Q3 2020 Triple-S Management Corp Earnings Call
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Thank you and good morning, welcome to the Triple S Management third quarter 2020 earnings conference call with US today are your hosts Bobby Garcia, President and Chief Executive Officer of Triple S and Juan Jose Roman Executive Vice President and Chief Financial Officer. In addition, Madeline Hernandez, Chief operating officer, and President managed care will be available during Q1 day.
By now everyone should have access to the earnings announcement, which was released prior to this call which may also be found on the company's website, a triple S management dotcom before we get formal remarks, we need to remind everyone that each quarter Triple S management executives will provide their current view of the company's future and thus they will be sharing forward looking information. These statements can be affected by risks and uncertainties involved in the business just.
Right management's best efforts actual results may differ materially from such forward looking statements and what you hear on today's call. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them.
For further information on factors that could impact the company and the statements.
Rejections contained herein. Please refer to the Safe Harbor section in today's news release, and the company's filings with Securities and Exchange Commission. Each forward looking statement and projection of financial information made during this call is based on information available to us as of the date of this call. We disclaim any obligation to update our forward looking statements unless required by law indeed.
In addition, this call is being webcast an archive version will be available shortly after the call ends on the Investor Relations portion of the company's website at Www Dot trip less management Dotcom, if you cannot download a copy of the release you can contact us at 70 779 to 6488, and we will get one to you immediately Canadian distribution list moving forward with that.
I'd now like to turn the call over to Bobby Garcia. Please go ahead.
Thanks, Gary and good morning, everyone. We appreciate your time today and hope you are all safe and healthy.
We recorded strong results for the third quarter thoughtfully navigating an unprecedented 19 environment and ensuring that all our members continued to receive a superior hope experience and.
And we did so while also laying the groundwork to achieve our vision of delivering high value integrated health care.
Total operating revenue for the quarter was $942.9 million, a 13% increase from the prior year period, driven by solid increases in Medicare premiums and a significant rise in Medicaid membership and average premium rates.
We recorded adjusted net income of $12.1 million or 61 cents per diluted share a 15% improvement for the third quarter of 2019.
We continue to experience overall lower utilization with MLL R decreasing 170 basis points year over year to 84.7% for the quarter.
In September we have been seeing utilization approach its historic baseline is Puerto Rico relevance undergo deferred procedures.
Of course closely tracking the spread of code 19, and any potential impact it may have up or down on utilization going forward.
Hospitals have significant capacity to accept new patients and the Puerto Rico government remains proactive in combating the virus and instituting measures to ensure the trends remain under control.
Throughout the pandemic the entire Triple S team has worked nonstop to support our members employees providers and communities. Thanks.
Thanks to the expansion of our Tele health and prescription drug home delivery platforms. Our members have been able to handle their medical needs safely and remote lease since the beginning of the pandemic.
And we have continued to partner with various organizations to assure our most vulnerable members are receiving vital assistance for their everyday needs, including grocery vouchers free delivery of prepaid meals and distribution and masks and sanitizer we.
We have an incredible team a triple S and because of their ongoing efforts I have no doubt we will emerge from these unusual times stronger than before.
Let me now turn to our segment performance beginning with managed care.
Our enhanced Medicare advantage offerings, along with the power of the Triple S brand in our superior service contributed to stable retention rates in the third quarter.
And our Medicare advantage membership rose by over 1500 members from the second quarter.
For the 2021 annual enrollment season now in full year. We expect these trends to continue as we are offering a very competitive innovative and quality product.
We are the first in our market and among the first of the blues to introduce a health plan I'd cards. It also serves as a debit card for the purchase of nonmedical supplemental benefits like groceries in home cleaning services for eligible members, it's a powerful combination.
Co branding Blue Cross Blue Shield of Mastercard, and it has generated a lot of buzz in the market.
That said, we are staying laser focused on retention during open enrollment given the challenging sales environment that pandemic has created.
We're also proud to be among the nine managed care organizations approved by CMS nationwide to provide palliative care hospice care under the May value based insurance design model in 2021.
Our participation. This program has a strategic intent to create expertise in an area that is important for Puerto Rico's aging population additive days of the healthcare continuum that presents an opportunity for cost efficiencies and better quality care.
Our Medicaid segment improved significantly in the third quarter led by the negotiation of an 8% increase in premium rates retroactive to July onest.
Also we gained over 21000, new Medicaid members with the exit of one of our competitors, which solidified our position as the leading medicate provider on the island with over 410000 members as of November Onest.
We're also continuing to see strong performance in our other two segments.
