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Section 1: 8-K (8-K)


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 8, 2019
TRIPLE-S MANAGEMENT CORPORATION
(Exact Name of Registrant as Specified in Charter)

Puerto Rico
001-33865
66-0555678
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)

Registrant’s telephone number, including area code: 787-749-4949

1441 F.D. Roosevelt Avenue, San Juan, Puerto Rico 00920
(Address of Principal Executive Offices and Zip Code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 Trading
Symbol(s)
Name of each exchange on which
registered
Common Stock Class B, $1.00 par value GTS New York Stock Exchange (NYSE)



Item 2.02.
Results of Operations and Financial Condition.
 
On August 8, 2019, Triple-S Management Corporation issued a press release announcing its unaudited financial results for the quarter ended June 30, 2019, a copy of which is attached as Exhibit 99.1 to this Current Report on Form 8-K.
 
In accordance with General Instruction B.2 of Form 8-K, the information furnished pursuant to this Item 2.02 of  this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
 
Item 9.01.
Financial Statements and Exhibits.
 
  99.1
Press release, dated August 8, 2019, issued by Triple-S Management Corporation.


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
TRIPLE-S MANAGEMENT CORPORATION
 
       
Date: August 8, 2019
By:
/s/ Juan José Román-Jiménez
 
   
Name: Juan José Román-Jiménez
 
   
Title: EVP and Chief Financial Officer
 



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Section 2: EX-99.1 (EXHIBIT 99.1)


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
Mr. Garrett Edson
EVP and Chief Financial Officer
ICR
(787) 749-4949
(787) 792-6488
   

Triple-S Management Corporation Reports Second Quarter 2019 Results

SAN JUAN, Puerto Rico, August 8, 2019 – Triple-S Management Corporation (NYSE:GTS), a leading managed care company in Puerto Rico, today announced its second quarter 2019 results.

Quarterly Consolidated and Other Highlights


Net income of $30.9 million, or $1.35 per diluted share, versus net loss of $38.7 million, or $1.68 per share, in the prior-year period;

Adjusted net income of $25.7 million, or $1.12 per diluted share, versus adjusted net loss of $37.3 million, or $1.62 per share;

Operating revenues of $878.6 million, a 15.1% increase from the prior-year period, primarily reflecting higher Managed Care net premiums earned;

Consolidated loss ratio improved 1,110 basis points to 82.2%, mostly driven by the unfavorable reserve development related to Hurricane Maria claims recognized by the Property and Casualty segment in the second quarter of 2018;

Medical loss ratio (“MLR”) improved 160 basis points to 84.5%;

Consolidated operating income was $38.2 million, compared to consolidated operating loss of $63.6 million in the prior-year period.

“We recorded a strong second quarter, driven by an excellent performance from our core Managed Care segment, along with solid results from our Life and P&C segments, leading us to raise our outlook for full year 2019,” said Roberto Garcia-Rodriguez, President and Chief Executive Officer.  “Our ongoing initiatives to enhance our product offering and brand are yielding positive results for Triple-S, reflected in strong year-over-year growth in Managed Care premiums and stable medical cost trends.”

“In pursuit of our overall growth strategy, we remain focused on creating a unique member experience through a combination of innovative clinical programs, the evolution of our provider network, advanced analytics, competitive pricing and superior service,” added Mr. Garcia-Rodriguez.  “In addition, effective yesterday we completed the conversion of our remaining outstanding Class A shares, simplifying our capital structure into a single class of common shares and increasing our public float, which should also enhance long-term value for our shareholders.”

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Triple-S Management Corporation
Selected Consolidated Quarterly Details

Consolidated net premiums earned were $859.5 million, up 15.9% from the prior-year period, primarily reflecting higher Medicare membership and premium rates within the Managed Care segment. The increase was partially offset by lower Medicaid membership resulting from the change in the program’s model and a new entrant to the program in November 2018.

