UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20202021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER: 001-33865
TRIPLE-S MANAGEMENT CORPORATION
Puerto Rico | | 66-0555678 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
1441 F.D. Roosevelt Avenue | | |
San Juan, Puerto Rico | | 00920 |
(Address of principal executive offices) | | (Zip code) |
(787) 749-4949 |
(Registrant’s telephone number, including area code) |
|
Not applicable |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, Class B, $1.00 par value | GTS | New York Stock Exchange (NYSE) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑☐ | Accelerated filer ☐☑ |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
Emerging growth company ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
Indicate the number of shares outstanding of each of the issuer'sissuer’s classes of common stock, as of the latest practicable date.
Title of each class | Outstanding at September 30, 20202021 |
| |
Common Stock, Class B, $1.00 par value | 23,430,22223,794,612 |
Triple-S Management Corporation
FORM 10-Q
For the Quarter Ended September 30, 20202021
| 3 |
| 3428 |
| 3428 |
| 3428 |
| 3529 |
| 3833 |
| 3833 |
| 3934 |
| 4136 |
| 4439 |
| 4540
|
| 4641
|
| 4843 |
| 4843 |
| 4944 |
| 4944 |
| 4944 |
| 5145 |
| 5145 |
| 5145 |
| 5145 |
| 5246 |
| 5347 |
Part I - Financial Information
Item 1.
Financial Statements
Triple-S Management Corporation
Condensed Consolidated Interim Balance Sheets (Unaudited)
(dollar amounts in thousands, except share data)information)
| | September 30, 2020 | | | December 31, 2019 | | | September 30, 2021 | | | December 31, 2020 | |
Assets | | | | | | | | | | | | |
Investments and cash: | | | | | | | | | | | | |
Fixed maturities available for sale, at fair value | | $ | 1,362,000 | | | $ | 1,242,883 | | |
Fixed maturities held to maturity, at amortized cost | | | 1,867 | | | | 1,860 | | |
Fixed-maturities available-for-sale, at fair value | | | $ | 1,290,234 | | | $ | 1,342,465 | |
Fixed-maturities held-to-maturity, at amortized cost | | | | 1,870 | | | | 1,867 | |
Equity investments, at fair value | | | 389,078 | | | | 287,525 | | | | 518,765 | | | | 404,328 | |
Other invested assets, at net asset value | | | 110,765 | | | | 100,508 | | | | 119,396 | | | | 114,905 | |
Policy loans | | | 10,621 | | | | 10,861 | | | | 10,480 | | | | 10,459 | |
Cash and cash equivalents | | | 129,603 | | | | 109,837 | | | | 122,709 | | | | 110,989 | |
Total investments and cash | | | 2,003,934 | | | | 1,753,474 | | | | 2,063,454 | | | | 1,985,013 | |
Premiums and other receivables, net | | | 546,959 | | | | 567,692 | | | | 496,477 | | | | 488,840 | |
Deferred policy acquisition costs and value of business acquired | | | 243,663 | | | | 234,885 | | | | 255,010 | | | | 248,325 | |
Property and equipment, net | | | 130,220 | | | | 88,588 | | | | 137,762 | | | | 131,974 | |
Deferred tax asset | | | 68,637 | | | | 77,294 | | | | 111,206 | | | | 119,534 | |
Goodwill | | | 28,614 | | | | 28,599 | | | | 28,614 | | | | 28,614 | |
Other assets | | | 98,260 | | | | 68,294 | | | | 99,143 | | | | 86,118 | |
Total assets | | $ | 3,120,287 | | | $ | 2,818,826 | | | $ | 3,191,666 | | | $ | 3,088,418 | |
Liabilities and Stockholders' Equity | | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | |
Claim liabilities | | $ | 786,920 | | | $ | 709,258 | | | $ | 798,508 | | | $ | 787,102 | |
Liability for future policy benefits | | | 408,116 | | | | 386,017 | | | | 438,008 | | | | 414,997 | |
Unearned premiums | | | 95,608 | | | | 93,301 | | | | 101,331 | | | | 97,481 | |
Policyholder deposits | | | 202,663 | | | | 189,120 | | | | 214,912 | | | | 206,109 | |
Liability to Federal Employees' Health Benefits and Federal Employees' Programs | | | 57,874 | | | | 47,781 | | |
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs | | | | 35,358 | | | | 45,109 | |
Accounts payable and accrued liabilities | | | 387,465 | | | | 325,761 | | | | 389,918 | | | | 332,699 | |
Deferred tax liability | | | 12,254 | | | | 10,257 | | | | 13,533 | | | | 15,046 | |
Short-term borrowings | | | 82,500 | | | | 54,000 | | | | 0 | | | | 30,000 | |
Long-term borrowings | | | 53,836 | | | | 25,694 | | | | 49,498 | | | | 52,751 | |
Liability for pension benefits | | | 23,364 | | | | 34,465 | | | | 133,659 | | | | 139,611 | |
Total liabilities | | | 2,110,600 | | | | 1,875,654 | | | | 2,174,725 | | | | 2,120,905 | |
Stockholders’ equity: | | | | | | | | | | | | | | | | |
Triple-S Management Corporation stockholders' equity | | | | | | | | | |
Common stock Class B, $1 par value. Authorized 100,000,000 shares; issued and outstanding 23,430,222 and 23,799,633 shares at September 30, 2020 and December 31, 2019, respectively | | | 23,430 | | | | 23,800 | | |
Triple-S Management Corporation stockholders’ equity | | | | | | | | | |
Common stock, $1 par value. Authorized 100,000,000 shares;
| | | |
| | | |
| |
issued and outstanding 23,794,612 and 23,430,292 shares at | | | | | | | | | |
September 30, 2021 and December 31, 2020, respectively | | | | 23,795 | | | | 23,430 | |
Additional paid-in capital | | | 53,964 | | | | 60,504 | | | | 63,471 | | | | 57,399 | |
Retained earnings | | | 871,067 | | | | 830,198 | | | | 952,258 | | | | 897,221 | |
Accumulated other comprehensive income | | | 61,939 | | | | 29,363 | | |
Total Triple-S Management Corporation stockholders' equity | | | 1,010,400 | | | | 943,865 | | |
Accumulated other comprehensive loss, net | | | | (21,850 | ) | | | (9,820 | ) |
Total Triple-S Management Corporation stockholders’ equity | | | | 1,017,674 | | | | 968,230 | |
Non-controlling interest in consolidated subsidiary | | | (713 | ) | | | (693 | ) | | | (733 | ) | | | (717 | ) |
Total stockholders' equity | | | 1,009,687 | | | | 943,172 | | |
Total liabilities and stockholders' equity | | $ | 3,120,287 | | | $ | 2,818,826 | | |
Total stockholders’ equity | | | | 1,016,941 | | | | 967,513 | |
Total liabilities and stockholders’ equity | | | $ | 3,191,666 | | | $ | 3,088,418 | |
SeeThe accompanying notes toare an integral part of these unaudited condensed consolidated interim financial statements.
