Triple-S Management second-quarter total consolidated operating revenues up 8.2%

Triple-S Management Corporation (NYSE: GTS), the largest managed care company in Puerto Rico, today announced consolidated revenues of $522.7 million and operating income of $26.1 million for the three months ended June 30, 2010.  Net income of $15.1 million, or $0.51 per diluted share, includes an after tax net loss of $4.5 million, or $0.16 per share, related to net realized and unrealized losses on investments and derivatives.

June-Quarter Consolidated Highlights

• Total consolidated operating revenues were up 8.2% year-over-year to $527.6 million;
• Operating income was $26.1 million;
• Excluding net realized and unrealized gains and losses on investments and a derivatives loss, which are included within other income (expenses), net income was $19.6 million, or $0.67 per diluted share;
• Consolidated loss ratio was 84.5% and the medical loss ratio (MLR) was 88.5%;
• Consolidated operating expense ratio increased 40 basis points to 14.9%;
• Commercial member months enrollment, including ASO, rose 23.3%.

"Overall, we are pleased with our second-quarter results," said Ramon M. Ruiz-Comas, President and Chief Executive Officer.  "Our Medicare business reflects a better-than-anticipated performance, primarily resulting from our decision to move to a new risk-sharing arrangement with our providers in the non-dual product and other strategic initiatives that were instituted for this year. Although there was an increase in the Commercial business MLR during the quarter, it improved by 60 basis points in the first six months of the year, reflecting solid membership growth, lower utilization and a favorable pricing environment. The Puerto Rico Healthcare Reform ("Medicaid") business continues to be impacted by the absence of any rate increases. Despite a series of delays in the bidding process, we should have more clarity on the outcome this month."  

Ruiz-Comas added, "The migration of members onto our new IT system is ongoing and we are on track to have the full implementation completed by the summer of 2011. We remain excited about our business prospects, have continued confidence in our strategic direction, and are proactively evaluating opportunities to expand our Managed Care footprint within Puerto Rico and the Caribbean."

Selected Quarterly Details

• Adjusted Net Income Rose to $19.6 million, or $0.67 Per Diluted Share.  Weighted average shares outstanding were 29.3 million.  This compares with adjusted net income of $15.0 million, or $0.51 per diluted share, in the corresponding quarter of 2009, based on weighted average shares outstanding of 29.4 million.  Net income for the three months ended June 30, 2010, was $15.1 million, or $0.51 per diluted share, which included $0.16 per diluted share in after tax net realized and unrealized losses on investments and derivatives.
• Consolidated Premiums Increased 8.6%.  Consolidated premiums were $502.8 million, up 8.6% from a year ago, principally due to increased volume and higher rates in the Managed Care business.  Reported Managed Care net premiums increased to $452.5 million driven by a 26.4% year-over-year rise in Commercial premiums.  The increase resulted primarily from growth in Commercial membership, reflecting new groups acquired during the period and the acquisition of La Cruz Azul (LCA), as well as higher premium rates across all businesses.
• Consolidated Administrative Service Fees Rose 8.0%.  Consolidated administrative service fees increased $0.9 million, to $12.2 million, reflecting the LCA acquisition.
• Managed Care Membership Increased 12.9%.  Total Commercial membership was 751,986, up 22.2% from the prior year, primarily reflecting the addition of LCA's members and organic growth.  Medicaid membership rose 2.5% to 544,887 and Medicare membership declined 8.2% to 65,008.
• Consolidated Claims Incurred Rose 7.5%.  Consolidated claims incurred were $424.8 million, up 7.5% from a year ago, principally due to higher claims in the Managed Care segment resulting from increased enrollment.  The consolidated loss ratio decreased by 90 basis points to 84.5%, reflecting the lower MLR in our Managed Care segment.
• Managed Care MLR Improved 80 Basis Points Year Over Year, to 88.5%.  The year-over-year improvement was driven by a decrease in the Medicare MLR, offset in part, by increases in the Commercial and Reform MLRs.
• Consolidated Operating Expense Ratio Rose 40 Basis Points, to 14.9%.  Consolidated operating expenses increased by $8.1 million, or 11.8%, from the prior year primarily attributable to higher business volume as well as increased IT costs related to our new managed care electronic data processing system.
• Consolidated Operating Income Was Up 9.2%. The increase reflected both the 8.2% rise in consolidated operating revenues and the 90 basis points reduction in the consolidated loss ratio.
• Consolidated Operating Margins Were 4.9%. Despite improvements of 20 and 230 basis points in the Managed Care and Life Insurance businesses, respectively, consolidated operating margins remained at 4.9%. The aforementioned improvements were offset by a year-over-year decline of 330 basis points in the Property and Casualty segment.
• Parent Company Information.  As of June 30, 2010, Triple-S Management had $45.5 million in parent company cash, cash equivalents, and investments.

Six-Month Recap

For the six months ended June 30, 2010, consolidated operating revenues rose 9.0% to $1.05 billion, primarily reflecting growth in the Managed Care segment.  Consolidated claims incurred for the six-month period were $850.7 million, up 7.9% year over year.  The six-month consolidated loss ratio decreased 90 basis points, to 85.3%, while the MLR fell 110 basis points, to 89.3%.  The MLR adjusted for reserve developments and premiums adjustments decreased 80 basis points, to 88.9%.  This decline was, mostly driven by lower utilization in the Medicare Advantage and Commercial businesses, offset by lower premium yields in the Medicaid business due to the lack of premium rate revisions in 2010.  Consolidated operating expenses for the six months ended June 30, 2010, were $153.6 million and the operating expense ratio was 15.0%.  Pro forma net income for the six-month period was $30.4 million, or $1.04 per diluted share, based on weighted average shares outstanding of 29.3 million, compared with $23.1 million, or $0.78 per diluted share, based on weighted average shares outstanding of 29.8 million at the same time last year.

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 gain or loss divided by operating revenues.