Consolidated claims incurred were $706.3 million, up 2.1% year-over-year.  Consolidated loss ratio of 82.2% improved 1,110 basis points from the prior-year period, mostly driven by lower Managed Care MLR on a year-over-year basis, as well as $76.4 million in unfavorable prior period reserve development related to Hurricane Maria recognized by the Property and Casualty segment in the second quarter of 2018.

Consolidated operating expenses of $134.1 million decreased by $0.5 million, or 0.4%, from the prior-year period primarily resulting from $12.2 million in savings due to the suspension in 2019 of the HIP Fee, offset by higher personnel costs and commission expense.  The Company’s operating expense ratio improved 240 basis points year-over-year to 15.6% mostly driven by the increase in premiums during the second quarter of 2019.

Consolidated income tax expense was $12.9 million, compared to an income tax benefit of $27.9 million in the prior-year period. Income tax expense in 2019 primarily reflects the increase in income before taxes in the Managed Care and Property and Casualty segments. The income tax benefit in the second quarter of 2018 mainly reflects the loss before taxes in that period in the Property and Casualty segment.

Selected Managed Care Segment Quarterly Details

Managed Care premiums earned were $793.8 million, up 17.0% year over year.


o
Medicare premiums earned of $366.0 million increased 30.8% from the prior-year period, largely due to an increase of approximately 51,000 member months and higher average premium rates, primarily reflecting a more competitive product offering and an increase in the average membership risk score.


o
Medicaid premiums earned increased 11.4% from the prior-year period to $227.0 million, primarily reflecting higher average premium rates in 2019 offset in part by a decrease in enrollment of approximately 110,000 member months and the suspension of the HIP Fee pass-through in 2019.  The decrease in membership was caused by the lower initial membership assigned to Triple-S by ASES when implementing the new contract effective November 1, 2018.  The increase in average premium rates is due to the change in the Medicaid model, where Triple-S now insures members across Puerto Rico, which have higher average premium rates per member, compared to the previous contract where Triple-S covered only two regions with lower premium rates per member.


o
Commercial premiums earned of $200.8 million increased 3.1% from the prior-year period, mainly reflecting higher enrollment during the quarter of approximately 15,000 member months and higher average premium rates, offset by the suspension of the HIP Fee pass-through in 2019.

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Triple-S Management Corporation
Reported MLR of 84.5% improved 160 basis points from the prior-year period, primarily reflecting favorable prior period reserve developments.  Adjusting for prior period reserve developments and moving risk-score revenue to its corresponding period in both the 2019 and 2018 quarters, Managed Care MLR for the second quarter of 2019 would have been 85.3%, 130 basis points higher than the prior-year period.  This largely reflects the improved benefits offered in the Medicare 2019 product offering, the elimination of the HIP Fee pass-through, and the higher target MLR of the current Medicaid contract.

2019 Outlook

The Company is raising its full year 2019 guidance for consolidated operating revenue, Managed Care premiums earned, and adjusted net income per diluted share, reducing its guidance for operating expense ratio and adjusting its effective tax rate guidance.  It is maintaining its full year 2019 guidance for its consolidated claims incurred ratio and Managed Care MLR.  More specifically:

The Company raised consolidated operating revenue expectations for 2019 to be between $3.29 billion and $3.33 billion, which includes Managed Care premiums earned, net between $2.95 billion and $2.99 billion.  The Company’s previous outlook was for consolidated operating revenue between $3.11 billion and $3.15 billion, which included Managed Care premiums earned, net between $2.78 billion and $2.82 billion;

The Company continues to expect the consolidated claims incurred ratio for 2019 to be between 81.3% and 83.3%, and Managed Care MLR to be between 84.0% and 86.0%;

The Company is reducing consolidated operating ratio expectations for 2019 to be between 17.0% and 17.5%. The Company’s previous outlook was for consolidated operating expense ratio to be between 17.6% and 18.6%;

The Company is adjusting expectations for its effective tax rate to be between 29.0% and 33.0% due to an expected increase in Managed Care operating income, which has a higher tax rate relative to the other segments.  The Company’s previous outlook was for effective tax rate to be between 29.0% and 34.0%; and

The Company raised adjusted net income per diluted share expectations for 2019 to be between $2.40 and $2.60, compared to its previous outlook for adjusted net income per diluted share between $1.90 and $2.10.  Adjusted net income per diluted share guidance accounts for the recently issued share dividend and does not account for any potential share repurchase activity during 2019.  Estimated weighted average diluted share count for full year 2019 is expected to be 23.44 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 June 30, 2019. To participate, callers within the U.S. and Canada should dial 1-877-451-6152 and international callers should dial 1-201-389-0879 at least five 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.

