Q1 2021 Triple-S Management Corp Earnings Call
Please stay on by we're about to begin.
The day and welcome to the Triple S management first quarter of 2021 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Garrett Edson of ICR. Please go ahead Sir.
Thank you and good morning, welcome to the Triple X management first quarter of 2021 earnings conference call with Us today or your host Bobby Garcia, President and Chief Executive Officer of Triple less than one Jose room on the executive Vice President and Chief Financial Officer edition, Madeleine Hernandez, Chief operating officer, and President of managed care will be available during Q&A.
Lastly, with US today is the incoming CFO Victor Haddock 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 of triplets management Dot com before we begin formula remarks me to remind everyone that each quarter trip less management executives will provide the current view of of the company's future in this they will be sharing forward looking information.
These statements can be affected by risks uncertainties involved in the business. Despite management as best efforts actual results may differ materially from such forward looking statements on what you hear on today's call. The statements are not guarantee of future performance and therefore undo rely on should not be placed upon them for.
For further information on factors that could impact the company and the statements and projections contained herein. Please refer to the Safe Harbor section today's news release and the company's filings with the Securities and Exchange Commission. Each for looking statement of protection of financial information made during this calls based on information available to US as of the date of this call. We disclaim any obligation update of for looking statements unless required.
By law. In addition to this call is being webcast an archived version will be available.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 Dot Com. If you cannot download a copy of the release you can contact us at 7877926488, and we will get once you immediately and can add you to distribute.
From the list and moving forward with that I now like to turn the call over the Bobby Garcia. Please go ahead.
Thanks, Garrett and good morning, everyone. We appreciate your time this morning, and we hope everyone is safe and healthy.
And the first quarter of 2021, we generate a double digit revenue growth and solid adjusted earnings per share our.
Thank you Bobby and thank you to the Triple S for for this terrific opportunity and humble to be taken the range from such an accomplished CFO on wholesale and I'm excited to be joining such a talented group of professionals of this pivotal time in triple S growth.
On a personal note I'm happy to be returning to Puerto Rico, where I have deep family routes.
I look forward to contributing to Triple S continued success and growth as the preferred healthcare services company in Puerto Rico.
I also look forward to working with our shareholders and the investment community on an ongoing basis.
Thank you Victor it's great to have you on the team.
Alright, So let me now turn of our segment performance beginning with managed care.
As we noted on our last call our Medicare advantage membership was relatively flat during the open enrollment period and market share has remained steady among all players looking forward, we're expecting modest membership gains by year end.
Our Medicaid segment has continued its healthy top line growth.
We added another 14750 members in the first quarter and continued to benefit from the premium rate increases we received last year.
We now have nearly 437000 members reinforcing our position as the dominant Medicaid provider on the island.
On the second half of 2021.
Through these programs, we expect to be able to engage a significantly larger percentage of the affected population than we've been able to reach under our legacy model for excited to provide some more detail on these programs in the quarters ahead.
Oh, let me turn to our for your guidance.
For full year of 2021, we are reaffirming our previous guidance based on the current economic environment. The continued impact of COVID-19, and the investment in an initial benefits from our strategic initiatives.
We still expect consolidated operating revenue to be between $3 98 billion and $4.02 billion, which includes managed care premiums are net between 358 billion and $362 billion.
Arkansas Sedated claims and current ratio is still expected to be between 83 and 84%. While the managed care of MLR is expected to be between 86 and 87 per cent.
This reflects expected higher utilization during 2021.
The elimination of the hip fee.
An increase membership in the Medicaid program, which has higher MLR than the commercial on Medicare businesses.
Our outlook for the consolidated operating explained expense ratio remains at 15.5 to 16.5 per cent as we invest in our integrated delivery model.
The effective tax rate is expected to be between 29% and.
And 31% and finally, our outlook for adjusted net income per diluted share as defined in this morning's earnings release remains between $2 95 and $315.
The companies assuming of weighted average diluted share count for a full year of 2021 of 23 6 million shares.
