PR Newswire | Aug 6, 2020 06:01AM EDT

08/06 05:00 CDT

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

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

"We are proud of our team's tireless efforts to provide our customers, providers and communities with quality health care services and support as we all navigate through the COVID-19 pandemic," said Roberto Garcia-Rodriguez, President and Chief Executive Officer. "Through the expansion of virtual health care consultations and home delivery of prescription drugs, food delivery to our elderly population and protective equipment to providers, as well as our focused efforts to enable the continuity of care for our most vulnerable members, we are committed to ensuring the safety and well-being of all our stakeholders in this challenging environment."

"Our second quarter results reflected lower utilization caused by the stay-at-home measures instituted by the government to combat COVID-19," added Mr. Garcia-Rodriguez. "Utilization has begun normalizing but will depend on the rate of progress containing the coronavirus and re-opening the economy. While we anticipate demand for deferred procedures to resume during the second half of 2020, we continue to be measured and thoughtful about our business, and our focus squarely remains on ensuring current and prospective members receive quality service and a superior health care experience."

Second Quarter 2020 Consolidated Results and Other Highlights

* Net income of $43.6 million, or $1.87 per diluted share, versus net income of $30.9 million, or $1.35 per diluted share, in the prior-year period; * Adjusted net income of $40.9 million, or $1.76 per diluted share, versus adjusted net income of $25.6 million, or $1.12 per diluted share, in the prior-year period; * Operating revenues of $875.5 million, a 0.4% decrease from the prior-year period, primarily reflecting lower Managed Care net premiums earned; * Consolidated loss ratio of 76.1%, a 610 basis-point decline from the second quarter of 2019, reflecting lower Managed Care utilization of services during the quarter as the result of the government-enforced lockdown related to the COVID-19 pandemic; * Medical loss ratio ("MLR") declined 510 basis points to 79.4%; * Consolidated operating income was $43.7 million, compared to consolidated operating income of $38.2 million in the prior-year period; * During the second quarter of 2020, the Company repurchased 375,373 shares at an aggregate cost of approximately $6.0 million, completing its share repurchase program.

Selected Consolidated Quarterly Details

* Consolidated net premiums earned were $858.5 million, down 0.1% from the prior-year period, primarily reflecting lower Managed Care premiums. * Consolidated claims incurred were $653.1 million, down 7.5% year-over-year. Consolidated loss ratio was 76.1%, 610 basis points lower than the prior-year period, mostly reflecting a decline in Managed Care utilization of services during the quarter as the result of the government-enforced lockdown. * Consolidated operating expenses of $178.7 million increased by $44.6 million, or 33.3%, from the prior-year period, primarily reflecting an accrual of a potential litigation loss in the Company's Managed Care segment and the reinstatement of the HIP fee in 2020. The consolidated operating expense ratio was 20.7%, a 510 basis point increase from the prior-year quarter.

Selected Managed Care Segment Quarterly Details

* Managed Care premiums earned were $789.3 million, down 0.6% year-over-year. * Medicare premiums earned of $372.4 million increased 1.7% from the prior-year period, largely due to an increase of approximately 19,000 member months, which primarily reflects a more competitive product offering, and an increase in the average membership risk score. This increase in premiums earned was partially offset by the recognition of estimated premium rebates due to the lower MLR resulting from the decreased utilization of services following the pandemic-related lock-down. * Commercial premiums earned of $195.8 million decreased 2.5% from the prior-year period, mainly reflecting lower average premium rates and the recognition of estimated premium rebates due to the decreased utilization of services following the lock-down. These decreases were partially offset by an increase in fully-insured enrollment during the quarter of approximately 20,000 member months and the reinstatement of the HIP Fee pass-through in 2020. * Medicaid premiums earned of $221.1 million decreased 2.6% from the prior-year period, primarily reflecting lower membership of approximately 15,000 member months. In addition, the 2019 quarter included retroactive premiums related to adjustments to the premium rates for high-cost high-need members as part of an ongoing reconciliation with ASES.

