PR Newswire | Nov 6, 2020 06:00AM EST

11/06 05:00 CST

Triple-S Management Corporation Reports Third Quarter 2020 Results SAN JUAN, Puerto Rico, Nov. 6, 2020

SAN JUAN, Puerto Rico, Nov. 6, 2020 /PRNewswire/ -- Triple-S Management Corporation (NYSE: GTS), a leading healthcare care company in Puerto Rico, today announced its third quarter 2020 results.

"Our strong third quarter performance reflects ongoing, improved performance resulting from our operational focus and enhanced organizational capabilities," said Roberto Garcia-Rodriguez, President and Chief Executive Officer. "This has led to sustained membership momentum and premium growth in a difficult environment, particularly in the government markets sector. Continuing this momentum, we are delivering a very competitive Medicare Advantage product for this year's open enrollment period. Like most of our peer managed care companies, we have also experienced lower than planned utilization due to the impact of the ongoing pandemic.

"I am proud of our people, who continue to support our customers, providers and communities. Through their efforts, we are helping our members handle their medical needs safely and partnering with our providers and community organizations to assist our seniors and most vulnerable members during this challenging time.

"As we look to 2021 and beyond, we aim to be the preeminent healthcare company in Puerto Rico by delivering seamless holistic care through innovative models, state of the art technology and service excellence, in partnership with our providers."

Third Quarter 2020 Consolidated Results and Other Highlights

* Net income of $23.6 million, or $1.02 per diluted share, versus net income of $13.9 million, or $0.58 per diluted share, in the prior-year period; * Adjusted net income of $14.2 million, or $0.61 per diluted share, a 17.4% increase versus adjusted net income of $12.1 million, or $0.51 per diluted share, in the prior-year period; * Operating revenues of $942.9 million, a 12.8% increase from the prior-year period, primarily reflecting higher Managed Care net premiums earned; * Consolidated loss ratio of 82.5%, a 90 basis-point improvement from the third quarter of 2019, reflecting higher premium rates and lower utilization; * Medical loss ratio ("MLR") of 84.7%, an improvement of 170 basis points over the same period last year; * Consolidated operating income of $22.3 million, a 17.4% increase compared to $19.0 million in the prior-year period;

Selected Consolidated Quarterly Details

* Consolidated net premiums earned were $923.0 million, up 13.3% from the prior-year period, primarily reflecting higher Managed Care premiums. * Consolidated claims incurred were $761.8 million, up 12.0% year-over-year. Consolidated loss ratio was 82.5%, 90 basis points lower than the prior-year period, reflecting higher premium rates and lower utilization in the Company's Managed Care segment. * Consolidated operating expenses of $158.8 million increased by $21.9 million, or 16.0%, from the prior-year period, primarily reflecting the reinstatement of the HIP fee in 2020 and expenses related to supplying much-needed assistance to our providers, communities and seniors to help them manage through the COVID-19 pandemic. The consolidated operating expense ratio was 17.1%, a 40 basis-point increase from the prior-year quarter.

Selected Segment Quarterly Details

Managed Care

* Managed Care premiums earned were $850.0 million, up 13.9% year-over-year. * Medicare premiums earned of $400.7 million increased 9.2% from the prior-year period, largely due to an increase of approximately 20,000 member months, which primarily reflects a more competitive product offering and higher premium rates due to an increase in the premium rate benchmark and membership risk score. In addition, as utilization of services has trended to almost-normalized levels, the Company reduced the estimated MLR rebate accrual, which was originally recorded as a reduction of premiums. * Medicaid premiums earned of $240.9 million increased 36.6% from the prior-year period, primarily reflecting higher member months of approximately 67,000, higher average premium rates following three premium rate increases effective November 1, 2019, May 1, 2020 and July 1, 2020, and the reinstatement of the HIP Fee pass-through in 2020. * Commercial premiums earned of $208.4 million increased 2.6% from the prior-year period, mainly reflecting higher average premium rates, an increase of approximately 3,000 fully insured member months and the reinstatement of the HIP Fee pass-through in 2020.

