Triple-S Management Corporation Provides COVID-19 Update and Reports First Quarter 2020 Results

SAN JUAN, Puerto Rico, May 7, 2020 /PRNewswire/ -- Triple-S Management Corporation (NYSE:GTS), a leading managed care company in Puerto Rico, today provided an update on its operations related to COVID-19 and reported its first quarter 2020 results.

"Since the onset of the COVID-19 pandemic across the world in March, our team has been fully engaged to support our members, providers and employees," said Roberto Garcia-Rodriguez, President and Chief Executive Officer. "Our community and front-line workers are our backbone, and their resiliency in these challenging times gives us confidence as the economy reopens and we learn to live with COVID-19 in the weeks and months ahead."

"Our team has worked tirelessly to ensure that members can continue accessing quality health care services during the pandemic," added Mr. Garcia-Rodriguez. "We are proud of their dedication and commitment, and we will continue to fully support the communities we serve throughout the pandemic and beyond."

COVID-19 Operational Update

The Company took quick action at the onset of the pandemic, activating its business continuity plans. The large majority of Triple-S employees and management seamlessly transitioned to working from home, while essential employees are onsite but adhering closely to Centers for Disease Control and local guidelines.

Employees

The well-being of Triple-S employees is an essential priority. Recognized as one of Puerto Rico's Best Employers, the Company rapidly implemented remote work arrangements for over 85% of its workforce throughout the lockdown, which was declared in mid-March. Though not all essential job duties can be performed from home, the Company has continued to meet its payroll responsibility toward its employees. Triple-S has maximized technology for companywide communications, including live employee meetings, as well as virtual workshops on crisis leadership and coping strategies. Its human resources team has reached out to employees through one-on-one calls and a survey to identify and address their needs for subsequent phases and their eventual return to work.

Member Support and Community

The Company is supporting its community and members during the pandemic to ensure their safety and care. At the onset of the crisis, Triple-S waived prior authorizations and copayments for diagnostic tests and covered services that are medically necessary for members diagnosed with COVID-19. It also increased access to prescription medications by waiving early medication refill limits on 30-day prescriptions. Other initiatives, in addition to those required by local and federal regulators, include:

Physicians, psychologists and other providers within its network can now use voice and video calls to replace office visits where appropriate, reducing exposure to the virus. Lab test orders can be sent via e-mail and drug prescriptions via e-prescribing.
The Company has expanded access to its 24/7 nurse triage and advice service, TeleConsulta, to assist people who may not require emergency care or can self-care at home.
The Company has also expanded the availability of its telehealth platform, TeleConsulta MD, which allows members to make virtual medical consultations with primary care physicians via smartphone, tablet or computer.
The Company has recently implemented a prescription drug home delivery service.
Triple-S Foundation committed an initial $250,000 donation to various organizations addressing food insecurity, including funds to bolster small farmers, provide food for the homeless, the general population through Puerto Rico's Food Bank, and an NGO serving the elderly in rural communities.

Strong Balance Sheet / Liquidity

As of March 31, 2020, the Company has cash and cash equivalents of $104.6 million, including $9.0 million at the parent company level. Triple-S's investment portfolio stood at $1.7 billion as of March 31, of which 76% where investment-grade fixed income securities. The Company also believes it would be able to access additional debt, if necessary, to further reinforce its liquidity. In sum, the Company believes it is well capitalized to support the fundamental operations of its business throughout the pandemic and beyond.

First Quarter 2020 Consolidated and Other Highlights

Following a $45 million net of tax impact of net unrealized losses on equity investments after the significant decrease in equity markets this quarter, the Company reported a net loss of $26.1 million, or $1.12 per share, versus net income of $34.8 million, or $1.52 per diluted share, in the prior-year period;
Adjusted net income of $17.7 million, or $0.75 per diluted share, versus adjusted net income of $17.7 million, or $0.77 per diluted share, in the prior-year period;
Operating revenues of $896.4 million, a 13.8% increase from the prior-year period, primarily reflecting higher Managed Care net premiums earned;
Consolidated loss ratio of 81.6%, a 50 basis point increase versus the first quarter of 2019;
Medical loss ratio ("MLR") increased 10 basis points to 83.7%;
Consolidated operating income was $19.7 million, compared to consolidated operating income of $31.7 million in the prior-year period;
Under the Company's share repurchase program, during the first quarter of 2020, the Company repurchased 577,447 shares at an aggregate cost of approximately $9.0 million. As of May 6, 2020, $2.5 million remained available under the program.

