021.
• Commercial premiums earned were $209.6 million, an increase of 7.0% from the prior-year period, mainly reflecting higher average premium rates in the 2021 period.  This increase was partially offset by a reduction of approximately 26,000 fully insured member months and the elimination of the HIP fee pass-through in 2021. 
• Reported MLR was 88.4%, an increase of 900 basis points from the prior-year period, primarily reflecting the elimination of the HIP fee in 2021, normalized utilization of services compared with the low utilization in the prior-year quarter due to the pandemic, higher costs associated with COVID-19-related testing, treatment costs and the waiver of medical and payment policies, and increased benefits in the Medicare product offering in 2021.
• Managed Care operating expenses were $107.6 million, a decrease of $33.5 million, or 23.7%, from the prior-year period, primarily reflecting the accrual in the prior-year quarter of a potential litigation loss and the elimination of the HIP fee in 2021.  The segment operating expense ratio was 11.8%, a 600 basis-point improvement from the prior-year quarter.

Life Insurance Segment

• Premiums earned, net were $54.0 million, a 12.3% increase from the prior-year period, resulting from new sales and increased persistency in monthly debit ordinary life (MDO) products.
• Operating income was $6.4 million, compared with $9.5 million in the prior-year period, primarily reflecting higher actuarial reserves, due to increased policy retention. The change in operating income also reflects higher benefits paid in the second quarter of 2021, as compared with lower volume of claim submissions in the prior-year quarter, due to the pandemic.

Property and Casualty Segment

• Premiums earned, net were $25.3 million, an increase of 12.9% from the prior-year period. The increase was mostly due to higher sales of commercial auto and personal package products.
• Operating income was $2.0 million, compared with $6.7 million in the prior-year period, primarily driven by higher losses and operating expenses in the 2021 quarter.  Losses during the 2020 period were lower due to the COVID-19 pandemic.

Liquidity and Capital Resources

• As of June 30, 2021, the Company had cash and cash equivalents of $174.4 million and investments of $1.9 billion on its consolidated balance sheet.

2021 Outlook

The Company is maintaining its 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%.
• 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 June 30, 2021. To participate, callers within the U.S. and Canada should dial 1-866-269-4260 and international callers should dial 1-323-347-3277 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, a health services company, is one of the top players in the Puerto Rico healthcare industry, with over 60 years of experience.  It is the premier insurance and managed care brand, with the largest customer base and broadest 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 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 in thousands)
Unaudited
							June 30, 2021			December 31, 2020
Assets
Investments							$	1,942,176		$	1,874,024
Cash and cash equivalents								174,390			110,989
Premium and other receivables, net								484,617			488,840
Deferred policy acquisition costs and value of business acquired								252,064			248,325
Property and equipment, net								136,146			131,974
Other assets								236,069			234,266
	Total assets						$	3,225,462		$	3,088,418
Liabilities and Stockholders' Equity
Policy liabilities and accruals							$	1,596,684		$	1,550,798
Accounts payable and accrued liabilities								528,442			487,356
Short-term borrowings								45,000			30,000
Long-term borrowings								50,583			52,751
	Total liabilities							2,220,709			2,120,905
Stockholders' equity:
	Common stock							23,796			23,430
	Other stockholders' equity							981,683			944,800
	Total Triple-S Management Corporation stockholders' equity							1,005,479			968,230
Non-controlling interest in consolidated subsidiary								(726)			(717)
Total stockholders' equity								1,004,753			967,513
Total liabilities and stockholders' equity							$	3,225,462		$	3,088,418

 

