Q2 2021 Triple-S Management Corp Earnings Call

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Good day, everyone and thank you for standing by.

Welcome to the Triple S management second quarter 2021earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to Garrett Edson. Please go ahead Sir.

Thank you and good morning, welcome to the Triple S Management second quarter 2021 earnings conference call with US today are your host Bobby Garcia, President and Chief Executive Officer of Triple S and Victor Hattic Executive Vice President and Chief Financial Officer. In addition, Madeline Hernandez, Chief operating officer, and President of managed care will be available during Q&A by now everyone should have access.

As to the earnings announcement, which was released prices call, which may also be found on the company's website at Triple S management Dot com before we begin 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. Despite management's best efforts.

15% from the prior year period.

To $1.01 billion.

As we benefited once again from higher Medicaid membership and average premium rates.

Adjusted net income was $10.5 million. This is 44 cents per diluted share.

Compared with 1 dollar and 76 cents per share in the second quarter of 2020.

As you will recall adjusted earnings per share in the same quarter of last year was significantly boosted by much lower utilization due to the pandemic.

As expected.

Second quarter utilization of services is almost fully normalized compared to last year's unusually low levels as the economy is reopening and more Puerto Rican or fully vaccinated.

Despite this increase in utilization, we remain confident in our outlook for the full year.

Let me now turn to our segment performance beginning with managed care.

At our men Medicare advantage business, we again saw a slight membership increase in the quarter.

Our team is working hard to further enhance for Medicare advantage offering in advance of this year's open enrollment period, which begins on October 15th.

We will highlight some of the new features during our next call.

Ah Medicaid segment continue to Chelsea top line growth.

We added on another 9000 members in the second quarter and continued to benefit from the premium rate increases we received last year.

We now have nearly 446000 members reinforcing our position as a leading Medicaid provider on the island.

And recently.

Rico Health insurance administration notified us of its decision to extend the current vitalik contract for an additional year through September of 2022.

Subject to the negotiation of rates over the next months, we have agreed to this extension.

Our life and PNC segments again delivered for Triple S.

Businesses generated another quarter of steady revenue and solid profits.

In terms of the overall environment in Puerto Rico will remain optimistic despite recent news concerning the delta barrier.

2.2 million, Puerto Ricans, where approximately 2 thirds of the items total population have received at least 1 vaccine dose 93% of the population older than 65 is fully vaccinated and 56% of the total population is fully vaccinated.

Strength, Puerto Rico number 11, among all U S states and territories for full vaccination rates.

As a result, the island is essentially open for business.

Also a few weeks ago. The government reached a verbal understanding with 2 bond insurers that should hopefully paved the way for final approval.

<unk> debt restructuring and the emergence of Puerto Rico from bankruptcy by the end of the year.

Combined with the recent additional flow of federal and reconstruction funds. We are excited for Puerto Rico's income.

What the triple s's longer term future.

In terms of our strategy to provide seamless affordable and top quality care for our members.

We noted on our last call that we were planning to introduce and scale specific chronic condition management programs for conditions, such as diabetes or.

Heart failure, and kidney disease, and the second half of this year.

We made solid progress during the quarter in further developing these programs and we remain on track to launch them in the coming months.

As a reminder, through these programs, we expect to engage a significantly larger percentage effective population than we've been able to reach under our legacy models.

We look forward to providing you with some other updates on the implementation annually feedback that these programs and upcoming calls.

Or moving onto guidance I'd like to take a minute to highlight our lifesaving.

While we typically focus these calls on our core managed care segment, which is of course, the lion's share of our business.

Life insurance has been a consistent reliable growth engine for triple less over the years and we believe it is a great compliment for managed care segment.

We've always thought of our life segment is a natural adjunct to what we do.

After our after all our mission is to enable long and healthy lives.

Being able to provide our members with additional life coverage rates cross selling opportunities for both groups and individuals.

It also gives our health insurance members the opportunity got affordable life, as well as short and long term disability cash or policies to their coverage enhancing their financial protection and peace of mind.

We distribute our life policies through a network of over 700 captive agents based in 25 district offices as well as through over 300 independent agents and brokers.

It's an offering that resonates with our members.

Last year, our life segment earned $196 million in premiums and we expect the best that Mark in 2021.

With over 672000 contracts and force our market share on the island is 21 per cent for life policies and 27% for cancer policies.

As importantly, the segment generates $28 million in operating income.

In 2020.

In other words, it's an ongoing material contributor or bottom line performance.

As we think about our lifestyle that going forward. We aim to continue growing are strong market share on the island.

Further building out our agent network.

Now, let me turn to a full year guidance.

For full year 2021, we are reaffirming our guidance based on the current economic environment. He continued impacted COVID-19.

And the investment in and initial benefits from.

Our strategic initiatives.

We expect consolidated operating revenue to be between $3.98 billion and $4.02 billion, which includes managed care premiums earned net between $358 billion and $3.62 billion.

Our consolidated claims incurred ratio is expected to be between 83 and 84%.

While the managed care MLR is expected to be between 86 and 87 per cent.

This reflects expected higher utilization during 2021 day.

The elimination of the hippie.