3

Triple-S Management Corporation
In addition, a replay will be available through August 22, 2019 by calling 1-844-512-2921 or 1-412-317-6671 and entering passcode 13692328. 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 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

4

Triple-S Management Corporation

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.

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Triple-S Management Corporation
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

6

Triple-S Management Corporation
Exhibit I

Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
Unaudited

   
June 30,
2019
   
December 31,
2018
 
Assets
           
             
Investments
 
$
1,600,180
   
$
1,564,542
 
Cash and cash equivalents
   
166,272
     
117,544
 
Premium and other receivables, net
   
609,523
     
628,444
 
Deferred policy acquisition costs and value of business acquired
   
225,989
     
215,159
 
Property and equipment, net
   
85,710
     
81,923
 
Other assets
   
149,391
     
152,636
 
                 
Total assets
 
$
2,837,065
   
$
2,760,248
 
                 
                 
Liabilities and Stockholders' Equity
               
                 
Policy liabilities and accruals
 
$
1,545,423
   
$
1,600,310
 
Accounts payable and accrued liabilities
   
342,964
     
309,747
 
Long-term borrowings
   
27,289
     
28,883
 
                 
Total liabilities
   
1,915,676
     
1,938,940
 
                 
Stockholders’ equity:
               
Common stock
   
23,151
     
22,931
 
Other stockholders’ equity
   
898,922
     
799,053
 
                 
Total Triple-S Management Corporation stockholders’ equity
   
922,073
     
821,984
 
                 
Non-controlling interest in consolidated subsidiary
   
(684
)
   
(676
)
                 
Total stockholders’ equity
   
921,389
     
821,308
 
                 
Total liabilities and stockholders’ equity
 
$
2,837,065
   
$
2,760,248
 

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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
June 30,
   
For the Six Months Ended
June 30,
 
   
2019
   
2018
   
2019
   
2018
 
Revenues:
                       
Premiums earned, net
 
$
859,493
   
$
741,770
   
$
1,627,495
   
$
1,493,804
 
Administrative service fees
   
2,456
     
4,066
     
5,088
     
7,414
 
Net investment income
   
15,062
     
15,707
     
30,438
     
29,462
 
Other operating revenues
   
1,591
     
1,588
     
3,168
     
2,659
 
                                 
Total operating revenues
   
878,602
     
763,131
     
1,666,189
     
1,533,339
 
                                 
Net realized investment gains (losses) on sale of securities
   
2,364
     
(921
)
   
3,679
     
2,021
 
 
                               
Net unrealized investment gains (losses) on equity investments
   
3,323
     
(776
)
   
22,992
     
(16,975
)
 
                               
Other income, net
   
1,705
     
494
     
2,874
     
1,657
 
                                 
Total revenues
   
885,994
     
761,928
     
1,695,734
     
1,520,042
 
                                 
                                 
Benefits and expenses:
                               
Claims incurred
   
706,304
     
692,138
     
1,329,494
     
1,311,127
 
Operating expenses
   
134,084
     
134,612
     
266,747
     
267,746
 
                                 
Total operating costs
   
840,388
     
826,750
     
1,596,241
     
1,578,873
 
                                 
Interest expense
   
1,831
     
1,825
     
3,619
     
3,515
 
                                 
Total benefits and expenses
   
842,219
     
828,575
     
1,599,860
     
1,582,388
 
                                 
Income (loss) before taxes
   
43,775
     
(66,647
)
   