Selected Consolidated Quarterly Details

Consolidated net premiums earned were $875.9 million, up 14.0% from the prior-year period, primarily reflecting an increase in membership and higher average premium rates within the Managed Care segment.
Consolidated claims incurred were $714.5 million, up 14.7% year-over-year. Consolidated loss ratio of 81.6% rose 50 basis points from the prior-year period, mostly reflecting $5 million of estimated earthquake losses recorded by the Property and Casualty segment and increased benefits in the Company's 2020 Medicare product offering, partially offset by lower Managed Care utilization of services during the last two weeks of the quarter as the result of the government-enforced lockdown related to the COVID-19 pandemic.
Consolidated operating expenses of $162.2 million increased by $29.5 million, or 22.2%, from the prior-year period, primarily resulting from reinstatement of the HIP fee in 2020. The consolidated operating expense ratio was 18.5%, a 130 basis point increase from the prior-year quarter.

Selected Managed Care Segment Quarterly Details

Managed Care premiums earned were $809.8 million, up 14.8% year-over-year.
- Medicare premiums earned of $387.8 million increased 16.6% from the prior-year period, largely due to an increase of approximately 24,000 member months, primarily reflecting a more competitive product offering, higher average premium rates, and an increase in the average membership risk score.
- Commercial premiums earned of $201.1 million increased 1.3% from the prior-year period, mainly reflecting an increase in fully insured enrollment during the quarter of approximately 25,000 member months.
- Medicaid premiums earned of $220.9 million increased 26.7% from the prior-year period, primarily reflecting higher membership of approximately 38,000 member months during the quarter, higher average premium rates, and the reinstatement of the HIP Fee pass-through in 2020.
Reported MLR of 83.7% was 10 basis points higher than the prior-year period, reflecting increased benefits in the Company's 2020 Medicare product offering, partially offset by lower Managed Care utilization of services during the last two weeks of the quarter as the result of the government-enforced lockdown related to the COVID-19 pandemic.

Update on P&C Segment Reserves related to Hurricane María

As of March 31, 2020:

Triple-S Propiedad, Inc. (TSP), the Company's P&C subsidiary, has paid a cumulative amount of $745 million in claims and expenses related to Hurricane María. Estimated gross losses remain unchanged at $967 million.
TSP received 9 new claims, reopened 26 claims, and paid 28 claims during the first quarter of 2020. 652 claims remain open.
The Company has been served with process in 361 of the 652 claims that remain open.
As is the case for all claim liabilities, the gross losses related to Hurricane Maria are based on the Company's best estimate of the ultimate expected cost of claims with the information currently on hand and are subject to change.

2020 Outlook

Due to COVID-19's potential impact on the macroeconomic environment and the Company's operations, the Company has decided to suspend its 2020 premium and cost guidance until it has more visibility; however, it is maintaining its full year 2020 adjusted net income per diluted share guidance of between $2.60 and $2.80. Adjusted net income per diluted share does not account for any potential share repurchase activity during 2020. The Company is assuming a weighted average diluted share count for full year 2020 of 23.3 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 March 31, 2020. To participate, callers within the U.S. and Canada should dial 1-888-204-4368 and international callers should dial 1-323-994-2093 at least ten 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.

In addition, a replay will be available through May 21, 2020 by calling 1-844-512-2921 or 1-412-317-6671 and entering passcode 9070409. 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 over 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
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.

