TRIPLE-S MANAGEMENT CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 5, 2016

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8-K - TRIPLE-S MANAGEMENT CORPORATION 8-K 5-5-2016 - TRIPLE-S MANAGEMENT CORPform8k.htm
Exhibit 99.1
 
Triple-S Management Corporation
 
1441 F.D. Roosevelt Ave.
 
San Juan, PR 00920
 
www.triplesmanagement.com

FOR FURTHER INFORMATION:

AT THE COMPANY:
INVESTOR RELATIONS:
Juan José Román-Jiménez
Kathy Waller
EVP and Chief Financial Officer
AllWays Communicate, LLC
(787) 749-4949
(312) 543-6708
 
Triple-S Management Corporation Reports First Quarter 2016 Results

SAN JUAN, Puerto Rico, May 5, 2016 – Triple-S Management Corporation (NYSE:GTS), a leading managed care company in Puerto Rico, today announced consolidated revenues of $756.7 million and pro forma net income of $3.4 million, or $0.14 per diluted share, for the quarter ended March 31, 2016, versus $9 million, or 34 cents per share, a year ago.
 
Quarterly Consolidated Highlights

●
Consolidated operating revenues were $755.8 million, a 31.7% increase from last year, reflecting the change in the Medicaid contract from an administrative services only agreement to an at-risk model;
●
Consolidated operating income was $6.1 million;
●
Consolidated loss ratio was 84.9%;
●
Medical loss ratio (MLR) was 87.9%;
●
Net income was $3.4 million, or $0.14 per diluted share.

Roberto García-Rodríguez, President and Chief Executive Officer of Triple-S Management, said, “We are pleased with the steady operational improvement we have made in what remains a challenging Puerto Rico economy. In Medicare Advantage, we continue implementing strategies to address scheduled rate reductions and improve our Star ratings. On the Commercial front, our underwriting discipline has continued to serve us well, resulting in a further MLR decline. Medicaid is performing in line with our expectations and we are beginning rate negotiations for the upcoming contract year, which will become effective July 1.”

“We have made significant progress on the first phase of our multi-year strategic transformation. With our redesigned and unified leadership, we are now integrating our three Managed Care businesses and implementing our new clinical strategy to provide our members with access to high value, integrated care.”

Garcia-Rodriguez concluded, “Over the next two to three years, the lion’s share of our corporate resources will be funneled toward the growth of our core managed care business. Our management team is keenly focused on making disciplined capital allocation decisions that create significant long-term value for our shareholders. As we continue to gain better visibility of Puerto Rico’s fiscal and economic issues, we should be better positioned to resume providing guidance next year.”
 
Triple-S Management Corporation
 
Selected Consolidated Quarterly Details

●
Pro-forma net income was $3.4 million, or $0.14 per diluted share, decreasing 62.2% year over year, reflecting a higher Managed Care MLR.
●
Consolidated premiums earned were $738.5 million, up 38.7% from last year. The increase was principally due to the additional Managed Care premiums generated by the change in the Medicaid contract from an ASO to an at-risk model, which was effective April 1, 2015.
●
Administrative service fees fell 82.5% year over year, to $5.1 million, reflecting the change in the Medicaid delivery model mentioned above.
●
The consolidated loss ratio of 84.9% was up 370 basis points from a year ago. The increase reflects a higher Managed Care MLR, offset by respective declines of 400 basis points and 200 basis points in the loss ratio of the Property and Casualty and Life Insurance segments.
●
The consolidated operating expense ratio of 16.5% was 620 basis points lower than last year, largely due to the increase in consolidated premiums earned and the reduction in the number of regions in the Medicaid business from eight to two when the contract changed from an ASO to an at-risk model.
●
Triple-S Management repurchased 367,101 shares during the quarter. As of March 31, 2016, the Company has approximately $14.1 million remaining under the buyback program authorized in November 2015.

