Triple-S Management Corporation Reports Second Quarter 2012 Results
SAN JUAN, Puerto Rico, Aug. 1, 2012 /PRNewswire/ — Triple-S Management Corporation (NYSE:GTS), the leading managed care company in Puerto Rico, today announced consolidated revenues of $623.0 million and operating income of $24.2 million for the three months ended June 30, 2012. Net income was $17.0 million, or $0.60 per diluted share, which includes an after tax net investment gain of $0.4 million, or $0.02 per share.
June-Quarter Consolidated Highlights
- Total consolidated operating revenues were $622.7 million;
- Operating income was $24.2 million;
- Consolidated loss ratio was 85.2%;
- Medical loss ratio (MLR) was 88.7%;
- Managed Care member month enrollment increased 111.0%;
- Medicare member month enrollment rose 16.9%.
Ramon M. Ruiz-Comas, President and Chief Executive Officer of Triple-S Management Corporation, commented, “We were pleased with our solid second quarter results, achieving membership growth in each of our three managed care businesses while maintaining control of our operating expenses. Our Life and Property and Casualty Insurance segments also posted solid performance consistent with our expectations.
“Within our Medicare business, we are making progress in our efforts to better assess the health risk of our patient population. Moreover, we continue working on the main issues that caused the shortfall at American Health last quarter, and a number of key initiatives are being implemented. We are in the midst of renegotiations with American Health’s PBM, and have submitted bids for the 2013 open enrollment season, which take into account the increased pharmacy utilization that we have been experiencing. Our purchase of American Health provided us with a solid foothold in the growing Medicare Advantage business and remains an integral component of our long-term strategy. We are committed to this market and believe that we have the brand recognition, products and physician network necessary to exploit this opportunity,” continued Mr. Ruiz-Comas.
“We believe that having a strong, diversified and seasoned management team is instrumental to our long-term success. Recently, Amílcar L. Jordan joined Triple-S Management as Vice President and Chief Financial Officer, bringing over 27 years of financial industry and risk management experience. We look forward to his ongoing contributions as we continue to build and deliver shareholder value,” concluded Mr. Ruiz-Comas.
Selected Quarterly Details
- Pro Forma Net Income was $16.6 million, or $0.58 Per Diluted Share. Weighted average shares outstanding were 28.5 million. This compares with pro forma net income of $11.4 million, or $0.39 per diluted share, in the corresponding quarter of 2011, based on weighted average shares outstanding of 29.0 million.
- Consolidated Premiums Increased 14.2%, to $582.2 Million. The increase was principally due to a higher member month enrollment in the Medicare business and the overall increase in premiums per member per month.
- Consolidated Administrative Service Fees Rose 297.1%, to $27.8 Million. The significant increase in service fees was driven by the addition of the Medicaid ASO business (miSalud), effective November 1, 2011.
- Managed Care Membership. Our Managed Care membership grew by 112.3% year-over-year, reflecting the addition of the miSalud business, in which self-insured membership was 889,091 at the end of the quarter. Medicare membership increased 17.3%, to 122,151. Fully insured Commercial membership was down 0.2% from the same period last year.
- Managed Care MLR Increased 70 Basis Points, to 88.7%. The increased MLR results from a higher MA member month enrollment, which business has an inherently higher MLR than the Commercial business, and to higher-than-expected utilization and cost trends in the Medicare business, primarily at American Health, partially offset by the higher Medicare risk score adjustments received in 2012.
- Consolidated Loss Ratio Increased 130 Basis Points, to 85.2%. The higher consolidated loss ratio mainly reflects the 70-basis-point increase in the Managed Care MLR and an increase in the claims incurred in the Life segment, resulting from a higher loss ratio in the Cancer business and an increase in the liability for future policy benefits. The loss ratio in the Property and Casualty Insurance segment, although lower than in the first quarter of 2012, also experienced year-over-year increases.
- Consolidated Operating Expense Ratio Rose 20 Basis Points, to 16.8%. The higher consolidated operating expense ratio is due to the increase in self-insured contracts associated with our participation in the miSalud business.
- Consolidated Operating Income Increased 55.1%, to $24.2 Million. The increase reflects the contribution from the miSalud business, the higher Medicare risk score adjustments received in 2012, and the improved operating income of the Property and Casualty segment, partly offset by the increased MLR in the Medicare business.
- Consolidated Operating Income Margin Was 3.9%. The 100-basis-point improvement in the consolidated operating margin is primarily the result of the increased profitability in our Managed Care and Property and Casualty Insurance segments.
- Consolidated Effective Tax Rate Was 22.0%. The consolidated income tax expense rose by $1.9 million, or 65.5%, reflecting the increased taxable income in the Managed Care segment, which operates at a higher effective rate.
