Triple-S Advantage, Inc. (TSA) has a $10,000 revolving loan agreement with a commercial bank in Puerto Rico. This line of credit has an interest rate of 30-day LIBOR plus 250 basis points and contains certain financial and non-financial covenants that are customary for this type of facility. This line of credit matured on June 30, 2020 | • | TSA has a $10,000 revolving loan agreement with a commercial bank in Puerto Rico. This line of credit has an interest rate of 30-day LIBOR plus 250 basis points and contains certain financial and non-financial covenants that are customary for this type of facility. This line of credit matured on June 30, 2021 and was renewed for an additional year. There was 0 outstanding balance as of June 30, 2021. |
The components of net periodic benefit cost were as follows:
| | Three months ended June 30, | | | Six months ended June 30, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Components of net periodic benefit cost: | | | | | | | | | | | | |
Interest cost | | $ | 1,375 | | | $ | 1,540 | | | $ | 2,750 | | | $ | 3,080 | |
Expected return on assets | | | (1,100 | ) | | | (2,209 | ) | | | (2,200 | ) | | | (4,418 | ) |
Amortization of actuarial loss | | | 975 | | | | 244 | | | | 1,950 | | | | 488 | |
Settlement loss | | | 1,000 | | | | 356 | | | | 2,000 | | | | 712 | |
Net periodic benefit cost (income) | | $ | 2,250 | | | $ | (69 | ) | | $ | 4,500 | | | $ | (138 | ) |
Employer Contributions: The Company disclosed in its audited consolidated financial statements for the year ended December 31, 2020 that it expected to contribute $10,000 to the pension program in 2021. As of June 30, 2020, there is 0 outstanding balance.2021, the Company has contributed $10,000 to the pension program.
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)
(Unaudited)
The components of net periodic benefit cost were as follows:
| | Three months ended June 30, | | | Six months ended June 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Components of net periodic benefit cost: | | | | | | | | | | | | |
Interest cost | | $ | 1,540 | | | $ | 1,741 | | | $ | 3,080 | | | $ | 3,482 | |
Expected return on assets | | | (2,209 | ) | | | (2,217 | ) | | | (4,418 | ) | | | (4,434 | ) |
Amortization of actuarial loss | | | 244 | | | | 90 | | | | 488 | | | | 179 | |
Settlement loss | | | 356 | | | | 375 | | | | 712 | | | | 750 | |
Net periodic benefit cost | | $ | (69 | ) | | $ | (11 | ) | | $ | (138 | ) | | $ | (23 | ) |
Employer Contributions: The Company disclosed in its audited consolidated financial statements for the year ended December 31, 2019 that it expected to contribute $2,000 to the pension program in 2020. As of June 30, 2020, the Company has 0t made contributions to the pension program.
(11) | Stock Repurchase ProgramReinsurance |
The Company repurchases shares through open market transactions, in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, under repurchase programs authorized by the Board of Directors. Shares purchased under share repurchase programs are retired and returned to authorized and unissued status.
In August 2017 the Company’s Board of Directors authorized a $30,000 repurchase program (2017 $30,000 program) of its Class B common stock. In February 2018 the Company’s Board of Directors authorized a $25,000 expansion of this program. In October 2019 the Company’s Board of Directors authorized an expansion to this repurchase program increasing its remaining balance up to a total of $25,000, effective November 2019. During the three months ended June 30, 2020, the Company repurchased and retired under this program 375,373 shares at an average per share price of $15.96, for an aggregate cost of $5,993. During the six months ended June 30, 2020, the Company repurchased and retired under this program 952,820 shares at an average per share price of $15.72, for an aggregate cost of $14,982. During the three months and six months ended June 30, 2019 0 stocks were repurchased under a repurchase program. This program was completed in May 2020.
Triple-S Propiedad, Inc. (TSP) uses facultative reinsurance, pro rata, and excess of loss reinsurance treaties to manage its exposure to losses, including those from catastrophe events. TSP has geographic exposure to catastrophe losses from hurricanes and earthquakes. The incidence and severity of catastrophes are inherently unpredictable.
Under these treaties, TSP ceded premiums written were $14,310$14,471 and $10,245$14,310 for the three months ended June 30, 20202021 and 2019,2020, respectively, and $30,717$29,454 and $23,674$30,717 for the six months ended June 30, 2020,2021 and 2019,2020, respectively. During(Refunded) ceded incurred losses and loss adjustment expenses during the three months and six months ended June 30, 2021 and 2020 were $(323) and $1,565, respectively, and $(267) and $39,956, respectively. The ceded incurred losses and loss adjustment expenses for the six months ended June 30, 2020, TSP ceded claims incurred amounting to $40,000 include $40,000 related to earthquake losses caused by the January 2020 earthquakes.ceded under catastrophe reinsurance.
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
Principal reinsurance agreements are as follows:
• | Casualty excess of loss treaty provides reinsurance for losses up to $20,000, subject to a retention of $225.
|
• | Medical malpractice excess of loss treaty provides reinsurance for losses up to $3,000, subject to a retention of $150.Casualty excess of loss treaty provides reinsurance for losses up to $20,000, subject to a retention of $225. |
• | Property reinsurance treaty includes proportional cessions and a per risk excess of loss contract limiting losses to $400 in $30,000 risks.Medical malpractice excess of loss treaty provides reinsurance for losses up to $3,000, subject to a retention of $150. |
• | Catastrophe protection is purchased limiting losses to $5,000 per event with losses up to approximately $809,000 in a $814,000 event.Property reinsurance treaty includes proportional cessions and a per risk excess of loss contract limiting losses to $400 in $30,000 risks. |
Catastrophe protection is purchased limiting losses to $5,000 per event with losses up to approximately $811,450 in a $816,450 event.
All principal reinsurance contracts are for a period of one year and are subject to modifications and negotiations in each renewal. TSP’s current property and catastrophe reinsurance program was renewed effective April 1, 20202021 for a twelve monthstwelve-month period ending March 31, 2021.2022. Other contracts were renewed as expiringthat expired on January 1, 2020.2021 were renewed.
The Company’s subsidiaries lease their regional offices, certain equipment, and warehouse facilities under non-cancelable operating leases. These contracts generally do not include purchase options or residual value guarantees. The remaining lease terms ranges from 0.5 to 14.4 years. The Company identifies leases when it has both the right to obtain substantially all economic benefits from the use of the asset and the right to direct the use of the asset.
The Company recognizes the right-of -use of assets and lease liabilities related to operating leases in its balance sheet statement under the caption of other assets and accounts payables and accrued liabilities, respectively. As of June 30, 2020, the right -of -use asset and lease liabilities balance was $14,421 and $14,655, respectively. As of December 31, 2019, the right-of -use asset and lease liabilities balance was $10,438 and $10,586, respectively. The weighted -average remaining lease term is 6.0 years as of June 30, 2020.
The Company uses the incremental borrowing rate for purposes of discounting lease payments for our operating leases since our lease agreements do not provide a readily determinable implicit rate. We estimate our incremental borrowing rate based on information available at lease commencement date. The weighted-average discount rate of our operating leases is 5.2% as of June 30, 2020.
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)
(Unaudited)
11.Comprehensive Income (Loss)
Undiscounted cash flowsThe accumulated balances for each classification of operating leasesother comprehensive income (loss), net of tax, are summarized as follows:
Remaning of 2020 | | $ | 2,063 | |
2021 | | | 3,935 | |
2022 | | | 3,371 | |
2023 | | | 2,273 | |
2024 | | | 1,798 | |
Thereafter | | | 3,415 | |
Total lease payments | | | 16,855 | |
Less: imputed interest | | | (2,200 | ) |
Total | | $ | 14,655 | |
| | Three months ended June 30, | | | Six months ended June 30, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Net Unrealized Gain on Securities | | | | | | | | | | | | |
Beginning Balance | | $ | 75,136 | | | $ | 73,709 | | | $ | 91,689 | | | $ | 57,830 | |
Other comprehensive income (loss) before reclassifications | | | 4,274 | | | | 10,681 | | | | (12,105 | ) | | | 26,730 | |
Amounts reclassified from accumulated other comprehensive (loss) income | | | (2,011 | ) | | | 720 | | | | (2,185 | ) | | | 550 | |
Net current period change | | | 2,263 | | | | 11,401 | | | | (14,290 | ) | | | 27,280 | |
Ending Balance | | | 77,399 | | | | 85,110 | | | | 77,399 | | | | 85,110 | |
Liability for Pension Benefits | | | | | | | | | | | | | | | | |
Beginning Balance | | | (100,900 | ) | | | (28,314 | ) | | | (101,509 | ) | | | (28,467 | ) |
Amounts reclassified from accumulated other comprehensive income | | | 609 | | | | 153 | | | | 1,218 | | | | 306 | |
Ending Balance | | | (100,291 | ) | | | (28,161 | ) | | | (100,291 | ) | | | (28,161 | ) |
Accumulated Other Comprehensive Income | | | | | | | | | | | | | | | | |
Beginning Balance | | | (25,764 | ) | | | 45,395 | | | | (9,820 | ) | | | 29,363 | |
Other comprehensive income (loss) before reclassifications | | | 4,274 | | | | 10,681 | | | | (12,105 | ) | | | 26,730 | |
Amounts reclassified from accumulated other comprehensive (loss) income | | | (1,402 | ) | | | 873 | | | | (967 | ) | | | 856 | |
Net current period change | | | 2,872 | | | | 11,554 | | | | (13,072 | ) | | | 27,586 | |
Ending Balance | | $ | (22,892 | ) | | $ | 56,949 | | | $ | (22,892 | ) | | $ | 56,949 | |
At December 31, 2019, operating lease commitments under lessee arrangements were $4,713, $3,790, $3,200, $2,171, $1,710 and $2,707 for 2020 through 2024 and thereafter, respectively. The following presents the lease cost recognized by the Company:
| | Six months ended | |
| | June 30, 2020 | |
Operating lease cost | | $ | 1,903 | |
Short-term lease cost | | | 629 | |
Total lease cost | | $ | 2,532 | |
12. | Share-Based Compensation |
Also,Share-based compensation expense recorded during the Company leases certain floorsthree months ended June 30, 2021 and 2020 was $2,751 and $4,235, respectively. Share-based compensation expense recorded during the six months ended June 30, 2021 and 2020 was $3,933 and $6,594, respectively. During the three and six months ended June 30, 2021, 20,823 shares were repurchased and retired as the result of onenon-cash tax withholdings upon vesting of its buildings and generates rental income. Maturity analysis of lease payments to be received from its lessees as of shares. During the six months ended June 30, 2020 is summarized, 6,882 shares were repurchased and retired as follows:the result of non-cash tax withholdings upon vesting of shares. There were 0 non-cash tax withholdings during the three months ended June 30, 2020.
Remaining of 2020 | | $ | 945 | |
2021 | | | 1,909 | |
2022 | | | 1,947 | |
2023 | | | 1,986 | |
2024 | | | 2,026 | |
Thereafter | | | 2,625 | |
Total | | $ | 11,438 | |
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)
(Unaudited)
(14) | Comprehensive Income (Loss) |
The accumulated balances for each classification of other comprehensive income (loss), net of tax, are as follows:
| | Three months ended | | | Six months ended | |
| | June 30, | | | June 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Net Unrealized Gain on Securities | | | | | | | | | | | | |
Beginning Balance | | $ | 73,709 | | | $ | 40,749 | | | $ | 57,830 | | | $ | 27,308 | |
Other comprehensive income before reclassifications | | | 10,681 | | | | 16,820 | | | | 26,730 | | | | 31,313 | |
Amounts reclassified from accumulated other comprehensive income (loss) | | | 720 | | | | (1,891 | ) | | | 550 | | | | (2,943 | ) |
Net current period change | | | 11,401 | | | | 14,929 | | | | 27,280 | | | | 28,370 | |
Ending Balance | | | 85,110 | | | | 55,678 | | | | 85,110 | | | | 55,678 | |
Liability for Pension Benefits Beginning Balance | | | (28,314 | ) | | | (24,190 | ) | | | (28,467 | ) | | | (24,246 | ) |
Amounts reclassified from accumulated other comprehensive income | | | 153 | | | �� | 56 | | | | 306 | | | | 112 | |
Ending Balance | | | (28,161 | ) | | | (24,134 | ) | | | (28,161 | ) | | | (24,134 | ) |
Accumulated Other Comprehensive Income Beginning Balance | | | 45,395 | | | | 16,559 | | | | 29,363 | | | | 3,062 | |
Other comprehensive income before reclassifications | | | 10,681 | | | | 16,820 | | | | 26,730 | | | | 31,313 | |
Amounts reclassified from accumulated other comprehensive income (loss) | | | 873 | | | | (1,835 | ) | | | 856 | | | | (2,831 | ) |
Net current period change | | | 11,554 | | | | 14,985 | | | | 27,586 | | | | 28,482 | |
Ending Balance | | $ | 56,949 | | | $ | 31,544 | | | $ | 56,949 | | | $ | 31,544 | |
(15) | Share-Based Compensation |
Share-based compensation expense recorded during the three months ended June 30, 2020 and 2019 was $4,235 and $4,320, respectively. Share-based compensation expense recorded during the six months ended June 30, 2020 and 2019 was $6,594 and $5,907, respectively. During the six months ended June 30, 2020 and 2019,6,882 and 602 shares, respectively, were repurchased and retired as the result of non-cash tax withholdings upon vesting of shares. There were 0 non-cash tax withholdings during the three months ended June 30, 2020 and 2019.
(16)13. | Net Income Available to Stockholders and Net Income per Share |
The following table sets forth the computation of basic and diluted earnings per share:
| | Three months ended June 30, | | | Six months ended June 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Numerator for earnings per share: | | | | | | | | | | | | |
Net income attributable to TSM available to stockholders | | $ | 43,599 | | | $ | 30,931 | | | $ | 17,454 | | | $ | 65,717 | |
Denominator for basic earnings per share: | | | | | | | | | | | | | | | | |
Weighted average of common shares | | | 23,193,626 | | | | 22,830,399 | | | | 23,287,787 | | | | 22,794,297 | |
Effect of dilutive securities | | | 77,677 | | | | 64,601 | | | | 85,198 | | | | 72,394 | |
Denominator for diluted earnings per share | | | 23,271,303 | | | | 22,895,000 | | | | 23,372,985 | | | | 22,866,691 | |
Basic net income per share attributable to TSM | | $ | 1.88 | | | $ | 1.35 | | | $ | 0.75 | | | $ | 2.88 | |
Diluted net income per share attributable to TSM | | $ | 1.87 | | | $ | 1.35 | | | $ | 0.75 | | | $ | 2.87 | |
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
| | Three months ended June 30, | | | Six months ended June 30, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Numerator for earnings per share: | | | | | | | | | | | | |
Net income attributable to TSM available to stockholders | | $ | 23,560 | | | $ | 43,599 | | | $ | 46,870 | | | $ | 17,454 | |
Denominator for basic earnings per share: | | | | | | | | | | | | | | | | |
Weighted average of common shares | | | 23,478,867 | | | | 23,193,626 | | | | 23,355,965 | | | | 23,287,787 | |
Effect of dilutive securities | | | 120,111 | | | | 77,677 | | | | 160,331 | | | | 85,198 | |
Denominator for diluted earnings per share | | | 23,598,978 | | | | 23,271,303 | | | | 23,516,296 | | | | 23,372,985 | |
Basic net income per share attributable to TSM | | $ | 1.00 | | | $ | 1.88 | | | $ | 2.01 | | | $ | 0.75 | |
Diluted net income per share attributable to TSM | | $ | 1.00 | | | $ | 1.87 | | | $ | 1.99 | | | $ | 0.75 | |
The following information supplements and amends, as applicable, the disclosures in Note 24 to the Consolidated Financial Statements of the Company’s 2019 Annual Report on Form 10-K. The Company’s business is subject to numerous laws and regulations promulgated by Federal, Puerto Rico, U.S. Virgin Islands (USVI), Costa Rica, British Virgin Islands (BVI), and Anguilla governmental authorities. Compliance with these laws and regulations can be subject to government review and interpretation, as well as regulatory actions unknown and unasserted at this time. The Commissioner of Insurance of Puerto Rico, as well as other Federal, Puerto Rico, USVI, Costa Rica, BVI, and Anguilla government authorities, regularly make inquiries and conduct audits concerning the Company’s compliance with such laws and regulations. Penalties associated with violations of these laws and regulations may include significant fines and exclusion from participating in certain publicly funded programs and may require the Company to comply with corrective action plans or changes in our practices.