* Reported MLR of 84.7% improved 170 basis points from the prior-year period, primarily reflecting higher average premium rates and the reinstatement of the HIP Fee in 2020, as well as lower utilization of services during the quarter as the result of the pandemic, offset in part by increased benefits in the Medicare product offering in 2020.

Life Insurance Segment

* Premiums earned of $50.1 million increased 9.4% 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 $5.7 million, compared with $6.6 million in the prior year period, primarily caused by a higher actuarial reserve due to the reinstatement of policies that were cancelled during the second quarter of 2020 due to the COVID-19 lockdown.

Property and Casualty Segment

* Premiums earned of $23.9 million increased 0.8% from the prior-year period. * Operating income was $4.4 million, compared with $6.6 million during the same quarter last year; this decrease was primarily caused by an increase in net commission expense. * Updated information related to Hurricane Mara as of September 30, 2020: * The Company's P&C subsidiary has paid a cumulative amount of $767 million in claims and expenses related to Hurricane Mara. Estimated gross losses remain unchanged at $967 million. * TSP closed 75 claims during the third quarter of 2020, increasing the number of claims closed to 97.5%; 434 claims remain open. * The Company has been served with process with respect to 322 of the 434 claims that remain open.

2020 Outlook

The Company is raising its full year 2020 guidance for adjusted net income per diluted share to be between $3.25 and $3.35, compared to its previous outlook for adjusted net income per diluted share between $2.80 and $3.00. The Company is currently assuming a weighted average diluted share count for full year 2020 of 23.4 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 September 30, 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 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 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 BalanceSheets..................................................................................Exhibit I

Condensed Consolidated Statements ofEarnings.....................................................................Exhibit II

Condensed Consolidated Statements of CashFlows................................................................ ExhibitIII

Segment Performance SupplementalInformation.....................................................................Exhibit IV

Reconciliation of Non-GAAP FinancialMeasures.......................................................................Exhibit V

Exhibit I

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

Unaudited

September 30, December 31, 2020 2019

Assets

Investments $ 1,874,331 $ 1,643,637

Cash and cash equivalents 129,603 109,837

Premium and other receivables, net 546,959 567,692

Deferred policy acquisition costs and value of business acquired 243,663 234,885

Property and equipment, net 130,220 88,588

Other assets 195,511 174,187

Total assets $ 3,120,287 $ 2,818,826

Liabilities and Stockholders' Equity

Policy liabilities and accruals $ 1,551,181 $ 1,425,477

Accounts payable and accrued liabilities 423,083 370,483

Short-term borrowings 82,500 54,000

Long-term borrowings 53,836 25,694

Total liabilities 2,110,600 1,875,654

Stockholders' equity:

Common stock 23,430 23,800

Other stockholders' equity 986,970 920,065

Total Triple-S Management Corporation stockholders' equity 1,010,400 943,865

Non-controlling interest in consolidated subsidiary (713) (693)

Total stockholders' equity 1,009,687 943,172

Total liabilities and stockholders' equity $ 3,120,287 $ 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 Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Revenues:

Premiums earned, net $ 922,934 $ 815,021 $ 2,657,366 $ 2,442,516

Administrative service fees 3,752 2,607 8,755 7,695

Net investment income 14,168 15,176 42,294 45,614

Other operating revenues 2,052 3,167 6,394 6,335

Total operating revenues 942,906 835,971 2,714,809 2,502,160

Net realized investment gains (losses) 507 1,087 (180) 4,766

Net unrealized investment gains (losses) on equity investments 11,040 1,267 (17,428) 24,259

Other income, net 1,811 485 6,217 3,359

Total revenues 956,264 838,810 2,703,418 2,534,544

Benefits and expenses:

Claims incurred 761,792 680,010 2,129,401 2,009,504

Operating expenses 158,809 136,882 499,669 403,629

Total operating costs 920,601 816,892 2,629,070 2,413,133

Interest expense 2,096 2,062 5,813 5,681

Total benefits and expenses 922,697 818,954 2,634,883 2,418,814

Income before taxes 33,567 19,856 68,535 115,730

Income tax expense 9,989 5,910 27,520 36,075

Net income 23,578 13,946 41,015 79,655

Net (loss) attributable to the non-controlling interest (3) (2) (20) (10)

