Puerto Rico (State or Other Jurisdiction of Incorporation) |
001-33865 (Commission File Number) |
66-0555678 (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c)) |
Item 2.02. Results of Operations and Financial Condition | ||||||||
Item 9.01. Financial Statements and Exhibits | ||||||||
SIGNATURES | ||||||||
EX-99.1 |
99.1
|
Press release, dated August 3, 2011 issued by Triple-S Management Corporation |
TRIPLE-S MANAGEMENT CORPORATION |
||||
Date: August 3, 2011 | By: | /s/ Ramón M. Ruiz-Comas | ||
Name: | Ramón M. Ruiz-Comas | |||
Title: | President & Chief Executive Officer | |||
FOR FURTHER INFORMATION: |
||
AT THE COMPANY:
|
INVESTOR RELATIONS: | |
Ramón M. Ruiz-Comas
|
Kathy Waller | |
President & CEO
|
AllWays Communicate, LLC | |
(787) 749-4949
|
(312) 543-6708 |
| Total consolidated operating revenues were $529.4 million; |
| Operating income was $15.6 million; |
| Excluding the after tax net realized and unrealized gains and losses on investments and derivatives, net income was $11.4 million, or $0.39 per diluted share; |
| Consolidated loss ratio was 83.9% and the medical loss ratio (MLR) was 88.0%; |
| Medicare member month enrollment increased 59.2%. |
| Pro Forma Net Income was $11.4 million, or $0.39 Per Diluted Share. Weighted average shares outstanding were 29.0 million. This compares with pro forma net income of $19.6 million, or $0.67 per diluted share, in the corresponding quarter of 2010, based on weighted average shares outstanding of 29.4 million. |
| Consolidated Premiums Increased 1.4%, to $509.8 million. The increase is principally due to the acquisition of American Health (AH) offset by the termination of the Medicaid contracts in the fourth quarter of 2010. |
| Consolidated Administrative Service Fees Declined 42.6%, to $7.0 million. The significant decrease reflects the termination of the Medicaid contracts and lower Commercial ASO membership. |
| Managed Care Membership. Fully insured Commercial membership was 486,100, down 4.1% from the same period last year. Medicare membership increased 60.2%, to 104,200, mostly due to the AH acquisition. Medicaid fully insured membership was 345,300 at the end of the second quarter of 2010. |
| Consolidated Loss Ratio Declined by 60 Basis Points, to 83.9%. The consolidated loss ratio declined as a result of the 50 basis point reduction in the Managed Care MLR and the 440 basis point decrease in the Property and Casualty segments loss ratio. |
| Managed Care MLR Decreased by 50 Basis Points, to 88.0%. Excluding the effect of the lost Medicaid contracts, the MLR was 10 basis points lower than last year, reflecting the sustained improvement in the Commercial MLR. This was partially offset by a higher Medicare MLR, resulting from increased utilization trends in our non-dual offering and the addition of AH, which has a greater MLR than our existing Medicare products. |
| Consolidated Operating Expense Ratio Rose by 170 Basis Points, to 16.6%. The higher consolidated operating expense ratio was mainly due to additional operating costs incurred to maintain the historically high level of quality service we offer our members and providers throughout the Managed Care IT transition period. Also contributing to the increase in this metric is that the AH operations run at a higher operating expense ratio than the Medicaid business. Consolidated operating expenses increased by $9.2 million, or 12.0%, from a year ago. In the second quarter, $2.2 million was attributable to enhanced customer service to members and providers during the IT system conversion, and approximately $2.1 million was associated with the amortization of intangible assets related to the AH transaction. |