The Company is involved in various legal actions arising in the ordinary course of business. The Company is also defendant in various other litigations and proceedings, some of which are described below. Where the Company believes that a loss is both probable and estimable, such amounts have been recorded. Although the Company believes the estimates of such losses are reasonable, these estimates could change as a result of further developments in these matters. In other cases, it is at least reasonably possible that the Company may incur a loss related to one or more of the mentioned pending lawsuits or investigations, but the Company is unable to estimate the range of possible loss which may be ultimately realized, either individually or in the aggregate, upon their resolution. However, there are legal proceedings where a loss is reasonably possible, and for which it is possible to reasonably estimate the amount of the possible loss or range of losses. We currently believe that the range of possible losses for such proceedings in excess of established reserves is, in the aggregate, from $0 to approximately $10,000 at June 30, 2020. The outcome of legal proceedings is inherently uncertain; pending matters for which accruals have not been established have not progressed sufficiently to enable us to estimate a range of possible loss, if any. Given the inherent unpredictability of these matters, it is possible that an adverse outcome in one or more of these matters could have a material effect on the consolidated financial condition, operating results and/or cash flows of the Company.
Additionally, we may face various potential litigation claims that have not been asserted to date.
Claims by Heirs of Former Shareholders
The Company and TSS are defending 4 individual lawsuits: Vera Sanchez, et al, v. Triple-S; Olivella Zalduondo, et al, v. Seguros de Servicios de Salud, et al; Cebollero Santamaria v. Triple-S Salud, Inc., et al; and Ruiz de Porras, et al, v. Triple-S Salud, Inc. All claims were filed in the Puerto Rico Court of First Instance by persons who claim to have inherited a total of 41 shares of the Company or one of its predecessors or affiliates (before giving effect to a 3,000-for-one stock split). While each case presents unique facts and allegations, the lawsuits generally allege that the redemption of the shares by the Company pursuant to transfer and ownership restrictions contained in the Company’s (or its predecessors’ or affiliates’) articles of incorporation and bylaws was improper. Consequently, the remedy requested by the plaintiffs is to be recognized as shareholders of the Company in the corresponding proportion.
As a result of the Puerto Rico Supreme Court’s decision to deny the applicability of the statute of limitations contained in the local securities law, these claims are being litigated on their merits.
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
In Cebollero Santamaria v. Triple-S Salud, Inc., et. al. the Puerto Rico Court of First Instance entered partial summary judgment in favor of plaintiff on June 20, 2019. The Company filed a request for reconsideration that is pending adjudication and intends to continue defending this case vigorously in an appeal stage if necessary.
In Vera Sanchez, et. al. v. Triple-S, Inc., the Puerto Rico Court of First Instance entered summary judgment in favor of the Company. Plaintiffs appealed before the Puerto Rico Court of Appeals. The Company filed its opposition on October 31, 2019. On June 24, 2020, the Court of Appeals revoked the summary judgement and remanded the case back to the Court of First Instance on the grounds that summary judgement was inappropriate because there are disputes as to issues of material fact. We will continue to defend this case vigorously.
In Ruiz de Porras, et. al. v. Triple-S, Inc. the discovery stage is now completed. The Company intends to file a motion for summary judgment to dismiss all claims.
In Olivella Zalduondo, et al, v. Seguros de Servicios de Salud, et al, the Court of First Instance entered summary judgment in favor of the Company in November 2019, dismissing the complaint with prejudice. Plaintiffs appealed the decision on January 16, 2020. The Company will continue to defend this case as needed.
In re Blue Cross Blue Shield Antitrust Litigation
TSS is a co-defendant with multiple Blue Plans and the Blue Cross Blue Shield Association in a multi-district class action litigation filed by a group of providers and subscribers on July 24, 2012 and October 1, 2012, respectively, that has since been consolidated by the United States District Court for the Northern District of Alabama, Southern Division, in the case captioned In re Blue Cross Blue Shield Association Antitrust Litigation. Essentially, provider plaintiffs allege that the exclusive service area requirements of the Primary License Agreements with the Blue Plans constitute an illegal horizontal market allocation under federal antitrust laws. As per provider plaintiffs, the quid pro quo for said “market allocation” is a horizontal price fixing and boycott conspiracy implemented through BCBSA and whose benefits are allegedly derived through the BCBSA’s BlueCard/National Accounts Program. Among the remedies sought, provider plaintiffs seek increased compensation rates and operational changes. In turn, subscriber plaintiffs allege that the alleged conspiracy to allocate markets have prevented subscribers from being offered competitive prices and resulted in higher premiums for Blue Plan subscribers. Subscribers seek damages for the amounts that the Blue Plan premiums allegedly have been artificially inflated as a result of the alleged antitrust violations. Both actions seek injunctive relief.
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
Prior to consolidation, motions to dismiss were filed by several plans, including TSS - whose request was ultimately denied by the court without prejudice. On April 6, 2015, plaintiffs filed suit in the United States District Court of Puerto Rico against TSS. Said complaint, nonetheless, is believed not to preclude TSS’ jurisdictional arguments. Since inception, the Company has joined BCBSA and other Blue Plans in vigorously contesting these claims. On April 5, 2018, the United States District Court for the Northern District of Alabama, Southern Division, issued it’s ruling on the parties’ respective motions for partial summary judgment on the standard of review applicable to plaintiffs’ claims under Section 1 of the Sherman Act and subscriber plaintiffs’ motion for partial summary judgment on the Blue Plan’s single entity defense. After considering the “undisputed” facts (for summary judgment purposes only) and evidence currently on record in the light most favorable to defendants, the court essentially found that: (a) the combination of Exclusive Service Areas and the National Best Efforts Rule are subject to the Per Se standard of review; (b) there remain genuine issues of material fact as to whether defendants’ conduct can be shielded by the “single entity” defense; and (c) claims concerning the BlueCard Program and uncoupling rules are due to be analyzed under the Rule of Reason standard.
On April 16, 2018 Defendants moved the Federal District Court for the Northern District of Alabama to certify for immediate interlocutory appeal the court’s April 5, 2018 Standard of Review Ruling. On June 12, 2018 Hon. Judge Proctor agreed to grant Defendant’s motion for certification pursuant to 28 U.S.C. §1292(b). Defendants filed their Notice of Appeal on July 12, 2018. On December 12, 2018, the Court of Appeals for the Eleventh Circuit denied Defendants’ petition to appeal the District Court’s Standard of Review Ruling. The parties re-commenced mediation with subscribers in April 2019 and with providers in September 2019. Based on the state of negotiation with subscribers, the Company has accrued $32,000 related to this legal proceeding.
Claims Relating to the Provision of Health Care Services
TSS is a defendant in several claims for collection of monies in connection with the provision of health care services.
On April 17, 2015, the Puerto Rico Health Insurance Administration ("ASES" by its Spanish acronym) notified the Company of a complaint from a medical service provider demanding payment amounting to $5,073. Claimant alleges that TSS did not pay the claims, paid them incorrectly, or recovered payments from the provider for which TSS did not have the right. TSS answered the complaint and counterclaimed. TSS denies any wrongdoing and will continue to defend this matter vigorously. The parties have concluded the claim reconciliation process and have agreed on a settlement amount to be paid by ASES. On July 28, 2020 ASES approved the disbursment and issued a resolution closing the complaint.
On January 12, 2015, American Clinical Solutions LLC, a limited liability company that provides clinical laboratory services filed a complaint in Florida state court alleging that TSM and TSS failed to pay certain clinical laboratory services provided to Blue Cross Blue Shield members. TSS and TSM have filed a motion to dismiss alleging lack of jurisdiction. TSM and TSS also requested a transfer of the case to Puerto Rico. Plaintiff has requested jurisdictional discovery, which is ongoing. The claim amounts to $5,000. TSS and TSM will continue to vigorously oppose this claim.
(18)14. | Segment Information |
The Company’s operations of the Company are conducted principally through 3 reportable business segments: Managed Care, Life Insurance, and Property and Casualty Insurance. The Company evaluates performance based primarily on the operating revenues and operating income of each segment. Operating revenues include premiums earned, net, administrative service fees, net investment income,Premiums Earned, Net, Administrative Service Fees and revenues derived from other segments.Net Investment Income. Operating costs include claims incurredClaims Incurred and operating expenses.Operating Expenses. The CorporationCompany calculates operating income or loss as operating revenues less operating costs.
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)
(Unaudited)
The following tables summarize the operations by reportable segment for the three months and six months ended June 30, 20202021 and 2019:2020:
| | Three months ended June 30, | | | Six months ended June 30, | | | Three months ended June 30, | | | Six months ended June 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Operating revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Managed Care: | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net | | $ | 788,773 | | | $ | 793,355 | | | $ | 1,598,059 | | | $ | 1,498,405 | | | $ | 909,229 | | | $ | 788,773 | | | $ | 1,840,659 | | | $ | 1,598,059 | |
Administrative service fees | | | 2,809 | | | | 2,456 | | | | 5,003 | | | | 5,088 | | | | 2,676 | | | | 2,809 | | | | 5,441 | | | | 5,003 | |
Intersegment premiums/service fees | | | 1,076 | | | | 1,645 | | | | 2,719 | | | | 3,129 | | | | 899 | | | | 1,076 | | | | 1,721 | | | | 2,719 | |
Net investment income | | | 4,690 | | | | 5,479 | | | | 9,698 | | | | 11,357 | | | | 5,890 | | | | 4,690 | | | | 11,000 | | | | 9,698 | |
Total managed care | | | 797,348 | | | | 802,935 | | | | 1,615,479 | | | | 1,517,979 | | |
Total Managed Care | | | | 918,694 | | | | 797,348 | | | | 1,858,821 | | | | 1,615,479 | |
Life Insurance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net | | | 47,523 | | | | 44,511 | | | | 93,709 | | | | 88,233 | | | | 53,479 | | | | 47,523 | | | | 105,389 | | | | 93,709 | |
Intersegment premiums | | | 545 | | | | 508 | | | | 1,036 | | | | 986 | | | | 586 | | | | 545 | | | | 1,175 | | | | 1,036 | |
Net investment income | | | 6,795 | | | | 6,822 | | | | 13,725 | | | | 13,382 | | | | 6,658 | | | | 6,795 | | | | 13,066 | | | | 13,725 | |
Total life insurance | | | 54,863 | | | | 51,841 | | | | 108,470 | | | | 102,601 | | |
Total Life Insurance | | | | 60,723 | | | | 54,863 | | | | 119,630 | | | | 108,470 | |
Property and Casualty Insurance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net | | | 22,239 | | | | 21,627 | | | | 42,664 | | | | 40,857 | | | | 25,172 | | | | 22,239 | | | | 50,268 | | | | 42,664 | |
Intersegment premiums | | | 154 | | | | 154 | | | | 307 | | | | 307 | | | | 154 | | | | 154 | | | | 307 | | | | 307 | |
Net investment income | | | 2,323 | | | | 2,384 | | | | 4,448 | | | | 4,871 | | | | 2,247 | | | | 2,323 | | | | 4,278 | | | | 4,448 | |
Total property and casualty insurance | | | 24,716 | | | | 24,165 | | | | 47,419 | | | | 46,035 | | |
Total Property and Casualty Insurance | | | | 27,573 | | | | 24,716 | | | | 54,853 | | | | 47,419 | |
Other segments: * | �� | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Intersegment service revenues | | | 2,007 | | | | 2,007 | | | | 5,042 | | | | 3,973 | | | | 4,218 | | | | 2,007 | | | | 7,449 | | | | 5,042 | |
Operating revenues from external sources | | | 303 | | | | 1,591 | | | | 4,342 | | | | 3,168 | | | | 1,817 | | | | 303 | | | | 4,593 | | | | 4,342 | |
Total other segments | | | 2,310 | | | | 3,598 | | | | 9,384 | | | | 7,141 | | | | 6,035 | | | | 2,310 | | | | 12,042 | | | | 9,384 | |
Total business segments | | | 879,237 | | | | 882,539 | | | | 1,780,752 | | | | 1,673,756 | | | | 1,013,025 | | | | 879,237 | | | | 2,045,346 | | | | 1,780,752 | |
TSM operating revenues from external sources | | | 7 | | | | 377 | | | | 255 | | | | 828 | | | | 165 | | | | 7 | | | | 262 | | | | 255 | |
Elimination of intersegment premiums/service fees | | | (1,775 | ) | | | (2,307 | ) | | | (4,062 | ) | | | (4,422 | ) | | | (1,639 | ) | | | (1,775 | ) | | | (3,203 | ) | | | (4,062 | ) |
Elimination of intersegment service revenues | | | (2,007 | ) | | | (2,007 | ) | | | (5,042 | ) | | | (3,973 | ) | | | (4,218 | ) | | | (2,007 | ) | | | (7,449 | ) | | | (5,042 | ) |
Consolidated operating revenues | | $ | 875,462 | | | $ | 878,602 | | | $ | 1,771,903 | | | $ | 1,666,189 | | | $ | 1,007,333 | | | $ | 875,462 | | | $ | 2,034,956 | | | $ | 1,771,903 | |
* | Includes segments that are not required to be reported separately, primarily the health clinics. |
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)
(Unaudited)
| | Three months ended June 30, | | | Six months ended June 30, | | | Three months ended June 30, | | | Six months ended June 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Operating income (loss): | | | | | | | | | | | | | | | | | | | | | | | | |
Managed care | | $ | 29,322 | | | $ | 29,302 | | | $ | 43,489 | | | $ | 51,412 | | |
Life insurance | | | 9,457 | | | | 5,215 | | | | 14,506 | | | | 10,855 | | |
Property and casualty insurance | | | 6,777 | | | | 4,784 | | | | 6,535 | | | | 8,338 | | |
Managed Care | | | $ | 7,210 | | | $ | 29,322 | | | $ | 25,964 | | | $ | 43,489 | |
Life Insurance | | | | 6,378 | | | | 9,457 | | | | 12,181 | | | | 14,506 | |
Property and Casualty Insurance | | | | 1,947 | | | | 6,777 | | | | 5,788 | | | | 6,535 | |
Other segments * | | | (2,409 | ) | | | (730 | ) | | | (2,913 | ) | | | (1,122 | ) | | | (2,334 | ) | | | (2,409 | ) | | | (4,432 | ) | | | (2,913 | ) |
Total business segments | | | 43,147 | | | | 38,571 | | | | 61,617 | | | | 69,483 | | | | 13,201 | | | | 43,147 | | | | 39,501 | | | | 61,617 | |
TSM operating revenues from external sources | | | 7 | | | | 377 | | | | 255 | | | | 828 | | | | 165 | | | | 7 | | | | 262 | | | | 255 | |
TSM unallocated operating expenses | | | (1,841 | ) | | | (3,137 | ) | | | (3,244 | ) | | | (5,169 | ) | | | (3,753 | ) | | | (1,841 | ) | | | (6,589 | ) | | | (3,244 | ) |
Elimination of TSM intersegment charges | | | 2,403 | | | | 2,403 | | | | 4,806 | | | | 4,806 | | | | 2,403 | | | | 2,403 | | | | 4,806 | | | | 4,806 | |