Exhibit II

Condensed Consolidated Statements of Earnings
(dollar in thousands, except per share information)
Unaudited
								For the Three Months Ended June 30,						For the Six Months Ended June 30,
								2021			2020			2021			2020
Revenues
	Premiums earned, net							$	987,880		$	858,535		$	1,996,316		$	1,734,432
	Administrative service fees								2,676			2,809			5,441			5,003
	Net investment income								14,960			13,815			28,606			28,126
	Other operating revenues								1,817			303			4,593			4,342
	Total operating revenues								1,007,333			875,462			2,034,956			1,771,903
	Net realized investment gains (losses)								2,514			(221)			2,731			(687)
	Net unrealized investment gains (losses) on equity investments								12,743			28,338			21,295			(28,468)
	Other income, net								4,851			801			7,962			4,406
	Total revenues								1,027,441			904,380			2,066,944			1,747,154
Benefits and expenses
	Claims incurred								844,064			653,087			1,694,622			1,367,609
	Operating expenses								151,253			178,659			302,354			340,860
	Total operating costs								995,317			831,746			1,996,976			1,708,469
	Interest expense								2,217			1,864			4,209			3,717
	Total benefits and expenses								997,534			833,610			2,001,185			1,712,186
	Income before taxes								29,907			70,770			65,759			34,968
Income tax expense									6,353			27,181			18,898			17,531
Net income									23,554			43,589			46,861			17,437
	Net loss attributable to the non-controlling interest								6			10			9			17
Net income attributable to Triple-S Management Corporation								$	23,560		$	43,599		$	46,870		$	17,454
Earnings per share attributable to Triple-S Management Corporation:
	Basic net income per share							$	1.00		$	1.88		$	2.01		$	0.75
	Diluted net income per share							$	1.00		$	1.87		$	1.99		$	0.75
	Weighted average of common shares								23,478,867			23,193,626			23,355,965			23,287,787
	Diluted weighted average of common shares								23,598,978			23,271,303			23,516,296			23,372,985

 

Exhibit III

Condensed Consolidated Statements of Cash Flows
(dollar in thousands)
Unaudited
							For the Six Months Ended June 30,
							2021			2020
Net cash provided by operating activities							$	74,957		$	170,282
Cash flows from investing activities
Proceeds from investments sold or matured:
	Securities available-for-sale:
	Fixed-maturities sold							113,336			66,316
	Fixed-maturities matured/called							14,554			18,752
	Securities held-to-maturity - fixed-maturities matured/called							-			339
	Equity investments sold							76,348			72,775
	Other invested assets sold							14,855			11,814
	Other invested assets matured							210			-
Acquisition of investments:
	Securities available-for-sale - fixed-maturities							(102,356)			(91,930)
	Securities held-to-maturity - fixed-maturities							-			(340)
	Equity investments							(172,177)			(160,104)
	Other invested assets							(8,407)			(20,799)
Increase in other investments								(706)			(2,400)
Net change in policy loans								37			(97)
Net capital expenditures								(11,200)			(45,927)
Capital contribution on equity method investees								-			(4,933)
		Net cash used in investing activities						(75,506)			(156,534)
Cash flows from financing activities
Change in outstanding checks in excess of bank balances								47,264			34,024
Proceeds from (repayments of) short-term borrowings								15,000			(39,000)
Proceeds from long-term borrowings								-			30,841
Repayments of long-term borrowings								(2,246)			(1,618)
Repurchase and retirement of common stock								-			(14,982)
Proceeds from policyholder deposits								9,516			16,421
Surrenders of policyholder deposits								(5,584)			(8,200)
		Net cash provided by financing activities						63,950			17,486
		Net increase in cash and cash equivalents						63,401			31,234
Cash and cash equivalents, beginning of period								110,989			109,837
Cash and cash equivalents, end of period							$	174,390		$	141,071

 

Exhibit IV

Segment Performance Supplemental Information

(Unaudited)							Three months ended June 30,				Six months ended June 30,
(dollar in millions)							2021	2020	Percentage Change		2021	2020	Percentage Change
Premiums earned, net:
Managed Care:
Medicare							$     408.4	$     372.4	9.7%		$     810.7	$     760.2	6.6%
Medicaid							291.8	221.1	32.0%		614.5	442.0	39.0%
Commercial							209.6	195.8	7.0%		416.6	396.9	5.0%
Total Managed Care							909.8	789.3	15.3%		1,841.8	1,599.1	15.2%
Life Insurance							54.0	48.1	12.3%		106.5	94.8	12.3%
Property and Casualty							25.3	22.4	12.9%		50.6	43.0	17.7%
Other							(1.2)	(1.3)	7.7%		(2.6)	(2.5)	(4.0%)
		Consolidated premiums earned, net					$     987.9	$     858.5	15.1%		$   1,996.3	$   1,734.4	15.1%
Operating revenues (losses): 1
Managed Care							$     918.7	$     797.4	15.2%		$   1,858.8	$   1,615.5	15.1%
Life Insurance							60.7	54.9	10.6%		119.6	108.5	10.2%
Property and Casualty							27.6	24.7	11.7%		54.9	47.4	15.8%
Other							0.4	(1.5)	126.7%		1.7	0.5	240.0%
		Consolidated operating revenues					$   1,007.4	$     875.5	15.1%		$   2,035.0	$   1,771.9	14.8%
Operating income (loss): 2
Managed Care							$         7.2	$       29.3	(75.4%)		$       26.0	$       43.5	(40.2%)
Life Insurance							6.4	9.5	(32.6%)		12.2	14.5	(15.9%)
Property and Casualty							2.0	6.7	(70.1%)		5.8	6.5	(10.8%)
Other							(3.5)	(1.8)	(94.4%)		(6.0)	(1.1)	(445.5%)
		Consolidated operating income					$       12.1	$       43.7	(72.3%)		$       38.0	$       63.4	(40.1%)
Operating margin: 3
Managed Care							0.8%	3.7%	-290 bp		1.4%	2.7%	-130 bp
Life Insurance							10.5%	17.3%	-680 bp		10.2%	13.4%	-320 bp
Property and Casualty							7.2%	27.1%	-1,990 bp		10.6%	13.7%	-310 bp
Consolidated							1.2%	5.0%	-380 bp		1.9%	3.6%	-170 bp
Depreciation and amortization expense							$         3.6	$         3.8	(5.3%)		$         7.1	$         7.7	(7.8%)

