Triple-S Management Corporation Reports Third Quarter 2021 Results

SAN JUAN, Puerto Rico, Nov. 4, 2021 /PRNewswire/ -- Triple-S Management Corporation (NYSE:GTS), a leading healthcare services company in Puerto Rico, today announced its third quarter 2021 results.

(PRNewsfoto/Triple-S Management Corporation)

Roberto Garcia-Rodriguez, President and Chief Executive Officer, commented: "We had a solid third quarter performance as we continued to record double-digit revenue growth year-over-year, driven by our Medicaid offering along with solid growth at our Life and P&C segments. Moving forward, we continue to progress in our integrated healthcare strategy, enabling us to deliver additional attractive products, along with the high-quality care and superior service to which our members have become accustomed."

Third Quarter 2021 Consolidated Results and Other Highlights

Net income of $8.2 million, or $0.35 per diluted share, compared with $23.6 million, or $1.02 per diluted share, in the prior year period.
Adjusted net income of $9.6 million, or $0.41 per diluted share, versus $14.2 million, or $0.61 per diluted share, in the prior-year period.
Operating revenue of $1.0 billion, a 10.8% increase from the prior-year period, primarily reflecting higher Managed Care net premiums earned.
Consolidated loss ratio of 86.2%, an increase of 370 basis points compared with the third quarter of 2020, reflecting normalized Managed Care utilization patterns in the third quarter of 2021.
Medical loss ratio (MLR) of 88.7%, 400 basis points higher than the same period last year.
Consolidated operating income of $11.5 million, compared with $22.3 million in the prior-year period.

Selected Segment Quarterly Details

Managed Care

Managed Care premiums earned were $939.7 million, up 10.6% year-over-year.
- Medicare premiums earned were $423.1 million, an increase of 5.6% from the prior-year period. The increase was largely due to higher premium rates resulting from a rise in the premium rate benchmark and membership risk score and higher enrollment.
- Medicaid premiums earned were $302.2 million, an increase of 25.4% from the prior-year period, primarily reflecting an increase in enrollment of approximately 210,000 member months and higher average premium rates. In addition, following a reconciliation process with ASES this quarter, the Company recognized premiums corresponding to prior periods. These increases were partially offset by the elimination of the HIP fee pass-through in 2021.
- Commercial premiums earned were $214.4 million, an increase of 2.9% from the prior-year period, mainly reflecting higher average premium rates in the 2021 period, partially offset by the elimination of the HIP fee pass-through in 2021.
Reported MLR was 88.7%, an increase of 400 basis points from the prior-year period, primarily reflecting the elimination of the HIP fee in 2021, normalized utilization of services compared with the low utilization in the prior-year quarter due to the pandemic, higher costs associated with COVID-19-related testing, treatment costs and the waiver of medical and payment policies, and increased benefits in the Medicare product offering in 2021.
Managed Care operating expenses were $109.4 million, a decrease of $15.5 million, or 12.4%, from the prior-year quarter, primarily reflecting the elimination of the HIP fee in 2021 and lower business promotion expenses, partially offset by higher personnel costs. The segment operating expense ratio was 11.6%, a 300 basis-point improvement from the prior-year quarter.

Life Insurance Segment

Premiums earned, net were $55.1 million, a 10.0% increase from the prior-year period, resulting from higher sales across all lines of business, particularly in the Individual Life and Cancer lines of business. Operating income was $5.6 million, compared to $5.7 million in the prior-year period.

Property and Casualty Segment

Premiums earned, net were $26.3 million, an increase of 10.0% from the prior-year period. The increase was primarily due to higher premiums in Personal Package, Commercial Liability, Commercial Auto and Commercial Property products, partially offset by a decrease in Commercial Package products.
Operating income was $2.0 million, compared with $4.4 million in the prior-year period, primarily driven by higher losses and operating expenses in the 2021 quarter. Losses during the 2020 period were lower due to the COVID-19 pandemic.

Liquidity and Capital Resources

As of September 30, 2021, the Company had cash and cash equivalents of $122.7 million and investments of $1.9 billion on its consolidated balance sheet.