| Consolidated Operating Income Decreased 40.2%, to $15.6 Million. The decrease mostly reflects the termination of the Medicaid contracts, which contributed $5.9 million to the consolidated operating income last year, and higher consolidated operating expenses. |
| Consolidated Operating Income Margin Was 2.9%. The consolidated operating margin declined by 200 basis points year over year due to lower profitability across our Managed Care and Life Insurance segments. |
| Consolidated Effective Tax Rate Was 14.5%. The reduced effective income tax rate is the result of both a lower taxable income from our Managed Care segment, which has a higher effective tax rate, and Puerto Rican tax reform, which became effective in January 2011. This legislation decreased the maximum corporate tax rate to 30% from 39% and eliminated an additional tax rate imposed in 2009. |
| Parent Company Information. As of June 30, 2011, Triple-S Management had $59.6 million in parent company cash, cash equivalents, and investments. |
Pro Forma Net Income | ||||||||||||||||
(Unaudited) | Three months | Six months | ||||||||||||||
ended June 30, | ended June 30, | |||||||||||||||
(dollar amounts in millions) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net income |
$ | 17.1 | $ | 15.1 | $ | 27.5 | $ | 26.2 | ||||||||
Less pro forma adjustments: |
||||||||||||||||
Net realized investment gains, net of tax |
5.9 | 1.2 | 11.0 | | ||||||||||||
Net unrealized trading investments losses, net of tax |
(0.1 | ) | (5.1 | ) | (1.1 | ) | (3.4 | ) | ||||||||
Derivative loss, net of tax |
(0.1 | ) | (0.6 | ) | (0.3 | ) | (0.8 | ) | ||||||||
Charge related to change in enacted tax rate |
| | (6.4 | ) | | |||||||||||
Pro forma net income |
$ | 11.4 | $ | 19.6 | $ | 24.3 | $ | 30.4 | ||||||||
Diluted pro forma net income per share |
$ | 0.39 | $ | 0.67 | $ | 0.84 | $ | 1.04 | ||||||||
(Unaudited) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
Percentage | Percentage | |||||||||||||||||||||||
(dollar amounts in millions) | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||
Premiums earned, net: |
||||||||||||||||||||||||
Managed Care: |
||||||||||||||||||||||||
Commercial |
$ | 232.4 | $ | 244.0 | (4.8 | %) | $ | 468.8 | $ | 477.9 | (1.9 | %) | ||||||||||||
Medicare |
226.4 | 117.6 | 92.5 | % | 420.5 | 238.2 | 76.5 | % | ||||||||||||||||
Medicaid |
(0.1 | ) | 90.9 | (100.1 | %) | 2.7 | 180.2 | (98.5 | %) | |||||||||||||||
Total Managed Care |
458.7 | 452.5 | 1.4 | % | 892.0 | 896.3 | (0.5 | %) | ||||||||||||||||
Life Insurance |
27.9 | 26.1 | 6.9 | % | 54.9 | 52.0 | 5.6 | % | ||||||||||||||||
Property and Casualty |
23.9 | 25.2 | (5.2 | %) | 49.5 | 50.7 | (2.4 | %) | ||||||||||||||||
Other |
(0.7 | ) | (1.0 | ) | (30.0 | %) | (1.3 | ) | (2.1 | ) | (38.1 | %) | ||||||||||||
Consolidated premiums earned, net |
$ | 509.8 | $ | 502.8 | 1.4 | % | $ | 995.1 | $ | 996.9 | (0.2 | %) | ||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Managed Care |
$ | 471.5 | $ | 470.5 | 0.2 | % | $ | 916.6 | $ | 932.5 | (1.7 | %) | ||||||||||||
Life Insurance |
32.4 | 30.3 | 6.9 | % | 63.8 | 60.4 | 5.6 | % | ||||||||||||||||