95,874
     
(62,346
)
                                 
Income tax expense (benefit)
   
12,849
     
(27,901
)
   
30,165
     
(27,514
)
                                 
Net income (loss)
   
30,926
     
(38,746
)
   
65,709
     
(34,832
)
                                 
Net (loss) income attributable to the non-controlling interest
   
(5
)
   
1
     
(8
)
   
1
 
                                 
Net income (loss) attributable to Triple-S Management Corporation
 
$
30,931
   
$
(38,747
)
 
$
65,717
   
$
(34,833
)
                                 
Earnings per share attributable to Triple-S Management Corporation:
                               
                                 
Basic net income (loss) per share
 
$
1.35
   
$
(1.68
)
 
$
2.88
   
$
(1.50
)
Diluted net income (loss) per share
 
$
1.35
   
$
(1.68
)
 
$
2.87
   
$
(1.50
)
 
                               
Weighted average of common shares
   
22,830,399
     
23,016,447
     
22,794,297
     
23,146,318
 
Diluted weighted average of common shares
   
22,895,000
     
23,016,447
     
22,866,691
     
23,146,318
 

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Triple-S Management Corporation
Exhibit III

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

   
For the Six Months Ended
June 30,
 
   
2019
   
2018
 
             
Net cash provided by operating activities
 
$
26,305
   
$
130,723
 
                 
Cash flows from investing activities:
               
Proceeds from investments sold or matured:
               
Securities available for sale:
               
Fixed maturities sold
   
315,495
     
768,789
 
Fixed maturities matured/called
   
14,420
     
10,656
 
Securities held to maturity - fixed maturities matured/called
   
1,178
     
728
 
Equity investments sold
   
70,054
     
123,197
 
Other invested assets sold
   
2,096
     
1,788
 
Acquisition of investments:
               
Securities available for sale - fixed maturities
   
(291,533
)
   
(829,010
)
Securities held to maturity - fixed maturities
   
(539
)
   
(893
)
Equity investments
   
(67,560
)
   
(99,944
)
Other invested assets
   
(15,424
)
   
(18,649
)
Increase in other investments
   
(2,692
)
   
1,817
 
Net change in policy loans
   
(771
)
   
(372
)
Net capital expenditures
   
(10,659
)
   
(9,116
)
                 
Net cash provided by (used in) investing activities
   
14,065
     
(51,009
)
                 
Cash flows from financing activities:
               
Change in outstanding checks in excess of bank balances
   
13,189
     
(1,564
)
Repayments of long-term borrowings
   
(1,613
)
   
(1,618
)
Repurchase and retirement of common stock
   
(1
)
   
(16,395
)
Proceeds from policyholder deposits
   
8,204
     
11,606
 
Surrender of policyholder deposits
   
(11,421
)
   
(14,705
)
                 
Net cash provided by (used in) financing activities
   
8,358
     
(22,676
)
 
               
Net increase in cash and cash equivalents
   
48,728
     
57,038
 
                 
Cash and cash equivalents, beginning of period
   
117,544
     
198,941
 
                 
Cash and cash equivalents, end of period
 
$
166,272
   
$
255,979
 

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Triple-S Management Corporation
Exhibit IV

Segment Performance Supplemental Information

(Unaudited)
 
Three months ended June 30,
   
Six months ended June 30,
 
(dollar amounts in millions)
 
2019
   
2018
   
Percentage
Change
   
2019
   
2018
   
Percentage
Change
 
Premiums earned, net:
                                   
Managed Care:
                                   
Commercial
 
$
200.8
   
$
194.7
     
3.1
%
 
$
399.3
   
$
393.5
     
1.5
%
Medicare
   
366.0
     
279.8
     
30.8
%
   
698.6
     
567.7
     
23.1
%
Medicaid
   
227.0
     
203.8
     
11.4
%
   
401.4
     
404.1
     
(0.7
%)
Total Managed Care
   
793.8
     
678.3
     
17.0
%
   
1,499.3
     
1,365.3
     
9.8
%
Life Insurance
   
45.0
     
41.4
     
8.7
%
   
89.2
     
82.9
     
7.6
%
Property and Casualty
   
21.8
     
22.8
     
(4.4
%)
   