2021 Outlook and Conference Call

Due to the pending transaction with GuideWell Mutual Holding Corporation announced on August 24, 2021, the Company will not be hosting a conference call or providing an updated outlook for the fourth quarter or full year 2021. The Company's previously issued full year 2021 outlook should no longer be relied upon. Please visit the Investor Relations section of the Company's website at http://investors.triplesmanagement.com for the latest releases and information.

About Triple-S Management Corporation

Triple-S Management, a health services company, serves more than 1 million customers in Puerto Rico, which represents nearly one-third of the island's population. With over 60 years of experience, it is the premier insurance and managed care brand, with the largest customer base and broadest provider networks on the island. 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, Costa Rica, the British Virgin Islands and Anguilla, and offers a broad portfolio of managed care and related products in the commercial, Medicare Advantage and Medicaid segments. Triple-S Management is also a well-known brand in the life insurance and property and casualty insurance segments 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 and government agencies 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 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

Exhibit I

Condensed Consolidated Balance Sheets
(dollar in thousands)
Unaudited


			September 30, 2021		December 31, 2020
Assets

Investments			$	1,940,745	$	1,874,024
Cash and cash equivalents				122,709		110,989
Premium and other receivables, net				496,477		488,840
Deferred policy acquisition costs and value of business acquired				255,010		248,325
Property and equipment, net				137,762		131,974
Other assets				238,963		234,266

		Total assets	$	3,191,666	$	3,088,418


Liabilities and Stockholders' Equity

Policy liabilities and accruals			$	1,588,117	$	1,550,798
Accounts payable and accrued liabilities				537,110		487,356
Short-term borrowings				-		30,000
Long-term borrowings				49,498		52,751

		Total liabilities		2,174,725		2,120,905

Stockholders' equity:
	Common stock			23,795		23,430
	Other stockholders' equity			993,879		944,800

		Total Triple-S Management Corporation stockholders' equity		1,017,674		968,230

Non-controlling interest in consolidated subsidiary				(733)		(717)

Total stockholders' equity				1,016,941		967,513

Total liabilities and stockholders' equity			$	3,191,666	$	3,088,418

Exhibit II

Condensed Consolidated Statements of Earnings
(dollar in thousands, except per share information)
Unaudited

			For the Three Months Ended				For the Nine Months Ended
			September 30,				September 30,
			2021		2020		2021		2020
Revenues
	Premiums earned, net		$	1,019,696	$	922,934	$	3,016,012	$	2,657,366
	Administrative service fees			3,875		3,752		9,316		8,755
	Net investment income			17,572		14,168		46,178		42,294
	Other operating revenues			3,925		2,052		8,518		6,394
		Total operating revenues		1,045,068		942,906		3,080,024		2,714,809

	Net realized investment gains (losses)			1,015		507		3,746		(180)
	Net unrealized investment (losses) gains on equity investments			(7,912)		11,040		13,383		(17,428)
	Other income, net			11,085		1,811		19,047		6,217
		Total revenues		1,049,256		956,264		3,116,200		2,703,418

Benefits and expenses
	Claims incurred, net of reinsurance			878,947		761,792		2,573,569		2,129,401
	Operating expenses			154,526		158,809		456,880		499,669
		Total operating costs		1,033,473		920,601		3,030,449		2,629,070

	Interest expense			2,016		2,096		6,225		5,813

		Total benefits and expenses		1,035,489		922,697		3,036,674		2,634,883

		Income before taxes		13,767		33,567		79,526		68,535

Income tax expense				5,607		9,989		24,505		27,520

Net income				8,160		23,578		55,021		41,015

	Net loss attributable to the non-controlling interest			7		3		16		20

Net income attributable to Triple-S Management Corporation			$	8,167	$	23,581	$	55,037	$	41,035

Earnings per share attributable to Triple-S Management Corporation:

	Basic net income per share		$	0.35	$	1.02	$	2.35	$	1.77
	Diluted net income per share		$	0.35	$	1.02	$	2.34	$	1.76