Property and Casualty |
26.2 | 28.1 | (6.8 | %) | 54.1 | 56.3 | (3.9 | %) | ||||||||||||||||
Other |
(0.7 | ) | (1.3 | ) | (46.2 | %) | (1.4 | ) | (2.5 | ) | (44.0 | %) | ||||||||||||
Consolidated operating revenues |
$ | 529.4 | $ | 527.6 | 0.3 | % | $ | 1,033.1 | $ | 1,046.7 | (1.3 | %) | ||||||||||||
Operating income: |
||||||||||||||||||||||||
Managed Care |
$ | 9.0 | $ | 18.5 | (51.4 | %) | $ | 21.4 | $ | 31.1 | (31.2 | %) | ||||||||||||
Life Insurance |
3.6 | 4.7 | (23.4 | %) | 7.9 | 8.5 | (7.1 | %) | ||||||||||||||||
Property and Casualty |
2.0 | 2.0 | 0.0 | % | 3.0 | 1.1 | 172.7 | % | ||||||||||||||||
Other |
1.0 | 0.9 | 11.1 | % | 1.7 | 1.7 | 0.0 | % | ||||||||||||||||
Consolidated operating income |
$ | 15.6 | $ | 26.1 | (40.2 | %) | $ | 34.0 | $ | 42.4 | (19.8 | %) | ||||||||||||
Operating margin: |
||||||||||||||||||||||||
Managed Care |
1.9 | % | 3.9 | % | -200 bp | 2.3 | % | 3.3 | % | -100 bp | ||||||||||||||
Life Insurance |
11.1 | % | 15.5 | % | -440 bp | 12.4 | % | 14.1 | % | -170 bp | ||||||||||||||
Property and Casualty |
7.6 | % | 7.1 | % | 50 bp | 5.5 | % | 2.0 | % | 350 bp | ||||||||||||||
Consolidated |
2.9 | % | 4.9 | % | -200 bp | 3.3 | % | 4.1 | % | -80 bp | ||||||||||||||
Depreciation and amortization expense |
$ | 5.4 | $ | 4.0 | 35.0 | % | $ | 10.6 | $ | 6.9 | 53.6 | % | ||||||||||||
Three months ended | Six months ended | |||||||||||||||
Managed Care Additional Data | June 30, | June 30, | ||||||||||||||
(Unaudited) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Member months enrollment: |
||||||||||||||||
Commercial: |
||||||||||||||||
Fully-insured |
1,459,055 | 1,535,176 | 2,922,436 | 3,042,290 | ||||||||||||
Self-insured |
664,056 | 732,849 | 1,388,215 | 1,499,132 | ||||||||||||
Total Commercial |
2,123,111 | 2,268,025 | 4,310,651 | 4,541,422 | ||||||||||||
Medicare: |
||||||||||||||||
Medicare Advantage |
285,168 | 167,640 | 531,636 | 341,295 | ||||||||||||
Stand-alone PDP |
26,637 | 28,256 | 53,204 | 56,381 | ||||||||||||
Total Medicare |
311,805 | 195,896 | 584,840 | 397,676 | ||||||||||||
Medicaid: |
||||||||||||||||
Fully-insured |
| 1,030,703 | | 2,043,539 | ||||||||||||
Self-insured |
| 593,594 | | 1,182,778 | ||||||||||||
Total Medicaid |
| 1,624,297 | | 3,226,317 | ||||||||||||
Total member months |
2,434,916 | 4,088,218 | 4,895,491 | 8,165,415 | ||||||||||||
Claim
liabilities (in millions) |
$ | 277.1 | $ | 292.7 | * | |||||||||||
Days claim payable (excluding American Health) |
68.2 | 71.7 | * | |||||||||||||
Premium PMPM: |
||||||||||||||||
Managed Care |
$ | 259.03 | $ | 163.84 | $ | 254.33 | $ | 163.45 | ||||||||
Commercial |
159.28 | 158.94 | 160.41 | 157.09 | ||||||||||||
Medicare |
726.09 | 600.32 | 719.00 | 598.98 | ||||||||||||
Medicaid |
| 88.19 | | 88.18 | ||||||||||||
Medical loss ratio |
87.9 | % | 88.5 | % | 87.6 | % | 89.3 | % | ||||||||
Commercial |
84.9 | % | 92.1 | % | 87.8 | % | 91.4 | % | ||||||||
Medicare Advantage |
90.5 | % | 79.9 | % | 88.8 | % | 81.0 | % | ||||||||
Stand-alone PDP |
70.6 | % | 84.6 | % | 78.3 | % | 77.4 | % | ||||||||
Medicaid |
0.0 | % | 89.7 | % | 0.0 | % | 94.8 | % | ||||||||
Adjusted medical loss ratio |
89.0 | % | 88.9 | % | 87.8 | % | 88.7 | % | ||||||||
Commercial |
90.8 | % | 90.2 | % | 88.2 | % | 90.4 | % | ||||||||
Medicare Advantage |
87.5 | % | 84.3 | % | 87.6 | % | 82.6 | % | ||||||||
Stand-alone PDP |
69.9 | % | 79.1 | % | 79.1 | % | 77.1 | % | ||||||||