41.1
     
47.0
     
(12.6
%)
Other
   
(1.1
)
   
(0.7
)
   
(57.1
%)
   
(2.1
)
   
(1.4
)
   
(50.0
%)
Consolidated premiums earned, net
 
$
859.5
   
$
741.8
     
15.9
%
 
$
1,627.5
   
$
1,493.8
     
9.0
%
Operating revenues (loss): 1
                                               
Managed Care
 
$
802.9
   
$
689.3
     
16.5
%
 
$
1,518.0
   
$
1,385.5
     
9.6
%
Life Insurance
   
51.8
     
48.0
     
7.9
%
   
102.6
     
95.6
     
7.3
%
Property and Casualty
   
24.1
     
25.6
     
(5.9
%)
   
46.0
     
52.2
     
(11.9
%)
Other
   
(0.2
)
   
0.2
     
(200.0
%)
   
(0.4
)
   
-
     
(100.0
%)
Consolidated operating revenues
 
$
878.6
   
$
763.1
     
15.1
%
 
$
1,666.2
   
$
1,533.3
     
8.7
%
Operating income (loss): 2
                                               
Managed Care
 
$
29.3
   
$
1.4
     
1992.9
%
 
$
51.4
   
$
12.0
     
328.3
%
Life Insurance
   
5.2
     
5.3
     
(1.9
%)
   
10.9
     
9.0
     
21.1
%
Property and Casualty
   
4.8
     
(71.0
)
   
106.8
%
   
8.3
     
(67.9
)
   
(112.2
%)
Other
   
(1.1
)
   
0.7
     
(257.1
%)
   
(0.6
)
   
1.4
     
(142.9
%)
Consolidated operating income (loss)
 
$
38.2
   
$
(63.6
)
   
160.1
%
 
$
70.0
   
$
(45.5
)
   
253.8
%
Operating margin: 3
                                               
Managed Care
   
3.6
%
   
0.2
%
   
340
bp
   
3.4
%
   
0.9
%
   
250
bp
Life Insurance
   
10.0
%
   
11.0
%
   
-100
bp
   
10.6
%
   
9.4
%
   
120
bp
Property and Casualty
   
19.9
%
   
(277.3
%)
   
29,720
bp
   
18.0
%
   
(130.1
%)
   
14,810
bp
Consolidated
   
4.3
%
   
(8.3
%)
   
1,260
bp
   
4.2
%
   
(3.0
%)
   
720
bp
Depreciation and amortization expense
 
$
3.5
   
$
3.6
     
(2.8
%)
 
$
7.0
   
$
7.0
     
0.0
%

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.

10

Triple-S Management Corporation
Managed Care Additional Data
 
Three months ended
June 30,
   
Six months ended
June 30,
 
(Unaudited)
 
2019
   
2018
   
2019
   
2018
 
Member months enrollment:
                       
Commercial:
                       
Fully-insured
   
955,463
     
940,484
     
1,908,515
     
1,901,774
 
Self-insured
   
353,961
     
439,675
     
716,451
     
889,453
 
Total Commercial
   
1,309,424
     
1,380,159
     
2,624,966
     
2,791,227
 
Medicare Advantage
   
385,835
     
334,887
     
769,443
     
673,227
 
Medicaid
   
1,092,132
     
1,201,743
     
2,121,868
     
2,373,088
 
Total member months
   
2,787,391
     
2,916,789
     
5,516,277
     
5,837,542
 
Claim liabilities (in millions)
                 
$
423.1
   
$
437.5
 
Days claim payable
                   
57
     
68
 
Premium PMPM:
                               
Managed Care
 
$
326.21
   
$
273.83
   
$
312.37
   
$
275.92
 
Commercial
   
210.16
     
207.02
     
209.22
     
206.91
 
Medicare Advantage
   
948.59
     
835.51
     
907.93
     
843.25
 
Medicaid
   
207.85
     
169.59
     
189.17
     
170.28
 
Medical loss ratio:
   