Triple-S Management Corporation
Condensed Consolidated Interim Statements of Earnings (Unaudited)
(dollar amounts in thousands, except per share data)information)
| | Three months ended September 30, | | | Nine months ended September 30, | | | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Revenues: | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | |
Premiums earned, net | | $ | 922,934 | | | $ | 815,021 | | | $ | 2,657,366 | | | $ | 2,442,516 | | | $ | 1,019,696 | | | $ | 922,934 | | | $ | 3,016,012 | | | $ | 2,657,366 | |
Administrative service fees | | | 3,752 | | | | 2,607 | | | | 8,755 | | | | 7,695 | | | | 3,875 | | | | 3,752 | | | | 9,316 | | | | 8,755 | |
Net investment income | | | 14,168 | | | | 15,176 | | | | 42,294 | | | | 45,614 | | | | 17,572 | | | | 14,168 | | | | 46,178 | | | | 42,294 | |
Other operating revenues | | | 2,052 | | | | 3,167 | | | | 6,394 | | | | 6,335 | | | | 3,925 | | | | 2,052 | | | | 8,518 | | | | 6,394 | |
Total operating revenues | | | 942,906 | | | | 835,971 | | | | 2,714,809 | | | | 2,502,160 | | | | 1,045,068 | | | | 942,906 | | | | 3,080,024 | | | | 2,714,809 | |
Net realized investment gains (losses) | | | 507 | | | | 1,087 | | | | (180 | ) | | | 4,766 | | | | 1,015 | | | | 507 | | | | 3,746 | | | | (180 | ) |
Net unrealized investment gains (losses) on equity investments | | | 11,040 | | | | 1,267 | | | | (17,428 | ) | | | 24,259 | | |
Net unrealized investment (losses) gains on equity investments | | | | (7,912 | ) | | | 11,040 | | | | 13,383 | | | | (17,428 | ) |
Other income, net | | | 1,811 | | | | 485 | | | | 6,217 | | | | 3,359 | | | | 11,085 | | | | 1,811 | | | | 19,047 | | | | 6,217 | |
Total revenues | | | 956,264 | | | | 838,810 | | | | 2,703,418 | | | | 2,534,544 | | | | 1,049,256 | | | | 956,264 | | | | 3,116,200 | | | | 2,703,418 | |
Benefits and expenses: | | | | | | | | | | | | | | | | | |
Claims incurred | | | 761,792 | | | | 680,010 | | | | 2,129,401 | | | | 2,009,504 | | |
Benefits and expenses | | | | | | | | | | | | | | | | | |
Claims incurred, net of reinsurance | | | | 878,947 | | | | 761,792 | | | | 2,573,569 | | | | 2,129,401 | |
Operating expenses | | | 158,809 | | | | 136,882 | | | | 499,669 | | | | 403,629 | | | | 154,526 | | | | 158,809 | | | | 456,880 | | | | 499,669 | |
Total operating costs | | | 920,601 | | | | 816,892 | | | | 2,629,070 | | | | 2,413,133 | | | | 1,033,473 | | | | 920,601 | | | | 3,030,449 | | | | 2,629,070 | |
Interest expense | | | 2,096 | | | | 2,062 | | | | 5,813 | | | | 5,681 | | | | 2,016 | | | | 2,096 | | | | 6,225 | | | | 5,813 | |
Total benefits and expenses | | | 922,697 | | | | 818,954 | | | | 2,634,883 | | | | 2,418,814 | | | | 1,035,489 | | | | 922,697 | | | | 3,036,674 | | | | 2,634,883 | |
Income before taxes | | | 33,567 | | | | 19,856 | | | | 68,535 | | | | 115,730 | | | | 13,767 | | | | 33,567 | | | | 79,526 | | | | 68,535 | |
Income tax expense | | | 9,989 | | | | 5,910 | | | | 27,520 | | | | 36,075 | | | | 5,607 | | | | 9,989 | | | | 24,505 | | | | 27,520 | |
Net income | | | 23,578 | | | | 13,946 | | | | 41,015 | | | | 79,655 | | | | 8,160 | | | | 23,578 | | | | 55,021 | | | | 41,015 | |
Net loss attributable to non-controlling interest | | | (3 | ) | | | (2 | ) | | | (20 | ) | | | (10 | ) | | | 7 | | | | 3 | | | | 16 | | | | 20 | |
Net income attributable to Triple-S Management Corporation | | $ | 23,581 | | | $ | 13,948 | | | $ | 41,035 | | | $ | 79,665 | | | $ | 8,167 | | | $ | 23,581 | | | $ | 55,037 | | | $ | 41,035 | |
Earnings per share attributable to Triple-S Management Corporation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic net income per share | | $ | 1.02 | | | $ | 0.59 | | | $ | 1.77 | | | $ | 3.44 | | | $ | 0.35 | | | $ | 1.02 | | | $ | 2.35 | | | $ | 1.77 | |
Diluted net income per share | | $ | 1.02 | | | $ | 0.58 | | | $ | 1.76 | | | $ | 3.43 | | | $ | 0.35 | | | $ | 1.02 | | | $ | 2.34 | | | $ | 1.76 | |
SeeThe accompanying notes toare an integral part of these unaudited condensed consolidated interim financial statements.
Triple-S Management Corporation
Condensed Consolidated Interim Statements of Comprehensive Income (Loss) (Unaudited)
(dollar amounts in thousands)
| | Three months ended September 30, | | | Nine months ended September 30, | | | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Net income | | $ | 23,578 | | | $ | 13,946 | | | $ | 41,015 | | | $ | 79,655 | | | $ | 8,160 | | | $ | 23,578 | | | $ | 55,021 | | | $ | 41,015 | |
Other comprehensive income, net of tax: | | | | | | | | | | | | | | | | | |
Net unrealized change in fair value of available for sale securities, net of taxes | | | 4,743 | | | | 9,290 | | | | 32,023 | | | | 37,660 | | |
Other comprehensive income (loss), net of tax: | | | | | | | | | | | | | | | | | |
Net unrealized change in fair value of available-for-sale securities, net of taxes | | | | 421 | | | | 4,743 | | | | (13,869 | ) | | | 32,023 | |
Defined benefit pension plan: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Actuarial loss, net | | | 247 | | | | 61 | | | | 553 | | | | 173 | | | | 621 | | | | 247 | | | | 1,839 | | | | 553 | |
Total other comprehensive income, net of tax | | | 4,990 | | | | 9,351 | | | | 32,576 | | | | 37,833 | | |
Total other comprehensive income (loss), net of tax | | | | 1,042 | | | | 4,990 | | | | (12,030 | ) | | | 32,576 | |
Comprehensive income | | | 28,568 | | | | 23,297 | | | | 73,591 | | | | 117,488 | | | | 9,202 | | | | 28,568 | | | | 42,991 | | | | 73,591 | |
Comprehensive loss attributable to non-controlling interest | | | (3 | ) | | | (2 | ) | | | (20 | ) | | | (10 | ) | | | 7 | | | | 3 | | | | 16 | | | | 20 | |
Comprehensive income attributable to Triple-S Management Corporation | | $ | 28,571 | | | $ | 23,299 | | | $ | 73,611 | | | $ | 117,498 | | | $ | 9,209 | | | $ | 28,571 | | | $ | 43,007 | | | $ | 73,611 | |
SeeThe accompanying notes toare an integral part of these unaudited condensed consolidated interim financial statements.