Longer term, we're confident that the integrated delivery strategy that we're pursuing should enable us to achieve our goal of high single digit top line CAGR of low double digit bottom line CAGR over our for your strategic horizon.
I will now ask one jose to address for financial results.
Thank you moving and good morning, everyone for.
The net increase of $122 2 million or 15, 1% over the same period last year.
The increase was due to higher average premium rates across all businesses and higher Medicaid member months.
In the Medicaid business average premium rates increased 20% compared with the prior year, mainly as the result of two rate increases in made on July 2020.
Medicaid member months Rose again in the first quarter by over 228000 or 21% year over year.
As mentioned in previous quarters since the beginning of 2020, we have been consistently growing our membership.
The market developments in November of 2020 cost our growth for salary for.
The government of signing the remaining members of our Medicaid carrier debt was leaving the program.
And the assignment resulted in an additional 80000 member months for us.
In addition in November 2020, the number of people eligible for Medicaid increased by approximately 633 63000.
In the Medicare business, we had higher premiums per member per month, mostly because of an increase in our average risk scores and in the CMS premiums benchmark.
The commercial business had a declining member months of approximately $21000, reflecting the economic impact of the pandemic.
Managed care claims increased $133 6 million year over year and the MLR at 87, 1% was 340 basis points higher than last year there.
On the rise in MLR was primarily due to several factors.
First the waiver of medical and payment policies.
Second COVID-19 related testing and treatment costs, which together with the waiver policies represented approximately 170 basis points of the increase in MLR in the 2021 quarter.
Third increased membership in the Medicaid business, which has a higher MLR than the commercial business.
In addition in the prior year quarter MLR was favorably affected by the COVID-19, lockdown, which significantly reduce utilization in the last two weeks of March 2020.
Other factors contributing to a higher MLR on where the elimination of the heat fees pass through in 2021, and the return of the for utilization.
The rising MLR was partially offset by two Medicaid premium rate increases I mentioned earlier.
Managed care operating expenses decreased $16 1 million from a year ago, mostly due to elimination of the hip fee in 2021, which represented a savings of approximately $16 3 million.
Turning now to our life and property and casualty segments.
Life premiums earned net were up approximately 12% from the prior year period. The increase was driven mostly by new sales in the individual life on cancer products and by our acquisition of of life insurance portfolio in the second quarter of 2020.
The segment's operating income was $5 8 million, a 16% increase compare with $5 1 million in the prior year period, mostly reflecting higher premiums in the 2021 premiums and lower loss experience.
In our property and casualty segment net.
Net premiums earned were up approximately 22 person from the prior year period.
Most of the assets result of higher sales during 2021.
Also in the prior year period, we had $3 million in reinsurance restatement costs.
Following the January 2020 earthquakes that reviews prior year period reported premiums earned.
Operating income for the quarter was $3 8 million compared with an operating loss of <unk> 2 million during the same quarter last year.
The segment's improved operating income was driven by a better loss experienced in the 2021 first quarter and the earthquake net losses incurred in the 2020 quarter.
We serve towards European Maria were $177 million as of March 31, 2021.
And I'm happy to report the last week, we resolved our biggest Maria related claims and we will be paying the remaining balance of $46 5 million to a government agency in the coming days.
As of May for 2020, one we have 327 outstanding cases remaining.
In consideration of the $46 5 million settlement and additional claims we said on after the end of the quarter, our Maria related reserve will decrease to $119 million.
We're confident that where we are.
Well very well reserve against the remaining <unk> lanes.
Now returning to consolidated results.
Income tax expense this quarter was $12 5 million compared with an income tax benefit of $9 7 million during the prior year quarter.
The increase most of the results from higher year over year net unrealized gains on equity investments.
As of March 31, 2021, the company had cash and cash equivalents of $118 7 million in its investment portfolio stood at $1 9 billion of which 68% was in investment grade fixed income securities.
There were no significant changes in our short or long term debt.
And debt to capital ratio stood at 5% compared with five 2% on December 31 2020.
We believe we remain well capitalized to support our business operations.