Selected Managed Care Segment Quarterly Details

●
Managed Care premiums earned were $678.7 million, up $206.2 million, or 43.6%, year over year, largely reflecting an increase in fully-insured membership.
o
Total Medicaid premiums were up $202.2 million as a result of the change to the new at-risk contract.
o
Commercial premiums were up 1.4% from a year ago, to $215.5 million, reflecting higher average premium rates, offset in part by a 4.6% decline in fully-insured member month enrollment.
o
Medicare premiums of $261.0 million grew 0.4% year over year, resulting from a 5% member month enrollment increase, offset by lower average premium rates reflecting the reduction in Medicare reimbursement.
●
Administrative service fees were down 79.1% year over year, to $6.3 million, reflecting the change in the Medicaid contract from an ASO to an at-risk model. Self-insured Commercial member month enrollment decreased 5% year over year.
●
Managed Care MLR of 87.9% was up 320 basis points from a year ago. The higher MLR largely reflects the following:
o
An increase in the Medicare MLR, due to the 2016 reimbursement rate decrease of approximately 5% and an additional $6 million in claims and related service costs related to a higher completion rate of HRAs compared with the first quarter last year.
o
The impact of the new Medicaid at-risk contract, which has a higher loss ratio.
o
A 40 basis point decrease in the Commercial MLR which includes, the impact of prior period favorable reserve developments.
Excluding the impact of prior-period reserve developments and other claim and premium adjustments, the Managed Care MLR increased 60 basis points.
 
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Triple-S Management Corporation
 
Conference Call and Webcast

Management will host a conference call and webcast on May 5, 2016 at 9:00 a.m. Eastern Time to discuss its financial results for the three months ended March 31, 2016. 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).
 
3
Triple-S Management Corporation
 
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.
 
4
Triple-S Management Corporation
 
Earnings Release Schedules and Supplementary Information

Condensed Consolidated Balance Sheets
Exhibit I
   
Condensed Consolidated Statements 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
 
5
Triple-S Management Corporation
 
Exhibit I

Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
Unaudited

   
March 31,
 2016
    
December 31,
 2015
  
Assets
            
             
Investments
  
$
1,485,935
    
$
1,341,546
  
Cash and cash equivalents
    
112,466
      
197,818
  
Premium and other receivables, net
    
316,802
      
282,646
  
Deferred policy acquisition costs and value of business acquired
    
187,560
      
190,648
  
Property and equipment, net
    
72,221
      
73,953
  
Other assets
    
144,874
      
119,534
  
                 
Total assets
  
$
2,319,858
    
$
2,206,145
  
                 
Liabilities and Equity
                
                 
Policy liabilities and accruals
  
$
1,117,202
    
$
1,067,537
  
Accounts payable and accrued liabilities
    
302,323
      
254,925
  
Long-term borrowings
    
36,417
      
36,827
  
                 
Total liabilities
    
1,455,942
      
1,359,289
  
                 
Stockholders’ equity:
                
Common stock
    
24,750
      
24,999
  
Other stockholders’ equity
    
839,837
      
822,527
  
                 
Total Triple-S Management Corporation stockholders’ equity
    
864,587
      
847,526
  
                 
Non-controlling interest in consolidated subsidiary
    
(671
)
    
(670
)
                 
Total stockholders’ equity
    
863,916
      
846,856
  
                 
Total liabilities and equity
  
$
2,319,858
    
$
2,206,145
  
 
6
Triple-S Management Corporation
 
Exhibit II

Condensed Consolidated Statements of Earnings
(Dollar amounts in thousands, except per share data)
Unaudited

   
For the Three Months Ended
March 31,
  
   
2016
    
2015
  
Revenues:
            
Premiums earned, net
  
$
738,534
      
532,558
  
Administrative service fees
    
5,083
      
29,123
  
Net investment income
    
11,358
      
10,918
  
Other operating revenues
    
812
      
1,153
  
                 
Total operating revenues
    
755,787
      
573,752
  
                 
Net realized investment gains (losses):
                
Total other-than-temporary impairment losses on securities
    
-
      
(1,202
)
Net realized gains, excluding other-than-temporary impairment losses on securities
    
58
      
7,415
  
                 
Total net realized investment gains on sale of securities
    
58
      
6,213
  
                 
Other income, net
    
875
      
1,759
  
                 
Total revenues
    
756,720
      
581,724
  
                 
                 