Net income attributable to Triple-S Management Corporation $ 23,581 $ 13,948 $ 41,035 $ 79,665

Earnings per share attributable to Triple-S Management Corporation:

Basic net income per share $ 1.02 $ 0.59 $ 1.77 $ 3.44

Diluted net income per share $ 1.02 $ 0.58 $ 1.76 $ 3.43

Weighted average of common shares 23,073,511 23,830,106 23,215,840 23,143,361

Diluted weighted average of common shares 23,193,980 23,893,807 23,318,069 23,217,298

Exhibit III

Condensed Consolidated Statements of Cash Flows

(dollar amounts in thousands)

Unaudited

For the Nine Months Ended

September 30,

2020 2019

Net cash provided by (used in) operating activities $ 223,681 $ (3,455)

Cash flows from investing activities:

Proceeds from investments sold or matured:

Securities available for sale:

Fixed maturities sold 94,557 365,383

Fixed maturities matured/called 37,450 19,017

Securities held to maturity - fixed maturities matured/called 1,079 1,378

Equity investments sold 80,152 126,134

Other invested assets sold 13,231 3,379

Acquisition of investments:

Securities available for sale - fixed maturities (206,387) (397,956)

Securities held to maturity - fixed maturities (1,087) (748)

Equity investments (201,324) (88,945)

Other invested assets (25,442) (24,233)

Increase in other investments (3,924) (2,710)

Net change in policy loans 240 (1,097)

Net capital expenditures (52,549) (14,746)

Capital contribution on equity method investees (7,083) -

Net cash used in investing activities (271,087) (15,144)

Cash flows from financing activities:

Change in outstanding checks in excess of bank balances 16,814 3,808

Net change in short-term borrowings 28,500 -

Proceeds of long-term borrowings 30,841 -

Repayments of long-term borrowings (2,760) (2,425)

Repurchase and retirement of common stock (14,980) (1)

Proceeds from policyholder deposits 21,586 15,060

Surrender of policyholder deposits (12,829) (16,455)

Net cash provided by (used in) financing activities 67,172 (13)

Net increase (decrease) in cash and cash equivalents 19,766 (18,612)

Cash and cash equivalents, beginning of period 109,837 117,544

Cash and cash equivalents, end of period $ 129,603 $ 98,932

Exhibit IV

Segment Performance Supplemental Information

(Unaudited) Three months ended September 30, Nine months ended September 30,

(dollar amounts in millions) 2020 2019 Percentage 2020 2019 Percentage Change Change

Premiums earned, net:

Managed Care:

Commercial $ 208.4 $ 203.1 2.6% $ 605.3 $ 602.4 0.5%

Medicare 400.7 367.1 9.2% 1,160.9 1,065.7 8.9%

Medicaid 240.9 176.3 36.6% 682.9 577.7 18.2%

Total Managed Care 850.0 746.5 13.9% 2,449.1 2,245.8 9.1%

Life Insurance 50.1 45.8 9.4% 144.9 135.1 7.3%

Property and Casualty 23.9 23.7 0.8% 66.9 64.9 3.1%

Other (1.0) (1.0) 0.0% (3.5) (3.3) (6.1%)

Consolidated premiums earned, net $ 923.0 $ 815.0 13.3% $ 2,657.4 $ 2,442.5 8.8%

Operating revenues: ^1

Managed Care $ 858.2 $ 755.8 13.5% $ 2,473.7 $ 2,273.7 8.8%

Life Insurance 57.0 52.5 8.6% 165.5 155.1 6.7%

Property and Casualty 26.1 26.2 (0.4%) 73.5 72.3 1.7%

Other 1.6 1.4 14.3% 2.1 1.0 110.0%

Consolidated operating revenues $ 942.9 $ 835.9 12.8% $ 2,714.8 $ 2,502.1 8.5%

Operating income (loss): ^2

Managed Care $ 13.0 $ 5.4 140.7% $ 56.5 $ 56.8 (0.5%)

Life Insurance 5.7 6.6 (13.6%) 20.2 17.5 15.4%

Property and Casualty 4.4 6.6 (33.3%) 10.9 14.9 (26.8%)