Consolidated operating income | | | 43,716 | | | | 38,214 | | | | 63,434 | | | | 69,948 | | | | 12,016 | | | | 43,716 | | | | 37,980 | | | | 63,434 | |
Consolidated net realized investment (losses) gains | | | (221 | ) | | | 2,364 | | | | (687 | ) | | | 3,679 | | |
Consolidated net realized investment gains (losses) | | | | 2,514 | | | | (221 | ) | | | 2,731 | | | | (687 | ) |
Consolidated net unrealized investment gains (losses) on equity investments | | | 28,338 | | | | 3,323 | | | | (28,468 | ) | | | 22,992 | | | | 12,743 | | | | 28,338 | | | | 21,295 | | | | (28,468 | ) |
Consolidated interest expense | | | (1,864 | ) | | | (1,831 | ) | | | (3,717 | ) | | | (3,619 | ) | | | (2,217 | ) | | | (1,864 | ) | | | (4,209 | ) | | | (3,717 | ) |
Consolidated other income, net | | | 801 | | | | 1,705 | | | | 4,406 | | | | 2,874 | | | | 4,851 | | | | 801 | | | | 7,962 | | | | 4,406 | |
Consolidated income before taxes | | $ | 70,770 | | | $ | 43,775 | | | $ | 34,968 | | | $ | 95,874 | | | $ | 29,907 | | | $ | 70,770 | | | $ | 65,759 | | | $ | 34,968 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation and amortization expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Managed care | | $ | 2,930 | | | $ | 2,792 | | | $ | 5,976 | | | $ | 5,549 | | |
Life insurance | | | 308 | | | | 273 | | | | 580 | | | | 545 | | |
Property and casualty insurance | | | 91 | | | | 86 | | | | 203 | | | | 180 | | |
Managed Care | | | $ | 2,440 | | | $ | 2,930 | | | $ | 4,792 | | | $ | 5,976 | |
Life Insurance | | | | 318 | | | | 308 | | | | 645 | | | | 580 | |
Property and Casualty Insurance | | | | 74 | | | | 91 | | | | 144 | | | | 203 | |
Other segments* | | | 352 | | | | 193 | | | | 673 | | | | 378 | | | | 351 | | | | 352 | | | | 702 | | | | 673 | |
Total business segments | | | 3,681 | | | | 3,344 | | | | 7,432 | | | | 6,652 | | | | 3,183 | | | | 3,681 | | | | 6,283 | | | | 7,432 | |
TSM depreciation expense | | | 156 | | | | 196 | | | | 312 | | | | 393 | | | | 411 | | | | 156 | | | | 830 | | | | 312 | |
Consolidated depreciation and amortization expense | | $ | 3,837 | | | $ | 3,540 | | | $ | 7,744 | | | $ | 7,045 | | | $ | 3,594 | | | $ | 3,837 | | | $ | 7,113 | | | $ | 7,744 | |
* | Includes segments that are not required to be reported separately, primarily the health clinics. |
| | June 30, 2020 | | | December 31, 2019 | | | June 30, 2021 | | | December 31, 2020 | |
Assets: | | | | | | | | | | | | |
Managed care | | $ | 1,344,379 | | | $ | 1,190,538 | | |
Life insurance | | | 1,030,522 | | | | 981,370 | | |
Property and casualty insurance | | | 603,537 | | | | 592,758 | | |
Managed Care | | | $ | 1,478,811 | | | $ | 1,319,389 | |
Life Insurance | | | | 1,095,606 | | | | 1,051,819 | |
Property and Casualty Insurance | | | | 529,690 | | | | 583,404 | |
Other segments * | | | 30,304 | | | | 28,346 | | | | 38,692 | | | | 34,020 | |
Total business segments | | | 3,008,742 | | | | 2,793,012 | | | | 3,142,799 | | | | 2,988,632 | |
Unallocated amounts related to TSM: | | | | | | | | | | | | | | | | |
Cash, cash equivalents, and investments | | | 20,214 | | | | 28,167 | | | | 17,369 | | | | 16,489 | |
Property and equipment, net | | | 65,461 | | | | 25,623 | | | | 73,088 | | | | 68,678 | |
Other assets | | | 46,134 | | | | 37,176 | | | | 92,919 | | | | 88,684 | |
| | | 131,809 | | | | 90,966 | | | | 183,376 | | | | 173,851 | |
Elimination entries-intersegment receivables and others | | | (119,121 | ) | | | (65,152 | ) | | | (100,713 | ) | | | (74,065 | ) |
Consolidated total assets | | $ | 3,021,430 | | | $ | 2,818,826 | | | $ | 3,225,462 | | | $ | 3,088,418 | |
* | Includes segments that are not required to be reported separately, primarily the health clinics. |
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)
(Unaudited)
The Company evaluated subsequent events through the date the unaudited condensed consolidated interim financial statements were issued. No events, other than those described in these notes, have occurred that require adjustment or disclosure pursuant to current Accounting Standard Codification.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), the “Corporation”,“Corporation,” the “Company”, “TSM”, “we”,“Company,” “TSM,” “we,” “our,” and “us” and “our” refers to Triple-S Management Corporation and its subsidiaries. The MD&A included in this Quarterly Report on Form 10-Q is intended to update the reader on matters affecting the financial condition and results of operations for the three months and six months ended June 30, 2020.2021. Therefore, the following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K filed with the United States Securities and Exchange Commission as of and for the year ended December 31, 20192020 and the MD&A included therein, and our unaudited condensed consolidated interim financial statements and accompanying notes as of and for the three months and six months ended June 30, 20202021 included in this Quarterly Report on Form 10-Q.
Cautionary Statement Regarding Forward-Looking Information
This Quarterly Report on Form 10-Q and other of our publicly available documents may include statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, among other things: statements concerning our business and our financial condition and results of operations. These statements are not historical, but instead represent our belief regarding future events, any of which, by their nature, are inherently uncertain and outside of our control. These statements may address, among other things, future financial results, strategy for growth, and market position. It is possible that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. The factors that could cause actual results to differ from those in the forward-looking statements are discussed throughout this form. We are not under anyno obligation to update or alter any forward-looking statement (and expressly disclaims any such obligations), whether as a result of new information, future events or otherwise. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, but are not limited to, the development of the COVID-19 outbreak, rising healthcare costs, business conditions and competition in the different insurance segments, government action and other regulatory issues.
We areTriple-S is a health services company and one of the most significanttop players in the managed care industry in Puerto Rico and have overhealth care industry. With more than 60 years of experience, in this industry.we are the premier health care brand and serve more people through the most attractive provider networks on the island. We have the exclusive right to use the Blue Cross and Blue Shield (BCBS) name and mark throughout Puerto Rico, the U.S. Virgin Islands (USVI), Costa Rica, the British Virgin Islands (BVI) and Anguilla, and we offer a broad portfolio of managed care and related products in the Commercial, MedicaidMedicare Advantage and Medicare AdvantageMedicaid markets. In the Commercial market, we offer products to corporate accounts, U.S. federal government employees, local government employees, individual accounts and Medicare Supplement. We also participate in the Government of Puerto Rico Health Insurance Plan, (aa government of Puerto Rico and U.S. federal government funded managed care program for the medically indigent that is similar to the Medicaid program in the U.S.) (Medicaid) (Medicaid or the Government health plan). See details
Our commitment to our valued customers and provider partners, backed by our heritage of excellent care, access and service have positioned Triple-S for continued growth in the Medicaid contracthealthcare arena. Our progressive use of technology and clinical data, value-based partnerships with care providers and initial investments in Item 1Aambulatory and primary care assets are a strong foundation for differentiation and growth through the development of Part Ian integrated delivery system over the next several years. We believe continued investment and focus on delivering an excellent healthcare experience and great service, coupled with health management programs that improve outcomes and quality of life while reducing the total cost of care, will separate Triple-S from our competition and strengthen the financial performance of our Annual Report on Form 10-K forbusiness well into the year ended December 31, 2019 under the sub-caption “We are dependent on a small numberfuture.
We have the exclusive right to use the Blue Cross Blue Shield (BCBS) name and mark throughout Puerto Rico, the U.S. Virgin Islands (USVI), Costa Rica, the British Virgin Islands (BVI) and Anguilla. As of June 30, 2020,2021, we served approximately 932,0001 million managed care members across all regions ofin Puerto Rico. For the six months ended June 30, 2021 and 2020, and 2019, our managed careManaged Care segment represented approximately 92% of our total consolidated premiums earned. We also have significant positions in the life insurance and property and casualty insurance markets in Puerto Rico.
We participate in the managed care market through our subsidiaries, Triple-S Salud, Inc. (TSS);, Triple-S Advantage, Inc. (TSA), and Triple-S Blue, Inc. I.I. (TSB). TSS, TSA and TSB are Blue Cross Blue Shield Association (BCBSA) licensees, which provides uslicensees.
Triple-S is also a well-known brand in the life insurance and property and casualty insurance markets, with exclusive use of the Blue Cross and Blue Shield name and mark throughout Puerto Rico, the USVI, Costa Rica, the BVI, and Anguilla.
a significant share in each. We participate in the life insurance market through our subsidiary Triple-S Vida Inc.(TSV), and in the property and casualty insurance market through our subsidiary, Triple-S Propiedad Inc. (TSP).
Intersegment revenues and expenses are reported on a gross basis in each of the operating segments but eliminated in the consolidated results. Except as otherwise indicated, the numbersreported balances for each segment presented in this Quarterly Report on Form 10-Q do not reflect intersegment eliminations. These intersegment revenues and expenses affect the amounts reported on the financial statement line items for each segment but are eliminated in consolidation and do not change net income. See Note 1814 of the Condensed Consolidated Interim Financial Statementsunaudited condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q.
Our revenuesrevenue primarily consistconsists of premiums earned, net and investment income. Premiums are derived from the sale of managed care products and property and casualty and life insurance contracts. Substantially all our earnings are generated in Puerto Rico.
Claims incurred include the payment of benefits and losses, mostly to physicians, hospitals and other service providers, and policyholders. Each segment’s results of operations depend to a significant extent on theirmanagement’s ability to accurately predict and effectively manage claims. A portion of the claims incurred for each period consists of claims reported but not paid during the period, as well as a management and actuarial estimate of claims incurred but not reported during the period. Operating expenses consist primarily of compensation, commission payments to brokers and other overhead business expenses.
We use operating income as a measure of performance of the underwriting and investment functions of our segments. We also use the loss ratio and the operating expense ratio as measures of performance. The loss ratio is claims incurred divided by premiums earned, net, multiplied by 100. The operating expense ratio is operating expenses divided by premiums earned;earned net and administrative service fees, multiplied by 100.
COVID-19
COVID-19 Situation in Puerto Rico
As of August 5, 2020,July 30, 2021, the Puerto Rico Department of Health reported 19,651 positivea cumulative total of 126,158 and 19,329 confirmed (RT-PCR+) and probable (antigen) COVID-19 cases, respectively, and a total of 2462,578 confirmed and probable COVID-19-related deaths in Puerto Rico.
Puerto Rico was under a stay-at-home order (as amended and extended, the “Order”) from March 15, 2020 until June 16, 2020. The Order requiredGovernor of Puerto Rico also issued several consecutive executive orders establishing COVID-19 related restrictions and the closure of non-essential businesses for the same period of time. On May 1, 2020, the Governor issued a new order providingrules for the gradual re-opening of the economy, beginning onwhich were in effect from May 4, 2020 providedto July 4, 2021. As of July 5, the Governor delegated all authority to issue guidelines and protocols to address the COVID-19 emergency to the Puerto Rico Secretary of Health.
Puerto Rico began its COVID-19 vaccination program in December 2020 and as of May 12, 2021, all citizens 12 years old and older are eligible to receive the vaccine. The Puerto Rico Department of Health reported as of July 1, 2021 that the risk of contagion does not increase significantly. The Governor has issued several other executive orders establishing the rules to continue the gradual re-openingover 60% of the economy,eligible population had received the latestfull dose of which is effective until August 15, 2020. However, due to the recent increase in COVID-19 cases,vaccine and over 70% of the last two (2) executive orders have reinstated certain social distancing measures, such aseligible population had received at least the total closure of businesses on Sundays, subject to certain exceptions.
Healthcare is considered an essential service under the Order; therefore, all functions of our Managed Care business, other than sales, have been excluded from closure. Our Life and Property & Casualty businesses, which had been closed since March 16, 2020, re-opened on May 5, 2020, subject to compliance with certain safety and risk management measures.first dose.
We have implemented our business continuity and risk mitigation plans and are closely monitoring how the outbreak developsdevelopments in order to ensure the health and safety of our employees and visitors.
Economic Impact
As mentioned below, the 2021 Fiscal Plan (defined below) estimates that, while the COVID-19 pandemic and the measures taken in response to the same severely reduced economic activity and caused an unprecedented increase in unemployment in Puerto Rico, pandemic-related federal and local stimulus measures, some of which are summarized below, have more than offset the estimated income loss due to reduced economic activity and have caused a temporary increase in personal income on a net basis. ItHowever, it is still too early to fully assess the ultimate economicmedium- and long-term impact of the pandemic and lockdown. However,lockdown in the 2020 Fiscal Plan (as defined below) estimates that the economy of Puerto Rico will contract by 4% in real terms in fiscal year 2020 (which ended on June 30, 2020), largely due to the COVID-19 pandemic, with a limited recovery of 0.5% in fiscal year 2021. These projections incorporate the combined effect of the measures enacted by the federal and Puerto Rico governments (discussed below), which are expected to play an essential role in mitigating the economic damage from the sudden economic shock caused by the pandemic.
economy. See Item 1A. Risk Factors – Risks Related to our Business – “OurOur business is geographically concentrated in Puerto Rico and weakness in the economy and the fiscal health of the government has adversely impactedaffected and may continue to adversely impact us.”affect us. included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Legislative Measures and Initiatives
The federal and state governments have enacted a number of measures in response to the COVID-19 outbreak and the impact the outbreak has had on the economy, public health, government, individuals, and businesses. We include summaries of some of those measures below.