* Reported MLR of 79.4% improved 510 basis points from the prior-year period, primarily reflecting lower utilization of services during the quarter as the result of the lockdown.

Update on P&C Segment Reserves related to Hurricane Mara

As of June 30, 2020:

* Triple-S Propiedad, Inc. (TSP), the Company's P&C subsidiary, has paid a cumulative amount of $757 million in claims and expenses related to Hurricane Mara. Estimated gross losses remain unchanged at $967 million. * TSP received 3 new claims and closed 150 claims during the second quarter of 2020. 505 claims remain open. * The Company has been served with process with respect to 341 of the 505 claims that remain open. * As is the case for all claim liabilities, the gross losses related to Hurricane Maria are based on the Company's best estimate of the ultimate expected cost of claims with the information currently on hand and are subject to change.

Liquidity

As of June 30, 2020, the Company has cash and cash equivalents of $141.1 million. Triple-S's investment portfolio stood at $1.7 billion as of June 30, of which 74% was in investment-grade fixed income securities. The Company also believes it would be able to access additional debt, if necessary, to further reinforce its liquidity. In sum, the Company believes it remains well capitalized to support its business operations throughout the pandemic and beyond.

2020 Outlook

The Company is raising its full year 2020 guidance for adjusted net income per diluted share to be between $2.80 and $3.00, compared to its previous outlook for adjusted net income per diluted share between $2.60 and $2.80. The Company is currently assuming a weighted average diluted share count for full year 2020 of 23.4 million shares and no further share repurchases.

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, 2020. To participate, callers within the U.S. and Canada should dial 1-855-327-6837 and international callers should dial 1-631-891-4304 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 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 website.

In addition, a replay will be available through August 20, 2020 by calling 1-844-512-2921 or 1-412-317-6671 and entering passcode 10010350. A replay will also be available at www.triplesmanagement.com for 30 days.

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 over 60 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. It also 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 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 * 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

June 30, December 2020 31, 2019

Assets

Investments $ 1,755,698 $ 1,643,637

Cash and cash equivalents 141,071 109,837

Premium and other receivables, net 547,209 567,692

Deferred policy acquisition costs and value of business 238,636 234,885acquired

Property and equipment, net 126,685 88,588

Other assets 212,131 174,187

Total assets $ 3,021,430 $ 2,818,826

Liabilities and Stockholders' Equity

Policy liabilities and accruals $ 1,470,558 $ 1,425,477

Accounts payable and accrued liabilities 501,397 370,483

Short-term borrowings 15,000 54,000

Long-term borrowings 54,940 25,694

Total liabilities 2,041,895 1,875,654

Stockholders' equity:

Common stock 23,438 23,800

Other stockholders' equity 956,807 920,065

Total Triple-S Management Corporation stockholders' equity 980,245 943,865

Non-controlling interest in consolidated subsidiary (710) (693)

Total stockholders' equity 979,535 943,172

Total liabilities and stockholders' equity $ 3,021,430 $ 2,818,826

Exhibit II

Condensed Consolidated Statements of Earnings

(dollar amounts in thousands, except per share data)

Unaudited

For the Six Months Ended For the Three Months Ended

June 30, June 30,

2020 2019 2020 2019

Revenues:

Premiums earned, net $ 858,535 $ 859,493 $ 1,734,432 $ 1,627,495

Administrative service fees 2,809 2,456 5,003 5,088

Net investment income 13,815 15,062 28,126 30,438

Other operating revenues 303 1,591 4,342 3,168

Total operating revenues 875,462 878,602 1,771,903 1,666,189

Net realized investment (losses) gains (221) 2,364 (687) 3,679

Net unrealized investment gains (losses) on equity investments 28,338 3,323 (28,468) 22,992

Other income, net 801 1,705 4,406 2,874

Total revenues 904,380 885,994 1,747,154 1,695,734

Benefits and expenses:

Claims incurred 653,087 706,304 1,367,609 1,329,494

Operating expenses 178,659 134,084 340,860 266,747

Total operating costs 831,746 840,388 1,708,469 1,596,241

Interest expense 1,864 1,831 3,717 3,619

Total benefits and expenses 833,610 842,219 1,712,186 1,599,860

Income before taxes 70,770 43,775 34,968 95,874

Income tax expense 27,181 12,849 17,531 30,165

Net income 43,589 30,926 17,437 65,709

Net loss attributable to the non-controlling interest (10) (5) (17) (8)

Net income attributable to Triple-S Management Corporation $ 43,599 $ 30,931 $ 17,454 $ 65,717

Earnings per share attributable to Triple-S Management Corporation:

Basic net income per share $ 1.88 $ 1.35 $ 0.75 $ 2.88

Diluted net income per share $ 1.87 $ 1.35 $ 0.75 $ 2.87

Weighted average of common shares 23,193,626 22,830,399 23,287,787 22,794,297

Diluted weighted average of common shares 23,271,303 22,895,000 23,372,985 22,866,691

Exhibit III

Condensed Consolidated Statements of Cash Flows

(dollar amounts in thousands)

Unaudited

For the Six Months Ended

June 30,

2020 2019

Net cash provided by operating activities $ 170,282 $ 26,305

Cash flows from investing activities:

Proceeds from investments sold or matured:

Securities available for sale:

Fixed maturities sold 66,316 315,495

Fixed maturities matured/called 18,752 14,420

Securities held to maturity - fixed maturities matured/called 339 1,178

Equity investments sold 72,775 70,054

Other invested assets sold 11,814 2,096

Acquisition of investments:

Securities available for sale - fixed maturities (91,930) (291,533)

Securities held to maturity - fixed maturities (340) (539)

Equity investments (160,104) (67,560)

Other invested assets (20,799) (15,424)

Increase in other investments (2,400) (2,692)

Net change in policy loans (97) (771)

Net capital expenditures (45,927) (10,659)

Capital contribution on equity method investees (4,933) -

Net cash (used in) provided by investing activities (156,534) 14,065

Cash flows from financing activities:

Change in outstanding checks in excess of bank balances 34,024 13,189

Repayments of short-term borrowings (39,000) -

Proceeds from long-term borrowings 30,841 -

Repayments of long-term borrowings (1,618) (1,613)

Repurchase and retirement of common stock (14,982) (1)

Proceeds from policyholder deposits 16,421 8,204

Surrender of policyholder deposits (8,200) (11,421)

Net cash provided by financing activities 17,486 8,358

Net increase in cash and cash equivalents 31,234 48,728

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

Cash and cash equivalents, end of period $ 141,071 $ 166,272

Exhibit IV Segment Performance Supplemental Information (Unaudited) Three months ended June 30, Six months ended June 30, (dollar amounts in millions) 2020 2019 Percentage 2020 2019 Percentage Change Change Premiums earned, net: Managed Care: Commercial $ 195.8 $ 200.8 (2.5%) $ 396.9 $ 399.3 (0.6%) Medicare 372.4 366.0 1.7% 760.2 698.6 8.8% Medicaid 221.1 227.0 (2.6%) 442.0 401.4 10.1% Total Managed Care 789.3 793.8 (0.6%) 1,599.1 1,499.3 6.7% Life Insurance 48.1 45.0 6.9% 94.8 89.2 6.3% Property and Casualty 22.4 21.8 2.8% 43.0 41.1 4.6% Other (1.3) (1.1) (18.2%) (2.5) (2.1) (19.0%) Consolidated premiums earned, net $ 858.5 $ 859.5 (0.1%) $ 1,734.4 $ 1,627.5 6.6% Operating revenues (losses): ^1 Managed Care $ 797.4 $ 802.9 (0.7%) $ 1,615.5 $ 1,518.0 6.4% Life Insurance 54.9 51.8 6.0% 108.5 102.6 5.8% Property and Casualty 24.7 24.1 2.5% 47.4 46.0 3.0% Other (1.5) (0.2) (650.0%) 0.5 (0.4) 225.0% Consolidated operating revenues $ 875.5 $ 878.6 (0.4%) $ 1,771.9 $ 1,666.2 6.3% Operating income (loss): ^2 Managed Care $ 29.3 $ 29.3 0.0% $ 43.5 $ 51.4 (15.4%) Life Insurance 9.5 5.2 82.7% 14.5 10.9 33.0% Property and Casualty 6.7 4.8 39.6% 6.5 8.3 (21.7%) Other (1.8) (1.1) (63.6%) (1.1) (0.6) (83.3%) Consolidated operating income $ 43.7 $ 38.2 14.4% $ 63.4 $ 70.0 (9.4%) Operating margin: ^3 Managed Care 3.7% 3.6% 10 bp 2.7% 3.4% -70 bp Life Insurance 17.3% 10.0% 730 bp 13.4% 10.6% 280 bp Property and Casualty 27.1% 19.9% 720 bp 13.7% 18.0% -430 bp Consolidated 5.0% 4.3% 70 bp 3.6% 4.2% -60 bp Depreciation and amortization expense $ 3.8 $ 3.5 8.6% $ 7.7 $ 7.0 10.0% ^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 Six months ended June 30, June 30,

