Triple-S Management Corporation Reports Fourth Quarter 2015 Results
Thursday, February 18, 2016 6:30:00 AM ET
Triple-S Management Corporation (GTS ), a leading managed care company in Puerto Rico, today announced consolidated revenues of $773.9 million and pro forma net income of $11.2 million, or $0.45 per diluted share for the quarter ended December 31, 2015. For the full year, consolidated revenues amounted to $2.9 billion and pro forma net income was $38.2 million, or $1.48 per diluted share.
Quarterly Consolidated Highlights
-- Consolidated operating revenues were $768.3 million, a 35.9% increase from last year, reflecting the change in the Medicaid contract from an administrative services only (ASO) agreement to an at-risk model;
-- Consolidated operating income was $16.2 million;
-- Consolidated loss ratio was 81.8%;
-- Medical loss ratio (MLR) was 84.3%;
-- Net income was $14.2 million, or $0.57 per diluted share.
Roberto Garc?a-Rodr?guez, President and Chief Executive Officer of Triple-S Management, said, "The results of our Managed Care operation improved significantly in the fourth quarter, reflecting seasonal strength and sustained progress with the strategic transformation initiatives we launched last year, aimed at creating organizational agility and functional excellence. Our primary operational focus was to enhance the performance of our Medicare segment and we are pleased with the outcome to date. Having consolidated leadership within our Managed Care segment, we expect to generate additional synergies in 2016. On the Commercial front, we have maintained our underwriting discipline in what remains a stressed market. Medicaid is profitable and tracking our expectations.
"Our strategic transformation is ongoing and we are proud of the strides we have made so far. Our goal is to complete our organization redesign initiatives and increasingly focus on clinical strategies and avenues of growth as the year progresses. In doing so, we will carefully choose investments aimed at providing sustainable long-term growth in our core and adjacent markets."
Garc?a-Rodr?guez concluded, "We expect to realize further operating improvements and gain better visibility of Puerto Ricos fiscal and economic situation throughout the year, and plan to resume providing guidance by 2017. I am genuinely excited about leading Triple-S into the future. My executive team and I recognize that we will face both challenges and opportunities as we continue this journey. We are confident that together we can steadily improve financial results over the next several years."
Selected Consolidated Quarterly Details
-- Pro-forma net income was $11.2 million, or $0.45 per diluted share, increasing 300% year over year, primarily reflecting improved profitability of our Managed Care segment resulting from higher premium revenues and a lower MLR.
-- Consolidated premiums earned were $749.8 million, up 43.6% from last year. The increase was principally due to the additional Managed Care premiums generated due to a change in the Medicaid contract from an ASO to an at-risk model, which was effective April 1, 2015.
-- Administrative service fees fell 83.7% year over year, to $4.9 million, reflecting the change mentioned above.
-- The consolidated loss ratio of 81.8% was down 170 basis points from a year ago. The decline reflects a lower Managed Care MLR and a 290-basis-point decrease in the Property and Casualty Insurance segments loss ratio, offset by a 390-basis-point increase in the loss ratio of the Life Insurance segment.
-- The consolidated operating expense ratio of 18.4% was 460 basis points lower than last year, largely due to the increase in consolidated premiums earned.
-- Consolidated operating income rose more than eightfold year over year, to $16.2 million, primarily reflecting higher premiums and a lower MLR in the Managed Care segment. This increase resulted in a 170 basis-point expansion of the consolidated operating margin.
-- Triple-S Management repurchased 346,292 shares during the quarter. As of December 31, 2015, the Company has approximately $21.4 million remaining under the buyback program authorized in mid-November.
Selected Managed Care Segment Quarterly Details
-- Managed Care premiums earned were $691.4 million, up $228.0 million, or 49.2%, year over year, largely reflecting an increase in fully-insured membership.
-- Total Medicaid premiums were $201.9 million and member month enrollment was 1,273,000. With the new at-risk contract, we elected to participate in only two service regions, compared with the eight regions we served under the government of Puerto Ricos previous ASO model.
-- Medicare premiums of $279.6 million grew 12.3% year over year, resulting from a 5.3% enrollment increase, partially offset by lower average premium rates.
-- Commercial premiums were down 2.0% from a year ago, to $210.5 million, reflecting an 8.3% decline in fully-insured enrollment, offset in part by higher average premium rates.