Triple-S Management Corporation
Condensed Consolidated Interim Statements of Stockholders’ Equity (Unaudited)
(dollar amounts in thousands)
| | | Class A Common Stock | | | Class B Common Stock | | | Additional Paid-in Capital | | | Retained Earnings | | | Accumulated Other Comprehensive (Loss) Income
| | | Triple-S Management Corporation Stockholders’ Equity | | | Non-controlling Interest in Consolidated Subsidiary | | | Total Stockholders’ Equity | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2020 | | | $ | 0 | | | $ | 23,430 | | | $ | 57,399 | | | $ | 897,221 | | | $ | (9,820 | ) | | $ | 968,230 | | | $ | (717 | ) | | $ | 967,513 | |
Share-based compensation | | | | 0 | | | | 250 | | | | 932 | | | | 0 | | | | 0 | | | | 1,182 | | | | 0 | | | | 1,182 | |
Comprehensive income (loss) | | | | 0 | | | | 0 | | | | 0 | | | | 23,310 | | | | (15,944 | ) | | | 7,366 | | | | (3 | ) | | | 7,363 | |
Balance, March 31, 2021 | | | $ | 0 | | | $ | 23,680 | | | $ | 58,331 | | | $ | 920,531 | | | $ | (25,764 | ) | | $ | 976,778 | | | $ | (720 | ) | | $ | 976,058 | |
Share-based compensation | | | | 0 | | | | 137 | | | | 2,614 | | | | 0 | | | | 0 | | | | 2,751 | | | | 0 | | | | 2,751 | |
Repurchase and retirement of common stock | | | | 0 | | | | (21 | ) | | | (461 | ) | | | 0 | | | | 0 | | | | (482 | ) | | | 0 | | | | (482 | ) |
Comprehensive income (loss) | | | | 0 | | | | 0 | | | | 0 | | | | 23,560 | | | | 2,872 | | | | 26,432 | | | | (6 | ) | | | 26,426 | |
Balance, June 30, 2021 | | | $ | 0 | | | $ | 23,796 | | | $ | 60,484 | | | $ | 944,091 | | | $ | (22,892 | ) | | $ | 1,005,479 | | | $ | (726 | ) | | $ | 1,004,753 | |
Share-based compensation | | | | 0 | | | | 1 | | | | 3,030 | | | | 0 | | | | 0 | | | | 3,031 | | | | 0 | | | | 3,031 | |
Repurchase and retirement of common stock | | | | 0 | | | | (2 | ) | | | (43 | ) | | | 0 | | | | 0 | | | | (45 | ) | | | 0 | | | | (45 | ) |
Comprehensive income (loss) | | | | 0 | | | | 0 | | | | 0 | | | | 8,167 | | | | 1,042 | | | | 9,209 | | | | (7 | ) | | | 9,202 | |
Balance, September 30, 2021 | | | $ | 0 | | | $ | 23,795 | | | $ | 63,471 | | | $ | 952,258 | | | $ | (21,850 | ) | | $ | 1,017,674 | | | $ | (733 | ) | | $ | 1,016,941 | |
| | Class A Common Stock | | | Class B Common Stock | | | Additional Paid-in Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Income | | | Triple-S Management Corporation Stockholders’ Equity | | | Non-controlling Interest in Consolidated Subsidiary | | | Total Stockholders’ Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2019 | | $ | 0 | | | $ | 23,800 | | | $ | 60,504 | | | $ | 830,198 | | | $ | 29,363 | | | $ | 943,865 | | | $ | (693 | ) | | $ | 943,172 | | | $ | 0 | | | $ | 23,800 | | | $ | 60,504 | | | $ | 830,198 | | | $ | 29,363 | | | $ | 943,865 | | | $ | (693 | ) | | $ | 943,172 | |
Share-based compensation | | | 0 | | | | 590 | | | | 1,769 | | | | 0 | | | | 0 | | | | 2,359 | | | | 0 | | | | 2,359 | | | | 0 | | | | 590 | | | | 1,769 | | | | 0 | | | | 0 | | | | 2,359 | | | | 0 | | | | 2,359 | |
Repurchase and retirement of common stock | | | 0 | | | | (584 | ) | | | (8,511 | ) | | | 0 | | | | 0 | | | | (9,095 | ) | | | 0 | | | | (9,095 | ) | | | 0 | | | | (584 | ) | | | (8,511 | ) | | | 0 | | | | 0 | | | | (9,095 | ) | | | 0 | | | | (9,095 | ) |
Comprehensive (loss) income | | | 0 | | | | 0 | | | | 0 | | | | (26,145 | ) | | | 16,032 | | | | (10,113 | ) | | | (7 | ) | | | (10,120 | ) | |
Cummulative effect adjustment due to implementation of ASU 2016-13 | | | 0 | | | | 0 | | | | 0 | | | | (166 | ) | | | 0 | | | | (166 | ) | | | 0 | | | | (166 | ) | |
Comprehensive income (loss) | | | | 0 | | | | 0 | | | | 0 | | | | (26,145 | ) | | | 16,032 | | | | (10,113 | ) | | | (7 | ) | | | (10,120 | ) |
Cumulative effect adjustment due to implementation of ASU 2016-13 | | | | 0 | | | | 0 | | | | 0 | | | | (166 | ) | | | 0 | | | | (166 | ) | | | 0 | | | | (166 | ) |
Balance, March 31, 2020 | | $ | 0 | | | $ | 23,806 | | | $ | 53,762 | | | $ | 803,887 | | | $ | 45,395 | | | $ | 926,850 | | | $ | (700 | ) | | $ | 926,150 | | | $ | 0 | | | $ | 23,806 | | | $ | 53,762 | | | $ | 803,887 | | | $ | 45,395 | | | $ | 926,850 | | | $ | (700 | ) | | $ | 926,150 | |
Share-based compensation | | | 0 | | | | 7 | | | | 4,228 | | | | 0 | | | | 0 | | | | 4,235 | | | | 0 | | | | 4,235 | | | | 0 | | | | 7 | | | | 4,228 | | | | 0 | | | | 0 | | | | 4,235 | | | | 0 | | | | 4,235 | |
Repurchase and retirement of common stock | | | 0 | | | | (375 | ) | | | (5,618 | ) | | | 0 | | | | 0 | | | | (5,993 | ) | | | 0 | | | | (5,993 | ) | | | 0 | | | | (375 | ) | | | (5,618 | ) | | | 0 | | | | 0 | | | | (5,993 | ) | | | 0 | | | | (5,993 | ) |
Comprehensive income (loss) | | | 0 | | | | 0 | | | | 0 | | | | 43,599 | | | | 11,554 | | | | 55,153 | | | | (10 | ) | | | 55,143 | | | | 0 | | | | 0 | | | | 0 | | | | 43,599 | | | | 11,554 | | | | 55,153 | | | | (10 | ) | | | 55,143 | |
Balance, June 30, 2020 | | $ | 0 | | | $ | 23,438 | | | $ | 52,372 | | | $ | 847,486 | | | $ | 56,949 | | | $ | 980,245 | | | $ | (710 | ) | | $ | 979,535 | | | $ | 0 | | �� | $ | 23,438 | | | $ | 52,372 | | | $ | 847,486 | | | $ | 56,949 | | | $ | 980,245 | | | $ | (710 | ) | | $ | 979,535 | |
Share-based compensation | | | 0 | | | | 7 | | | | 1,842 | | | | 0 | | | | 0 | | | | 1,849 | | | | 0 | | | | 1,849 | | | | 0 | | | | 7 | | | | 1,842 | | | | 0 | | | | 0 | | | | 1,849 | | | | 0 | | | | 1,849 | |
Repurchase and retirement of common stock | | | 0 | | | | (15 | ) | | | (250 | ) | | | 0 | | | | 0 | | | | (265 | ) | | | 0 | | | | (265 | ) | | | 0 | | | | (15 | ) | | | (250 | ) | | | 0 | | | | 0 | | | | (265 | ) | | | 0 | | | | (265 | ) |
Comprehensive income (loss) | | | 0 | | | | 0 | | | | 0 | | | | 23,581 | | | | 4,990 | | | | 28,571 | | | | (3 | ) | | | 28,568 | | | | 0 | | | | 0 | | | | 0 | | | | 23,581 | | | | 4,990 | | | | 28,571 | | | | (3 | ) | | | 28,568 | |
Balance, September 30, 2020 | | $ | 0 | | | $ | 23,430 | | | $ | 53,964 | | | $ | 871,067 | | | $ | 61,939 | | | $ | 1,010,400 | | | $ | (713 | ) | | $ | 1,009,687 | | | $ | 0 | | | $ | 23,430 | | | $ | 53,964 | | | $
| 871,067 | | | $ | 61,939 | | | $ | 1,010,400 | | | $ | (713 | ) | | $ | 1,009,687 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2018 | | $ | 951 | | | $ | 21,980 | | | $ | 34,021 | | | $ | 761,970 | | | $ | 3,062 | | | $ | 821,984 | | | $ | (676 | ) | | $ | 821,308 | | |
Share-based compensation | | | 0 | | | | 177 | | | | 1,409 | | | | 0 | | | | 0 | | | | 1,586 | | | | 0 | | | | 1,586 | | |
Repurchase and retirement of common stock | | | 0 | | | | (1 | ) | | | (15 | ) | | | 0 | | | | 0 | | | | (16 | ) | | | 0 | | | | (16 | ) | |
Comprehensive income (loss) | | | 0 | | | | 0 | | | | 0 | | | | 34,786 | | | | 13,497 | | | | 48,283 | | | | (3 | ) | | | 48,280 | | |
Balance, March 31, 2019 | | $ | 951 | | | $ | 22,156 | | | $ | 35,415 | | | $ | 796,756 | | | $ | 16,559 | | | $ | 871,837 | | | $ | (679 | ) | | $ | 871,158 | | |
Share-based compensation | | | 0 | | | | 44 | | | | 4,276 | | | | 0 | | | | 0 | | | | 4,320 | | | | 0 | | | | 4,320 | | |