Funding and Economic Relief for Puerto Rico
Public Law 116-127, known as theThe Families First Coronavirus Response Act (FFCRA), enacted on March 18, 2020, makes approximately $182.9$182.9 million available for Puerto Rico’s Medicaid Program and increases the percentage of federal government funding for its Medicaid program expenditures from 76% to approximately 82% during the emergency period. Public Law 116-136, theThe Coronavirus Aid, Relief, and Economic Security or CARES Act, enacted on March 27, 2020, includesthe Coronavirus Response and Relief Supplemental Appropriations Act of 2021, enacted on December 27, 2020, and the American Rescue Plan, enacted on March 11, 2021 include a series of direct relief and financial assistance measures for Puerto Rico residents and businesses. The CARES Act also assigns $2.2 billion to the Government of Puerto Rico to cover necessary expenditures related to COVID-19 and not included in the territory’s budget, among other measures. The Puerto Rico government has earmarked approximately $1 billion for its COVID-19 response.
Measures Impacting our Business
The FFCRA and CARES Act also require health plans and insurers to cover testing for COVID-19 without imposing cost-sharing or prior authorization requirements. On April 16, 2020, the Puerto Rico Government enacted Act number 43, which requires health plans and insurers to cover COVID-19-related diagnostic and treatment services, including hospitalization, without cost-sharing. Our regulators have also issued regulations andor circular letters requiring waivers of pre-authorizations for certain services and drugs, requiring temporary coverage of certain out-of-network providers and services, and limiting cost-sharing for certain services. See Item 1A. Risk Factors – “TheRisks Related to our Business – Pandemics, like the COVID-19 pandemicpandemics and local, state and federal governments’ response to the pandemicpandemics may have a material adverse effect on our business, financial condition and results of operations” in this Quarterlyoperations. included on our Annual Report on Form 10-Q.10-K for the year ended December 31, 2020.
Puerto Rico Economy
The Puerto Rico economy entered a recession in the fourth quarter of fiscal year 2006. Puerto Rico’s gross national product (GNP) contracted (in real terms) every fiscal year between 2007 and 2018, with the exception of fiscal year 2012. Pursuant to the latest Puerto Rico Planning Board (the Planning Board) estimates, dated March 2021, the Commonwealth’s real GNP increased by 1.8% in fiscal year 2019, primarily due to federal disaster recovery spending related to Hurricanes Irma and María. The Planning Board estimates, however, that the Commonwealth’s real GNP decreased by approximately 3.2% in fiscal year 2020 due primarily to the adverse impact of the COVID-19 pandemic and the measures taken by the government in response to the same, and that the negative effects of COVID-19 will continue through the current fiscal year, resulting in a contraction in real GNP of approximately -2%.
Puerto Rico’s population has also been in decline over the past decade. Estimates by the U.S. Census Bureau indicate the population has decreased by 14.3%, or approximately 530,000 people, from April 1, 2010 to July 1, 2019. The 2021 Fiscal Plan (as defined below) projects that population will continue to steadily decline at an average rate of approximately 1.2% per year, due to a combination of outmigration and economic factors. The weakness of Puerto Rico’s economy has also adversely affected employment. Total average annual employment, as measured by the Puerto Rico Department of Labor and Human Resources (the DLHR) has decreased approximately 20% since 2007. The reduction in total employment began in the fourth quarter of fiscal year 2007, when total employment was 1,244,425, and continued consistently until the first half of fiscal year 2015, after which it mostly stabilized. According to the most recent data from DLHR, Puerto Rico’s average total employment as of February 2021 was 952,000, a decrease of 13,000 from total employment of 965,000 as of February 2020. The DLHR also reported an average unemployment rate of approximately 9.2% as of February 2021, up from a 9.0% unemployment rate reported by the DLHR as of February 2020.
PROMESA and the Oversight Board
The Commonwealth has been enduring a fiscal and economic crisis for over a decade. Such crisis prompted the U.S. Congress to enact the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”)(PROMESA) in June 2016. PROMESA, among other things, created a federal fiscal oversight board (the “Oversight Board”)Oversight Board) with broad powers over the Commonwealth’s fiscal affairs and established two mechanisms for the restructuring of the obligations of the Commonwealth, its instrumentalities and municipalities, contained in Titles III and VI of PROMESA. The Commonwealth and several of its instrumentalities arehave been in the process of restructuring their debts through the mechanisms provided by PROMESA.PROMESA for some time.
Commonwealth Fiscal Plan and Plan of Adjustment
The Oversight Board has certified several fiscal plans for the Commonwealth since 2017. The most recent fiscal plan for the Commonwealth certified by the Oversight Board is dated May 27, 2020April 23, 2021 (the “20202021 Fiscal Plan”)Plan). The 2021 Fiscal Plan provides that, while the COVID-19 pandemic and the measures taken in response to the same severely reduced economic activity and caused an unprecedented increase in unemployment in Puerto Rico, pandemic-related federal and local stimulus funding have more than offset the estimated income loss due to reduced economic activity and are estimated to have caused a temporary increase in personal income on a net basis. As mentioned above,a result, the 20202021 Fiscal Plan’s economic projections incorporate adjustments for the short-term income effects caused by such stimulus programs. For example, the 2021 Fiscal Plan estimates that the economy of Puerto Rico will contractreal GNP contracted by 4% in real terms3% in fiscal year 2020 largely duebut estimates the GNP contraction adjusted for short-term income effects to have been approximately 1.1%. For fiscal years 2021 and 2022, the COVID-19 pandemic, with a limited recovery of 0.5% in fiscal year 2021. This new economic outlook exacerbates the Commonwealth government’s fiscal challenges. As a result of these changes, the 20202021 Fiscal Plan projects that the Commonwealthreal GNP will have a pre-contractual debt service deficit each year through 2025grow 1% and 0.6%, respectively, but projects that growth adjusted for income effects for such years will be approximately 3.8% and 1.5%, respectively.
The 2021 Fiscal Plan projects that, if the fiscal measures and structural reforms contemplated by the plan are not successfully implemented.implemented, the Commonwealth will have a pre-contractual debt service deficit starting in fiscal year 2023. It estimates that the proposed fiscal measures and structural reforms willcould drive approximately $10 billion in savings and extra revenue over fiscal years 2022 through 20252026 and that the structural reforms could drive a cumulative 0.88%0.90% increase in growth by fiscal year 2029.2051 (equal to approximately $30.7 billion). However, even after the fiscal measures and structural reforms, and before contractual debt service, the 20202021 Fiscal Plan’s projections reflectPlan projects that there will be an annual deficit starting in fiscal year 2032.2036.
On February 28, 2020,July 27, 2021, the Oversight Board filed an amended planthe Sixth Amended Title III Joint Plan of adjustmentAdjustment for the Commonwealth, the Employees Retirement System of the Government of the Commonwealth and the Puerto Rico Public Buildings Authorityet. al. (the Proposed Plan) in the pending debt restructuring proceedings under Title III of PROMESA (the “ProposedPROMESA. The Proposed Plan, which has substantial support from several creditor constituencies but is still subject to confirmation in the Title III proceeding, seeks to restructure approximately $35 billion of Adjustment”). In lightdebt and other claims against the Commonwealth, PBA and ERS, and more than $50 billion of unfunded pension liabilities. On July 29, 2021, the COVID-19 pandemic, however,Title III court approved the disclosure statement for the Proposed Plan. The Oversight Board requestedhas proposed that the court adjourn court proceedings related to the Proposed Planfinal hearings on confirmation of Adjustment so as to allow for the Government and the Oversight Board to prioritize the health and safetya plan of the people of Puerto Rico and to gain a better understanding of the economic and fiscal impact of the pandemic.adjustment take place in November 2021.
Property & Casualty Litigation
As of June 30, 2020,2021, our Property and Casualty subsidiary had been served in a total of 461487 cases relating to Hurricane Maria. Of those, 341274 remained open as of June 30, 2020.2021. SeeItem 1A. Risk Factors – Risks Related to our Business – “Large-scaleLarge-scale natural disasters may have a material adverse effect on our business, financial condition and results of operations”operations. and “WeWe face risks related to litigation”litigation. included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Property and Casualty Reinsurance Program
The Company’s Property and Casualty segment completed the renewal of its reinsurance property and catastrophe program with an effective date of April 1, 2020 for twelve-month2021 with a term of twelve-months ending on March 31, 2021.2022. The new reinsurance program considers a change in cessions in the Commercial Property quota share agreement from 25% to 20% and provides the segment with a catastrophe loss protection of $809$811.5 million in excess of $5 million. The cost of entering into the new reinsurance program is estimated to be approximately $2.0 million more thanremain similar to the expiring program.
Recent Seismic ActivityASES Contract Renewal
On January 7, 2020, a magnitude 6.4 earthquake struckThe Puerto Rico causing island-wide power outages and extensive damageHealth Insurance Administration (ASES by its Spanish acronym) has notified us of its exercise of its right to infrastructure and property in the southwest region of the island. The 6.4 magnitude earthquake was preceded by foreshocks and followed by aftershocks. During the three months ended March 31, 2020, the Company recognized $5 million in losses related to this event, which is its maximum exposure for a single event under its current reinsurance program.
See “Item 1A. Risk Factors—Risks Related to Our Business – Our business is geographically concentrated in Puerto Rico and weakness in the economy and the fiscal health of the government has adversely impacted and may continue to adversely impact us”included inextend our Annual Report on Form 10-K for the year ended December 31, 2019.
Legislative Initiatives
On July 20, 2020, the Governor of Puerto Rico announced she would call the legislature to an extraordinary session for the consideration of legislative projects affecting the healthcare insurance industry, among other measures.
Acquisition of Life Insurance Portfolio
Effective June 1, 2020, our Life Insurance company acquired a life insurance portfolio from a local insurance company. The portfolio represents approximately $5.5 million in annualized premiums.
ASES Contract Premium Negotiations
Our contract with ASESagreement for the provision of health coverage to the medically indigent in Puerto Rico under the Puerto Rico Health Reform Program (similar to Medicaid), provides for an additional year, from October 1, 2021 to September 30, 2022. The renewal is subject to premium negotiations for the annual negotiation of premium rates. The premium rates for the current contract year expired on June 30, 2020. However, we have executed amendments to the contract extending the current premium rates until August 30, 2020 while new premium ratesextended term, which are negotiated. The new premium rates will be effective retroactively from July 1, 2020 and will apply through the expiration of the contract on September 30, 2021.under way.
Recent Accounting Standards
For a description of recent accounting standards, see Note 2 toof the unaudited condensed consolidated interim financial statements included in this quarterly reportQuarterly Report on Form 10-Q.
| | As of June 30, | | | As of June 30, | |
| | 2020 | | | 2019 | | | 2021 | | | 2020 | |
Managed care enrollment: | | | | | | | |
Managed Care enrollment: | | | | | | | |
Commercial 1 | | | 433,471 | | | | 436,407 | | | | 418,414 | | | | 433,471 | |
Medicare | | | 134,601 | | | | 128,670 | | | | 136,490 | | | | 134,601 | |
Medicaid | | | 364,157 | | | | 364,495 | | | | 445,881 | | | | 364,157 | |
Total | | | 932,229 | | | | 929,572 | | | | 1,000,785 | | | | 932,229 | |
Managed care enrollment by funding arrangement: | | | | | | | | | |
Fully-insured | | | 823,247 | | | | 811,594 | | |
Managed Care enrollment by funding arrangement: | | | | | | | | | |
Fully insured | | | | 898,573 | | | | 823,247 | |
Self-insured | | | 108,982 | | | | 117,978 | | | | 102,212 | | | | 108,982 | |
Total | | | 932,229 | | | | 929,572 | | | | 1,000,785 | | | | 932,229 | |
(1) | Commercial membership includes corporate accounts, self-funded employers, individual accounts, Medicare Supplement, Federal government employees and local government employees. |
Consolidated Operating Results
The following table sets forth the Corporation’sour consolidated operating results. Further details of the results of operations of each reportable segment are included in the analysis of operating results for the respective segments.
| | Three months ended | | | Six months ended | | | Three months ended | | | Six months ended | |
| | June 30, | | | June 30, | | | June 30, | | | June 30, | |
(dollar amounts in millions) | | 2020 | | | 2019 | | | 2020 | | | 2019 | | |
Revenues: | | | | | | | | | | | | | |
(dollar in millions) | | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Revenues | | | | | | | | | | | | | |
Premiums earned, net | | $ | 858.5 | | | $ | 859.5 | | | $ | 1,734.4 | | | $ | 1,627.5 | | | $ | 987.9 | | | $ | 858.5 | | | $ | 1,996.3 | | | $ | 1,734.4 | |
Administrative service fees | | | 2.8 | | | | 2.5 | | | | 5.0 | | | | 5.1 | | | | 2.6 | | | | 2.8 | | | | 5.4 | | | | 5.0 | |
Net investment income | | | 13.8 | | | | 15.0 | | | | 28.1 | | | | 30.4 | | | | 15.0 | | | | 13.8 | | | | 28.6 | | | | 28.1 | |
Other operating revenues | | | 0.4 | | | | 1.6 | | | | 4.4 | | | | 3.2 | | | | 1.9 | | | | 0.4 | | | | 4.7 | | | | 4.4 | |
Total operating revenues | | | 875.5 | | | | 878.6 | | | | 1,771.9 | | | | 1,666.2 | | | | 1,007.4 | | | | 875.5 | | | | 2,035.0 | | | | 1,771.9 | |
Net realized investment (losses) gains | | | (0.2 | ) | | | 2.4 | | | | (0.7 | ) | | | 3.6 | | |
Net realized investment gains (losses) | | | | 2.5 | | | | (0.2 | ) | | | 2.7 | | | | (0.7 | ) |
Net unrealized investment gains (losses) on equity investments | | | 28.3 | | | | 3.3 | | | | (28.5 | ) | | | 23.0 | | | | 12.7 | | | | 28.3 | | | | 21.3 | | | | (28.5 | ) |
Other income, net | | | 0.8 | | | | 1.7 | | | | 4.4 | | | | 2.9 | | | | 4.9 | | | | 0.8 | | | | 8.0 | | | | 4.4 | |
Total revenues | | | 904.4 | | | | 886.0 | | | | 1,747.1 | | | | 1,695.7 | | | | 1,027.5 | | | | 904.4 | | | | 2,067.0 | | | | 1,747.1 | |
Benefits and expenses: | | | | | | | | | | | | | | | | | |
Benefits and expenses | | | | | | | | | | | | | | | | | |
Claims incurred | | | 653.1 | | | | 706.3 | | | | 1,367.6 | | | | 1,329.5 | | | | 844.0 | | | | 653.1 | | | | 1,694.6 | | | | 1,367.6 | |
Operating expenses | | | 178.7 | | | | 134.1 | | | | 340.9 | | | | 266.7 | | | | 151.3 | | | | 178.7 | | | | 302.4 | | | | 340.9 | |
Total operating expenses | | | 831.8 | | | | 840.4 | | | | 1,708.5 | | | | 1,596.2 | | | | 995.3 | | | | 831.8 | | | | 1,997.0 | | | | 1,708.5 | |
Interest expense | | | 1.8 | | | | 1.8 | | | | 3.7 | | | | 3.6 | | | | 2.2 | | | | 1.8 | | | | 4.2 | | | | 3.7 | |
Total benefits and expenses | | | 833.6 | | | | 842.2 | | | | 1,712.2 | | | | 1,599.8 | | | | 997.5 | | | | 833.6 | | | | 2,001.2 | | | | 1,712.2 | |
Income before taxes | | | 70.8 | | | | 43.8 | | | | 34.9 | | | | 95.9 | | | | 30.0 | | | | 70.8 | | | | 65.8 | | | | 34.9 | |
Income tax expense | | | 27.2 | | | | 12.9 | | | | 17.5 | | | | 30.2 | | | | 6.4 | | | | 27.2 | | | | 18.9 | | | | 17.5 | |
Net income attributable to TSM | | $ | 43.6 | | | $ | 30.9 | | | $ | 17.4 | | | $ | 65.7 | | | $ | 23.6 | | | $ | 43.6 | | | $ | 46.9 | | | $ | 17.4 | |
Three Months Ended June 30, 20202021 Compared to Three Months Ended June 30, 20192020
Operating Revenues
Consolidated premiums earned, net decreasedincreased by $1.0$129.4 million, or 0.1%15.1%, to $858.5 million during the three months ended June 30, 2020.$987.9 million. This decreaseincrease primarily reflects lowerhigher premiums in the Managed Care segment by $4.5 million offset in part by a$120.5 million. The growth in Managed Care premiums reflects higher average premium rates across all lines of business and an increase in the Life Insurance segment of $3.1 million.Medicaid membership.