Benefits and expenses:
                
Claims incurred
    
626,694
      
432,430
  
Operating expenses
    
122,980
      
127,375
  
                 
Total operating costs
    
749,674
      
559,805
  
                 
Interest expense
    
1,882
      
2,182
  
                 
Total benefits and expenses
    
751,556
      
561,987
  
                 
Income before taxes
    
5,164
      
19,737
  
                 
Income taxes
    
1,709
      
4,931
  
                 
Net income
    
3,455
      
14,806
  
                 
Less: Net loss attributable to the non-controlling interest
    
1
      
30
  
                 
Net income attributable to Triple-S Management Corporation
  
$
3,456
    
$
14,836
  
                 
Earnings per share attributable to Triple-S Management Corporation:
          
                 
Basic net income per share
  
$
0.14
    
$
0.56
  
Diluted net income per share
  
$
0.14
    
$
0.56
  
 
7
Triple-S Management Corporation
 
Exhibit III

Condensed Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
Unaudited

   
For the Three Months ended
March 31,
  
   
2016
    
2015
  
             
Net cash provided by operating activities
  
$
31,260
    
$
38,776
  
                 
Cash flows from investing activities:
                
Proceeds from investments sold or matured:
                
Securities available for sale:
                
Fixed maturities sold
    
90,328
      
139,115
  
Fixed maturities matured/called
    
699
      
30,320
  
Equity securities sold
    
11,257
      
28,566
  
Acquisition of investments:
                
Securities available for sale:
                
Fixed maturities
    
(118,039
)
    
(126,895
)
Equity securities
    
(92,956
)
    
(11,973
)
Increase in other investments
    
(182
)
    
(1,549
)
Net disbursements for policy loans
    
(231
)
    
(137
)
Net capital expenditures
    
(1,465
)
    
(1,463
)
                 
Net cash (used in) provided by investing activities
    
(110,589
)
    
55,984
  
                 
Cash flows from financing activities:
                
Change in outstanding checks in excess of bank balances
    
1,916
      
(2,428
)
Repayments of long-term borrowings
    
(410
)
    
(410
)
Repurchase and retirement of common stock
    
(8,027
)
    
(14,997
)
Proceeds from policyholder deposits
    
3,403
      
3,047
  
Surrenders of policyholder deposits
    
(2,905
)
    
(3,687
)
                 
Net cash used in financing activities
    
(6,023
)
    
(18,475
)
                 
Net (decrease) increase in cash and cash equivalents
    
(85,352
)
    
76,285
  
                 
Cash and cash equivalents, beginning of period
    
197,818
      
110,037
  
                 
Cash and cash equivalents, end of period
  
$
112,466
    
$
186,322
  
 
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Triple-S Management Corporation
 
Exhibit IV

Segment Performance Supplemental Information

(Unaudited)
  
Three months ended March 31,
  
(dollar amounts in millions)
  
2016
    
2015
    
Percentage
Change
  
Premiums earned, net:
                  
Managed Care:
                  
Commercial
  
$
215.5
    
$
212.5
      
1.4
%
Medicare
    
261.0
      
260.0
      
0.4
%
Medicaid
    
202.2
      
-
      
100
%
Total Managed Care
    
678.7
      
472.5
      
43.6
%
Life Insurance
    
39.1
      
37.8
      
3.4
%
Property and Casualty
    
21.3
      
22.8
      
(6.6
%)
Other
    
(0.6
)
    
(0.5
)
    
(20.0
%)
Consolidated premiums earned, net
  
$
738.5
    
$
532.6
      
38.7
%
Operating revenues: 1
                        
Managed Care
  
$
688.5
    
$
505.5
      
36.2
%
Life Insurance
    
45.0
      
43.6
      
3.2
%
Property and Casualty
    
23.2
      
24.9
      
(6.8
%)
Other
    
(0.9
)
    
(0.2
)
    
(350.0
%)
Consolidated operating revenues
  
$
755.8
    
$
573.8
      
31.7
%
Operating income (loss): 2
                        
Managed Care
  
$
(0.6
)
  