Comprehensive income (loss) | | | 0 | | | | 0 | | | | 0 | | | | 30,931 | | | | 14,985 | | | | 45,916 | | | | (5 | ) | | | 45,911 | | |
Balance, June 30, 2019 | | $ | 951 | | | $ | 22,200 | | | $ | 39,691 | | | $ | 827,687 | | | $ | 31,544 | | | $ | 922,073 | | | $ | (684 | ) | | $ | 921,389 | | |
Share-based compensation | | | 0 | | | | 1 | | | | 2,816 | | | | 0 | | | | 0 | | | | 2,817 | | | | 0 | | | | 2,817 | | |
Issuance of Common Stock | | | 48 | | | | 0 | | | | 1,151 | | | | 0 | | | | 0 | | | | 1,199 | | | | 0 | | | | 1,199 | | |
Stock dividend | | | 0 | | | | 1,133 | | | | 23,522 | | | | (24,655 | ) | | | 0 | | | | 0 | | | | 0 | | | | 0 | | |
Dividend | | | 0 | | | | 0 | | | | 0 | | | | (11 | ) | | | 0 | | | | (11 | ) | | | 0 | | | | (11 | ) | |
Common Stock Class A conversion to Class B | | | (999 | ) | | | 999 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | |
Comprehensive income (loss) | | | 0 | | | | 0 | | | | 0 | | | | 13,948 | | | | 9,351 | | | | 23,299 | | | | (2 | ) | | | 23,297 | | |
Balance, September 30, 2019 | | $ | 0 | | | $ | 24,333 | | | $ | 67,180 | | | $ | 816,969 | | | $ | 40,895 | | | $ | 949,377 | | | $ | (686 | ) | | $ | 948,691 | | |
SeeThe accompanying notes toare an integral part of these unaudited condensed consolidated interim financial statements.
Triple-S Management Corporation
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Dollar amounts in thousands)
| | Nine months ended September 30, | |
| | 2021 | | | 2020 | |
Cash flows from operating activities: | | | | | | |
Net income | | $ | 55,021 | | | $ | 41,015 | |
Adjustments to reconcile net income to net cash
| | | | | | | | |
provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 10,667 | | | | 10,855 | |
Net amortization of investments | | | 2,290 | | | | 2,151 | |
(Reversal) provision for doubtful receivables | | | (340 | ) | | | 2,229 | |
Deferred tax expense
| | | 8,635 | | | | 2,277 | |
Net realized investment (gains) losses on sale of securities | | | (3,746 | ) | | | 180 | |
Net unrealized (gains) losses on equity investments | | | (13,383 | ) | | | 17,428 | |
Interest credited to policyholder deposits | | | 4,874 | | | | 4,788 | |
Share-based compensation | | | 6,964 | | | | 8,443 | |
Gain on sale of property and equipment | | | 0 | | | | 154 | |
(Increase) decrease in assets: | | | | | | | | |
Premium and other receivables, net | | | (7,811 | ) | | | 26,038 | |
Deferred policy acquisition costs and value of business acquired | | | (5,474 | ) | | | (10,827 | ) |
Deferred taxes | | | 45 | | | | (109 | ) |
Other assets | | | (11,197 | ) | | | (29,831 | ) |
Increase (decrease) in liabilities: | | | | | | | | |
Claim liabilities | | | 11,406 | | | | 77,662 | |
Liability for future policy benefits | | | 23,011 | | | | 22,099 | |
Unearned premiums | | | 3,850 | | | | 2,307 | |
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs | | | (9,751 | ) | | | 10,093 | |
Accounts payable and accrued liabilities | | | 25,638 | | | | 36,729 | |
Net cash provided by operating activities | | | 100,699 | | | | 223,681 | |
(Continued)
Triple-S Management Corporation
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Dollar amounts in thousands)
| | Nine months ended September 30, | |
| | 2020 | | | 2019 | |
Cash flows from operating activities: | | | | | | |
Net income | | $ | 41,015 | | | $ | 79,655 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 10,855 | | | | 10,729 | |
Net amortization of investments | | | 2,151 | | | | 1,484 | |
Provision for doubtful receivables | | | 2,229 | | | | 2,476 | |
Deferred tax expense | | | 2,277 | | | | 14,570 | |
Net realized investment losses (gains) on sale of securities | | | 180 | | | | (4,766 | ) |
Net unrealized losses (gains) on equity investments | | | 17,428 | | | | (24,259 | ) |
Interest credited to policyholder deposits | | | 4,788 | | | | 4,414 | |
Share-based compensation | | | 8,443 | | | | 8,723 | |
Gain on sale of property and equipment | | | 154 | | | | 0 | |
Decrease (increase) in assets: | | | | | | | | |
Premium and other receivables, net | | | 26,038 | | | | 17,663 | |
Deferred policy acquisition costs and value of business acquired | | | (10,827 | ) | | | (20,004 | ) |
Deferred taxes | | | (109 | ) | | | 114 | |
Other assets | | | (29,831 | ) | | | (12,428 | ) |
Increase (decrease) in liabilities: | | | | | | | | |
Claim liabilities | | | 77,662 | | | | (134,798 | ) |
Liability for future policy benefits | | | 22,099 | | | | 19,769 | |
Unearned premiums | | | 2,307 | | | | 5,291 | |
Liability to Federal Employees' Health Benefits and Federal Employees' Programs | | | 10,093 | | | | 21 | |
Accounts payable and accrued liabilities | | | 36,729 | | | | 27,891 | |
Net cash provided by (used in) operating activities | | | 223,681 | | | | (3,455 | ) |
(Continued)
Triple-S Management Corporation
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(Dollar amounts in thousands)
| | Nine months ended September 30, | | |
| | 2020 | | | 2019 | | | Nine months ended September 30, | |
| | | | | | | | 2021 | | | 2020 | |
Cash flows from investing activities: | | | | | | | | | | | | |
Proceeds from investments sold or matured: | | | | | | | | | | | | |
Securities available for sale: | | | | | | | | | | | | |
Fixed maturities sold | | $ | 94,557 | | | $ | 365,383 | | |
Fixed maturities matured/called | | | 37,450 | | | | 19,017 | | |
Fixed-maturities sold | | | $ | 140,866 | | | $ | 94,557 | |
Fixed-maturities matured/called | | | | 18,271 | | | | 37,450 | |
Securities held to maturity: | | | | | | | | | | | | | | | | |
Fixed maturities matured/called | | | 1,079 | | | | 1,378 | | |
Fixed-maturities matured/called | | | | 747 | | | | 1,079 | |
Equity investments sold | | | 80,152 | | | | 126,134 | | | | 99,951 | | | | 80,152 | |
Other invested assets sold | | | 13,231 | | | | 3,379 | | | | 19,652 | | | | 13,231 | |
Acquisition of investments: | | | | | | | | | | | | | | | | |
Securities available for sale: | | | | | | | | | | | | | | | | |
Fixed maturities | | | (206,387 | ) | | | (397,956 | ) | |
Fixed-maturities | | | | (129,066 | ) | | | (206,387 | ) |
Securities held to maturity: | | | | | | | | | | | | | | | | |
Fixed maturities | | | (1,087 | ) | | | (748 | ) | |
Fixed-maturities | | | | (751 | ) | | | (1,087 | ) |
Equity investments | | | (201,324 | ) | | | (88,945 | ) | | | (199,046 | ) | | | (201,324 | ) |
Other invested assets | | | (25,442 | ) | | | (24,233 | ) | | | (9,317 | ) | | | (25,442 | ) |
Increase in other investments | | | (3,924 | ) | | | (2,710 | ) | | | (4,470 | ) | | | (3,924 | ) |
Net change in policy loans | | | 240 | | | | (1,097 | ) | | | (21 | ) | | | 240 | |
Net capital expenditures | | | (52,549 | ) | | | (14,746 | ) | | | (16,948 | ) | | | (52,549 | ) |
Capital contribution on equity method investees | | | (7,083 | ) | | | 0 | | | | 0 | | | | (7,083 | ) |
Net cash used in investing activities | | | (271,087 | ) | | | (15,144 | ) | | | (80,132 | ) | | | (271,087 | ) |