Our life business once again generated steady revenue and profits.
And as part of the 2021 enrollment season for the majority of our individual and small group health insurance products, we are including a guaranteed 10000 dollar life insurance policy for a minimum dollar figure.
This will strengthen our biggest customer interaction and the stickiness of these products. While also giving the 700 strong sale salesforce in our life business the opportunity to introduce additional ancillary products to our members.
Our PNC business benefiting from the harder market and its more conservative underwriting posture also delivered solid results in the quarter.
As of October 30, Onest 2020, we reduced the number of Hurricane Maria related open claims to 416.
We have now closed 98% of total claims and we believe this segment remains adequately reserved to handle all remaining claims to date.
At the beginning of the year I noted that our longer term vision for Triple EPS was to lead the health care market in Puerto Rico by offering our customers seamless access to high value healthcare.
While we all look forward to turning to page on 2020, and hope for a much safer and healthier 2021.
We've been hard at work throughout the year developing our 2024 integrated delivery strategy.
We have recently been ramping up our investments in informatics and clinical capabilities to enhance our overall care management performance and create deeper partnerships with providers to develop high performing health networks.
These investments include clinical profiling and predictive stratification tools provider network performance analytics.
Intervention programs for chronic and advanced illness.
Once these targeted investments are completed over the next few years.
They will ensure our members receive higher quality holistic and more affordable health care.
Through better care management, and enhance service, we expect to lower overall utilization and total cost of care, leading to better margins and a stronger bottom line.
Yeah.
We've made significant progress since launching our turnaround plan in 2016.
Today, we are more efficient and focused organization with competitive products and a sizable market share.
We have a strong brand and great people.
We are strengthening our capabilities to grow in our core markets, particularly Medicare advantage.
We are ready to take next step towards sustained growth as a leading health services company.
In the quarters ahead, you'll be hearing more about our strategic plans the timing and targets for the integrated delivery model. What this means longer term for triple S and how we will translate this strategy into significant and sustainable top and bottom line growth.
In terms of our initial thoughts on 2021.
We remain confident in our overall business and ability to succeed in our longer term objectives.
At the same time utilization is continuing to normalize as remain in a very fluid and challenging environment.
We believe we are well positioned to grow in 2021, given our leading offerings in our strong brand, but we are keeping a close eye on potential coated related issues that could have more near term impacts.
Now given our strong third quarter results. The company is raising its guidance for full 2020 year.
Year 2020, adjusted net income per diluted share to between $3.25 and $3.35 from its previous guidance of between 280 and $3.
Adjusted net income per diluted share assumes a weighted average diluted share count for.
For full year 2020 of 23.4 million shares and assumes no further share repurchases.
So summing up we remain proud of our entire team's efforts to help our members and all Puerto Rico's navigate through this pandemic thing.
Thanks to our teams nonstop efforts, we produced another solid quarter.
And while we remain very mindful of the overall environment. We are moving ahead and our strategic plans that are both mission critical to our current managed care business and foundational for the company's transition to value based integrated care delivery model over the longer term.
Our vision remains unchanged to create value for all our stakeholders by providing seamless access to high quality affordable and holistic health care.
Now I would like to ask one Jose to address our financial results.
Thank you will and good morning to everyone of these core assets.
As expected in the third quarter, our results continue to lean back like they changed it changes in utilization buyers brought on by fully 19, but the pandemic related impact was mostly lower down in the second quarter.
Most loved dominated friction where leads that during the third quarter and utilization of services gradually increase reaching approximately 95% of that the pandemic baseline they.
Compared with any estimated 75% in the second quarter look.
Looking ahead, although we expect a portion of that in our utilization to come back did in the last quarter of this year early indications point that utilization will reach a baseline.
Now for our third quarter results.
We reported GAAP net income per diluted share of one dollar two cents versus 58 cents independent a year period.
Adjusted net income per diluted share was 61 cents compared with 51 cents in that but I know year period.
Turning to the segment results.
He managed care premiums earned increased 103.5 million or 13.9% over that same beat of last year.
The increase was due to higher average premium rates and fully insured member month across all businesses.
In the Medicaid business average premium rates increased 29% compared with the prior year as a result of three separate rate increases.
Two increases of approximately 6% each beginning effective in November 2019, and May 2020, respectively, and another 8% increase beginning safety phone do like first to any to any.
The November 2019 on July 2020 increases resulted from the contractually established premium review process there.
That may 22, any premium rating rice resulted from the negative actually requirement to provide rate increases to certain providers.