We will now proceed toward Q&A session. Operator, please open the call for questions.
Thank you if you would like to ask a question. Please press star followed by the digit one.
We are using a speaker phone. Please make sure your mute function of turned off to allow your signal to reach our equipment. Once again star one and we'll pause for just a moment.
And we'll hear from Scott Green with eight.
Hey, guys. Thank you for the questions can you hear me okay.
Yes, good morning, Scott.
Great Good morning.
My first question is the I just wanted to get your sense of how the results for the quarter came in versus your expectations anything that was positive or negative.
On that that'd be helpful first question.
Sure Scott.
The short it was in line with our expectations.
Yes, Scott.
Scott Inkjet as Bobby said is in line, we definitely saw a leader a higher increase in membership in the Medicaid business that probably is the one.
So larry of higher than expected.
Mhm.
Hey.
And.
On the <unk>.
On a question on the health insurance reserves. So there I noticed that the days in claims payable metric.
Was 55 day, which is up about five days sequentially nine days year over year can you talk a little bit about what is driving that increase in the days in claims payable.
Is it mostly first last year at the end as we said at the end of the quarter. There was a significant increase in claims so that was part of the reduction of loss of years. This year.
Is basically our hour increase is that basically our claims.
For the year as compared Denver of claims on the utilization with the pent up demand is back. So that's basically and there is no nothing mayor of outside of debt.
And the other bodies that.
We have on increase in our <unk> the membership and then the MAA products.
Okay.
On M&A you mentioned in the press release that the.
Premium rates benefited including from member risk scores and I wanted to ask how you've been managing that.
Especially considering how some other health insurance plans of talked about some headwinds from risk scores. This year. It seems like you've done a really good job.
On being able to capture those can you talk little bit about what you put in place to be able to make sure you've been getting those risk scores, which are showing up in your premium rates.
Yes.
We have continued our process right, we have been working together with our ipas or where primary care physicians.
To maintain.
Receiving the information that is necessary for on our membership. So basically also we work with the team of people that actually help us going to the primary care offices just to make sure debt.
We're getting the right recommendation, so that process broadly has not changed from from our usual process.
But obviously because of the pandemic, we try to be as active as possible, especially especially starting in the effect in the third quarter of 2020, where we were able really to get back.
The interest rate on meeting again with our per Medicare physician, but was a significant year for really for on our team just going back making sure as the very well said that we don't lose the critical information for this business.
Okay great.
On on the.
The Medicaid of reform MLR that showed substantial improvement, especially sequentially.
Into the eighteens for MLR.
I know theres been from reconciliations going back in force with the government can you talk about how that's turned out and the.
The MLR you view now is stable and I think in the past you expected it to be in the very low nineties are the rates, where they need to be now so that that's where it should be going forward.
Yes, so couple of items as you very well said, we continue making the reconciliations with the government we collected some premiums from the previous year.
As part of that the reconciliation and that was recognized in Q1, but in addition to the the current business. We are also seeing better bnb M or higher <unk> as we continue to improve the recurrent process with the government on we're getting membership classified in the.
<unk> sales. So it's the combination of both we're seeing of better process on one hand and on the other hand, we did saw some incremental revenue related to getting done those reconciliation that come from last year.
In terms of the expected MLR for the remainder of the year.
We are expecting debt to be in the lower nineties.
Okay and for overall MLR of 87.1.
The the full year guidance of 86 to 87, I know historically I believe first quarter has tended to be.
On the highest in all of our quarter of the year, although utilization.
Asian normalizing this year can you talk a little bit about what you're expecting in your outlook in terms of the seasonal progression of MLR, especially relative to history. When first quarter was the highest.
Yeah, and yeah in relation to the result, this quarter versus the full year guidance.
Yes.
So.
We saw basically utilization came back right. It's a combination of Israel some items higher the unusual other slow but overall when we look at the utilization and compared with pre pandemic levels. We are there right. So March we believe it is basically back to be our highest month.
