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Triple-S Management Corporation$28.90$.05.17%

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 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 Rico’s 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 segment’s 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 Rico’s 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 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 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 kwaller@allwayscommunicate.com.

Non-GAAP Financial Measures

This earnings release presents information about the Company’s 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.

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.

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
Exhibit I
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
                                                                      Unaudited         December 31,
                                                                      December 31,      2014
                                                                      2015
Assets
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
Stockholders’ equity:
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
Exhibit II
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
Revenues:
                       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
Exhibit III
Condensed Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
                                                                                                                      For the Year Ended
                                                                                                                      December 31,
                                                                                                                      Unaudited       2014
                                                                                                                      2015
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
Exhibit IV
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:
       Managed Care:
              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:
       Commercial:
              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:
              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
       Medicaid:
              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
Premium PMPM:
       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,
                                            2015      2014
Members:
       Commercial:
              Fully-insured                 367,278   400,424
              Self-insured                  180,356   192,697
                     Total Commercial       547,634   593,121
       Medicare:
              Medicare Advantage            123,888   104,332
              Stand-alone PDP               -         13,341
                     Total Medicare         123,888   117,673
       Medicaid:
              Fully-insured                 422,922   -
              Self-insured                  -         1,428,690
                     Total Medicaid         422,922   1,428,690
                              Total members 1,094,444 2,139,484
Exhibit V
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 Company’s results of operations.  This non-GAAP metric does not consider all of 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.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/triple-s-management-corporation-reports-fourth-quarter-2015-results-300222096.html

SOURCE Triple-S Management Corporation

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