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 amounts in thousands)
Unaudited


			March 31, 2020		December 31, 2019
Assets

Investments			$	1,666,126	$	1,643,637
Cash and cash equivalents				104,580		109,837
Premium and other receivables, net				644,984		567,692
Deferred policy acquisition costs and value of business acquired				237,171		234,885
Property and equipment, net				89,367		88,588
Other assets				245,966		174,187

		Total assets	$	2,988,194	$	2,818,826


Liabilities and Stockholders' Equity

Policy liabilities and accruals			$	1,466,165	$	1,425,477
Accounts payable and accrued liabilities				492,982		370,483
Short-term borrowings				78,000		54,000
Long-term borrowings				24,897		25,694

		Total liabilities		2,062,044		1,875,654

Stockholders' equity:
	Common stock			23,386		23,800
	Other stockholders' equity			903,464		920,065

		Total Triple-S Management Corporation stockholders' equity		926,850		943,865

Non-controlling interest in consolidated subsidiary				(700)		(693)

Total stockholders' equity				926,150		943,172

Total liabilities and stockholders' equity			$	2,988,194	$	2,818,826

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

			For the Three Months Ended
			March 31,
			2020		2019
Revenues:
	Premiums earned, net		$	875,897	$	768,002
	Administrative service fees			2,194		2,632
	Net investment income			14,311		15,376
	Other operating revenues			4,039		1,577
		Total operating revenues		896,441		787,587

	Net realized investment (losses) gains on sale of securities			(466)		1,315
	Net unrealized investment (losses) gains on equity investments			(56,806)		19,669
	Other income, net			3,605		1,169
		Total revenues		842,774		809,740

Benefits and expenses:
	Claims incurred			714,522		623,190
	Operating expenses			162,201		132,663
		Total operating costs		876,723		755,853

	Interest expense			1,853		1,788

		Total benefits and expenses		878,576		757,641

		(Loss) income before taxes		(35,802)		52,099

Income tax (benefit) expense				(9,650)		17,316

Net (loss) income				(26,152)		34,783

	Net loss attributable to the non-controlling interest			7		3

Net (loss) income attributable to Triple-S Management Corporation			$	(26,145)	$	34,786

Earnings per share attributable to Triple-S Management Corporation:

	Basic net (loss) income per share		$	(1.12)	$	1.53
	Diluted net (loss) income per share		$	(1.12)	$	1.52

	Weighted average of common shares			23,381,949		22,757,794
	Diluted weighted average of common shares			23,381,949		22,840,274

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

					For the three months ended
					March 31,
					2020		2019

Net cash provided by (used in) operating activities					$	6,518	$	(69,900)

Cash flows from investing activities:
	Proceeds from investments sold or matured:
		Securities available for sale:
			Fixed maturities sold			43,425		164,997
			Fixed maturities matured/called			11,099		12,267
		Securities held to maturity - fixed maturities matured/called				81		1,154
		Equity investments sold				21,107		23,123
		Other invested assets sold				8,524		373
	Acquisition of investments:
		Securities available for sale - fixed maturities				(42,822)		(166,626)
		Securities held to maturity - fixed maturities				(80)		(539)
		Equity investments				(102,733)		(9,139)
		Other invested assets				(10,438)		(8,546)
	Increase in other investments					(4,086)		(535)
	Net change in policy loans					(241)		(309)
	Net capital expenditures					(4,587)		(2,968)
	Capital contribution on equity method investees					(4,933)		-

				Net cash (used in) provided by investing activities		(85,684)		13,252

Cash flows from financing activities:
	Change in outstanding checks in excess of bank balances					53,485		36,682
	Net change in short-term borrowings					24,000		-
	Repayments of long-term borrowings					(810)		(808)
	Repurchase and retirement of common stock					(8,989)		(1)
	Proceeds from policyholder deposits					10,296		3,607
	Surrender of policyholder deposits					(4,073)		(4,560)

				Net cash provided by financing activities		73,909		34,920

				Net decrease in cash and cash equivalents		(5,257)		(21,728)