<unk> of the year, but the most important part really that we do expect to see an improvement from the second half when the waivers.
And are eliminated so the waivers on payment policies really as I mentioned in my section represented are on 170 basis point of incremental MLR.
Some of the waivers has already been eliminated effective April others will be in July. So what we do expect is the progression from now to year end with some improvement just because we will not have those waivers the debt cost money rate increase of the MLR. So we do expect for.
For all our businesses for the tree line of businesses to see improvements just because of daily in the nation of the of the waivers.
That we have in place today.
Okay, great or other on what are what are a couple of is there one or two examples of.
Of waivers that were in place that are now being waived and either April or July curious, what an example of something like that might be.
For example, the comparator review at the hospital submissions.
That.
It was not allowed during the pandemic and that will come back of it right as soon as the waivers are out also in pharmacy we.
Have to reduce or eliminate the the time period right to get your next.
The.
The next what's the level.
I say the history.
On the refill too soon.
Was eliminated and that definitely will have some impact of <unk>.
He has mentioned in the previous calls we saw a significant decrease in basically everything with the exception of pharmacy.
So thats one that we do expect once refill too soon for example.
Is back to normal then we should see the control expense in the pharmacy.
Okay got it great and then on the.
The Hurricane Maria Slide so congratulations on the on the progress there I guess, if you could just elaborate a little debt.
What your biggest claim out of the way and and at this point you have a bunch of experienced settling claims of large claimants and.
And with the court process.
Just at this point, how youre thinking about the reserve level and the potential range of outcomes of the claims that are left on <unk>.
Relative to your reserve level.
Sure Scott I'll take that.
I would say overall when you when you think about the the overall experience where we settled over 98% of claims and those that remain open are basically all on court with few exceptions.
And we and at the same time, we've been able to settle.
A number of those cases that are on court within our reserves.
And when you put that altogether and you think alright, if we've been able to settle over 98% of the cases.
Within our reserve levels.
It suggests that we have of methodology.
And the track record with all of these cases that is solid.
So our position with respect of the remaining cases.
In court is that the claim is for being unreasonable.
And we have of solid basis for our reserve levels and that's why you want <unk> says that we continue to be confident in those reserve levels.
Uh-huh great.
Okay and anything else in terms of either the timing on on how you think this plays out going forward is this something where.
You know it could just take a while for some of these some of the last two per cent of claims to the.
Of the finalized or is there a reason to believe there could be more resolution and in the near term and then secondly, and lastly on.
Hum.
Wanted to more specifically ask about your comfort level and experience around.
And that was to give us the <unk>.
Say more dry powder to continue litigating. These cases and so at this point, we don't see a reason to add to that estimate of of L. E y.
On or anything else I don't know that's the right on point I think in terms of timing Scott is what we said we haven't been actually closing cases, the wording court. So the worst set of really really soon we even have to go through the whole process. So those are the good news some of those at settle so what to us.
<unk> is that we will continue slowly but stay the right. It's only 300 now and as Bobby said most of them are in court. So however, we continue with many making progress in our discussions.
They are offers out there with some of those so we're cautiously positive that will continue closing cases, even those add that on in card. So in them of timing he will the pain, but it probably will take another year.
Yeah on a half what expectation is that you would see because again is only 300. So we will see slowly but steadily every quarter. Some cases clothes every quarter, that's our expectation, but could pay goes of year year and a half I want to reaffirm what we said is that our research of work very comes.
The wall with them now the number of cases that we have outstanding in terms of total value are lower because we have been closing and happy to report the day, we close our biggest case. So now they are even also smaller cases right that doesn't mean.
That we have one or two of our 10 million dollar, but but at least we have much of lives on in the past and that'll give us a lot of kung for one of the thing that I always said, we'll do of look back how we're closing the hour cases be service on what reserve on in to any of <unk> I can tell you we went right on point.
When we look at what we pay be service the reserve for the full year, we basically were at the reserve slightly lower down on what reserve.
That that's great. Thanks for that update and congratulations on the the call.
Appreciate it thank you Scott.