(Unaudited) 2020 2019 2020 2019

Member months enrollment:

Commercial:

Fully-insured 975,212 955,463 1,953,554 1,908,515

Self-insured 327,030 353,961 657,262 716,451

Total Commercial 1,302,242 1,309,424 2,610,816 2,624,966

Medicare Advantage 405,203 385,835 813,110 769,443

Medicaid 1,077,456 1,092,132 2,145,472 2,121,868

Total member months 2,784,901 2,787,391 5,569,398 5,516,277

Claim liabilities (in millions) $ 349.1 $ 423.1

Days claim payable 49 61

Premium PMPM:

Managed Care $ 321.13 $ 326.21 $ 325.54 $ 312.37

Commercial 200.78 210.16 203.17 209.22

Medicare Advantage 919.05 948.59 934.93 907.93

Medicaid 205.21 207.85 206.02 189.17

Medical loss ratio: 79.4% 84.5% 81.6% 84.1%

Commercial 67.5% 80.9% 73.0% 81.9%

Medicare Advantage 77.2% 82.4% 80.0% 81.5%

Medicaid 93.7% 91.1% 92.0% 90.7%

Adjusted medical loss ratio: ^1 76.9% 85.7% 80.5% 85.5%

Commercial 67.5% 83.6% 72.8% 83.4%

Medicare Advantage 74.6% 82.9% 78.1% 81.3%

Medicaid 89.3% 92.2% 92.0% 94.2%

Operating expense ratio:

Consolidated 20.7% 15.6% 19.6% 16.3%

Managed Care 17.8% 12.9% 16.6% 13.7%

^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

As of June 30,

2020 2019

Members:

Commercial:

Fully-insured 324,489 318,429

Self-insured 108,982 117,978

Total Commercial 433,471 436,407

Medicare Advantage 134,601 128,670

Medicaid 364,157 364,495

Total members 932,229 929,572

Exhibit V

Reconciliation of Non-GAAP Financial Measures

Adjusted Net Income

(Unaudited) Three months ended Six months ended June 30, June 30,

(dollar amounts in millions) 2020 2019 2020 2019

Net income $ 43.6 $ 30.9 $ 17.4 $ 65.7

Less adjustments:

Net realized investment (losses) gains, net of tax (0.2) 1.9 (0.6) 2.9

Unrealized gains (losses) on equity investments 22.7 2.7 (22.8) 18.4

Contingency accrual (20.0) - (20.0) -

Private equity investment income, net of tax 0.2 0.7 2.3 1.0

Adjusted net income $ 40.9 $ 25.6 $ 58.5 $ 43.4

Diluted adjusted net income per share $ 1.76 $ 1.12 $ 2.50 $ 1.90

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