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

						Three months ended June 30,			Six months ended June 30,
(Unaudited)						2021	2020		2021	2020
Member months enrollment:
	Commercial:
		Fully insured				948,839	975,212		1,905,786	1,953,554
		Self-insured				298,854	327,030		594,691	657,262
			Total Commercial			1,247,693	1,302,242		2,500,477	2,610,816
	Medicare Advantage					409,012	405,203		817,793	813,110
	Medicaid					1,332,994	1,077,456		2,629,183	2,145,472
			Total member months			2,989,699	2,784,901		5,947,453	5,569,398
Claim liabilities (in millions)									$           544.6	$            349.1
Days claim payable									61	49
Premium PMPM:
	Managed Care					$      338.11	$      321.13		$          344.08	$          325.54
		Medicare Advantage				998.50	919.05		991.33	934.93
		Medicaid				218.91	205.21		233.72	206.02
		Commercial				220.90	200.78		218.60	203.17
Medical loss ratio:						88.4%	79.4%		87.7%	81.6%
	Medicare Advantage					85.5%	77.2%		86.4%	80.0%
	Medicaid					94.3%	93.7%		90.7%	92.0%
	Commercial					85.6%	67.5%		85.9%	73.0%
Adjusted medical loss ratio: 1						89.7%	77.9%		89.1%	81.1%
	Medicare Advantage					88.0%	76.0%		88.3%	78.8%
	Medicaid					94.2%	90.3%		92.6%	92.7%
	Commercial					86.8%	67.4%		85.8%	72.7%
Operating expense ratio:
	Consolidated					15.3%	20.7%		15.1%	19.6%
	Managed Care					11.8%	17.8%		11.8%	16.6%

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 Business

						As of June 30,
						2021	2020
Members:
	Commercial:
	Fully insured					316,202	324,489
	Self-insured					102,212	108,982
	Total Commercial					418,414	433,471
	Medicare Advantage					136,490	134,601
	Medicaid					445,881	364,157
	Total members					1,000,785	932,229

Exhibit V

Reconciliation of Non-GAAP Financial Measures

						Adjusted Net Income
(Unaudited)						Three months ended  June 30,			Six months ended June 30,
(dollar in millions)						2021	2020		2021	2020
Net income						$         23.6	$         43.6		$       46.9	$       17.4
Less adjustments:
Net realized investment gains (losses)						2.5	(0.2)		2.7	(0.7)
Unrealized gains (losses) on equity investments						12.7	28.3		21.3	(28.5)
Contingency accrual						-	(32.0)		-	(32.0)
Private equity investment income						1.4	0.4		2.4	3.6
Tax impact of non-GAAP adjustments						(3.5)	6.2		(5.6)	16.5
	Adjusted net income					$         10.5	$         40.9		$       26.1	$       58.5
	Diluted adjusted net income per share					$         0.44	$         1.76		$       1.11	$       2.50

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.  The Company estimates tax impact of net realized and non-realized gains (losses), private equity investment income and contingency accrual at the applicable statutory tax rates.  These non-GAAP metrics do 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:
Victor J. Haddock-Morales	Mr. Garrett Edson
EVP and Chief Financial Officer	ICR
(787) 749-4949	(787) 792-6488

 

 

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SOURCE Triple-S Management Corporation