- Parent Company Information. As of June 30, 2012, Triple-S Management had $50.7 million in parent company cash, cash equivalents, and investments.
Pro Forma Net
Income
-------------
(Unaudited) Three months Six months
ended June 30, ended June 30,
-------------- --------------
(dollar amounts in millions) 2012 2011 2012 2011
--------------------------- ---- ---- ---- ----
Net income $17.0 $17.1 $24.5 $27.4
Less pro forma adjustments:
Net realized
investment
gains, net of
tax 0.4 5.9 1.8 10.9
Net unrealized
trading
investments,net
of tax - (0.1) - (1.1)
Derivative
loss, net of
tax - (0.1) - (0.3)
Charge related
to change in
enacted tax
rate - - - (6.4)
Pro forma net
income $16.6 $11.4 $22.7 $24.3
------------- ----- ----- ----- -----
Diluted pro
forma net
income per
share $0.58 $0.39 $0.80 $0.84
--------------- ----- ----- ----- -----
Six-Month Recap
For the six months ended June 30, 2012, consolidated operating revenues increased 17.1%, to $1.21 billion, primarily reflecting higher member month enrollment in the Medicare and Commercial segments, the addition of the miSalud business, and the receipt of higher Medicare risk score adjustments in 2012 when compared with the prior year. Consolidated claims incurred for the six-month period were $971.9 million, up 17.0% year-over-year. The six-month consolidated loss ratio increased 250 basis points to 86.0%, while the MLR rose 190 basis points, to 89.6%. This increase was driven by a higher MA member month enrollment and higher-than-expected utilization and cost trends in the Medicare business, primarily at American Health. Consolidated operating expenses for the six months ended June 30, 2012 were $204.8 million and the operating expense ratio was 17.3%. Pro forma net income for the six-month period was $22.7 million, or $0.80 per diluted share, based on weighted average shares outstanding of 28.5 million, compared with $24.3 million, or $0.84 per diluted share, based on weighted average shares outstanding of 29.0 million at the same time last year.
Segment Performance
Triple-S Management operates in three segments: 1) Managed Care, 2) Life Insurance, and 3) Property and Casualty Insurance. Management evaluates performance based primarily on the operating revenues and operating income of each segment. Operating revenues include premiums earned, net, administrative service fees and net investment income. Operating costs include claims incurred and operating expenses. The Company calculates operating income or loss as operating revenues minus operating expenses. Operating margin is defined as operating income or loss divided by operating revenues.
(Unaudited) Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
(dollar amounts in millions) 2012 2011 Percentage Change 2012 2011 Percentage Change
--------------------------- ---- ---- ----------------- ---- ---- -----------------
Premiums earned, net:
Managed Care:
Commercial $242.8 $232.4 4.5% $484.4 $468.8 3.3%
Medicare 285.7 226.4 26.2% 539.9 420.5 28.4%
Medicaid - (0.1) (100.0%) - 2.7 (100.0%)
--- ---- --- ---
Total Managed
Care 528.5 458.7 15.2% 1,024.3 892.0 14.8%
Life Insurance 30.7 27.9 10.0% 60.7 54.9 10.6%
Property and Casualty 23.6 23.9 (1.3%) 45.8 49.5 (7.5%)
Other (0.6) (0.7) (14.3%) (1.3) (1.3) 0.0%
---- ----
Consolidated
premiums
earned, net $582.2 $509.8 14.2% $1,129.5 $995.1 13.5%
------------- ------ ------ ---- -------- ------ ----
Operating revenues:
Managed Care $561.3 $471.5 19.0% $1,089.7 $916.6 18.9%
Life Insurance 35.9 32.4 10.8% 70.8 63.8 11.0%
Property and Casualty 25.9 26.2 (1.1%) 50.3 54.1 (7.0%)
Other (0.4) (0.7) (42.9%) (1.1) (1.4) (21.4%)
---- ----
Consolidated
operating
revenues $622.7 $529.4 17.6% $1,209.7 $1,033.1 17.1%
------------- ------ ------ ---- -------- -------- ----
Operating income:
Managed Care $18.6 $9.0 106.7% $26.0 $21.4 21.5%
Life Insurance 4.0 3.6 11.1% 8.4 7.9 6.3%
Property and Casualty 3.5 2.0 75.0% 2.1 3.0 (30.0%)
Other (1.9) 1.0 (290.0%) (3.4) 1.7 (300.0%)
--- ---
Consolidated
operating
income $24.2 $15.6 55.1% $33.1 $34.0 (2.6%)
------------- ----- ----- ---- ----- ----- -----
