Form 8-K TRIPLE-S MANAGEMENT CORP For: Aug 06

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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 6, 2015

 

TRIPLE-S MANAGEMENT CORPORATION

(Exact Name of Registrant as Specified in Charter)

 

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))

 

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Item 2.02.

Results of Operations and Financial Condition.

 

On August 6, 2015, Triple-S Management Corporation issued a press release announcing its unaudited financial results for the quarter ended June 30, 2015, 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 6, 2015, 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.

 

 

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Exhibit 99.1

FOR FURTHER INFORMATION:

Triple-S Management Corporation Reports Second Quarter 2015 Results

SAN JUAN, Puerto Rico, August 6, 2015 – Triple-S Management Corporation (NYSE: GTS), a leading managed care company in Puerto Rico, today announced consolidated revenues of $782.0 million and net income of $18.9 million, or $0.73 per diluted share for the quarter ended June 30, 2015.

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Consolidated operating revenues were $770.3 million, a 31.4% increase from last year;

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Managed Care member month enrollment declined 48.1% year over year, reflecting the reduction in Medicaid service regions from eight to two;

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Consolidated operating income was $5.6 million;

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Consolidated loss ratio was 84.6%;

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Medical loss ratio (MLR) was 87.4%.

Ramón Ruiz-Comas, President and Chief Executive Officer of Triple-S Management said, “Our second-quarter financial performance was in line with our expectations, despite the challenges facing our Medicare business and Puerto Rico’s distressed economy. Also, as a result of the island’s fiscal crisis, we thought it prudent to strengthen the allowance for doubtful accounts by $4.3 million, which represents $0.10 per diluted share, net of taxes.”

“Consolidated premiums earned increased approximately 40%, reflecting the additional Managed Care premiums attributable to the new at-risk Medicaid contract, which became effective April 1, 2015. We were able to seamlessly incorporate this new model into our operations and the contract was profitable for the three-month period. Within the Medicare business, we remain keenly focused on pursuing the strategic initiatives that we have outlined previously, which, we believe, will allow us to be more appropriately positioned for 2016 and beyond. Moreover, we will continue to repurchase our common stock in the open market and, in fact, bought back 528,000 shares this quarter.”

 

Ruiz-Comas concluded, “We are satisfied with the progress we have made with our action plan, which was designed to confront the current economic and industry challenges we face. Our corporate strategy is based on developing a foundation for the longer term and addressing issues within our sphere of influence. In light of the local government’s fiscal situation and the weak local economy, both of which are beyond our control, we continue to refrain from providing 2015 guidance.”

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Pro Forma Net Income Was $7.3 Million, or $0.28 Per Diluted Share.  Weighted average shares outstanding were 26.0 million. This compares with pro forma net income of $24.1 million, or $0.89 per diluted share, in the corresponding quarter of 2014, based on weighted average shares outstanding of 27.1 million.

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Managed Care Membership.  Fully-insured and self-insured Commercial membership decreased by 10.2% and 7.8%, respectively. Medicare membership was up 0.3% year over year, to 120,147. Medicaid membership declined 69.3%, reflecting our decision, effective April 1, 2015, to participate in only two service regions when the government of Puerto Rico changed its administrative services only (ASO) model, under which we served all eight regions, to an at-risk model. As a result, our Managed Care membership decreased by 48.1% year over year.

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Consolidated Premiums Earned Increased 38.7%, to $754.1 Million.  The increase in consolidated premiums earned was principally due to the additional Managed Care premiums generated under the new at-risk Medicaid contract.  Total Medicaid premiums during this quarter were $205.6 million.

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Administrative Service Fees Were Down 84.6%, to $4.6 Million.  The lower service fee income reflects the change in the Medicaid business model from an ASO agreement to an at-risk agreement beginning April 1, 2015.

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Managed Care MLR Rose 500 Basis Points, to 87.4%.  The higher MLR largely reflects the impact of the new Medicaid at-risk contract, lower favorable prior-period reserve developments as compared to last year, a higher proportion of new Medicare Advantage enrollees, who have lower premium risk scores than continuing members, and increased pharmacy utilization and cost trends across all Managed Care businesses.

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Consolidated Loss Ratio Rose 580 Basis Points, to 84.6%.  The consolidated loss ratio reflects the increase in the Managed Care MLR and the Property and Casualty segment’s loss ratio, which rose 500 and 380 basis points, respectively.