84.5
%
   
86.1
%
   
84.1
%
   
85.5
%
Commercial
   
80.9
%
   
80.2
%
   
81.9
%
   
80.8
%
Medicare Advantage
   
82.4
%
   
88.4
%
   
81.5
%
   
86.4
%
Medicaid
   
91.1
%
   
88.5
%
   
90.7
%
   
88.9
%
Adjusted medical loss ratio: 1
   
85.3
%
   
84.0
%
   
85.6
%
   
83.9
%
Commercial
   
82.6
%
   
84.0
%
   
82.3
%
   
83.4
%
Medicare Advantage
   
83.2
%
   
82.5
%
   
84.3
%
   
82.2
%
Medicaid
   
91.1
%
   
85.8
%
   
91.4
%
   
86.7
%
Operating expense ratio:
                               
Consolidated
   
15.6
%
   
18.0
%
   
16.3
%
   
17.8
%
Managed Care
   
12.9
%
   
15.2
%
   
13.7
%
   
15.0
%

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


Managed Care Membership by Segment
 
As of June 30,
 
   
2019
   
2018
 
Members:
           
Commercial:
           
Fully-insured
   
318,429
     
312,049
 
Self-insured
   
117,978
     
145,040
 
Total Commercial
   
436,407
     
457,089
 
Medicare Advantage
   
128,670
     
111,667
 
Medicaid
   
364,495
     
404,338
 
Total members
   
929,572
     
973,094
 

11

Triple-S Management Corporation
Exhibit V

Reconciliation of Non-GAAP Financial Measures

   
Adjusted Net Income (Loss)
 
(Unaudited)
 
Three months ended
June 30,
   
Six months ended
June 30,
 
(dollar amounts in millions)
 
2019
   
2018
   
2019
   
2018
 
Net income (loss)
 
$
30.9
   
$
(38.7
)
 
$
65.7
   
$
(34.8
)
Less adjustments:
                               
Net realized investment gains (losses), net of tax
   
1.9
     
(0.7
)
   
2.9
     
1.6
 
Unrealized gains (losses) on equity investments
   
2.7
     
(0.6
)
   
18.4
     
(13.6
)
Private equity investment income (loss), net of tax
   
0.7
     
(0.1
)
   
1.0
     
0.4
 
Adjusted net income (loss)
 
$
25.6
   
$
(37.3
)
 
$
43.4
   
$
(23.2
)
Diluted adjusted net income (loss) per share
 
$
1.12
   
$
(1.62
)
 
$
1.90
   
$
(1.00
)

   
Adjusted Net Income (Loss) and Operating Income
(Loss) Excluding Property and Casualty
Unfavorable Development
 
(Unaudited)
 
Three months ended
June 30,
   
Six months ended
June 30,
 
(dollar amounts in millions)
 
2019
   
2018
   
2019
   
2018
 
Adjusted net income (loss)
 
$
25.6
   
$
(37.3
)
 
$
43.4
   
$
(23.2
)
Less unfavorable prior period reserve development, net of tax
   
-
     
47.5
     
-
     
47.5
 
Adjusted net income excluding Property and Casualty unfavorable prior period reserve development
 
$
25.6
   
$
10.2
   
$
43.4
   
$
24.3
 
Diluted adjusted net income per share excluding
                               
Property and Casualty unfavorable prior period reserve development
 
$
1.12
   
$
0.44
   
$
1.90
   
$
1.05
 
Operating income (loss)
 
$
38.2
   
$
(63.6
)
 
$
70.0
   
$
(45.5
)
Less unfavorable prior period reserve development
   
-
     
76.4
     
-
     
76.4
 
Operating income (loss) excluding Property and Casualty unfavorable prior period reserve development
 
$
38.2
   
$
12.8
   
$
70.0
   
$
30.9
 

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 do 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.


12

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