Medicaid |
0.0 | % | 91.2 | % | 0.0 | % | 92.2 | % | ||||||||
Operating expense ratio: |
||||||||||||||||
Consolidated |
16.6 | % | 14.9 | % | 16.7 | % | 15.0 | % | ||||||||
Managed Care |
12.6 | % | 11.1 | % | 12.5 | % | 11.0 | % | ||||||||
* | Information provided as of March 31, 2011. |
As of June 30, | ||||||||
2011 | 2010 | |||||||
Members: |
||||||||
Commercial: |
||||||||
Fully-insured |
486,138 | 513,366 | ||||||
Self-insured |
220,521 | 238,620 | ||||||
Total Commercial |
706,659 | 751,986 | ||||||
Medicare: |
||||||||
Medicare Advantage |
95,351 | 55,625 | ||||||
Stand-alone PDP |
8,808 | 9,383 | ||||||
Total Medicare |
104,159 | 65,008 | ||||||
Medicaid: |
||||||||
Fully-insured |
| 345,317 | ||||||
Self-insured |
| 199,570 | ||||||
Total Medicaid |
| 544,887 | ||||||
Total members |
810,818 | 1,361,881 | ||||||
2011 Range | ||||
Medical enrollment fully-insured
(member months) |
7.1-7.3 million | |||
Medical enrollment self-insured
(member months) |
2.5-2.6 million | |||
Consolidated operating revenues
(in billions) |
$ | 2.0-$2.2 | ||
Consolidated loss ratio |
83.0%-84.0 | % | ||
Medical loss ratio |
87.0%-88.0 | % |
Consolidated operating expense
ratio |
16.0%-16.4 | % | ||
Consolidated operating income (in
millions) |
$ | 80.0-$86.0 | ||
Consolidated effective tax rate |
24%-26 | % | ||
Pro forma earnings per share |
$ | 2.02-$2.12 | ||
Weighted average of diluted shares
outstanding (in millions) |
29.0 |
| 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 Companys 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 Companys disease management, utilization management and Star ratings programs | |
| Volatility in the securities markets and investment losses and defaults | |
| General economic downturns, major disasters, and epidemics |
Unaudited | ||||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Investments |
$ | 1,151,994 | $ | 1,105,926 | ||||
Cash and cash equivalents |
57,372 | 45,021 | ||||||
Premium and other receivables, net |
304,087 | 325,780 | ||||||
Deferred policy acquisition costs and value of business acquired |
145,812 | 146,086 | ||||||
Property and equipment, net |
80,309 | 76,745 | ||||||
Other assets |
116,231 | 59,812 | ||||||
Total assets |
$ | 1,855,805 | $ | 1,759,370 | ||||
Liabilities and Stockholders Equity |
||||||||
Policy liabilities and accruals |
$ | 801,933 | $ | 760,028 | ||||
Accounts payable and accrued liabilities |
266,019 | 216,043 | ||||||
Long-term borrowings |
140,207 | 166,027 | ||||||
Total liabilities |
1,208,159 | 1,142,098 | ||||||
Stockholders equity: |
||||||||
Common stock |
28,932 | 28,816 | ||||||
Other
stockholders equity |
618,714 | 588,456 | ||||||
Total stockholders equity |
647,646 | 617,272 | ||||||
Total liabilities and stockholders equity |
$ | 1,855,805 | $ | 1,759,370 | ||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
Unaudited | Historical | Unaudited | Historical | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues: |
||||||||||||||||
Premiums earned, net |
$ | 509,843 | $ | 502,761 | $ | 995,114 | $ | 996,938 | ||||||||
Administrative service fees |
6,962 | 12,166 | 13,557 | 24,664 | ||||||||||||
Net investment income |
12,654 | 12,671 | 24,452 | 25,094 | ||||||||||||
Total operating revenues |
529,459 | 527,598 | 1,033,123 | 1,046,696 | ||||||||||||
Net realized investment gains: |
||||||||||||||||