$
11.0
      
(105.5
%)
Life Insurance
    
5.6
      
4.8
      
16.7
%
Property and Casualty
    
2.1
      
1.5
      
40.0
%
Other
    
(1.0
)
    
(3.3
)
    
(69.7
%)
Consolidated operating income
  
$
6.1
    
$
14.0
      
(56.4
%)
Operating margin: 3
                        
Managed Care
    
(0.1
%)
    
2.2
%
    
-230
bp
Life Insurance
    
12.4
%
    
11.0
%
    
140
bp
Property and Casualty
    
9.1
%
    
6.0
%
    
310
bp
Consolidated
    
0.8
%
    
2.4
%
    
-160
bp
Depreciation and amortization expense
  
$
3.7
    
$
4.2
      
(11.9
%)
 
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.
 
9
Triple-S Management Corporation
 
Managed Care Additional Data
  
Three months ended March 31,
  
(Unaudited)
  
2016
    
2015
  
             
Member months enrollment:
            
Commercial:
            
Fully-insured
    
1,096,282
      
1,143,729
  
Self-insured
    
543,026
      
574,334
  
Total Commercial
    
1,639,308
      
1,718,063
  
Medicare Advantage
    
364,427
      
347,082
  
Medicaid:
                
Fully-insured
    
1,221,892
      
-
  
Self-insured
    
-
      
4,229,082
  
Total Medicaid
    
1,221,892
      
4,229,082
  
Total member months
    
3,225,627
      
6,294,227
  
                 
Claim liabilities (in millions)
  
$
381.4
    
$
348.3
  
Days claim payable
    
58
      
58
 * 
                 
Premium PMPM:
                
Managed Care
  
$
253.00
    
$
316.94
  
Commercial
    
196.57
      
185.80
  
Medicare Advantage
    
716.19
      
749.10
  
Medicaid
    
165.48
      
-
  
                 
Medical loss ratio:
    
87.9
%
    
84.7
%
Commercial
    
82.8
%
    
83.2
%
Medicare Advantage
    
90.1
%
    
85.8
%
Medicaid
    
90.1
%
    
-
  
                 
Adjusted medical loss ratio: 1
    
87.6
%
    
87.0
%
Commercial
    
80.9
%
    
87.3
%
Medicare Advantage
    
90.9
%
    
86.5
%
Medicaid
    
90.3
%
    
-
  
                 
Operating expense ratio:
                
Consolidated
    
16.5
%
    
22.7
%
Managed Care
    
13.5
%
    
18.8
%

*Information provided as of December 31, 2015. 

1 The adjusted medical loss ratio accounts for subsequent adjustments to estimates, such as prior-period reserve developments and Medicare premium adjustments, and present them in the corresponding period.
 
10
Triple-S Management Corporation
 
Managed Care Membership by Segment      
   
As of March 31,
  
   
2016
    
2015
  
             
Members:
            
Commercial:
            
Fully-insured
    
364,390
      
377,798
  
Self-insured
    
180,456
      
190,624
  
Total Commercial
    
544,846
      
568,422
  
Medicare Advantage
    
119,224
      
116,292
  
Medicaid:
                
Fully-insured
    
402,933
      
-
  
Self-insured
    
-
      
1,407,045
  
Total Medicaid
    
402,933
      
1,407,045
  
Total members
    
1,067,003
      
2,091,759
  
 
11
Triple-S Management Corporation
 
Exhibit V

Reconciliation of Non-GAAP Financial Measures

   
Pro Forma Net Income
  
(Unaudited)
  
Three months ended
March 31,
  
(dollar amounts in millions)
  
2016
    
2015
  
                 
Net income
  
$
3.4
    
$
14.8
  
Less pro forma adjustments:
                
Net realized investment gains, net of tax
    
-
      
5.0
  
Private equity investment income, net of tax 1
    
-
      
0.8
  
Pro forma net income
  
$
3.4
    
$
9.0
  
Diluted pro forma net income per share
  
$
0.14
    
$
0.34
  
 
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.

1 The pro-forma net income for 2015 was modified to exclude income generated from private equity investments not under management’s control.

 
###

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