-- Administrative service fees were down 80.1% year over year, to $6.2 million, reflecting the change in the Medicaid contract from an ASO to an at-risk model. Self-insured Commercial membership decreased 6.4% year over year.
-- Managed Care MLR of 84.3% was down 320 basis points from a year ago. The lower MLR largely reflects a 1060-basis-point and 80-basis-point decrease in the Medicare and Commercial MLRs, respectively, somewhat mitigated by the impact of the new Medicaid at-risk contract, which has a higher loss ratio.
Consolidated Year-End Recap
For the year ended December 31, 2015, consolidated operating revenues increased 25.1%, to $2.9 billion, primarily reflecting the additional Managed Care premiums generated under the new at-risk Medicaid contract that became effective April 1, 2015. Total Medicaid premiums during this period were $607.2 million. Consolidated claims incurred were $2.3 billion, up 32.7% over last year, reflecting the higher fully-insured Managed Care enrollment associated with the new Medicaid contract. The consolidated loss ratio was up 120 basis points, to 83.3%, and the MLR rose 30 basis points, to 86.2%. This increase was mostly driven by the boost in Managed Care volume associated with the change in the Medicaid contract from an ASO agreement to an at-risk model, which has a higher MLR than the Commercial and Medicare businesses. Consolidated operating expenses for the year ended December 31, 2015 were $518.7 million and the operating expense ratio was 18.3%. Pro-forma net income for the year was $38.2 million, or $1.48 per diluted share, based on weighted average shares outstanding of 25.8 million, compared with $42.4 million, or $1.56 per diluted share, based on weighted average shares outstanding of 27.2 million at the same time last year.
Conference Call and Webcast
Management will host a conference call and webcast on February 18, 2016 at 9:00 a.m., Eastern Time to discuss its financial results for the three months and year ended December 31, 2015. To participate, callers within the U.S. and Canada should dial 1-855-327-6837, and international callers should dial 1-631-891-4304 about five minutes before the call.
To listen to the webcast, participants should visit the "Investor Relations" section of the Companys 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 Managements 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 has the exclusive right to use the Blue Cross Blue Shield name and mark throughout Puerto Rico, the U.S. Virgin Islands, and Costa Rica. 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, Medicare Advantage, and Medicaid 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 firstname.lastname@example.org.
Non-GAAP Financial Measures
This earnings release presents information about the Companys pro-forma 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 pro-forma net income to net income, the most comparable GAAP financial measure, is provided in the accompanying tables found at the end of this release.
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 managements 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 Companys planning assumptions (either individually or in combination), could cause Triple-S Managements 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 Companys financial strength ratings
-- A downgrade in the Government of Puerto Ricos 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 Companys 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 Companys 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 Companys SEC reports.
Earnings Release Schedules and Supplementary Information
Condensed Consolidated Balance Sheets Exhibit I
Condensed Consolidated Statement 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
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
Unaudited December 31,
December 31, 2014
Investments $ 1,341,546 $ 1,323,859
Cash and cash equivalents 197,818 110,037
Premium and other receivables, net 282,646 315,622
Deferred policy acquisition costs and value of business acquired 190,648 184,100