Cash and cash equivalents, beginning of period						109,837		117,544

Cash and cash equivalents, end of period					$	104,580	$	95,816

Exhibit IV Segment Performance Supplemental Information

(Unaudited)					Three months ended March 31,
(dollar amounts in millions)					2020	2019	Percentage Change
Premiums earned, net:
	Managed Care:
		Commercial			$ 201.1	$ 198.5	1.3%
		Medicare			387.8	332.7	16.6%
		Medicaid			220.9	174.3	26.7%
			Total Managed Care		809.8	705.5	14.8%
	Life Insurance				46.7	44.2	5.7%
	Property and Casualty				20.6	19.4	6.2%
	Other				(1.2)	(1.1)	(9.1%)
				Consolidated premiums earned, net	$ 875.9	$ 768.0	14.0%
Operating revenues: ¹
	Managed Care				$ 818.1	$ 715.0	14.4%
	Life Insurance				53.6	50.8	5.5%
	Property and Casualty				22.7	21.9	3.7%
	Other				2.0	(0.1)	100.0%
				Consolidated operating revenues	$ 896.4	$ 787.6	13.8%
Operating income (loss): ²
	Managed Care				$ 14.2	$ 22.1	(35.7%)
	Life Insurance				5.0	5.6	(10.7%)
	Property and Casualty				(0.2)	3.6	(105.6%)
	Other				0.7	0.4	75.0%
				Consolidated operating income	$ 19.7	$ 31.7	(37.9%)
Operating margin: ³
	Managed Care				1.7%	3.1%	-140 bp
	Life Insurance				9.3%	11.0%	-170 bp
	Property and Casualty				(0.9%)	16.4%	-1,730 bp
	Consolidated				2.2%	4.0%	-180 bp
Depreciation and amortization expense					$ 3.9	$ 3.5	11.4%

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 March 31,
(Unaudited)					2020	2019
Member months enrollment:
	Commercial:
		Fully-insured			978,342	953,052
		Self-insured			330,232	362,490
			Total Commercial		1,308,574	1,315,542
	Medicare Advantage				407,907	383,608
	Medicaid				1,068,016	1,029,736
				Total member months	2,784,497	2,728,886
Claim liabilities (in millions)					$ 340.0	$ 397.3
Days claim payable					46	61
Premium PMPM:
	Managed Care				$ 329.96	$ 298.13
		Commercial			205.55	208.28
		Medicare Advantage			950.71	867.29
		Medicaid			206.83	169.27
Medical loss ratio:					83.7%	83.6%
	Commercial				78.4%	82.9%
	Medicare Advantage				82.7%	80.6%
	Medicaid				90.3%	90.3%
Adjusted medical loss ratio: ¹					84.1%	85.5%
	Commercial				78.4%	83.1%
	Medicare Advantage				81.3%	79.4%
	Medicaid				94.6%	99.9%
Operating expense ratio:
	Consolidated				18.5%	17.2%
	Managed Care				15.5%	14.5%

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 Segment					As of March 31,
					2020	2019
Members:
	Commercial:
		Fully-insured			325,253	318,523
		Self-insured			109,760	118,677
			Total Commercial		435,013	437,200
	Medicare Advantage				135,710	128,090
	Medicaid				355,512	355,694
				Total members	926,235	920,984

Exhibit V Reconciliation of Non-GAAP Financial Measures

			Adjusted Net Income (Loss)
(Unaudited)			Three months ended March 31,
(dollar amounts in millions)			2020	2019
Net (loss) income			$ (26.1)	$ 34.8
Less adjustments:
	Net realized investment (losses) gains, net of tax		(0.4)	1.1
	Unrealized (losses) gains on equity investments		(45.4)	15.7
	Private equity investment income, net of tax		2.0	0.3
		Adjusted net income	$ 17.7	$ 17.7
		Diluted adjusted net income per share	$ 0.75	$ 0.77

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 does 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:
Juan José Román-Jiménez	Mr. Garrett Edson
EVP and Chief Financial Officer	ICR
(787) 749-4949	(787) 792-6488

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