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Consolidated Operating Expense Ratio Decreased 490 Basis Points, to 16.7%.  The lower consolidated operating expense ratio is mostly due to the increase in consolidated premiums earned offset, in part, by increases in the allowance for doubtful accounts, professional services incurred, and the health insurer fee.

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Consolidated Operating Income Decreased to $5.6 Million.  The decrease in operating income primarily reflects lower profitability in the Managed Care and Property and Casualty segments, resulting in a 510-basis-point decline in the consolidated operating margin.

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Share Repurchase Program. Triple-S Management repurchased approximately 528,000 shares during the quarter, leaving $18.7 million remaining under the current buyback authorization.

 

For the six months ended June 30, 2015, consolidated operating revenues increased 14.8%, to $1.3 billion, primarily reflecting the additional Managed Care premiums generated under the new at-risk Medicaid contract that became effective April 1, 2015.  Total Medicaid premiums during this period were $205.6 million. Consolidated claims incurred for the six-month period were $1.1 billion, up 21.9% year over year, reflecting the higher fully-insured Managed Care enrollment associated with the new Medicaid contract. The six-month consolidated loss ratio was up 230 basis points, to 83.2%, and the MLR rose 180 basis points, to 86.3%.  This increase was driven by the impact of the new Medicaid at-risk contract, lower premium risk score in new Medicare Advantage enrollees, and increased pharmacy utilization and cost trends across all Managed Care businesses. Consolidated operating expenses for the six months ended June 30, 2015 were $254.2 million and the operating expense ratio was 19.3%. Pro forma net income for the six-month period was $17.2 million, or $0.65 per diluted share, based on weighted average shares outstanding of 26.3 million, compared with $31.0 million, or $1.14 per diluted share, based on weighted average shares outstanding of 27.3 million at the same time last year.

Triple-S Management operates in three segments: 1) Managed Care, 2) Life Insurance, and 3) Property & 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 Medicare premium adjustments and prior-period reserve developments, and presents them in the corresponding period.

 

 

* Information provided as of December 31, 2014.

 

Management will host a conference call and webcast on August 6, 2015 at 9:00 a.m., Eastern Time to discuss its financial results for the three months and six months ended June 30, 2015. To participate, callers within the U.S. and Canada should dial 1-855-327-6837, and international callers should dial 1-631-982-4565 about five minutes before the call.

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 and Medicare Advantage 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 [email protected].

 

 

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

●	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.

-FINANCIAL TABLES ATTACHED-

 

Condensed Consolidated Balance Sheets

(Dollar amounts in thousands)

Unaudited

 

Triple-S Management Corporation

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,
		2015				2014				2015				2014
Revenues:
Premiums earned, net		$	754,107				543,735			$	1,286,665				1,085,587
Administrative service fees			4,549				29,506				33,672				59,256
Net investment income			10,998				12,147				21,916				23,498
Other operating revenues			641				850				1,794				2,344
Total operating revenues			770,295				586,238				1,344,047				1,170,685
Net realized investment gains (losses):
Total other-than-temporary impairment losses on securities			(1,660	)			(462	)			(2,862	)			(462	)
Net realized gains, excluding other-than-temporary impairment losses on securities			12,267				4,390				19,682				4,516
Total net realized investment gains			10,607				3,928				16,820				4,054
Other income, net			1,083				575				2,842				821
Total revenues			781,985				590,741				1,363,709				1,175,560
Benefits and expenses:
Claims incurred			637,898				428,641				1,070,328				877,748
Operating expenses			126,824				123,589				254,199				248,956
Total operating costs			764,722				552,230				1,324,527				1,126,704
Interest expense			2,074				2,396				4,256				4,701
Total benefits and expenses			766,796				554,626				1,328,783				1,131,405
Income before taxes			15,189				36,115				34,926				44,155
Income tax expense (benefit)			(3,712	)			8,662				1,219				9,773
Net income			18,901				27,453				33,707				34,382
Less: Net loss attributable to the non-controlling interest			25				23				55				49
Net income attributable to Triple-S Management Corporation		$	18,926			$	27,476			$	33,762			$	34,431
Earnings per share attributable to Triple-S Management Corporation:
Basic net income per share		$	0.73			$	1.01			$	1.29			$	1.27
Diluted earnings per share		$	0.73			$	1.01			$	1.28			$	1.26

 

Triple-S Management Corporation

Condensed Consolidated Statements of Cash Flows

(Dollar amounts in thousands)

Unaudited

 

 

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