Operating margin:
Managed Care 3.3% 1.9% 140 bp 2.4% 2.3% 10 bp
Life Insurance 11.1% 11.1% 0 bp 11.9% 12.4% -50 bp
Property and Casualty 13.5% 7.6% 590 bp 4.2% 5.5% -130 bp
Consolidated 3.9% 2.9% 100 bp 2.7% 3.3% -60 bp
Depreciation and amortization expense $5.9 $5.4 9.3% $11.8 $10.6 11.3%
------------------------------------- ---- ---- --- ----- ----- ----
Managed Care Additional Data Three months ended June
30, Six months ended June 30,
------------------------ -------------------------
(Unaudited) 2012 2011 2012 2011
---------- ---- ---- ---- ----
Member months enrollment:
Commercial:
Fully-insured 1,459,127 1,459,055 2,926,275 2,922,436
Self-insured 672,128 664,056 1,331,628 1,388,215
------- ------- --------- ---------
Total Commercial 2,131,255 2,123,111 4,257,903 4,310,651
Medicare:
Medicare
Advantage 339,026 285,168 668,970 531,636
Stand-alone PDP 25,424 26,637 50,695 53,204
Total Medicare 364,450 311,805 719,665 584,840
Medicaid -Self-
insured 2,641,905 - 5,254,863 -
Total member
months 5,137,610 2,434,916 10,232,431 4,895,491
------------- --------- --------- ---------- ---------
Claim liabilities (in millions) $292.3 $262.2 *
Days claim payable 58.0 59.4 *
------------------ ---- ---- ---
Premium PMPM:
Managed Care $289.82 $259.03 $280.94 $254.33
Commercial 166.40 159.28 165.53 160.41
Medicare 783.92 726.09 750.21 719.00
Medical loss ratio 88.7% 88.0% 89.6% 87.7%
Commercial 88.4% 84.9% 88.9% 87.8%
Medicare Advantage 88.7% 90.5% 89.8% 88.8%
Stand-alone PDP 81.9% 70.6% 87.3% 78.3%
Adjusted medical loss ratio 90.5% 87.2% 90.0% 86.9%
Commercial 86.3% 86.6% 88.2% 86.5%
Medicare Advantage 94.4% 87.9% 91.6% 87.2%
Stand-alone PDP 84.1% 70.1% 86.9% 78.4%
----
Operating expense ratio:
Consolidated 16.8% 16.6% 17.3% 16.7%
Managed Care 13.2% 12.6% 13.5% 12.5%
------------ ---- ---- ---- ----
* Information provided as of December 31, 2011.
Managed Care Membership by Segment As of June 30,
--------------
2012 2011
---- ----
Members:
Commercial:
Fully-insured 485,013 486,138
Self-insured 225,102 220,521
-------
Total Commercial 710,115 706,659
Medicare:
Medicare Advantage 113,669 95,351
Stand-alone PDP 8,482 8,808
Total Medicare 122,151 104,159
Medicaid -Self-insured 889,091 -
---
Total members 1,721,357 810,818
------------- --------- -------
2012 Guidance
The company’s full-year outlook, remains unchanged, except for the consolidated effective tax rate, which was lowered from 25% – 26% to 23% – 24%.
2012 Range
----------
Medical enrollment fully-insured 7.2-7.4 million
(member months)
Medical enrollment self-insured 12.7-13.0 million
(member months)
Consolidated operating revenues $2.3-$2.4
(in billions)
Consolidated loss ratio 85.0%-86.0%
Medical loss ratio 88.8%-89.8%
Consolidated operating expense
ratio 17.2%-18.2%
Consolidated operating income
(in millions) $67.0-$77.0
Consolidated effective tax rate 23%-24%
Pro forma earnings per share $1.80-$1.85
Weighted average of diluted
shares 28.5
outstanding (in millions)
Conference Call and Webcast
Management will host a conference call and webcast on August 1, 2012 at 9:00 a.m., Eastern Time to discuss its financial results for the three months ended June 30, 2012. To participate, callers within the U.S. and Canada should dial 1-877-941-0844, and international callers should dial 1-480-629-9835 about five minutes before the presentation.
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 the leading player in the managed care industry in Puerto Rico. Triple-S Management also has the exclusive right to use the Blue Cross Blue Shield name and mark throughout Puerto Rico and the U.S. Virgin Islands. 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 and Medicare Advantage markets under the Blue Cross Blue Shield brand through its subsidiary Triple-S Salud, Inc. and effective February 2011, also offers non-branded Medicare products through American Health Inc. 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.
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 Employee Program, 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.