Net unrealized investment gainsUnrealized Investment Gains (Losses) on equity investmentsEquity Investments
The $28.3$12.7 million in consolidated net unrealized investment gains on equity investments reflect the impact of changes in equity markets.
Claims Incurred
Consolidated claims incurred decreasedincreased by $53.2$190.9 million, or 7.5%29.2%, to $653.1$844.0 million, and the consolidated loss ratio decreased 610increased 930 basis points, to 76.1%85.4%, when compared to the prior-year period primarily reflecting lower claims across all segments, mostly the result of the COVID-19 pandemic. Managed Care claims incurred decreased $43. 7 million and its MLR decreased 510 basis points reflecting lower utilization of services as the result of the government enforced lockdown and the prohibition of elective procedures due to the COVID-19 pandemic, as well as the reinstatement of the HIP fee pass-through in 2020. This reduction is offset by other costs such as COVID-19 related treatment and testing, the waiver of medical and payment policies, and the assistance we are providing to our elderly population and other vulnerable members.
Following the government enforced lockdown related to the COVID-19 pandemic in mid-March, we have seen a decrease inmore normalized utilization of Managed Care services as memberscompared to the low utilization in the prior-year quarter due to the pandemic, increased benefits in the Medicare product offering in 2021 and providers deferred non-emergentthe effect of the elimination of the Health Insurance Providers Fee (HIP fee) pass-through in 2021.
Operating Expenses
Consolidated operating expenses decreased by $27.4 million, or elective health services. While this trend has caused, and may continue15.3%, to cause, a short-term$151.3 million. The decrease in our claim costs, we expect these costsoperating expenses primarily reflects the accrual in the prior year quarter of a contingency reserve related to increasea legal proceeding in the Managed Care segment amounting to $32.0 million and affect our medical cost trends as the demand forelimination in 2021 of the deferred non-emergent or elective health services resumes.HIP fee of $14.9 million offset in part by higher personnel costs. The accessconsolidated operating expense ratio decreased 540 basis points, to and demand for care was most constrained from mid-March through April, began to recover in late May and approached more typical levels by the end of this quarter.15.3%.
Operating Expenses
Consolidated operating expenses increased by $44.6 million, or 33.3%, to $178.7 million. The increase in operating expenses mostly results from the recognition of a contingency reserve of $32 million related to a legal proceeding in our Managed Care segment (see Note 17 to the unaudited condensed consolidated interim financial statements included in this quarterly report on Form 10-Q) and the reinstatement in 2020 of the Health Insurance Providers Fee (HIP fee) of $14.9 million. For the three months ended June 30, 2020, the consolidated operating expense ratio increased 510 basis points to 20.7%.
Income Taxes
Consolidated income tax expense for the three months ended June 30, 2020 increased2021 decreased by $14.3$20.8 million, to $27.2$6.4 million, primarily reflecting the higherlower taxable income in 2020.2021.
Six Months Ended June 30, 20202021 Compared to Six Months Ended June 30, 20192020
Operating Revenues
Consolidated premiums earned, net increased by $106.9$261.9 million, or 6.6%15.1%, to $1,734.4$1,996.3 million during the six months ended June 30, 2020.2021. This increase primarily reflects higher premiums in the Managed Care segment by $242.7 million due to higher average premium rates in all lines of business and Life Insurance segments by $99.8 million and $5.6 million, respectively.an increase in Medicaid membership.
Net unrealized investment lossesUnrealized Investment Gains (Losses) on equity investmentsEquity Investments
The $28.5$21.3 million in consolidated net unrealized investment lossesgains on equity investments reflect the impact of changes in equity markets.
Claims Incurred
Consolidated claims incurred increased by $38.1$327.0 million, or 2.9%23.9%, to $1,367.6$1,694.6 million, during the six months ended June 30, 2020.2021. The consolidated loss ratio decreased 280increased 600 basis points, to 78.9%84.9%, from the prior-year period, mostly reflecting lowerhigher Managed Care claim trends and utilization of services since mid-March asbecause of COVID-19-related testing and treatments costs, the resultwaiver of medical and payment policies (see Recent Developments – COVID-19 – Measures Impacting our Business included in this quarterly report on Form 10-Q), increased benefits in the government enforced lockdown2021 Medicare product and a more normalized utilization of services compared to the low utilization in the prior year due to the COVID-19 pandemic and the effect in the MLR of the reinstatement of the HIP fee pass-through in 2020. These decreases were partially offset by the increased benefits in our 2020 Medicare product offering and $5 million of earthquake losses recorded by the Property and Casualty segment.pandemic.
Following the government enforced lockdown related to the COVID-19 pandemic in mid-March, we have seen a decrease in utilization of Managed Care services as members and providers deferred non-emergent or elective health services. While this trend has caused, and may continue to cause, a short-term decrease in these costs, we expect these costs to increase in the second half of the year and affect our medical cost trends as the demand for the deferred non-emergent or elective health services resumes. The access to and demand for care was most constrained from mid-March through April, began to recover in late May and approached more typical levels by the end of June.
Operating Expenses
Consolidated operating expenses increaseddecreased by $74.2$38.5 million, or 27.8%11.3%, to $340.9$302.4 million. The increasedecrease in operating expenses mostly results fromprimarily reflects the recognitionaccrual in the prior year quarter of a $32 million contingency reserve related to a legal proceeding in ourthe Managed Care segment (see Note 17amounting to $32.0 million and the unaudited condensed consolidated interim financial statements included in this quarterly report on Form 10-Q), the reinstatementelimination of the HIP fee in 20202021 of $31.2 millionmillion. These decreases were partially offset by higher personnel costs and higher amortization of deferred acquisition costs.professional fees. The consolidated operating expense ratio increased 330decreased 450 basis points, to 19.6%15.1%.
Income Taxes
Consolidated income tax expense for the six months ended June 30, 2020 decreasedincreased by $12.7$1.4 million, or 8.0%, to $17.5$18.9 million, primarily reflecting the lowerhigher taxable income in 2020.2021.
Managed Care Operating Results
| | Three months ended | | | Six months ended | | | Three months ended June 30, | | | Six months ended June 30, | |
| | June 30, | | | June 30, | | |
(dollar amounts in millions) | | 2020 | | | 2019 | | | 2020 | | | 2019 | | |
Operating revenues: | | | | | | | | | | | | | |
Medical premiums earned, net: | | | | | | | | | | | | | |
(dollar in millions) | | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Operating revenues | | | | | | | | | | | | | |
Medical premiums earned, net | | | | | | | | | | | | | |
Medicare | | $ | 372.4 | | | $ | 366.0 | | | $ | 760.2 | | | $ | 698.6 | | | $ | 408.4 | | | $ | 372.4 | | | $ | 810.7 | | | $ | 760.2 | |
Medicaid | | | 221.1 | | | | 227.0 | | | | 442.0 | | | | 401.4 | | | | 291.8 | | | | 221.1 | | | | 614.5 | | | | 442.0 | |
Commercial | | | 195.8 | | | | 200.8 | | | | 396.9 | | | | 399.3 | | | | 209.6 | | | | 195.8 | | | | 416.6 | | | | 396.9 | |
Medical premiums earned, net | | | 789.3 | | | | 793.8 | | | | 1,599.1 | | | | 1,499.3 | | | | 909.8 | | | | 789.3 | | | | 1,841.8 | | | | 1,599.1 | |
Administrative service fees | | | 3.4 | | | | 3.6 | | | | 6.7 | | | | 7.3 | | | | 3.0 | | | | 3.4 | | | | 6.1 | | | | 6.7 | |
Net investment income | | | 4.7 | | | | 5.5 | | | | 9.7 | | | | 11.4 | | | | 5.9 | | | | 4.7 | | | | 11.0 | | | | 9.7 | |
Total operating revenues | | | 797.4 | | | | 802.9 | | | | 1,615.5 | | | | 1,518.0 | | | | 918.7 | | | | 797.4 | | | | 1,858.9 | | | | 1,615.5 | |
Medical operating costs: | | | | | | | | | | | | | | | | | |
Medical operating costs | | | | | | | | | | | | | | | | | |
Medical claims incurred | | | 627.0 | | | | 670.7 | | | | 1,304.8 | | | | 1,260.7 | | | | 803.9 | | | | 627.0 | | | | 1,615.3 | | | | 1,304.8 | |
Medical operating expenses | | | 141.1 | | | | 102.9 | | | | 267.2 | | | | 205.9 | | | | 107.6 | | | | 141.1 | | | | 217.6 | | | | 267.2 | |
Total medical operating costs | | | 768.1 | | | | 773.6 | | | | 1,572.0 | | | | 1,466.6 | | | | 911.5 | | | | 768.1 | | | | 1,832.9 | | | | 1,572.0 | |
Medical operating income | | $ | 29.3 | | | $ | 29.3 | | | $ | 43.5 | | | $ | 51.4 | | | $ | 7.2 | | | $ | 29.3 | | | $ | 26.0 | | | $ | 43.5 | |
| | | | | | | | | | | | | | | | | |
Additional data: | | | | | | | | | | | | | | | | | |
Member months enrollment: | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | |
Fully-insured | | | 975,212 | | | | 955,463 | | | | 1,953,554 | | | | 1,908,515 | | |
Self-funded | | | 327,030 | | | | 353,961 | | | | 657,262 | | | | 716,451 | | |
Total commercial | | | 1,302,242 | | | | 1,309,424 | | | | 2,610,816 | | | | 2,624,966 | | |
Additional data | | | | | | | | | | | | | | | | | |
Member months enrollment | | | | | | | | | | | | | | | | | |
Medicare | | | 405,203 | | | | 385,835 | | | | 813,110 | | | | 769,443 | | | | 409,012 | | | | 405,203 | | | | 817,793 | | | | 813,110 | |
Medicaid | | | 1,077,456 | | | | 1,092,132 | | | | 2,145,472 | | | | 2,121,868 | | | | 1,332,994 | | | | 1,077,456 | | | | 2,629,183 | | | | 2,145,472 | |
Commercial | | | | | | | | | | | | | | | | | |
Fully insured | | | | 948,839 | | | | 975,212 | | | | 1,905,786 | | | | 1,953,554 | |
Self-funded | | | | 298,854 | | | | 327,030 | | | | 594,691 | | | | 657,262 | |
Total Commercial | | | | 1,247,693 | | | | 1,302,242 | | | | 2,500,477 | | | | 2,610,816 | |
Total member months | | | 2,784,901 | | | | 2,787,391 | | | | 5,569,398 | | | | 5,516,277 | | | | 2,989,699 | | | | 2,784,901 | | | | 5,947,453 | | | | 5,569,398 | |
Medical loss ratio | | | 79.4 | % | | | 84.5 | % | | | 81.6 | % | | | 84.1 | % | | | 88.4 | % | | | 79.4 | % | | | 87.7 | % | | | 81.6 | % |
Operating expense ratio | | | 17.8 | % | | | 12.9 | % | | | 16.6 | % | | | 13.7 | % | | | 11.8 | % | | | 17.8 | % | | | 11.8 | % | | | 16.6 | % |
Three Months Ended June 30, 20202021 Compared to Three Months Ended June 30, 2019
Managed Care Operating Revenues
Managed Care premiums earned decreased by $4.5 million, or 0.6%, to $789.3 million. This decrease is principally the result of the following:2020
Medical Premiums generated by the Medicare business increased by $6.4 million, or 1.7% to $372.4 million, mostly due to an increase in enrollment of approximately 19,000 member months, which primarily reflects a more competitive product offering, and an increase in the average membership risk score. This increase in premiums earned was partially offset by the recognition of estimated premium rebates due to the lower MLR resulting from the decreased utilization of services following the pandemic-related lockdown. Earned, Net
Premiums generated by the Medicaid business decreased by $5.9 million, or 2.6% to $221.1 million, primarily reflecting lower membership of approximately 15,000 member months. In addition, the 2019 quarter includes retroactive premiums related to adjustments to the premium rates for high cost high need members as part of an ongoing reconciliation with ASES.
• | MedicalPremiums generated by the Commercial business decreased by $5.0 million, or 2.5%, to $195.8 million, mainly reflecting lower average premium rates and the recognition of estimated premium rebates due to the lower MLR resulting from the decreased utilization of services following the government enforced lockdown due to the COVID-19 pandemic. These decreases were partially offset by an increase in fully-insured enrollment during the quarter by approximately 20,000 member months and the reinstatement of the HIP fee pass-through in 2020. |
Managed Care Claims Incurred
Managed Care claims incurred decreased by $43.7 million, or 6.5%, to $627.0 million when compared to the three months ended June 30, 2019. The medical loss ratio (MLR) of the segment decreased 510 basis points during the 2020 period, to 79.4%. This fluctuation is primarily attributed to the net effect of the following:
Claims incurred in the Medicare business decreased by $13.9 million, or 4.6%, during the 2020 period and its MLR decreased 520 basis points to 77.2%. The lower MLR mostly reflects lower utilization of services as the result of the government enforced lockdown due to the COVID-19 pandemic, which was in force during most of the second quarter, partially offset by improved benefits in the 2020 product offerings and the impact of the previously mentioned estimated premium rebates.