	Weighted average of common shares			23,494,415		23,073,511		23,402,622		23,215,840
	Diluted weighted average of common shares			23,610,672		23,193,980		23,546,277		23,318,069

Exhibit III

Condensed Consolidated Statements of Cash Flows
(dollar in thousands)
Unaudited

					For the Nine Months Ended
					September 30,
					2021		2020

Net cash provided by operating activities					$	100,699	$	223,681

Cash flows from investing activities:
	Proceeds from investments sold or matured:
		Securities available-for-sale:
			Fixed-maturities sold			140,866		94,557
			Fixed-maturities matured/called			18,271		37,450
		Securities held-to-maturity - fixed-maturities matured/called				747		1,079
		Equity investments sold				99,951		80,152
		Other invested assets sold				19,652		13,231
	Acquisition of investments:
		Securities available-for-sale - fixed-maturities				(129,066)		(206,387)
		Securities held-to-maturity - fixed-maturities				(751)		(1,087)
		Equity investments				(199,046)		(201,324)
		Other invested assets				(9,317)		(25,442)
	(Decrease) increase in other investments					(4,470)		(3,924)
	Net change in policy loans					(21)		240
	Net capital expenditures					(16,948)		(52,549)
	Capital contribution on equity method investees					-		(7,083)

				Net cash used in investing activities		(80,132)		(271,087)

Cash flows from financing activities:
	Change in outstanding checks in excess of bank balances					20,594		16,814
	Net change in short-term borrowings					(30,000)		28,500
	Proceeds of long-term borrowings					-		30,841
	Repayments of long-term borrowings					(3,370)		(2,760)
	Repurchase and retirement of common stock					-		(14,980)
	Proceeds from policyholder deposits					12,594		21,586
	Surrender of policyholder deposits					(8,665)		(12,829)

				Net cash (used in) provided by financing activities		(8,847)		67,172

				Net increase in cash and cash equivalents		11,720		19,766

Cash and cash equivalents, beginning of period						110,989		109,837

Cash and cash equivalents, end of period					$	122,709	$	129,603

Exhibit IV

Segment Performance Supplemental Information

(Unaudited)					Three months ended September 30,			Nine months ended September 30,
(dollar in millions)					2021	2020	Percentage Change	2021	2020	Percentage Change
Premiums earned, net:
	Managed Care:
		Medicare			$ 423.1	$ 400.7	5.6%	$ 1,233.8	$ 1,160.9	6.3%
		Medicaid			302.2	240.9	25.4%	916.7	682.9	34.2%
		Commercial			214.4	208.4	2.9%	631.0	605.3	4.2%
			Total Managed Care		939.7	850.0	10.6%	2,781.5	2,449.1	13.6%
	Life Insurance				55.1	50.1	10.0%	161.6	144.9	11.5%
	Property and Casualty				26.3	23.9	10.0%	76.9	66.9	14.9%
	Other				(1.4)	(1.0)	(40.0%)	(4.0)	(3.5)	(14.3%)
				Consolidated premiums earned, net	$ 1,019.7	$ 923.0	10.5%	$ 3,016.0	$ 2,657.4	13.5%
Operating revenues: ¹
	Managed Care				$ 951.7	$ 858.2	10.9%	$ 2,810.6	$ 2,473.7	13.6%
	Life Insurance				61.9	57.0	8.6%	181.5	165.5	9.7%
	Property and Casualty				28.8	26.1	10.3%	83.7	73.5	13.9%
	Other				2.6	1.6	62.5%	4.2	2.1	100.0%
				Consolidated operating revenues	$ 1,045.0	$ 942.9	10.8%	$ 3,080.0	$ 2,714.8	13.5%
Operating income (loss): ²
	Managed Care				$ 8.5	$ 13.0	(34.6%)	$ 34.5	$ 56.5	(38.9%)
	Life Insurance				5.6	5.7	(1.8%)	17.8	20.2	(11.9%)
	Property and Casualty				2.0	4.4	(54.5%)	7.8	10.9	(28.4%)
	Other				(4.6)	(0.8)	(475.0%)	(10.6)	(1.9)	(457.9%)
				Consolidated operating income	$ 11.5	$ 22.3	(48.4%)	$ 49.5	$ 85.7	(42.2%)
Operating margin: ³
	Managed Care				0.9%	1.5%	-60 bp	1.2%	2.3%	-110 bp
	Life Insurance				9.0%	10.0%	-100 bp	9.8%	12.2%	-240 bp
	Property and Casualty				6.9%	16.9%	-1,000 bp	9.3%	14.8%	-550 bp
	Consolidated				1.1%	2.4%	-130 bp	1.6%	3.2%	-160 bp
Depreciation and amortization expense					$ 3.6	$ 3.1	16.1%	$ 10.7	$ 10.9	(1.8%)