-FINANCIAL TABLES ATTACHED-
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands, except per share data)
Unaudited December 31,
June 30, 2011
2012
----
Assets
Investments $1,207,303 $1,153,293
Cash and cash equivalents 164,958 71,834
Premium and other receivables, net 322,032 287,184
Deferred policy acquisition costs and value of business acquired 161,724 155,788
Property and equipment, net 97,476 81,872
Other assets 130,220 130,606
------- -------
Total assets $2,083,713 $1,880,577
Liabilities and Stockholders' Equity
Policy liabilities and accruals $977,869 $836,029
Accounts payable and accrued liabilities 250,712 253,202
Short-term borrowings 2,855 -
Long-term borrowings 127,250 114,387
------- -------
Total liabilities 1,358,686 1,203,618
--------- ---------
Stockholders' equity:
Common stock 28,397 28,365
Other stockholders equity 696,291 648,594
Total Triple-S Management Corporation
stockholders' equity 724,688 676,959
------- -------
Noncontrolling interest in consolidated subsididary 339 -
--- ---
Total stockholders' equity 725,027 676,959
------- -------
Total liabilities and stockholders' equity $2,083,713 $1,880,577
========== ==========
Condensed Consolidated Statements of Earnings
(Dollar amounts in thousands, except per share data)
For the Three Months Ended
June 30, For the Six Months Ended
June 30,
Unaudited Unaudited Unaudited Unaudited
2012 2011 2012 2011
---- ---- ---- ----
Revenues:
Premiums
earned, net $582,246 $509,843 $1,129,550 $995,114
Administrative
service fees 27,768 6,962 55,292 13,557
Net investment
income 11,562 12,654 22,754 24,452
Other
operating
revenues 1,105 - 2,152 -
Total
operating
revenues 622,681 529,459 1,209,748 1,033,123
Net realized
investment
gains 458 6,995 2,136 12,888
Net unrealized
investment
loss on
trading
securities - (119) - (1,260)
Other income,
net (154) 466 916 480
Total revenues 622,985 536,801 1,212,800 1,045,231
Benefits and expenses:
Claims
incurred 496,249 427,941 971,893 830,514
Operating
expenses 102,268 85,882 204,774 168,593
Total
operating
costs 598,517 513,823 1,176,667 999,107
Interest
expense 2,667 2,957 5,225 6,084
Total benefits
and expenses 601,184 516,780 1,181,892 1,005,191
Income before
taxes 21,801 20,021 30,908 40,040
Income tax expense 4,785 2,935 6,392 12,584
Net income 17,016 17,086 24,516 27,456
Less: Net loss attributable to the 19 - 33 -
noncontrolling interest
Net income attributable to TSM $17,035 $17,086 $24,549 $27,456
------- ------- ------- -------
Earnings per share attributable to
TSM:
Basic net income per share $0.60 $0.59 $0.87 $0.95
Diluted earnings per share $0.60 $0.59 $0.86 $0.95
Condensed Consolidated Statements of Cash Flows
(Dollar amounts in thousands, except per share data)
For the Six Months Ended
June 30,
Unaudited Unaudited
2012 2011
---- ----
Net cash provided by operating activities $125,485 $77,983
-------- -------
Cash flows from investing activities:
Proceeds from
investments sold or
matured:
Securities
available for
sale:
Fixed
maturities
sold 55,080 101,326
Fixed
maturities
matured/
called 64,292 51,443
Equity
securities 29,217 14,425
Securities held
to maturity:
Fixed
maturities
matured/
called 10,580 1,440
Acquisition of
investments:
Securities
available for
sale:
Fixed
maturities (114,064) (140,417)
Equity
securities (76,134) (35,334)
Securities held
to maturity:
Fixed
maturities (560) (255)
Other investments (246) -
Net inflows
(outflows) from
policy loans 140 (215)
Acquisition of
business, net of
cash acquired of
$816 and $29,370 in
the three months
ended March 31,
2012 and 2011,
respectively (2,685) (54,058)
Net capital
expenditures (5,680) (8,460)
Net cash used in
investing
activities (40,060) (70,105)
------- -------
Cash flows from financing activities:
Change in
outstanding checks
in excess of bank
balances (10,135) (13,008)
Proceeds from short-
term borrowings,
net 2,855 42,740
Repayments of long-
term borrowings (976) (25,820)
Repurchase and
retirement of
common stock (637) (1,557)
Cash settlements of
stock options - (2,420)
Proceeds from
exercise of stock
options 316 189
Proceeds from
policyholder
deposits 19,587 7,679
Surrenders of
policyholder
deposits (3,311) (3,330)
Net cash provided
by financing
activities 7,699 4,473
----- -----
Net increase in
cash and cash
equivalents 93,124 12,351
Cash and cash equivalents, beginning of period 71,834 45,021
------ ------
Cash and cash equivalents, end of period $164,958 $57,372
======== =======
SOURCE Triple-S Management Corporation