Claims incurred in the Medicaid business increased by $0.3 million, or 0.1%, during the 2020 period. The MLR, at 93.7%, was 260 basis point higher than the same period last year. The higher MLR mostly reflects the impact of the retroactive premiums adjustment in the second quarter of 2019 mentioned above.
Claims incurred in the Commercial business decreased by $30.1 million, or 18.6%, during 2020 and its MLR decreased 1,340 basis points, to 67.5%. The lower MLR mostly reflects the impact of the lower utilization as a result of the lockdown and the reinstatement of the HIP fee pass-through in 2020. These decreases were partially offset by the impact of the previously mentioned estimated premium rebates and the impact in 2019 of favorable prior period reserve development.
Managed Care Operating Expenses
Managed Care operating expenses increased by $38.2 million, or 37.1%, to $141.1 million. The operating expense ratio increased by 490 basis points to 17.8% in 2020. The higher operating expenses and expense ratio are mostly driven by the recognition of a contingency reserve related to a legal proceeding and a $14.9 million increase in the HIP Fee following the reinstatement of the fee in 2020, offset in part by lower professional fees and personnel costs.
Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
Managed Care Operating Revenues
Managed Care premiums earned increased by $99.8$120.5 million, or 6.7%15.3%, to $1,599.1$909.8 million. This increase is principally the result of the following:
Premiums generated by the Medicaid business increased by $70.7 million, or 32.0%, to $291.8 million, primarily reflecting an increase in enrollment of approximately 256,000 member months and higher average premium rates following the premium rate increase effective July 2020. These increases were partially offset by the elimination of the HIP fee pass-through in 2021.
• | Premiums generated by the Medicare business increased by $61.6$36.0 million, or 8.8%9.7%, to $760.2$408.4 million, mostlyprimarily due to higher average premium rates reflectingresulting from an increase in the premium rate benchmark and average membership risk score revenue in 2020, and higher memberscore. Member months enrollment by approximately 44,000. These increases were partially offset byincreased slightly compared with the recognition of estimated premium rebates due to the lower MLR resulting from the decreased utilization of services as the result of the government enforced lockdown due to the COVID-19 pandemic.prior-year period. |
Premiums generated by the Medicaid business increased by $40.6 million, or 10.1% to $442.0 million, primarily reflecting higher average premium rates, an increase in enrollment of approximately 24,000 member months, the reinstatement of the HIP fee pass-through in 2020, and the impact of the profit sharing accrual recorded in 2019. These increases were partially offset due to the impact recognized in the 2019 period, of the retroactive premiums related to adjustments to the premium rates for high cost high need members as part of an ongoing reconciliation with ASES.
• | Premiums generated by the Commercial business decreasedincreased by $2.4$13.8 million, or 0.6%7.0%, to $396.9 million. This fluctuation$209.6 million, primarily reflects lowerreflecting higher average premium rates and the recognition of estimated premium rebates due to the lower MLR resulting from the decreased utilization of services as the result of the government enforced lockdown. These decreases wererates. This increase was partially offset by higher fully-insured enrollment during the quarter bya decrease of approximately 45,00026,000 fully insured member months and the reinstatementelimination of the HIP feeFee pass-through in 2020.2021. |
Managed CareMedical Claims Incurred
Managed CareMedical claims incurred increased by $176.9 million, or 28.2%, to $803.9 million when compared to the three months ended June 30, 2020. The medical loss ratio (MLR) of the segment increased 900 basis points during the 2021 period, to 88.4%. This fluctuation is principally attributed to the net effect of the following:
• | Claims incurred in the Medicaid business increased by $68.1 million, or 32.9%, during the 2021 period. The MLR, at 94.3%, was 60 basis points higher than the same period last year. The increase in claims cost is due to higher member months, a more normalized utilization of services compared to the low utilization experienced in the prior-year quarter due to the pandemic, COVID-19-related testing and treatment costs, and the waiver of medical and payment policies. In addition, the 2021 MLR was impacted by the elimination of the HIP fee pass-through in 2021. |
• | Claims incurred in the Medicare business increased by $61.6 million, or 21.4%, during the 2021 period and its MLR increased 830 basis points to 85.5%. These increases reflect a more normalized utilization of services compared to the low utilization experienced in the prior-year quarter due to the pandemic, improved benefits in the 2021 product offerings, COVID-19-related testing and treatment costs and the waiver of medical and payment policies, partially offset by favorable prior period reserve development in the 2021 period. |
• | Claims incurred in the Commercial business increased by $47.2 million, or 35.7%, during 2021 and its MLR increased 1,810 basis points, to 85.6%. The higher MLR principally reflects higher claim trends, a more normalized utilization of services compared to the low utilization experienced in the prior-year quarter due to the pandemic, COVID-19-related testing and treatment costs and the elimination of the HIP fee pass-through in 2021. |
Medical Operating Expenses
Medical operating expenses decreased by $33.5 million, or 23.7%, to $107.6 million, primarily reflecting the accrual in the prior year quarter of a contingency reserve related to a legal proceeding and the elimination of the HIP fee in 2021, partially offset by higher personnel costs and professional services. The operating expense ratio decreased 600 basis points to 11.8% in 2021.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Medical Premiums Earned, Net
Medical premiums earned increased by $242.7 million, or 15.2%, to $1,841.8 million. This increase is principally the result of the following:
Premiums generated by the Medicaid business increased by $172.5 million, or 39.0%, to $614.5 million, primarily reflecting higher average premium rates following two premium rates increases that were effective in May 2020 and July 2020 and an increase in enrollment of approximately 484,000 member months. In addition, following a reconciliation process with ASES this year, we recognized premiums corresponding to prior periods in the first quarter of 2021. These increases were partially offset by the elimination of the HIP fee pass-through in 2021.
• | Premiums generated by the Medicare business increased by $50.5 million, or 6.6%, to $810.7 million, primarily due to higher average premium ratesreflecting an increase in the premium rate benchmark and membership risk score. Member months increased slightly when compared with the prior-year period. |
• | Premiums generated by the Commercial business increased by $19.7 million, or 5.0%, to $416.6 million, mainly reflecting higher average premium rates in the 2021 period. This increase was partially offset by the elimination of the HIP fee pass-through in 2021 and a decrease of approximately 48,000 fully insured member months. |
Medical Claims Incurred
Medical claims incurred increased by $44.1$310.5 million, or 3.5%23.8%, to $1,304.8$1,615.3 million when compared to the six months ended June 30, 2019.2020. The MLR of the segment decreased 250increased 610 basis points during 2020,2021, to 81.6%87.7%. This fluctuation is primarilyprincipally attributed to the net effect of the following:
Claims incurred in the MedicareMedicaid business increased by $38.8$150.5 million, or 6.8%37.0%, during the 2020 period2021 and its MLR decreased 150130 basis points, to 80.0%90.7%. The increase in claim cost is due to higher member monthsmonths. The lower MLR reflects the premium rates increases and prior period premiums recognized this year, partially offset by COVID-19-related testing and treatment costs, the loser MLR. The lower MLR mostly reflects lower utilizationwaiver of services as the result of the government enforced lockdown due to the COVID-19 pandemic, which was in force during most of the second quarter, partially offset by improved benefits in the 2020 product offerings. In addition, the 2019 MLR was favorably impacted by prior period reserve development.
The Managed Care claims incurred in the Medicaid business increased by $42.3 million, or 11.6%, during 2020medical and its MLR increased 130 basis points, to 92.0%. The higher MLR mostly reflects the impact of the retroactive premiums adjustment in the second quarter of 2019 mentioned above and an unfavorable prior period reserve development in the 2020 period.
Claims incurred in the Commercial business decreased by $37.0 million, or 11.3%, during 2020 and its MLR decreased 890 basis points, to 73.0%. These decreases mostly result from lower utilization related to the COVID-19 lockdownpayment policies and the impact in the MLR of the reinstatementelimination of the HIP fee pass-through in 2020. These decreases were partially offset by the impact of the previously mentioned estimated premium rebates, higher fully-insured enrollment, and the impact in 2019 of favorable prior period reserve development.2021.
• | Claims incurred in the Medicare business increased by $92.2 million, or 15.2%, during the 2021 period and its MLR increased 640 basis points, to 86.4%. The higher MLR reflects a more normalized utilization of services compared to the low utilization experienced in the prior-year period due to the pandemic, improved benefits in the 2021 product offerings, COVID-19-related testing and treatment costs and the waiver of medical and payment policies. These increases were partially offset by favorable prior period reserve development in the 2021 period. |
• | Claims incurred in the Commercial business increased by $67.8 million, or 23.4%, during 2021 and its MLR increased 1,290 basis points, to 85.9%. These increases primarily result from higher claim trends, a more normalized utilization of services compared to low utilization in the prior year due to the pandemic, COVID-19-related testing and treatment costs, the waiver of medical and payment policies and the elimination of the HIP fee pass-through in 2021. These increases were partially offset by the lower fully insured membership enrollment. |
Managed CareMedical Operating Expenses
Managed CareMedical operating expenses increaseddecreased by $61.3$49.6 million, or 29.8%18.6%, to $267.2 million. The operating expense ratio increased by 290 basis points to 16.6%$217.6 million, primarily reflecting the accrual in 2020. The higher operating expenses mostly result from the recognitionprior year of a contingency reserve related to a legal proceeding and the reinstatement in 2020elimination of the HIP fee of $31.2 million,in 2021 offset in part by a decreasean increase in the provision for doubtful accountspersonnel costs and professional fees. The operating expense ratio decreased 480 basis points to 11.8% in 2021.
Life Insurance
Segment Operating Results
| | Three months ended | | | Six months ended | | | Three months ended | | | Six months ended | |
| | June 30, | | | June 30, | | | June 30, | | | June 30, | |
(dollar amounts in millions) | | 2020 | | | 2019 | | | 2020 | | | 2019 | | |
(dollar in millions) | | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Operating revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net: | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 50.6 | | | $ | 46.8 | | | $ | 99.6 | | | $ | 92.4 | | | $ | 56.9 | | | $ | 50.6 | | | $ | 112.1 | | | $ | 99.6 | |
Assumed earned premiums | | | - | | | | 0.3 | | | | - | | | | 1.0 | | |
Ceded premiums earned | | | (2.5 | ) | | | (2.1 | ) | | | (4.8 | ) | | | (4.2 | ) | | | (2.9 | ) | | | (2.5 | ) | | | (5.6 | ) | | | (4.8 | ) |
Premiums earned, net | | | 48.1 | | | | 45.0 | | | | 94.8 | | | | 89.2 | | | | 54.0 | | | | 48.1 | | | | 106.5 | | | | 94.8 | |
Net investment income | | | 6.8 | | | | 6.8 | | | | 13.7 | | | | 13.4 | | | | 6.7 | | | | 6.8 | | | | 13.1 | | | | 13.7 | |
Total operating revenues | | | 54.9 | | | | 51.8 | | | | 108.5 | | | | 102.6 | | | | 60.7 | | | | 54.9 | | | | 119.6 | | | | 108.5 | |
Operating costs: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Policy benefits and claims incurred | | | 20.6 | | | | 27.3 | | | | 48.0 | | | | 53.3 | | | | 29.6 | | | | 20.6 | | | | 59.0 | | | | 48.0 | |
Underwriting and other expenses | | | 24.8 | | | | 19.3 | | | | 46.0 | | | | 38.4 | | | | 24.7 | | | | 24.8 | | | | 48.4 | | | | 46.0 | |
Total operating costs | | | 45.4 | | | | 46.6 | | | | 94.0 | | | | 91.7 | | | | 54.3 | | | | 45.4 | | | | 107.4 | | | | 94.0 | |
Operating income | | $ | 9.5 | | | $ | 5.2 | | | $ | 14.5 | | | $ | 10.9 | | | $ | 6.4 | | | $ | 9.5 | | | $ | 12.2 | | | $ | 14.5 | |
Additional data: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss ratio | | | 42.8 | % | | | 60.7 | % | | | 50.6 | % | | | 59.8 | % | | | 54.8 | % | | | 42.8 | % | | | 55.4 | % | | | 50.6 | % |
Operating expense ratio | | | 51.6 | % | | | 42.9 | % | | | 48.5 | % | | | 43.0 | % | | | 45.7 | % | | | 51.6 | % | | | 45.4 | % | | | 48.5 | % |
Three Months Ended June 30, 20202021 Compared to Three Months Ended June 30, 20192020
Operating Revenues
Premiums earned, net increased by $3.1$5.9 million, or 6.9%12.3%, to $48.1$54.0 million, mainly as the result of higher sales, mainly in the Individual Life, Cancer, and Group Business lines of business, and by the acquisition of an insurance portfolio during this quarter. Although premiums increased over the same period last year, premium growth slowed down during the second quarter as a result of the two-month government enforced lockdown due to COVID-19.
Policy Benefits and Claims Incurred
Policy benefits and claims incurred decreased by $6.7 million, or 24.5%, to $20.6 million, mostly as the result of lower actuarial reserves following an increase of policy cancellations and lower claim levels through all lines of business due to the lockdown. As a result, the segment’s loss ratio decreased 1,790 basis point to 42.8%.
Underwriting and Other Expenses
Underwriting and other expenses increased $5.5 million, or 28.5%, to $24.8 million mostly reflecting higher amortization of deferred acquisition costs as a result of policy cancellations following the segment’s lower volume of business due to the COVID-19 lockdown. The segment’s operating expense ratio increased 870 basis points to 51.6%.
Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
Operating Revenues
Premiums earned, net increased by $5.6 million, or 6.3%, to $94.8 million, mainlyprimarily as the result of higher sales across all lines of business, particularly in the Individual Life and Cancer lines of business. Although premiums increased over the same period lastLast year premium growth slowed down during the two-month COVID-19 government-enforced lockdown, which severely affected sales and increased policy cancellations.
Policy Benefits and Claims Incurred
Policy benefits and claims incurred increased by $9.0 million, or 43.7%, to $29.6 million, primarily as the result of higher actuarial reserves, due to higher persistency during the period, and higher benefits paid driven by the lower volume of claim submissions in the prior year quarter following the government-enforced lockdown due to COVID-19 pandemic. As a result, the segment’s loss ratio increased 1,200 basis points, to 54.8%.
Underwriting and Other Expenses
Underwriting and other expenses decreased $0.1 million, or 0.4%, to $24.7 million, while the segment’s operating expense ratio decreased 590 basis points, to 45.7%.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Operating Revenues
Premiums earned, net increased by $11.7 million, or 12.3%, to $106.5 million, primarily as the result of increased persistency and new sales across all lines of business, particularly in the Individual Life, Cancer and Group Life lines of business. In addition, during the second quarter as a result of 2020, this segment acquired an insurance portfolio that contributed additional premiums in the two-month government enforced lockdown.Cancer and Group Life lines of business.