Cash flows from financing activities: | | | | | | | | | | | | | | | | |
Change in outstanding checks in excess of bank balances | | | 16,814 | | | | 3,808 | | | | 20,594 | | | | 16,814 | |
Net change in short-term borrowings | | | 28,500 | | | | 0 | | | | (30,000 | ) | | | 28,500 | |
Proceeds from long-term borrowings | | | 30,841 | | | | 0 | | | | 0 | | | | 30,841 | |
Repayments of long-term borrowings | | | (2,760 | ) | | | (2,425 | ) | | | (3,370 | ) | | | (2,760 | ) |
Repurchase and retirement of common stock | | | (14,980 | ) | | | (1 | ) | | | 0 | | | | (14,980 | ) |
Proceeds from policyholder deposits | | | 21,586 | | | | 15,060 | | | | 12,594 | | | | 21,586 | |
Surrenders of policyholder deposits | | | (12,829 | ) | | | (16,455 | ) | | | (8,665 | ) | | | (12,829 | ) |
Net cash provided by (used in) financing activities | | | 67,172 | | | | (13 | ) | |
Net increase (decrease) in cash and cash equivalents | | | 19,766 | | | | (18,612 | ) | |
Net cash (used in) provided by financing activities | | | | (8,847 | ) | | | 67,172 | |
Net increase in cash and cash equivalents | | | | 11,720 | | | | 19,766 | |
Cash and cash equivalents: | | | | | | | | | | | | | | | | |
Beginning of period | | | 109,837 | | | | 117,544 | | | | 110,989 | | | | 109,837 | |
End of period | | $ | 129,603 | | | $ | 98,932 | | | $ | 122,709 | | | $ | 129,603 | |
See accompanying notes to unaudited condensed consolidated interim financial statements.
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(Unaudited)
(1)1. | Basis of Presentation |
The accompanying condensed consolidated interim financial statements prepared by Triple-S Management Corporation (Triple-S, TSM, the Company, the Corporation, we, us or our) and its subsidiaries are unaudited. In this filing, the “Corporation”, the “Company”, “TSM”, “we”, “us” and “our” refer to Triple-S Management Corporation and its subsidiaries. The condensed consolidated interim financial statements do not include all of the information and the footnotes required by accounting principles generally accepted in the United States of America (GAAP or U.S. GAAP) for complete financial statement presentation pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, these condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
2020.
In the opinion of management, all adjustments, consisting of a normal recurring nature necessary for a fair presentation of such condensed consolidated interim financial statements, have been included. The results of operations for the three months and nine months ended September 30, 20202021 are not necessarily indicative of the results for the full year ending December 31, 2020.
2021.
(2)2. | Significant Accounting Policies |
Investments
Fixed maturities
Investment in debt securities at September 30, 2020 and December 31, 2019 consists mainly of obligations of government-sponsored enterprises, U.S. Treasury securities and obligations of U.S. government instrumentalities, municipal securities, corporate bonds, residential mortgage-backed securities, and collateralized mortgage obligations. The Company classifies its debt securities in one of two categories: available-for-sale or held-to-maturity. Securities classified as held-to-maturity are those securities in which the Company has the ability and intent to hold until maturity. All other securities not included in held-to-maturity are classified as available-for-sale.
Available-for-sale securities are recorded at fair value. The fair values of debt securities (both available-for-sale and held-to-maturity investments) are based on quoted market prices for those or similar investments at the reporting date. Held-to-maturity debt securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums and discounts, respectively. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are included in earnings and are determined on a specific identification basis.
Transfers of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains or losses associated with transfers of securities from held-to-maturity to available-for-sale are recorded as a separate component of other comprehensive income. The unrealized holding gains or losses included in the separate component of other comprehensive income for securities transferred from available-for-sale to held-to-maturity, are maintained and amortized into earnings over the remaining life of the security as an adjustment to yield in a manner consistent with the amortization or accretion of premium or discount on the associated security.
If a fixed maturity security is in an unrealized loss position and the Company does not have the intent to sell the fixed maturity security, or it is more likely than not that the Company will not have to sell the fixed maturity security before recovery of its amortized cost basis, the credit component of the impairment, if any, is recorded as an allowance for credit losses with an offsetting entry in the Company’s consolidated statements of earnings. The non-credit component of the impairment is recognized in other comprehensive income. Furthermore, unrealized losses entirely caused by non-credit related factors related to fixed maturity securities for which the Company expects to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive income.
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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
If a fixed maturity security is in an unrealized loss position and the Company has the intent to sell the fixed maturity security, or it is more likely than not that the Company will have to sell the fixed maturity security before recovery of its amortized cost basis, the Company will write off any previously recognized allowance for credit losses and will decrease the amortized cost basis of the security. If the allowance has been fully written off and the fair value is less than its amortized cost basis, the amortized cost basis is written down and an impairment loss is recognized in the Company’s consolidated statements of earnings. As of September 30, 2020, no allowance for credit losses was recorded in the condensed consolidated interim financial statements.
The credit component of the impairment is determined by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed maturity security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed maturity security at the date of acquisition. If there is an increase in the projected future cash flows of the fixed maturity security in subsequent periods, all or part of the allowance for credit losses may be reversed.
In addition, the Company considers the following factors when evaluating whether a credit loss exist: the reasons for the impairment, the severity of the impairment, market conditions, changes in the security’s rating, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
Premiums and discounts are amortized or accreted over the life of the related held-to-maturity or available-for-sale security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned.