Total other-than-temporary impairment losses on
securities |
| (761 | ) | | (2,616 | ) | ||||||||||
Net realized gains, excluding other-than-temporary
impairment losses on securities |
6,995 | 2,194 | 12,888 | 2,670 | ||||||||||||
Total net realized investment gains |
6,995 | 1,433 | 12,888 | 54 | ||||||||||||
Net unrealized investment loss on trading securities |
(119 | ) | (6,010 | ) | (1,260 | ) | (3,980 | ) | ||||||||
Other income (expense), net |
466 | (324 | ) | 480 | (172 | ) | ||||||||||
Total revenues |
536,801 | 522,697 | 1,045,231 | 1,042,598 | ||||||||||||
Benefits and expenses: |
||||||||||||||||
Claims incurred |
427,941 | 424,838 | 830,514 | 850,666 | ||||||||||||
Operating expenses |
85,882 | 76,720 | 168,593 | 153,591 | ||||||||||||
Total operating costs |
513,823 | 501,558 | 999,107 | 1,004,257 | ||||||||||||
Interest expense |
2,957 | 3,372 | 6,084 | 6,600 | ||||||||||||
Total benefits and expenses |
516,780 | 504,930 | 1,005,191 | 1,010,857 | ||||||||||||
Income before taxes |
20,021 | 17,767 | 40,040 | 31,741 | ||||||||||||
Income tax expense |
2,935 | 2,710 | 12,584 | 5,492 | ||||||||||||
Net income |
$ | 17,086 | $ | 15,057 | $ | 27,456 | $ | 26,249 | ||||||||
Basic net income per share |
$ | 0.59 | $ | 0.52 | $ | 0.95 | $ | 0.90 | ||||||||
Diluted earnings per share |
$ | 0.59 | $ | 0.51 | $ | 0.95 | $ | 0.90 |
For the Six Months Ended | ||||||||
June 30, | ||||||||
Unaudited | Historical | |||||||
2011 | 2010 | |||||||
Net cash provided by operating activities |
$ | 77,983 | $ | 31,594 | ||||
Cash flows from investing activities: |
||||||||
Proceeds from investments sold or
matured: |
||||||||
Securities available for sale: |
||||||||
Fixed maturities sold |
101,326 | 43,443 | ||||||
Fixed maturities matured/called |
51,443 | 58,312 | ||||||
Equity securities |
14,425 | 14,685 | ||||||
Securities held to maturity: |
||||||||
Fixed maturities matured/called |
1,440 | 1,276 | ||||||
Acquisition of investments: |
||||||||
Securities available for sale: |
||||||||
Fixed maturities |
(140,417 | ) | (143,742 | ) | ||||
Equity securities |
(35,334 | ) | (17,285 | ) | ||||
Securities held to maturity: |
||||||||
Fixed maturities |
(255 | ) | (250 | ) | ||||
Net inflows / (outflows) for policy loans |
(215 | ) | (114 | ) | ||||
Acquisition of business, net of $27,430
of cash acquired |
(54,058 | ) | | |||||
Net capital expenditures |
(8,460 | ) | (10,197 | ) | ||||
Net cash used in investing
activities |
(70,105 | ) | (53,872 | ) | ||||
Cash flows from financing activities: |
||||||||
Change in outstanding checks in excess
of bank balances |
(13,008 | ) | (2,483 | ) | ||||
Payments of short-term borrowings, net |
42,740 | 17,695 | ||||||
Repayments of long-term borrowings |
(25,820 | ) | (820 | ) | ||||
Repurchase and retirement of common stock |
(1,557 | ) | | |||||
Proceeds from policyholder deposits |
7,679 | 5,772 | ||||||
Cash settlements of stock options |
(2,420 | ) | | |||||
Proceeds from exercise of stock options |
189 | | ||||||
Surrenders of policyholder deposits |
(3,330 | ) | (3,959 | ) | ||||
Net cash provided by
financing activities |
4,473 | 16,205 | ||||||
Net increase (decrease) in
cash and cash equivalents |
12,351 | (6,073 | ) | |||||
Cash and cash equivalents, beginning of
period |
45,021 | 40,376 | ||||||
Cash and cash equivalents, end of period |
$ | 57,372 | $ | 34,303 | ||||
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