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 September 30,		Nine months ended September 30,
(Unaudited)					2021	2020	2021	2020
Member months enrollment:
	Medicare Advantage				410,939	407,170	1,228,732	1,220,280
	Medicaid				1,342,953	1,132,626	3,972,136	3,278,098
	Commercial:
		Fully insured			966,002	966,906	2,871,788	2,920,460
		Self-insured			281,153	324,372	875,844	981,634
			Total Commercial		1,247,155	1,291,278	3,747,632	3,902,094
				Total member months	3,001,047	2,831,074	8,948,500	8,400,472
Claim liabilities (in millions)							$ 533.7	$ 417.6
Days claim payable							60	57
Premium PMPM:
	Managed Care				$ 345.49	$ 339.09	$ 344.56	$ 330.12
		Medicare Advantage			1,029.59	984.11	1,004.12	951.34
		Medicaid			225.03	212.69	230.78	208.32
		Commercial			221.95	215.53	219.72	207.26
Medical loss ratio:					88.7%	84.7%	88.0%	82.7%
	Medicare Advantage				82.5%	80.6%	85.1%	80.2%
	Medicaid				95.2%	94.0%	92.1%	92.7%
	Commercial				91.9%	81.9%	87.9%	76.1%
Adjusted medical loss ratio: ¹					90.7%	81.8%	89.9%	81.1%
	Medicare Advantage				84.6%	75.0%	86.8%	77.4%
	Medicaid				99.2%	90.9%	95.6%	91.1%
	Commercial				90.5%	83.8%	87.8%	76.5%
Operating expense ratio:
	Consolidated				15.1%	17.1%	15.1%	18.7%
	Managed Care				11.6%	14.6%	11.7%	15.9%

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

Managed Care Membership by Business

Managed Care Membership by Segment					As of September 30,
					2021	2020
Members:
	Medicare Advantage				136,459	136,135
	Medicaid				449,474	385,344
	Commercial:
		Fully insured			321,772	321,673
		Self-insured			94,261	107,830
			Total Commercial		416,033	429,503
				Total members	1,001,966	950,982

Exhibit V

Reconciliation of Non-GAAP Financial Measures

			Adjusted Net Income
(Unaudited)			Three months ended September 30,		Nine months ended September 30,
(dollar in millions)			2021	2020	2021	2020
Net income			$ 8.2	$ 23.6	$ 55.0	$ 41.0
Less adjustments:
	Net realized investment gains (losses)		1.0	0.5	3.7	(0.2)
	Unrealized (losses) gains on equity investments		(7.9)	11.0	13.4	(17.4)
	Contingency accrual		-	-	-	(32.0)
	Private equity investment income		8.4	0.2	10.8	3.9
	GuideWell transaction costs		(1.8)	-	(1.8)	-
	Tax impact of non-GAAP adjustments		(1.095)	(2.3)	(6.80)	14.0
		Adjusted net income	$ 9.6	$ 14.2	$ 35.7	$ 72.7
		Diluted adjusted net income per share	$ 0.41	$ 0.61	$ 1.52	$ 3.12

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. The Company estimates tax impact of net realized and non-realized gains (losses), private equity investment income and contingency accrual at the applicable statutory tax rates. These non-GAAP metrics do 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:
Victor J. Haddock-Morales	Mr. Garrett Edson
EVP and Chief Financial Officer	ICR
(787) 749-4949	(787) 792-6488

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SOURCE Triple-S Management Corporation

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