The Company regularly invests in mortgaged-backed securities and other securities subject to prepayment and call risk. Significant changes in prevailing interest rates may adversely affect the timing and amount of cash flows on such securities. In addition, the amortization of market premium and accretion of market discount for mortgaged-backed securities is based on historical experience and estimates of future payment speeds on the underlying mortgage loans. Actual prepayment speeds may differ from original estimates and may result in material adjustments to amortization or accretion recorded in future periods.
Equity investments
Investment in equity securities at September 30, 2020 and December 31, 2019 consists of mutual funds whose underlying assets are comprised of domestic equity securities, international equity securities and higher risk fixed income instruments. Equity investments are recorded at fair value. The fair values of equity investments are mainly based on quoted market prices for those or similar investments at the reporting date. For a specific equity investment, the fair value is estimated using the net asset value (NAV) of the Company’s ownership interest in the partnership. Unrealized holding gains and losses on equity investments are included in earnings. Realized gains and losses from the sale of equity investments are included in earnings and are determined on a specific identification basis.
Other invested assets
Other invested assets at September 30, 2020 and December 31, 2019 consist mainly of alternative investments in partnerships that invest in several private debt and private equity funds. Portfolios are diversified by vintage year, stage, geography, business sectors and number of investments. These investments are not redeemable with the funds. Distributions from each fund are received as the underlying investments of the funds are liquidated. It is estimated that the underlying assets of the funds will be liquidated in the next 5 to 12 years. The fair value of the investments in this class have been estimated using the net asset value (NAV) of the Company’s ownership interest in the partnerships. Total unfunded capital commitments for these positions as of September 30, 2020 amounted to $57,762. The remaining average commitments period is approximately three years.
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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
Health Insurance Providers Fee
The Patient Protection and Affordable Care Act (ACA) as amended by the Health Care and Education Reconciliation Act mandates an annual Health Insurance Providers Fee (HIP Fee). The annual HIP Fee becomes payable to the U.S. Treasury once the entity provides health insurance for any U.S. health risk each applicable calendar year. The initial estimated annual fee is accrued as of January 1, with a corresponding deferred cost that is amortized over 12 months on a straight-line basis. The fee payment is due on September 30 of each year. The deferred cost is included within the other asset line item and the accrued fee is included within the accounts payable and accrued liabilities line item in the accompanying condensed consolidated balance sheets. The fee is presented within operating expenses in the accompanying condensed consolidated statements of earnings. The HIP Fee was waived for all health insurance providers during the year ended December 31, 2019. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 and the Further Consolidated Appropriations Act of 2020, signed into law on December 20, 2019, repealed the HIP Fee effective calendar years beginning after December 31, 2020. As of September 30, 2020, the HIP Fee deferred cost amounted to $12,139. During the quarter ended September 30, 2020, the Company made the corresponding payment amounting to $55,514. As of December 31, 2019, 0 balance was deferred or accrued for the HIP Fee.
Recently Adopted Accounting Standards
On June 16, 2016,August 28, 2018, the Financial Accounting Standards Board (FASB) issued guidance for Compensation – Retirement Benefits – Defined Benefit Plans – General which addresses changes to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In addition, on April 25, 2019, the FASB issued Accounting Standard Update (ASU) 2019-04: Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.disclosure requirement for defined benefit plans. The amendments in this update represent changesguidance modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Specifically, the guidance removes certain disclosure requirements, including the amounts of accumulated other comprehensive income expected to clarify, correct errors in or improvebe recognized as components of net periodic benefit cost over the codification. Such amendments should makenext fiscal year, related-party disclosures concerning the codification easier to understandamount of future annual benefits covered by insurance and easier to apply by eliminating inconsistenciesannuity contracts and providing clarifications. Withinsignificant transactions between the clarifications wasemployer and related-parties and the FASB’s intent to include all reinsurance recoverables withinplan, and adds other disclosures including the scope of ASU 2016-13 (Topic 326). For public companies,weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates, and an explanation for the improvementsreasons for significant gains and losses related to ASU 2016-13 (Topic 326) and ASU 2016-01 (Topic 825) are effectivechanges in the benefit obligation for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.the period. The Company adopted the standard effective January 1, 2020 and recognized $166, net of deferred tax asset, as a cumulative effect adjustment to the opening balance of retained earnings on the adoption date.
On January 26, 2017, the FASB issued guidance to simplify the manner in which an entity is required to evaluate goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this guidance, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, this guidance removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. For public companies, these amendments, which should be applied on a prospective basis, are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the standard effective January 1, 2020. Upon adoption of this standard, if the carrying amount of any of the reporting units exceeds its fair value, the Company will be required to record an impairment charge for the difference up to the amount of the goodwill.
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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
On August 27, 2018, the FASB issued guidance for Fair Value Measurement – Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement. This update focuses on improving the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each entity’s financial statements. Specifically, certain disclosure requirements are removed (the amount of, and reasons for, transfer between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; the valuation processes for Level 3 fair value measurements) while certain other disclosures are modified and added (changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements). The amendments regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent period in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. For public companies, these amendments will be applied for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the standard effective January 1, 2020.2021. The adoption of this guidance did not have a material impact on the presentation and disclosures of the Company’s condensed consolidated interim financial statements.
On August 29, 2018,December 18, 2019, the FASB issued guidanceAccounting Standards Update (ASU) 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Intangibles – Goodwill and Other – Internal-Use Software. Guidance addresses customers’ accounting for implemented costs incurredIncome Taxes. The amendments in a cloud computing arrangement that is a service contract and aims to reduce complexity inthis update simplify the accounting for costs of implementingincome taxes by removing certain exceptions to the general principles in Topic 740. Also, the amendments simplify the accounting for income taxes by requiring the following: (1) that an entity recognize a cloud computing service arrangement. The amendments require a customer in a hosting arrangementfranchise tax that is partially based on income in accordance with Topic 740 and account for any incremental amount incurred as a service contract to determine which implementation costs to capitalize asnon-income-based tax; (2) that an asset related toentity evaluate when a step-up in the service contract and which costs to expense. Additionally, it requires the customer to expense the capitalized implementation costs over the termtax basis of Goodwill should be considered part of the hosting arrangement. For public companies, these amendments willbusiness combination in which the book goodwill was originally recognized and when it should instead be applied onconsidered a prospective basis, for fiscal years beginning after December 15, 2019, includingseparate transaction; and (3) that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim periods within those fiscal years.period that included the enactment date. The Company adopted the standard effective January 1, 2020.2021. The adoption of this guidance did not have a material impact on the results of the Company’s condensed consolidated interim financial statements.
On January 16, 2020, the FASB issued guidance to clarify the interaction between the accounting standards on recognition and measurement of financial instruments in Topic 321: Investments – Equity Securities, the one on equity method investments in Topic 323: Investments – Equity Method and Joint Ventures, and forward contracts and purchased options in Topic 815: Derivatives and Hedging. The amendments clarify that upon an increase or decrease in level of ownership or degree of influence, a company should remeasure the interest held in the investee to take into account observable transactions immediately before applying or discontinuing the equity method of accounting under Topic 323. The guidance also clarifies that an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchase option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option. The Company adopted the standard effective January 1, 2021. The adoption of this guidance did not have a material impact on the results of the Company’s consolidated financial statements.