Medicaid member month were also up in the third quarter, increasing by 67008 or 6% year over year as we continue to gain market share.
At November Onest, our membership reach approximately 410000 as they have or may not find the remaining members of the exiting carrier.
In the Medicare business the increase in the per member per month rate was mainly due to a reduction in day estimated 8 million related to the one we reported last quarter. These.
These rebate, which was already recorded a 50 live channels premiums was realized during the quarter as utilization continued to trend up to almost normal levels.
Managed care claims increased 75.1 million year over year and the monarch at 84.7% was 170 basis points lower than last year.
The increasing claim so we saw a bit from growth in fully insured members on favorable prior period Reserve development.
Other plus we added to their testing and treatment of COVID-19, and that Waivered off medical and payment policies.
The decrease in AML are mostly reflects the impact of the premium rate increases mentioned above.
And the heat fee rate in statement as well as the lower utilization.
We previously noted that the access to on demand for care, what's most constrained to meet the March through April.
And began to recover in late may gradually increasing through the near expected levels.
Additionally, access to services is mostly back to normal although environments by type of service for example, as part of the base station experienced no relocation.
An invasion and in medical utilization are almost at expected levels.
But he our urgent care utilization continued to be lower than expected as members avoid exposure to areas. They believe have a higher risk of infection.
Lastly, the managed care operating expenses increased $19.7 million from a year ago, mostly resulting from the heat feet reinstatement, which represents an additional $12.1 million.
Expenses related to providing much needed assistance from seniors to help them manage through that under any also contributed to the increasing operating expenses.
Turning to our life and property and casualty segments.
Life premiums earned were up approximately 9% from the prior year period. The increase was driven mostly by growth by premium growth in cancer individual and group life businesses.
Our water we featured in the second quarter of health insurance portfolio with annual estimate that they need a $5 million also contributed to that rice.
The segment's operating income was $5.7 million compared with $6.6 million in the prior year period.
Dedicate was mostly due to higher reserve as we reinstate most of their policies that have been canceled it in the second quarter because of call. It.
In our BMC segment operating income for the third quarter was $4.4 million compared with $6.6 million during the same quarter last year.
The segment's net premiums earned and claims and care, where without the stable year over year.
Operating expenses increased by almost 2 million, primarily reflecting higher net commission expenses.
Returning to our resource.
Consolidated income tax expense in the third quarter increased $4 million as every sort of higher taxable income in the managed care segment into end to end.
As of September 32020, the company had cash and cash equivalents $129.6 million any investment portfolio stood at 1.9 billion of which 73% was in investment grade fixed income securities.
The company also have several short term facilities available consisting of everyone's been pretty fast CVB and collateralized advances for lip at home loan Bank of New York.
These short term facilities further reinforce our liquidity.
In sum the company believe it remains award capitalized to supporting business operations broadly of understanding and beyond.
We will now proceed store Q on a section operator, please open the call for questions.
We will now begin the question and answer session.
Question remains that as anyone on you've got some time to retire.
Thanks Brent.
Again, if you have a question. Please press Star then one.
The first question is from that we've got to at least eight minutes. Please go ahead.
Hi, guys. Thanks for the questions on.
I had a question first about the Medicaid rate update for July one looked like it was a nice rate increase and the ml art for the quarter was about 94%, which is pretty flat sequentially. How do you expect Medicaid and our large such trend going forward.
Versus that 94% this quarter with rate increase.
Yes, Hi, this is Juan Jose.
Yet in demo there may be Cade, we expect day AMR to be around 92%, which is the.
Annual required by the contract so that that ending we expect to see going forward.
In the in the contract.
Okay, Okay, great and.
How about on commercial membership can you speak to how that holding up.
In the local economy, and any insight you can share about selling season, or 2021, and what kind of changes you expect and commercial number going forward.
Hi, This is Bobby.
We've been holding up fairly well given the environment, the economic environment and the challenges of the sales season, given the pandemic.
We have seen some attrition.
Especially in larger groups the small groups are holding up relatively well.
But that but it hasn't impacted of course, given the state of the economy. Overall now, whereas you know November 1st we started with the open enrollment for our individual and small market plans as small group plans.
We've come out with some competitive products and we feel like we're well positioned in the marketplace based on early results.
Okay great.
And then in Medicare advantage can you talk about.
Now that you've had a look at how your competitors were.
Establishing benefit for 2021.
How you are competitively positioned this year.
Grow and Medicare advantage enrollment.
Sure as you know with the changes we've been seeing in regulation and the options now people have there's been quite a variety of products on the market.