Policy Benefits and Claims Incurred
Policy benefits and claims incurred decreasedincreased by $5.3$11.0 million, or 9.9%22.9%, to $48.0$59.0 million, mostlyprimarily as the result of lowerhigher actuarial reserves, followingdue to higher policy cancellations than usual, mainlypersistency during the period, and higher benefits paid driven by the lower volume of claim submissions in the Home Services line of business afterprior year quarter following the government-enforced lockdown due to COVID-19 lockdown. pandemic. As a result, the segment’s loss ratio decreased 920increased 480 basis pointpoints, to 50.6%55.4%.
Underwriting and Other Expenses
Underwriting and other expenses increased $7.6$2.4 million, or 19.8%5.2%, to $46.0$48.4 million, mostlyprimarily reflecting an increase in commissions expense resulting from higher sales during the period, offset in part by lower amortization of deferred acquisition costs as a result of policy cancellations due to the lockdown.costs. The segment’s operating expense ratio increased 550decreased 310 basis points to 48.5%.
Property and Casualty Insurance Operating Results
| | Three months ended | | | Six months ended | |
| | June 30, | | | June 30, | |
(dollar amounts in millions) | | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Operating revenues: | | | | | | | | | | | | |
Premiums earned, net: | | | | | | | | | | | | |
Premiums written | | $ | 38.4 | | | $ | 36.4 | | | $ | 71.6 | | | $ | 67.3 | |
Premiums ceded | | | (14.3 | ) | | | (10.3 | ) | | | (30.7 | ) | | | (23.7 | ) |
Change in unearned premiums | | | (1.7 | ) | | | (4.3 | ) | | | 2.1 | | | | (2.5 | ) |
Premiums earned, net | | | 22.4 | | | | 21.8 | | | | 43.0 | | | | 41.1 | |
Net investment income | | | 2.3 | | | | 2.4 | | | | 4.4 | | | | 4.9 | |
Total operating revenues | | | 24.7 | | | | 24.2 | | | | 47.4 | | | | 46.0 | |
Operating costs: | | | | | | | | | | | | | | | | |
Claims incurred | | | 6.5 | | | | 9.4 | | | | 17.4 | | | | 18.0 | |
Underwriting and other expenses | | | 11.5 | | | | 10.0 | | | | 23.5 | | | | 19.7 | |
Total operating costs | | | 18.0 | | | | 19.4 | | | | 40.9 | | | | 37.7 | |
Operating income | | $ | 6.7 | | | $ | 4.8 | | | $ | 6.5 | | | $ | 8.3 | |
Additional data: | | | | | | | | | | | | | | | | |
Loss ratio | | | 29.0 | % | | | 43.1 | % | | | 40.5 | % | | | 43.8 | % |
Operating expense ratio | | | 51.3 | % | | | 45.9 | % | | | 54.7 | % | | | 47.9 | % |
Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019
Operating Revenues
Total premiums written increased by $2.0 million, or 5.5%, to $38.4 million, driven by higher sales of Commercial Package policies partially offset by a decrease in Commercial Liability policies.
The premiums ceded to reinsurers increased by $4.0 million, or 38.8%, as a result of the increase in premiums written and higher costs in nonproportional reinsurance mostly resulting from lower reinsurance premium adjustment in current period when compared to the same period in prior year.
The change in unearned premiums is $2.6 million lower than the same period in prior year mostly resulting from the effects of the changes in the quotas share cession. In current year the commercial quota share changed from 25% to 20% and in prior year the quota share changed from 35% to 25%.
Claims Incurred
Claims incurred decreased by $2.9 million, or 30.9%, to $6.5 million primarily driven by better loss experience in the segment’s ongoing business resulting from the effects of the lockdown. As a result, the loss ratio decreased 1,410 basis points, from 43.1% to 29.0%45.4%.
Property and Casualty Insurance Operating Results
| | Three months ended June 30, | | | Six months ended June 30, | |
(dollar in millions) | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Operating revenues | | | | | | | | | | | | |
Premiums earned, net: | | | | | | | | | | | | |
Premiums written | | $ | 41.2 | | | $ | 38.4 | | | $ | 77.8 | | | $ | 71.6 | |
Premiums ceded | | | (14.4 | ) | | | (14.3 | ) | | | (29.4 | ) | | | (30.7 | ) |
Change in unearned premiums | | | (1.5 | ) | | | (1.7 | ) | | | 2.2 | | | | 2.1 | |
Premiums earned, net | | | 25.3 | | | | 22.4 | | | | 50.6 | | | | 43.0 | |
Net investment income | | | 2.3 | | | | 2.3 | | | | 4.3 | | | | 4.4 | |
Total operating revenues | | | 27.6 | | | | 24.7 | | | | 54.9 | | | | 47.4 | |
Operating costs | | | | �� | | | | | | | | | | | | |
Claims incurred | | | 11.6 | | | | 6.5 | | | | 21.1 | | | | 17.4 | |
Underwriting and other expenses | | | 14.0 | | | | 11.5 | | | | 28.0 | | | | 23.5 | |
Total operating costs | | | 25.6 | | | | 18.0 | | | | 49.1 | | | | 40.9 | |
Operating income | | $ | 2.0 | | | $ | 6.7 | | | $ | 5.8 | | | $ | 6.5 | |
Additional data: | | | | | | | | | | | | | | | | |
Loss ratio | | | 45.8 | % | | | 29.0 | % | | | 41.7 | % | | | 40.5 | % |
Operating expense ratio | | | 55.3 | % | | | 51.3 | % | | | 55.3 | % | | | 54.7 | % |
Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
Operating Revenues
Total premiums written increased by $2.8 million, or 7.3%, to $41.2 million, primarily driven by higher premiums in Personal Package, Commercial Auto and Commercial Property products, partially offset by a decrease in Commercial Package products.
Claims Incurred
Claims incurred increased by $5.1 million, or 78.5%, to $11.6 million, primarily resulting from lower losses in the 2020 period in the segment’s on-going business as a result of the two-month government-enforced lockdown because of the COVID-19 pandemic. As a result, the loss ratio increased 1,680 basis points, to 45.8% during this period.
Underwriting and Other Expenses
Underwriting and other operating expenses increased by $1.5$2.5 million, or 15.0%21.7%, to $11.5$14.0 million mostlyprimarily due to higher net commission expense following the increase in net premiums earned. The net commission expense for the current period is unfavorably impacted by a lower capitalization of deferred acquisition costs. The operating expense ratio was 51.3%55.3%, 540400 basis points higher than prior year.
Six Months Ended June 30, 20202021 Compared to Six Months Ended June 30, 20192020
Operating Revenues
Total premiums written increased by $4.3$6.2 million, or 6.4%8.7%, to $71.6$77.8 million, mostlyprimarily driven by higher premiums, particularly in Personal Package, Commercial Package,Property, Commercial Auto and Commercial PropertyLiability products, partially offset by lowera decrease in Commercial Liability premiums.Package products.
The premiums ceded to reinsurers increaseddecreased by $7.0$1.3 million, or 29.5%4.2%, mostlyprimarily due to approximately $3.0 million of the reinsurance reinstatement premiums in 2020 following the losses recorded after the earthquakes experienced in the southwest region of Puerto Rico in January 2020, as well as higher premiums written and increased nonproportional reinsurance costs.
The changeoffset in unearned premiums is favorably impacting premiums earnedpart by $4.6 million when compared to prior year mostly reflecting the benefits of the changesan increase in the commercial quota share program.cost of catastrophe reinsurance protection.
Claims Incurred
Claims incurred decreasedincreased by $0.6$3.7 million, or 3.3%21.3%, to $17.4$21.1 million mostly due to better loss experienceprimarily resulting from lower losses in the segment’s on-going business due to the effects2020 period because of the COVID-19 measures and lockdown, partiallypandemic, offset in part by the recognition of $5.0 million of earthquake losses after the January 2020 events. As a result, the loss ratio improvedincreased by 330120 basis points, to 40.5%41.7% during this period.
Underwriting and Other Expenses
Underwriting and other operating expenses increased by $3.8$4.5 million, or 19.3%19.1%, to $23.5$28.0 million, mostly due tobecause of higher net commission expense following the increase in net premiums earned. Current year net commission expense is impactedaffected by a lower capitalization of deferred acquisition costscosts. . The operating expense ratio was 54.7%55.3%, 68060 basis points higher than prior year.
Liquidity and Capital Resources
Cash Flows
A summary of our major sources and uses of cash for the periods indicated is presented in the following table:
| | Six months ended | | | Six months ended June 30, | |
| | June 30, | | |
(dollar amounts in millions) | | 2020 | | | 2019 | | |
(dollar in millions) | | | 2021 | | | 2020 | |
Sources (uses) of cash: | | | | | | | | | | | | |
Cash provided by operating activities | | $ | 170.3 | | | $ | 26.3 | | | $ | 75.0 | | | $ | 170.3 | |
Net (purchases) proceeds of investment securities | | | (105.6 | ) | | | 25.5 | | |
Net purchases of investment securities | | | | (64.3 | ) | | | (105.6 | ) |
Net capital expenditures | | | (45.9 | ) | | | (10.7 | ) | | | (11.2 | ) | | | (45.9 | ) |
Capital contribution on equity method investees | | | (4.9 | ) | | | - | | | | - | | | | (4.9 | ) |
Proceeds from long-term borrowings | | | 30.8 | | | | - | | | | - | | | | 30.8 | |
Payments of long-term borrowings | | | (1.6 | ) | | | (1.6 | ) | | | (2.2 | ) | | | (1.6 | ) |
Net change in short-term borrowings | | | (39.0 | ) | | | - | | | | 15.0 | | | | (39.0 | ) |
Proceeds from policyholder deposits | | | 16.4 | | | | 8.2 | | | | 9.5 | | | | 16.4 | |
Surrenders of policyholder deposits | | | (8.2 | ) | | | (11.4 | ) | | | (5.6 | ) | | | (8.2 | ) |
Repurchase and retirement of common stock | | | (14.9 | ) | | | - | | | | - | | | | (14.9 | ) |
Other | | | 33.8 | | | | 12.4 | | | | 47.2 | | | | 33.8 | |
Net increase in cash and cash equivalents | | $ | 31.2 | | | $ | 48.7 | | | $ | 63.4 | | | $ | 31.2 | |
The increasedecrease of approximately $144.0$95.3 million in net cash provided by operating activities is mostly due to higher premium collections partiallyclaims paid in the Managed Care segments, offset in part by higher claimspremiums collections, and lower income taxes paid.paid, and lower cash paid to suppliers and employees.
Net (purchases) proceeds from investmentThe net purchases of investments in securities are part of our asset/liability management strategy.
The increasedecrease in capital contribution reflects capital contributions made in the 2020 period in exchange for a participation in equity method investees.
On June 19, 2020, TSM entered into a $31.4 million Credit Agreement (the Loan) with a commercial bank in Puerto Rico. The proceeds of the Loan were used by the Company to partially finance the acquisition of a Building, which such acquisition is included within the capital expenditures in the statement of cash flows. For further details, see Note 9 of the condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q.
The net change in short-term borrowings represents the repaymentadvances of short-term facilities available to address timing differences between cash receipts and disbursements.
The fluctuation in other sources of cash reflects the $13.2 million change in outstanding checks in excess of bank balances.
Stock Repurchase Program
In August 2017 the Company’s Board of Directors authorized a $30.0 million repurchase program of its Class B common stock and in February 2018 the Company’s Board of Directors authorized a $25.0 million expansion of this program. In October 2019 the Company’s Board of Directors authorized an additional expansion to this program increasing its remaining balance up to a total of $25.0 million, effective November 2019. Repurchases were conducted through open-market purchases of Class B shares only, in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. During the sixthree months ended June 30,March 31, 2020, the Company repurchased and retired under this program 952,820577,447 shares at an average per share price of $15.72,$15.57, for an aggregate cost of $15.0 million, completing the amount available for repurchases under this program.$9.0 million. The program was completed in 2020.
The fluctuation in other sources
Financing and Financing Capacity
Long-Term Borrowings
TSM has a $35.5 million credit agreement (the Loan) with a commercial bank in Puerto Rico. The agreement consists of three term loans: (i) Term Loan A in the principal amount of $11.2 million, (ii) Term Loan B in the principal amount of $20.2 million, and (iii) Term Loan C in the principal amount of $4.1 million. Term Loan A matures in October 2023 while Term Loans B and C mature in January 2024. Term Loan A was used to refinance a previous $41.0 million secured loan payable with the same commercial bank. Pursuant to the credit agreement, interest is payable on the outstanding balance of the Loan at the following annual rate: (i) 100 basis points over LIBOR for Term Loan A, (ii) 275 basis points over LIBOR for Term Loan B, and (iii) 325 basis points over LIBOR for Term Loan C. The loan includes certain financial and non-financial covenants, which are customary for this type of facility, including negative covenants imposing certain restrictions on the Company’s business. Failure to meet these covenants may trigger the accelerated payment of the outstanding balance. As of June 30, 2020, we areThe Company was in compliance with these covenants.covenants as of June 30, 2021.
As detailed above, the three term loans under our credit agreement with a commercial bank in Puerto Rico bear interest rates in relation to 1-month and 3-month LIBOR, a widely used interest rate benchmark.
In July 2017, the Financial Conduct Authority (“FCA”)(FCA) in the United Kingdom, which regulates LIBOR, announced that it would phase out this benchmark by the end of 2021. In response, the U.S. Federal Reserve convened the Alternative Reference Rates Committee (“ARRC”)(ARRC), a working group comprised of private market participants, to ensure a transition to a new reference rate.
The ARRC has recommended the use of the Secured Overnight Financing Rate (“SOFR”)(SOFR), which is an index based on the cost of borrowing overnight cash collateralized by U.S. Treasury securities. Currently, there is no definitive information regarding the future use of SOFR as a widely accepted benchmark or any other replacement rate.
If LIBOR rates are no longer available and we have not agreed with the bank on a replacement rate, we are subject to an alternative benchmark rate, as defined in the credit agreement of our long-term bank loan. At this time we cannot assess the impact, if any, on the interest paid on this loan. We are in regular contact with the lender about this subject, but at this point the bank has not yet determined a course of action. Alternatively, the loan could be refinanced by us without prepayment penalties.
We will closely follow any new developments regarding the LIBOR phase out.
On June 19, 2020, TSM entered into a $31.4 million Credit Agreement with a commerciaIcommercial bank in Puerto Rico. The proceeds of the Loanproceeds were used by the Company to partially finance the acquisition of a Building.building. The Credit Agreement is guaranteed by a mortgage over the Building,building, a pledge of all collateral relaterelated to the Buildingbuilding and an assignment of the rents collected for the lease of office space in the Building.building. Approximately 64.25% of the acquired Buildingbuilding is currently leased to thirdthird parties. The Company expectsto move withinis in the next yearprocess of moving some of its offices currently leased to third parties to thethe new Buildingbuilding and together with the leased spaceexpects to fully occupy the new facilities.facilities together with the leased space. Pursuant to the credit agreement,Credit Agreement, interest is payable on the outstanding principal balance of the Loan at an annual rate equal to the Prime Rate. Interest shall be paid on a monthly basis commencingMonthly interest payments commenced on July 1, 2020 and will continue to be paid each month until the principal of the Loan has been paid in full.