Future AdoptionAdoptions of Accounting Standards
On March 12, 2020,January 7, 2021, the FASB issued ASU 2020-04:2021-01: Reference Rate Reform (Topic 848): FacilitationScope Refinement – to clarify the scope of the Effectsrecent reference reform guidance in Topic 848. This ASU refines the scope of Reference Rate Reform on Financial Reporting. The ASU was issuedTopic 848 and clarifies that certain optional expedients and exceptions therein for contract modifications and hedge accounting apply to provide optional guidance, for a limited time,contracts that are affected by the discounting transition. Specifically, modifications related to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting.would not be considered an event that requires reassessment of previous accounting conclusions. The amendments, which are elective and apply to all entities, provideASU also amends the expedients and exceptions for applying U.S. GAAPin Topic 848 to contract modificationscapture the incremental consequences of the scope clarification and hedging relationshipsto tailor the existing guidance to derivative instruments affected by reference rate reform if certain criteria are met.the discounting transition. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate that is expected to be discontinued due to reference rate reform. Becausein the guidance is intended to assist stakeholders during the global market-wide reference rate transition period, it is in effectASU are effective immediately for a limited time, from March 12, 2020 through December 31, 2022.all entities. The Company is currently in the process of identifying its LIBOR-based contracts that will be impactedaffected by the phase-out of LIBOR and expects to utilizeuse the optional expedients provided in this ASU.
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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
Other than the accounting pronouncements disclosed above, there were no other new accounting pronouncements issued during the three months and nine months ended September 30, 20202021 that could have a material impact on the Company’s financial position, operating results or financials statement disclosures.
(3)3. | Investment in Securities |
The amortized cost for debt securities and cost for alternative investments, gross unrealized gains gross unrealizedand losses, and estimated fair value for the Company’s investments in securities by major security type and class of security atas of September 30, 20202021, and December 31, 2019,2020, were as follows:
| | September 30, 2020 | | September 30, 2021 | |
| | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value | |
| | | | | | | | | | | | | | | | | | | | |
Fixed maturities available for sale | | | | | | | | | | | | | |
Obligations of government- sponsored enterprises | | $ | 36,762 | | | $ | 784 | | | $ | (29 | ) | | $ | 37,517 | | |
Fixed-maturities available-for-sale | | | | | | | | | |
Obligations of government-sponsored enterprises | | | $ | 21,303 | | | $ | 294 | | | $ | (53 | ) | | $ | 21,544 | |
U.S. Treasury securities and obligations of U.S. government instrumentalities | | | 103,483 | | | | 8,747 | | | | 0 | | | | 112,230 | | | | 104,546 | | | | 5,367 | | | | (4 | ) | | | 109,909 | |
Municipal securities | | | 628,689 | | | | 56,009 | | | | (126 | ) | | | 684,572 | | | | 611,211 | | | | 40,598 | | | | (853 | ) | | | 650,956 | |
Corporate bonds | | | 195,293 | | | | 31,863 | | | | 0 | | | | 227,156 | | | | 177,640 | | | | 23,510 | | | | (69 | ) | | | 201,081 | |
Residential mortgage-backed securities | | | 263,715 | | | | 17,230 | | | | (376 | ) | | | 280,569 | | | | 284,745 | | | | 16,807 | | | | (546 | ) | | | 301,006 | |
Collateralized mortgage obligations | | | 19,275 | | | | 726 | | | | (45 | ) | | | 19,956 | | | | 5,301 | | | | 437 | | | | 0 | | | | 5,738 | |
Total fixed maturities available for sale | | $ | 1,247,217 | | | $ | 115,359 | | | $ | (576 | ) | | $ | 1,362,000 | | |
Total fixed-maturities available-for-sale | | | $ | 1,204,746 | | | $ | 87,013 | | | $ | (1,525 | ) | | $ | 1,290,234 | |
| | December 31, 2019 | | | December 31, 2020 | |
| | Amortized Cost | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Estimated Fair Value | | | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Fixed maturities available for sale | | | | | | | | | | | | | |
Obligations of government- sponsored enterprises | | $ | 17,209 | | | $ | 477 | | | $ | 0 | | | $ | 17,686 | | |
Fixed-maturities available-for-sale | | | | | | | | | | | | | |
Obligations of government-sponsored enterprises | | | $ | 24,496 | | | $ | 665 | | | $ | (9 | ) | | $ | 25,152 | |
U.S. Treasury securities and obligations of U.S. government instrumentalities | | | 102,230 | | | | 4,779 | | | | 0 | | | | 107,009 | | | | 103,694 | | | | 7,993 | | | | 0 | | | | 111,687 | |
Municipal securities | | | 595,051 | | | | 34,735 | | | | (22 | ) | | | 629,764 | | | | 646,961 | | | | 54,067 | | | | 0 | | | | 701,028 | |
Corporate bonds | | | 187,096 | | | | 21,721 | | | | (74 | ) | | | 208,743 | | | | 189,516 | | | | 30,280 | | | | 0 | | | | 219,796 | |
Residential mortgage-backed securities | | | 262,783 | | | | 8,073 | | | | (320 | ) | | | 270,536 | | | | 249,801 | | | | 21,487 | | | | (57 | ) | | | 271,231 | |
Collateralized mortgage obligations | | | 8,674 | | | | 471 | | | | 0 | | | | 9,145 | | | | 12,954 | | | | 638 | | | | (21 | ) | | | 13,571 | |
Total fixed maturities available for sale | | $ | 1,173,043 | | | $ | 70,256 | | | $ | (416 | ) | | $ | 1,242,883 | | |
Total fixed-maturities available-for-sale | | | $ | 1,227,422 | | | $ | 115,130 | | | $ | (87 | ) | | $ | 1,342,465 | |
| | September 30, 2020 | |
| | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | |
| | | | | | | | | | | | |
Fixed maturities held to maturity | | | | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government instrumentalities | | $ | 614 | | | $ | 217 | | | $ | 0 | | | $ | 831 | |
Residential mortgage-backed securities | | | 165 | | | | 6 | | | | 0 | | | | 171 | |
Certificates of deposit | | | 1,088 | | | | 0 | | | | 0 | | | | 1,088 | |
Total | | $ | 1,867 | | | $ | 223 | | | $ | 0 | | | $ | 2,090 | |
| | December 31, 2019 | |
| | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | |
Securities held to maturity | | | | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government instrumentalities | | $ | 615 | | | $ | 158 | | | $ | 0 | | | $ | 773 | |
Residential mortgage-backed securities | | | 165 | | | | 1 | | | | 0 | | | | 166 | |
Certificates of deposit | | | 1,080 | | | | 0 | | | | 0 | | | | 1,080 | |
Total | | $ | 1,860 | | | $ | 159 | | | $ | 0 | | | $ | 2,019 | |
| | September 30, 2020 | |
| | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | |
| | | | | | | | | | | | |
Other invested assets - Alternative investments | | $ | 110,532 | | | $ | 3,795 | | | $ | (3,562 | ) | | $ | 110,765 | |
| | December 31, 2019 | |
| | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | |
| | | | | | | | | | | | |
Other invested assets - Alternative investments | | $ | 97,575 | | | $ | 3,721 | | | $ | (788 | ) | | $ | 100,508 | |
14Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(Unaudited)
| | September 30, 2021 | |
| | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | |
Fixed-maturities held-to-maturity | | | | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government instrumentalities | | $ | 613 | | | $ | 154 | | | $ | 0 | | | $ | 767 | |
Residential mortgage-backed securities | | | 164 | | | | 8 | | | | 0 | | | | 172 | |
Certificates of deposit | | | 1,093 | | | | 0 | | | | 0 | | | | 1,093 | |
Total fixed-maturities held-to-maturity | | $ | 1,870 | | | $ | 162 | | | $ | 0 | | | $ | 2,032 | |
| | December 31, 2020 | |
| | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | |
Fixed-maturities held-to-maturity | | | | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government instrumentalities | | $ | 614 | | | $ | 201 | | | $ | 0 | | | $ | 815 | |
Residential mortgage-backed securities | | | 164 | | | | 17 | | | | 0 | | | | 181 | |
Certificates of deposit | | | 1,089 | | | | 0 | | | | 0 | | | | 1,089 | |
Total fixed-maturities held-to-maturity | | $ | 1,867 | | | $ | 218 | | | $ | 0 | | | $ | 2,085 | |
| | September 30, 2021 | |
| | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | |
| | | �� | | | | | | | | | |
Other invested assets - Alternative investments | | $ | 105,151 | | | $ | 17,908 | | | $ | (3,663 | ) | | $ | 119,396 | |
| | December 31, 2020 | |
| | Amortized cost | | | Gross unrealized gains | | | Gross unrealized losses | | | Estimated fair value | |
| | | | | | | | | | | | |
Other invested assets - Alternative investments | | $ | 112,171 | | | $ | 6,119 | | | $ | (3,385 | ) | | $ | 114,905 | |
Corporate bonds: The unrealized losses of these bonds were mainly caused by fluctuations in interest rates and general market conditions. All corporate bonds with an unrealized loss have investment grade ratings. The Company does not consider these investments to be credit-impaired because of several factors: the decline in fair value is attributable to changes in interest rates and not credit quality; the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity; and because the Company expects to collect all contractual cash flows.