So each one of the.
And a organizations is accommodated the regular supplemental benefits with new ones and slightly different manners.
So there's a lot of information for the seniors to analyze and understand right. So when you combine that with the same circumstances I mentioned, a moment ago with respect to commercial.
The sales season has got off to a relatively slow start so we expect people to be making decisions later in the in the period.
Brought our total sales have been going well the phones are ringing.
Consistently.
We're getting a lot of leads on the street.
We've come out with a slightly different approach to our marketing were going drive through.
Events, very well received and attended.
So back to the main point your question.
Each carrier has come out with slightly different products, but we are.
Very competitive with our product matching.
The main competitors in our supplemental benefits in our monthly cash values.
And so we do expect some additional growth during this open enrollment season.
Okay, and Tom anything in the 2022 Medicare.
On rate notice that came out the other day that would be specific to Puerto Rico or is that was that more of a normal.
Our moderate up David as you read it.
We are seeing it in line with what we've seen in the past as they've considered some special circumstances for Puerto Rico I don't have.
Anything more specific to comment on that at this moment.
We we've been through through the.
Medicaid and Medicare advantage products Association.
In Puerto Rico.
We've been very active over these years make sure the CMS and HHS understand some of the unique circumstances and way to program works in Puerto Rico and they've been.
Very responsive from an administrative standpoint.
Yep and Don a question about Hurricane Maria claims so it looks like you're making a.
A lot of progress there I believe in October you you settled one of the biggest claims you have left.
Does your affirmation of the reserve adequacy with data.
Considered.
I'm curious how that settlements or not but just your progress through I guess that you're speaking today, what your affirmation of reserve adequacy adequacy would cover subsequent events beyond just the end of September.
Yes, Youre right. So our biggest thing that has been settled.
During Q.
Filling our reserve because the payment has not been done yet but.
But it was set up in.
In line with our reserve.
So, yes youre right.
We continuously making progress.
The slow but steady so we continue to see the number of claims open decrease.
Overall, we continue to be in line with our water reserves.
The things that we paid out in line with our reserves.
Great and the last question I had was gone thank.
Thinking about 2021 can you can you list a few of the Tailwinds and headwinds that we should be keeping in mind going into next year.
Well I think I'd say first and foremost we have to say COVID-19 is still out there and frankly I I couldn't tell you at this point, if it's a headwind or tailwind I do believe that given all the advances and in potential treatment vaccines that that the worst is clearly behind us.
Also in Puerto Rico, we Havent seen the spikes that you are seeing in certain areas of the of the nation. So we think thats actually a good sign here I think additional tailwind is that right.
Regardless of how the federal.
Elections turn out.
Both candidates have expressed.
Great interest in promoting the economic development of Puerto Rico.
The President mention just a few weeks back the $13 billion package for support of infrastructure development and continued.
Relief redevelopment after the hurricanes.
And likewise.
Democratic.
Candidate has has expressed interest in supporting.
The further.
Parity efforts of Puerto Ricos physically in the healthcare space. So those those are the I.
I think the the Tailwinds.
On a on a.
On a company level, a tailwind as weve been growing in a.
Over the past couple of years better.
Percentage wise than the competition, we are in third place.
With respect to market share.
So when we look at the total addressable market in Medicare advantage, we think there's still room for us to grow.
And as we continue to develop our integrated delivery model over the next few years, we think that will further buttress our efforts to grow our our our EMEA business, which is our main focus at this point for for top and bottom line growth.
With respect to potential headwinds as I said at the beginning it we are all looking.
And how the pandemic will will evolve.
Where do we go from here, but theres clearly a new normal for everyone.
How much of that remains and how much will go back to what were good.
Trends and.
Patters prior to covered yet to be seen.
And finally I think.
That we all have to be looking at what's going to happen at the macro level with respect to.
Healthcare law nationwide and how that would impact Puerto Rico.
Great.
Thanks, all for the questions good job.
Thank you.
As a reminder, if you have a question. Please press Star then one.
This concludes this concludes our question and answer session I would like to turn the conference back on that maybe you have for any closing remarks.
Thank you operator, and thanks once again to all the Triple S team for their hard work and efforts, while we build a health care delivery system for the longer term, that's patient centered and committed to quality outcomes through thank you all for your time and ongoing support and hope you and your families remain safe and healthy.
Look forward to talking you again early in 2021 as we begin to describe our long term strategic plan in more detail and in the meantime, please reach out to us if you have any more questions and enjoy the rest of your day.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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