And increased membership in the Medicaid program, which has higher MLR than the commercial and Medicare businesses.

Our outlook of the consolidated operating expense ratio remains at $15.516.5 per cent as we invest in our integrated delivery model.

The effective tax rate is expected to be between 29 and 31 per cent.

And our outlook for adjusted net income per share as defined in this morning's earnings call.

I'm sorry, the earnings release remains between $2.95 and $3.15.

Companies, assuming a weighted average diluted share count from full year 2021 of 23.6 million shares.

Longer term, we remain confident that the integrated delivery strategy that we're pursuing will enable us to achieve our goal high single digit top line CAGR and low double double digit bottom line taher over our 4 year strategic horizon.

And now I will ask Victor to address our financial results.

Thank you Bobby and good morning, everyone from <unk>.

<unk> part of results were driven by a significant increase in Medicaid membership and the impact of normalized utilization patterns compared with the prior year quarter.

Because of the COVID-19 pandemic.

We also continue to see previously deferred utilization among the pandemic related costs, resulting in unexpected year over year increase in our MLR.

Reported adjusted net income per diluted share for the second quarter West 44 cents.

Compared with $1.76, and the prior year.

Now I'm moving to a segment results.

And managed care premiums earn net increased $125 million or 15% over the same quarter last year.

The increase was due to higher average payment rates across all businesses and hire medic aid remember months.

And the Medicare business.

It's premium rates increased 7% compared with the prior year.

Primarily as a result of a rate increase in July 2020.

Many K member months gross again in the second quarter, I, approximately 256000 or 24% year over year.

You have seen an acceleration in our membership growth since November 2020.

Primarily due to the government be assigning members of a Medicaid carrier that left the island program.

And an increase in medical eligible population of approximately 60000.

And the Medicare business, we have higher premiums per member per month.

Primarily due to an increase in our average risk force and in in CMS premium benchmark.

The commercial business, how to decline and remember months of approximately 26000, reflecting the economic impact of dependent Mike.

Managed care claims increased 176.9 million year over year and to MLR at 88, 4% was 900 basis points higher than last year.

The rising MLR was primarily due to several factors.

First the prior year quarter, MLR favorably affected by independent MC.

Which led to significantly reduce utilization in the second quarter of 2020.

The normal lives utilization, we experience in the second quarter of 2021 made up most of the increase.

Second a waiver of medical and payment policies.

Third endemic related testing and treatment costs, which together with the waiver of policy represented approximately 90 basis points of the increase in MLR in the second quarter of 2020.

Force the elimination of the hippie acid from 2021 contributed to the higher MLR.

Lastly increase in membership in the medical business has a higher MLR under Medicare and commercial loans.

Managed care operating expenses improved $33.5 million from a year ago.

Marilee to reflect in the accrual ended prior year quarter of a potential litigation loss and the elimination of the hit in 2021.

The rising MLR was partially offset by Medicaid premium rate increase I mentioned earlier and a favorable prior period you surf development.

Moving to our life property and casualty segments.

Life premiums earn net growth, 12% from the prior year quarter, driven by new sales and retention and the individual and cancer products.

The segment's operating income was $6.4 million compared with 9.5 noon in the prior year quarter from.

Marilee, reflecting higher actuarial research due to increase policy retention.

The changing operating income also reflects higher benefits paid in the second quarter of 2021 as compared with lower volume of claims submissions in the prior year quarter due to dependents.

In our property and casualty settlement.

Premiums earn increased 13% from the prior year quarter because of higher sales during 2021.

Operating income for the quarter was $2 million from here with $6.7 million during the same quarter boxing.

The segments lower operating income was driven by higher losses, and operating expenses in the second quarter of 2021.

Losses during the second quarter of 2020 were lower due to the pandemic.

Returning to consolidated results.

Income tax expense this quarter was $6.4 million compared with $27.2 million during the prior year quarter.

The decrease was due to lower year over year net unrealized schemes on equity investments and pretax income and day managed care segment.

As of June 30th 2021 day.

Company had cash and cash equivalents $174.4 million.

And its investment portfolio stood at $1.9 billion, 67% of which is investment grade fixed income securities.

We believe we remain well capitalized to support our business operations and our long term strategy.

We will now proceed to our Q&A section.

Operator, these open to call for questions.

Thank you.

He would like to ask a question. Please send all by pressing star followed by the 1 on your telephone keypad could you are using a speakerphone. Please make sure. Your mute function is turned off the line you're signal can reach our equipment.

Again press Star 1 to ask a question and we will pass for just a moment to allow everyone an opportunity to signal for questions.

And once again that as Darwin.

Alright, I would know line could turn the conference back over to you Mr profit Garcia.

Any additional line closing remarks.

Thank you operator.

There's always I want to recognize and thank the entire true blessed team for continued efforts and dedication as they stay focused on building a health care delivery system that is patient centered and committed to quality outcomes.

Want to think I'll share he went on to call today for your time and ongoing sport.

We look forward to talking with you again during our third quarter earnings call.

In the meantime, please reach out to US you have any more questions and I wish you all great day.

And that concludes today's conference. Thank you for your participation. He may now disconnect.

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