Property and equipment, net 73,953 78,343
Other assets 126,578 133,775
Total assets $ 2,213,189 $ 2,145,736
Liabilities and Stockholders Equity
Policy liabilities and accruals $ 1,067,537 $ 935,613
Accounts payable and accrued liabilities 260,478 277,630
Long-term borrowings 36,827 74,467
Total liabilities 1,364,842 1,287,710
Common stock 24,999 27,032
Other stockholders equity 824,018 831,526
Total Triple-S Management Corporation stockholders equity 849,017 858,558
Non-controlling interest in consolidated subsidiary (670) (532)
Total stockholders equity 848,347 858,026
Total liabilities and stockholders equity $ 2,213,189 $ 2,145,736
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 Unaudited Unaudited 2014
2015 2014 2015
Premiums earned, net $ 749,771 522,213 $ 2,783,154 2,128,566
Administrative service fees 4,870 29,793 44,705 119,302
Net investment income 12,640 12,226 45,174 47,540
Other operating revenues 1,063 949 3,719 4,232
Total operating revenues 768,344 565,181 2,876,752 2,299,640
Net realized investment gains (losses):
Total other-than-temporary impairment losses on securities (723) (708) (5,212) (1,170)
Net realized gains, excluding other-than-temporary
impairment losses on securities 4,405 11,777 24,153 19,401
Total net realized investment gains on sale of securities 3,682 11,069 18,941 18,231
Other income, net 1,912 1,055 7,043 2,243
Total revenues 773,938 577,305 2,902,736 2,320,114
Benefits and expenses:
Claims incurred 613,478 435,994 2,318,715 1,747,595
Operating expenses 138,635 127,202 518,721 497,194
Total operating costs 752,113 563,196 2,837,436 2,244,789
Interest expense 1,934 2,300 8,169 9,274
Total benefits and expenses 754,047 565,496 2,845,605 2,254,063
Income before taxes 19,891 11,809 57,131 66,051
Total income taxes 5,730 (14,460) 5,099 745
Net income 14,161 26,269 52,032 65,306
Less: Net loss attributable to the non-controlling interest 4 237 89 354
Net income attributable to Triple-S Management Corporation $ 14,165 $ 26,506 $ 52,121 $ 65,660
Earnings per share attributable to Triple-S Management Corporation:
Basic net income per share $ 0.57 $ 0.98 $ 2.03 $ 2.42
Diluted earnings per share $ 0.57 $ 0.97 $ 2.02 $ 2.41
Condensed Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
For the Year Ended
Net cash provided by operating activities $ 233,521 $ 37,991
Cash flows from investing activities:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold 356,045 235,282
Fixed maturities matured/called 66,615 31,329
Equity securities sold 100,152 113,942
Securities held to maturity - fixed maturities matured/called 640 4,127
Other investments - 8,925
Acquisition of investments:
Securities available for sale:
Fixed maturities (469,198) (288,507)
Equity securities (92,844) (69,101)
Securities held to maturity - fixed maturities (624) (935)
Other investments (3,236) (483)
Net outflows from policy loans (641) (555)
Net capital expenditures (9,094) (4,783)
Net cash (used in) provided by investing activities (52,185) 29,241
Cash flows from financing activities:
Change in outstanding checks in excess of bank balances (1,786) (4,858)
Repayments of long-term borrowings (37,640) (14,835)
Repurchase and retirement of common stock (48,287) (11,337)
Proceeds from policyholder deposits 6,916 9,551
Surrenders of policyholder deposits (12,758) (10,072)
Net cash used in financing activities (93,555) (31,551)
Net increase in cash and cash equivalents 87,781 35,681
Cash and cash equivalents, beginning of period 110,037 74,356
Cash and cash equivalents, end of period $ 197,818 $ 110,037
Segment Performance Supplemental Information
(Unaudited) Three months ended December 31, Year ended December 31,
(dollar amounts in millions) 2015 2014 Percentage Change 2015 2014 Percentage Change
Premiums earned, net:
Commercial $ 209.9 $ 214.3 (2.1%) $ 844.6 $ 882.4 (4.3%)
Medicare 279.6 249.1 12.2% 1,097.7 1,013.7 8.3%
Medicaid 201.9 - 100% 607.2 - 100%
Total Managed Care 691.4 463.4 49.2% 2,549.5 1,896.1 34.5%
Life Insurance 38.3 36.8 4.1% 148.1 142.5 3.9%
Property and Casualty 20.7 22.6 (8.4%) 87.6 92.1 (4.9%)
Other (0.6) (0.6) 0.0% (2.0) (2.1) 4.8%
