Triple-S Management reports consolidated revenues of $584.8 million for first quarter 2014

Triple-S Management Corporation (NYSE: GTS), the leading managed care company in Puerto Rico, today announced consolidated revenues of $584.8 million and consolidated operating income of $10.0 million for the three months ended March 31, 2014. Net income was $7.0 million, or $ 0.25 per diluted share.

Quarterly Consolidated Highlights

• Total consolidated operating revenues were $584.5 million;
• Consolidated operating income was $10.0 million;
• Consolidated loss ratio was 82.9%;
• Medical loss ratio (MLR) was 86.6%;
• Managed Care member month enrollment increased 28.4% year over year;
• Medicaid self-insured member month enrollment was up 58.1% from the prior year;
• Medicare member month enrollment increased 4.1% year over year.

Ramon Ruiz-Comas, President and CEO of Triple-S Management Corporation commented, "Earnings for the first quarter were better than expected and reflect sequential improvement in our business. Our MLR decreased from 88.8% to 86.6%; our consolidated loss ratio fell by 220 basis points and we generated $4.1 million in Managed Care operating income during the period, compared with a $5.0 million operating loss in the fourth quarter of 2013.  Overall, we are seeing progress, but we recognize that there is still more work ahead in light of the year-over-year earnings decline."

"Triple-S has initiated a comprehensive strategic review designed to position us more appropriately for the changing healthcare market. We saw progress in MLR trends in the U.S. Virgin Islands, supporting our objective of reaching break even in this geography by the end of 2014.  Also in our Commercial business, we implemented a new model to reduce specialty pharmacy costs and began a revision of our pricing structure and underwriting policies to increase profitability.  Our efforts to reduce administrative expenses are also producing results.  Net of the increase in Medicaid expansion costs and the implementation of new taxes and regulatory fees, Triple-S saw a decline of more than $6 million in administrative expenses compared with the prior quarter. In our Medicare Advantage business, we acquired approximately 6,000 Part D lives from Pharmacy Insurance Company of America (PICA) with no additional personnel, consolidated all Medicare Advantage lives under one pharmacy benefit management company and continued the transition to a pay-for-performance model, which should be completed by year-end. Our management team remains steadfastly committed to taking the corrective actions needed to achieve further improvement in the organization's overall performance," said Ruiz-Comas. 

Ruiz-Comas continued, "The Medicaid bid process continues. Based on public information provided by the Puerto Rico Health Insurance Administration (ASES), Triple-S and two other entities are currently in conversations to potentially provide services under an at-risk model. We will provide an update as soon as we have definitive news from ASES."

Selected Quarterly Details

• Pro Forma Net Income Was $6.9 Million, or $0.25 Per Diluted Share.  Weighted average shares outstanding were 27.3 million. This compares with pro forma net income of $15.6 million, or $0.55 per diluted share, in the corresponding quarter of 2013, based on weighted average shares outstanding of 28.3 million.
• Managed Care Membership.  Our Managed Care membership increased by 28.8% year over year, reflecting the addition of the three new Medicaid ASO regions effective October 1, 2013. Medicaid membership (all self-funded) increased 60.0%, to 1,398,243. Medicare membership increased 5.3% year over year, to 119,817, driven primarily by the acquisition of a PDP portfolio.  Fully-insured and self-funded Commercial membership declined by 7.5% and 5.8%, respectively.
• Consolidated Premiums Fell 1.5%, to $541.9 Million.  The decrease in consolidated premiums was principally due to lower Managed Care and Property and Casualty premiums, partially offset by higher premiums in the Life Insurance segment.
• Administrative Service Fees Were Up 9.6%, to $29.7 Million.  The higher service fee income reflects the addition of the three new Medicaid ASO regions offset, in part, by the lower per-member, per-month fees agreed upon in the new contract that became effective July 1, 2013 and the reduction in self-funded Commercial membership described above.
• Managed Care MLR Rose 90 Basis Points, to 86.6%.  The increased MLR primarily reflects higher cost and utilization trends in both the Commercial and Medicare sectors due to increased drug costs, greater utilization and costs of surgical procedures and laboratory services and higher utilization and costs in the U.S. Virgin Islands business. In addition, the cost and utilization trends experienced in the first quarter of 2013 were positively impacted by the early occurrence of the Easter holidays, when utilization typically declines.
• Consolidated Loss Ratio Increased 70 Basis Points, to 82.9%.  The higher consolidated loss ratio mainly reflects the 90-basis-point increase in the Managed Care MLR and a 130-basis-point increase in the Property and Casualty segment.  The Life Insurance segment loss ratio improved by 190 basis points.
• Consolidated Operating Expense Ratio Rose 200 Basis Points, to 21.9%.  The higher consolidated operating expense ratio was largely due to the health insurer fee that became effective on January 1, 2014, expenses related to the addition of the three new Medicaid ASO regions effective October 1, 2013 and premium taxes that became effective July 1, 2013, partially offset by the impact of cost containment initiatives.
• Consolidated Operating Income Declined 56.2%, to $10.0 Million.  The decrease in operating income primarily reflects the effect of the increased utilization and cost trends in the Managed Care segment and increased operating expenses.

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

2014 Guidance

Mr. Ruiz-Comas concluded, "As mentioned earlier in the year, we have elected not to provide guidance at this time. Several uncertainties remain, including the outcome of the Medicaid bid, which incorporates a change to an at-risk model; the impact of all recent industry regulations and taxes; continued pricing pressure in the Commercial segment stemming from heavy competition and the unknown effect that the announced spending reductions by the Government of Puerto Rico may have on the economy and our business."

SOURCE Triple-S Management Corporation