Other (0.8) 0.4 (300.0%) (1.9) (0.2) (850.0%)

Consolidated operating income $ 22.3 $ 19.0 17.4% $ 85.7 $ 89.0 (3.7%)

Operating margin: ^3

Managed Care 1.5% 0.7% 80 bp 2.3% 2.5% -20 bp

Life Insurance 10.0% 12.6% -260 bp 12.2% 11.3% 90 bp

Property and Casualty 16.9% 25.2% -830 bp 14.8% 20.6% -580 bp

Consolidated 2.4% 2.3% 10 bp 3.2% 3.6% -40 bp

Depreciation and amortization expense $ 3.1 $ 3.7 (16.2%) $ 10.9 $ 10.7 1.9%

^1 Operating revenues include premiums earned, net, administrative service feesand 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 operatingrevenues.

Managed Care Additional Data

Three months ended Nine months ended September 30, September 30,

(Unaudited) 2020 2019 2020 2019

Member months enrollment:

Commercial:

Fully-insured 966,906 964,321 2,920,460 2,872,836

Self-insured 324,372 356,059 981,634 1,072,510

Total Commercial 1,291,278 1,320,380 3,902,094 3,945,346

Medicare Advantage 407,170 386,995 1,220,280 1,156,438

Medicaid 1,132,626 1,065,885 3,278,098 3,187,753

Total member months 2,831,074 2,773,260 8,400,472 8,289,537

Claim liabilities (in millions) $ 420.6 $ 390.3

Days claim payable 57 56

Premium PMPM:

Managed Care $ 339.09 $ 308.83 $ 330.12 $ 311.18

Commercial 215.53 210.61 207.26 209.69

Medicare Advantage 984.11 948.59 951.34 921.54

Medicaid 212.69 165.40 208.32 181.22

Medical loss ratio: 84.7% 86.4% 82.7% 84.9%

Commercial 81.9% 84.7% 76.1% 82.8%

Medicare Advantage 80.6% 81.1% 80.2% 81.4%

Medicaid 94.0% 99.6% 92.7% 93.4%

Adjusted medical loss ratio: ^1 82.1% 89.4% 81.3% 86.5%

Commercial 78.3% 88.5% 74.9% 85.1%

Medicare Advantage 78.4% 81.6% 78.9% 80.9%

Medicaid 91.7% 104.9% 91.0% 97.2%

Operating expense ratio:

Consolidated 17.1% 16.7% 18.7% 16.5%

Managed Care 14.6% 14.0% 15.9% 13.8%

^1 The adjusted medical loss ratio accounts for subsequent adjustments toestimates, such as prior-period reserve developments and Medicare premiumadjustments, and presents them in their corresponding period.

Managed Care Membership by Segment

Managed Care Membership by Segment As of September 30,

2020 2019

Members:

Commercial:

Fully-insured 321,673 322,992

Self-insured 107,830 119,077

Total Commercial 429,503 442,069

Medicare Advantage 136,135 128,660

Medicaid 385,344 354,230

Total members 950,982 924,959

Exhibit V

Reconciliation of Non-GAAP Financial Measures

Adjusted Net Income

(Unaudited) Three months ended Nine months ended September 30, September 30,

(dollar amounts in millions, except per share data) 2020 2019 2020 2019

Net income $ 23.6 $ 13.9 $ 41.0 $ 79.7

Less adjustments, net of taxes:

Net realized investment gains (losses) 0.4 0.9 (0.1) 3.8

Unrealized gains (losses) on equity investments 8.8 1.0 (13.9) 19.4

Contingency accrual - - (20.0) -

Private equity investment income (loss) 0.2 (0.1) 2.4 1.0

Adjusted net income $ 14.2 $ 12.1 $ 72.6 $ 55.6

Diluted adjusted net income per share $ 0.61 $ 0.51 $ 3.12 $ 2.39

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 Jos? Rom?n-Jim?nez Mr. Garrett Edson

EVP and Chief Financial Officer ICR

(787) 749-4949 (787) 792-6488

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SOURCE Triple-S Management Corporation