Consolidated premiums earned, net $ 749.8 $ 522.2 43.6% $2,783.2 $2,128.6 30.8%
Operating revenues: 1
Managed Care $ 700.9 $ 498.2 40.7% $2,610.6 $2,034.8 28.3%
Life Insurance 45.0 42.9 4.9% 172.6 166.2 3.9%
Property and Casualty 23.2 24.9 (6.8%) 96.3 100.7 (4.4%)
Other (0.8) (0.8) 0.0% (2.7) (2.0) (35.0%)
Consolidated operating revenues $ 768.3 $ 565.2 35.9% $2,876.8 $2,299.7 25.1%
Operating income: 2
Managed Care $ 14.2 $ (1.5) 1046.7% $ 20.5 $ 31.4 (34.7%)
Life Insurance 5.6 6.5 (13.8%) 20.0 22.6 (11.5%)
Property and Casualty 1.7 2.5 (32.0%) 8.3 10.0 (17.0%)
Other (5.3) (5.5) 3.6% (9.5) (9.2) (3.3%)
Consolidated operating income $ 16.2 $ 2.0 710.0% $ 39.3 $ 54.8 (28.3%)
Operating margin: 3
Managed Care 2.0% (0.3%) 230 bp 0.8% 1.5% -70 bp
Life Insurance 12.4% 15.2% -280 bp 11.6% 13.6% -200 bp
Property and Casualty 7.3% 10.0% -270 bp 8.6% 9.9% -130 bp
Consolidated 2.1% 0.4% 170 bp 1.4% 2.4% -100 bp
Depreciation and amortization expense $ 4.3 $ 8.4 (48.8%) $ 16.4 $ 24.4 (32.8%)
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 Year ended
December 31, December 31,
(Unaudited) 2015 2014 2015 2014
Member months enrollment:
Fully-insured 1,103,959 1,208,723 4,492,395 5,025,284
Self-insured 540,892 580,846 2,221,327 2,408,967
Total Commercial 1,644,851 1,789,569 6,713,722 7,434,251
Medicare Advantage 373,694 316,823 1,447,420 1,274,441
Stand-alone PDP - 40,223 - 163,707
Total Medicare 373,694 357,046 1,447,420 1,438,148
Fully-insured 1,272,741 - 3,855,945 -
Self-insured - 4,286,975 4,229,082 16,912,990
Total Medicaid 1,272,741 4,286,975 8,085,027 16,912,990
Total member months 3,291,286 6,433,590 16,246,169 25,785,389
Claim liabilities (in millions) $ 348.3 $ 249.3
Days claim payable 58 56
Managed Care $ 251.38 $ 295.96 $ 260.27 $ 293.36
Commercial 190.13 177.29 188.01 175.59
Medicare Advantage 748.21 774.56 758.38 782.15
Stand-alone PDP - 91.99 - 103.23
Medicaid 158.63 - 157.47 -
Medical loss ratio: 84.3% 87.5% 86.2% 85.9%
Commercial 83.4% 84.2% 84.2% 85.3%
Medicare Advantage 79.6% 90.2% 84.6% 86.3%
Stand-alone PDP - 82.4% - 94.2%
Medicaid 91.4% - 91.5% -
Adjusted medical loss ratio: 1 85.6% 89.4% 86.6% 87.1%
Commercial 84.8% 86.6% 85.3% 86.5%
Medicare Advantage 81.5% 91.5% 84.9% 87.5%
Stand-alone PDP - 85.5% - 94.6%
Medicaid 91.7% - 91.0% -
Operating expense ratio:
Consolidated 18.4% 23.0% 18.3% 22.1%
Managed Care 14.9% 19.0% 15.1% 18.5%
1 The adjusted medical loss ratio accounts for subsequent adjustments to estimates, such as Medicare premium adjustments and prior-period reserve developments, and presents them in the corresponding period.
Managed Care Membership by Segment As of December 31,
Fully-insured 367,278 400,424
Self-insured 180,356 192,697
Total Commercial 547,634 593,121
Medicare Advantage 123,888 104,332
Stand-alone PDP - 13,341
Total Medicare 123,888 117,673
Fully-insured 422,922 -
Self-insured - 1,428,690
Total Medicaid 422,922 1,428,690
Total members 1,094,444 2,139,484
Reconciliation of Non-GAAP Financial Measures
Pro Forma Net Income
(Unaudited) Three months ended Year ended
December 31, December 31,
(dollar amounts in millions) 2015 2014 2015 2014
Net income $14.2 $26.5 $52.1 $65.7
Less pro forma adjustments:
Net realized investment gains, net of tax 3.0 8.9 15.2 14.8
Non-recurring tax benefit - 17.0 3.1 17.0
Impairment charge - (2.2) - (2.2)
Change in enacted tax rate-capital gains - - - (6.3)
Contingency accrual - - (4.4) -
Pro forma net income $11.2 $2.8 $38.2 $42.4
Diluted pro forma net income per share $0.45 $0.10 $1.48 $1.56
Pro-forma 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 pro-forma net income and pro-forma net income per share provides investors and management useful information about the earnings impact of realized investment gains and other non-recurring items impacting the Companys results of operations. This non-GAAP metric does not consider all of the items associated with the Companys operations as determined in accordance with GAAP. As a result, one should not consider these measures in isolation.
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SOURCE Triple-S Management Corporation