The Company may, at its option and at any time, upon notice as specified in the credit agreement,Credit Agreement, prepay prior to maturity, all, or any part of the Term Loan upon the payment of a penalty fee of the outstanding principal amount at the time of the prepayment of 3% during the first year, 2% during the second year, and 1% during the third year and thereafter at par.
The Credit Agreement includes certain customary financial and non-financial covenants, including negative covenants imposing certain restrictions on the Corporation’s business. The Company was in compliance with these covenants as of June 30, 2020.2021.
For further details, see Note 913, Borrowings, of the condensed consolidated interim financial statements includedNotes to Consolidated Financial Statements in this QuarterlyItem 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-Q10-K for a summary of the long-term borrowings.year ended December 31, 2020.
Short-Term Facilities
We have several short-term facilities available to address timing differences between cash receipts and disbursements, consisting of collateralized advances from the Federal Home Loan Bank of New York (“FHLBNY”)(FHLBNY) and a revolving credit facility. See Note 98 of the unaudited condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q for details of available short-term facilities.
We anticipate that we will have sufficient liquidity to support our currently expected needs.
For further details, see Note 13, Borrowings, of the Notes to the Consolidated Financial Statements, included in “Item 8, Financial Statements and Supplementary Data”, of our Annual Report on Form 10-K for the year ended December 31, 2019.Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
We are exposed to certain market risks that are inherent in our financial instruments, which arise from transactions entered into in the normal course of business. We have exposure to market risk mostly in our investment activities. For purposes of this disclosure, “market risk” is defined as the risk of loss resulting from changes in interest rates and equity prices. No material changes have occurred in our exposure to financial market risks since December 31, 2019.2020. A discussion of our market risk is incorporated by reference to “ItemItem 7A. Quantitative and Qualitative Disclosures about Market Risk”Risk included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this Quarterly Report on Form 10-Q, management,Management, under the supervision and with the participation of the chief executive officerPresident and chief financial officer,Chief Executive Officer and Executive Vice President and Chief Financial Officer, conducted an evaluation of the effectiveness of the “disclosure controls and procedures” (as such term is defined under Exchange Act Rule 13a-15(e)) of the Corporation and its subsidiaries. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to management,Management, including the chief executive officerPresident and chief financial officer,Chief Executive Officer and Executive Vice President and Chief Financial Officer, to allow timely decisions regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility that judgments in decision-making can be faulty, and breakdowns as a result of simple errors or mistake. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on this evaluation, our chief executive officerPresident and chief financial officerChief Executive Officer and Executive Vice President and Chief Financial Officer have concluded that as of June 30, 2020,2021, which is the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective to a reasonable level of assurance.
There were no significant changes in our disclosure controls and procedures, or in factors that could significantly affect internal controls, subsequent to the date the chief executive officerPresident and chief financial officerChief Executive Officer and Executive Vice President and Chief Financial Officer completed the evaluation referred to above.
Changes in Internal Controls Over Financial Reporting
No changes in ourThe Company hired a new Chief Financial Officer, Victor J. Haddock-Morales, replacing Juan J. Román Jiménez, who retired. As the Company’s principal financial officer, Mr. Haddock-Morales, will oversee the Company’s internal control overcontrols and financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended June 30, 2020 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.moving forward.
Part II – Other Information
For a descriptionNone of the legal proceedings that have experienced significant developments during this quarter, seedisclosed in Note 17 to25 of the unaudited condensed consolidated interim financial statements includedConsolidated Financial Statements in this quarterly reportthe Company’s 2020 Annual Report on Form 10-Q.10-K had a material development during the six months ended June 30, 2021.
For a description of our risk factors, see Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019.
The following risk factor was updated during the three months ended June 30, 2020.
The COVID-19 pandemic and local, state and federal governments’ response to the pandemic may have a material adverse effect on our business, financial condition and results of operations.
On March 11, 2020, the World Health Organization characterized the outbreak of a novel strain of coronavirus (COVID-19) as a global pandemic. In response, the Puerto Rico Governor issued a stay at home order (as amended and extended, the “Order”) from March 15, 2020 until June 16, 2020. The Order required the closure of non-essential businesses for the same period of time. On May 1, 2020, the Governor issued a new order providing for the gradual re-opening of the economy beginning on May 4, 2020, provided that the risk of contagion does not increase significantly. New sales have been affected in all our segments and lines of business during the lockdown as sales functions in all our businesses, had to be performed remotely given that they were not considered essential under the Order.
At this point it is not possible to reliably estimate the length or severity of this outbreak, the length and effectiveness of government and private sector mitigation measures, and other variables which will determine the ultimate financial impact of the pandemic on the Company. Additionally, the situation is rapidly developing and evolving. We are therefore unable to reliably estimate the ultimate impact of the COVID-19 pandemic on the Company. However, certain risks discussed in our 2019 Annual Report on Form 10-K may increase or materialize. We are closely monitoring the development of the situation to assess its impact on our business. We have experienced a temporary decrease in utilization caused by postponement or cancelation of elective services and medical appointments driven by the Order, which could cause our MLR to temporarily drop below the Affordable Care Act (ACA) and Medicare required ratios. Conversely, the pandemic could result in a material increase in medical claims as COVID-19 cases increases and the return of deferred utilization. In addition, the postponement or cancellation of medical appointments, treatments and evaluations in our High Cost High Needs (HCHN) Medicaid membership during the pandemic has and may continue to affect our ability to provide qualifying encounter or utilization data to certify them as such, which has and may continue to result in assignment of such members to a different rate cell with lower premium payments and retroactive premium adjustments by ASES. See Item 1A. Risk Factors – Risks Relating to the Regulation of Our Industry– “ASES’s risk adjustment payment system and payment structure, and its dependence on scarce or unavailable data, make our revenue and profitability difficult to predict and could result in material retroactive adjustments to our results of operations.”
Furthermore, COVID-19 related federal and state legislation and regulation may adversely impact our business, financial condition and results of operations. For example, the U.S. and Puerto Rico legislatures have enacted or are contemplating measures requiring health care insurers to cover and/or waive pre-authorization and cost-sharing for COVID-19 related testing, vaccines, treatment or services, which may adversely affect our profitability. In addition, any legislation requiring insurance companies to make advance payments to providers not linked to services previously provided increases our credit risk and could have a material impact on our business financial conditions and results of operations.
See Item 1A. Risk Factors – Risks Related to our Business – “Our inability to contain managed care costs may adversely affect our business and profitability” included in our Annual Report on Form 10-K for the year ended December 31, 2019.
Our Property & Casualty business interruption policies include an exclusion of coverage due to virus or bacteria. However, there are federal and local legislative efforts to retroactively eliminate such exclusions or otherwise require property and casualty insurers to cover COVID-19 losses under their business interruption policies. While we believe this type of legislative measure could be challenged on constitutional and other grounds, if successfully implemented, it would have a material adverse effect on our Property and Casualty Insurance segment. With respect to our Life segment, there is a risk that the pandemic result in a higher number of deaths, and therefore a higher number of claims for death benefits than assumed in our actuarial models.
See Item 1A. Risk Factors – Risks Related to our Business – “Large-scale natural disasters may have a material adverse effect on our business, financial condition and results of operations” included in our Annual Report on Form 10-K for the year ended December 31, 2019.
Finally, while estimates vary, the COVID-19 pandemic is widely considered to have had and continue to have a significant effect on the Puerto Rico, U.S. and global economies. Financial market volatility caused by the pandemic may decrease the value of our investment portfolios, including our pension plan asset portfolio. Furthermore, as the financial capacity of our customers is adversely affected, we may experience delinquency in premium payments and ultimately a decrease in insured customers in our commercial line of business and premiums earned, net, or other adverse effects. See Item 1A. Risk Factors – Risks Related to our Business – “Our investment portfolios are subject to varying economic and market conditions.” See also “The securities and credit markets could experience extreme volatility and disruption.” and “Our business is geographically concentrated in Puerto Rico and weakness in the economy and the fiscal health of the government has adversely impacted and may continue to adversely impact us.” included in our Annual Report on Form 10-K for the year ended December 31, 2019.
These and other risks, some of which we may be unable to identify at this time due to the evolving and highly uncertain nature of this event, could adversely impact our business, financial condition and results of operations.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Purchases of Equity Securities by the Issuer
The following table presents information related to our repurchases of common stock for the period indicated:
(Dollar amounts in millions, except per share data) | | Total Number of Shares Purchased (1) | | | Average Price Paid per Share | | | Total Number of Shares Purchased as Part of Publicly Announced Programs (1) | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs | |
| | | | | | | | | | | | |
Apri 1, 2020 to April 30, 2020 | | | 197,739 | | | $ | 15.15 | | | | 197,739 | | | $ | 3.0 | |
May 1, 2020 to May 31, 2020 | | | 177,634 | | | | 16.87 | | | | 177,634 | | | | - | |
June 1, 2020 to June 30, 2020 | | | - | | | | - | | | | - | | | | - | |
(Dollar amounts in millions, except per share data) | | Total Number of Shares Purchased (1) | | | Average Price Paid per Share | | | Total Number of Shares Purchased as Part of Publicly Announced Programs | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs | |
| | | | | | | | | | | | |
April 1, 2021 to April 30, 2021 | | | - | | | $ | - | | | | - | | | $ | - | |
May 1, 2021 to May 31, 2021 | | | - | | | | - | | | | - | | | | - | |
June 1, 2021 to June 30, 2021 | | | 20,823 | | | | 23.15 | | | | - | | | | - | |
(1) In August 2017 Represents shares repurchased and retired as the result of non-cash tax witholdings upon vesting of shares of participants under the Company’s Boardequity compensation plans. In June 2021, 20,823 shares were repurchased and retired as the result of Directors authorized a $30.0 million Share Repurchase Programnon-cash tax witholdings upon vesting of its Class B common stock. In October 2019 the Company’s Board of Directors authorized an expansion to this repurchase program, effective November 2019, increasing its remaining balance up to a total of $25.0 million.shares.
Item 3. | Defaults Upon Senior Securities |
Not applicable.
Item 4. | Mine Safety Disclosures |
Not applicable.
We are reporting the following events corresponding to Item 1.01 of Form 8-K (Entry into a Material Definitive Agreement).
On August 5, 2020, Triple-S Salud, Inc., a Puerto Rico insurance company (“Triple-S”) and managed care subsidiary of Triple-S Management Corporation (the “Company”), entered into two amendments (collectively, the “Amendments”) with the Puerto Rico Health Insurance Administration (“ASES,” by its Spanish acronym) for the offering of health care services for the Medicaid and Child Health Insurance subscribers for the Government of Puerto Rico’s revised Medicaid health insurance program (the “Contract”). The Company announced the entry into the Contract under Item 1.01 of a Current Report on Form 8-K dated September 27, 2018, an amendment to the Contract under Item 1.01 of a Current Report on Form 8-K dated November 6, 2019 and a further amendment to the Contract under Item 1.01 of a Current Report on Form 8-K dated November 19, 2019.Not applicable.
The first amendment (“Amendment I”), among other things, extended the rating period which ended on June 30, 2020 to July 31, 2020 (the “Extension Period”) to provide Triple-S and ASES additional time to negotiate revised PMPM for the rating period commencing on July 1, 2020. During the Extension Period, the existing per member per month payment rates made by ASES to Triple-S under the Contract for enrollees remained the same. In addition, Amendment I provides that upon final agreement of revised per member per month payment rates, and the approval of such payment rates by CMS and the Financial Oversight and Management Board for Puerto Rico, such rates would be effective as of July 1, 2020, and ASES and Triple-S would reconcile any differences in per member per month payments made during the Extension Period as a result of the revised rates.
The second amendment (“Amendment J”), among other things, extended the rating period which ended on July 31, 2020 (as a result of Amendment I) to August 31, 2020 (the “Additional Extension Period”) to provide Triple-S and ASES additional time to negotiate revised PMPM for the rating period commencing on July 1, 2020. During the Additional Extension Period, the existing per member per month payment rates made by ASES to Triple-S under the Contract for will remain the same. In addition, Amendment J provides that upon final agreement of revised per member per month payment rates, and the approval of such payment rates by CMS and the Financial Oversight and Management Board for Puerto Rico, such rates would be effective as of July 1, 2020, and ASES and Triple-S would reconcile any differences in per member per month payments made during the Additional Extension Period as a result of the revised rates.
The foregoing summary of the terms and conditions of the Amendments is subject to, and qualified in its entirety by, the full text of the Amendments included as exhibits to this Quarterly Report on Form 10-Q.
Exhibits | Description |
| |
| Amendment to the contract between Administracion de Seguros de Salud de Puerto Rico (ASES) and Triple-S Salud, Inc., to administer the Provision of Physical & Behavioral Health Services under the Government Health Plan dated as of May 1, 2020. |
| |
| Amendment to the contract between Administracion de Seguros de Salud de Puerto Rico (ASES) and Triple-S Salud, Inc., to administer the Provision of Physical & Behavioral Health Services under the Government Health Plan dated as of June 29, 2020. |
| |
| Amendment to the contract between Administracion de Seguros de Salud de Puerto Rico (ASES) and Triple-S Salud, Inc., to administer the Provision of Physical & Behavioral Health Services under the Government Health Plan dated as of July 31, 2020. |
| |
| Statement re computation of per share earnings; an exhibit describing the computation of the earnings per share for the three and six months ended June 30, 20202021 and 20192020 has been omitted as the detail necessary to determine the computation of earnings per share can be clearly determined from the material contained in Part I of this Quarterly Report on Form 10-Q. |
| |
| Certification of the President and Chief Executive Officer required by Rule 13a-14(a)/15d-14(a). |
| |
| Certification of the Executive Vice President and Chief Financial Officer required by Rule 13a-14(a)/15d-14(a). |
| |
| Certification of the President and Chief Executive Officer required pursuant to 18 U.S.C Section 1350. |
| |
| Certification of the Executive Vice President and Chief Financial Officer required pursuant to 18 U.S.C Section 1350. |
All other exhibits for which provision is made in the applicable accounting regulation of the United States Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
* Filed herein.
Pursuant to the requirements of the United States Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | Triple-S Management Corporation |
| | | | |
| | | | Registrant |
| | | | |
Date: | August 6, 20205, 2021 | | By: | /s/ Roberto García-Rodríguez | |
| | | | Roberto García-Rodríguez | |
| | | | President and Chief Executive Officer |
| | | | |
Date: | August 6, 20205, 2021 | | By: | /s/ JuanVictor J. Román-JiménezHaddock-Morales | |
| | | | JuanVictor J. Román-Jiménez | Haddock-Morales |
| | | | Executive Vice President and Chief Financial Officer |