Residential mortgage-backed securities and Collateral mortgage obligations:securities: The unrealized losses on these investments were mostly caused by fluctuations in interest rates and credit spreads. The contractual cash flows of these securities are guaranteed by a U.S. government-sponsored enterprise. Any loss in these securities is determined according to the seniority level of each tranche, with the least senior, (or most junior), typically the unrated residual tranche, taking any initial loss. The investment grade credit rating of our securities reflects the seniority of the securities that the Company owns. The Company does not consider these investments to be credit impairedcredit-impaired because of several factors: the decline in fair value is attributable to changes in interest rates;rates and not credit quality; the Company does not intend to sell the investments and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost basis, which may be at maturity; and because the Company expects to collect all contractual cash flows.
Alternative investments:Investments: As of September 30, 2020,2021, alternative investments with unrealized losses arewere not considered credit impairedcredit-impaired based on market conditions.
Maturities of investment securities classified as available for saleavailable-for-sale and held to maturityheld-to-maturity were as follows:
| | September 30, 2020 | |
| | Amortized cost | | | Estimated fair value | |
Fixed maturities available for sale | | | | | | |
Due in one year or less | | $ | 33,764 | | | $ | 34,244 | |
Due after one year through five years | | | 564,825 | | | | 610,357 | |
Due after five years through ten years | | | 204,234 | | | | 220,251 | |
Due after ten years | | | 161,404 | | | | 196,623 | |
Residential mortgage-backed securities | | | 263,715 | | | | 280,569 | |
Collateralized mortgage obligations | | | 19,275 | | | | 19,956 | |
| | $ | 1,247,217 | | �� | $ | 1,362,000 | |
Fixed maturities held to maturity | | | | | | | | |
Due in one year or less | | $ | 1,088 | | | $ | 1,088 | |
Due after ten years | | | 614 | | | | 831 | |
Residential mortgage-backed securities | | | 165 | | | | 171 | |
| | $ | 1,867 | | | $ | 2,090 | |
| | September 30, 2021 | |
| | Amortized cost | | | Estimated fair value | |
Fixed-maturities available-for-sale | | | | | | |
Due in one year or less | | $ | 60,380 | | | $ | 61,218 | |
Due after one year through five years | | | 572,854 | | | | 605,722 | |
Due after five years through ten years | | | 149,432 | | | | 157,360 | |
Due after ten years | | | 132,034 | | | | 159,190 | |
Residential mortgage-backed securities | | | 284,745 | | | | 301,006 | |
Collateralized mortgage obligations | | | 5,301 | | | | 5,738 | |
| | $ | 1,204,746 | | | $ | 1,290,234 | |
Fixed-maturities held-to-maturity | | | | | | | | |
Due in one year or less | | $ | 1,093 | | | $ | 1,093 | |
Due after ten years | | | 613 | | | | 767 | |
Residential mortgage-backed securities | | | 164 | | | | 172 | |
| | $ | 1,870 | | | $ | 2,032 | |
Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.
InvestmentsOn September 30, 2021 and December 31, 2020 investments with an amortized cost of $232,818$207,890 and $145,981 and a fair$227,890 (fair value of $252,601$223,930 and $152,916 at September 30, 2020 and December 31, 2019,$250,088), respectively, were pledged with the Federal Home Loan Bank of New York (FHLBNY) to secure short-term borrowings.
(4)4. | Realized and Unrealized Gains (Losses) |
Information regarding realized and unrealized gains and losses from investments is as follows:
| | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Realized gains (losses) | | | | | | | | | | | | |
Fixed maturity securities: | | | | | | | | | | | | |
Securities available for sale: | | | | | | | | | | | | |
Gross gains | | $ | 402 | | | $ | 950 | | | $ | 1,953 | | | $ | 3,597 | |
Gross losses | | | (1 | ) | | | 0 | | | | (7 | ) | | | (319 | ) |
Total fixed securities | | | 401 | | | | 950 | | | | 1,946 | | | | 3,278 | |
Equity investments: | | | | | | | | | | | | | | | | |
Gross gains | | | 67 | | | | 401 | | | | 1,057 | | | | 2,532 | |
Gross losses | | | (479 | ) | | | (443 | ) | | | (3,249 | ) | | | (1,488 | ) |
Gross losses from impaired securities | | | 0 | | | | 0 | | | | (678 | ) | | | 0 | |
Total equity investments | | | (412 | ) | | | (42 | ) | | | (2,870 | ) | | | 1,044 | |
Other invested assets: | | | | | | | | | | | | | | | | |
Gross gains | | | 518 | | | | 179 | | | | 744 | | | | 500 | |
Gross losses | | | 0 | | | | 0 | | | | 0 | | | | (56 | ) |
Total other invested assets | | | 518 | | | | 179 | | | | 744 | | | | 444 | |
Net realized investment gains (losses) | | $ | 507 | | | $ | 1,087 | | | $ | (180 | ) | | $ | 4,766 | |
| | Three months ended | | | Nine months ended | |
| | September 30, | | | September 30, | |
| | 2021
| | | 2020
| | | 2021
| | | 2020
| |
Realized gains (losses) | | | | | | | | | | | | |
Fixed-maturity securities | | | | | | | | | | | | |
Fixed-maturities available-for-sale | | | | | | | | | | | | |
Gross gains | | $ | 0 | | | $ | 402 | | | $ | 90 | | | $ | 1,953 | |
Gross losses | | | (138 | ) | | | (1 | ) | | | (1,104 | ) | | | (7 | ) |
Total fixed-maturity securities | | | (138 | ) | | | 401 | | | | (1,014 | ) | | | 1,946 | |
Equity investments | | | | | | | | | | | | | | | | |
Gross gains | | | 238 | | | | 67 | | | | 2,121 | | | | 1,057 | |
Gross losses | | | (19 | ) | | | (479 | ) | | | (438 | ) | | | (3,249 | ) |
Gross losses from impaired securities | | | 0 | | | | 0 | | | | 0 | | | | (678 | ) |
Total equity investments | | | 219 | | | | (412 | ) | | | 1,683 | | | | (2,870 | ) |
Other invested assets | | | | | | | | | | | | | | | | |
Gross gains | | | 934 | | | | 518 | | | | 3,077 | | | | 744 | |
Total other invested assets | | | 934 | | | | 518 | | | | 3,077 | | | | 744 | |
Net realized gains (losses) on securities | | $ | 1,015 | | | $ | 507 | | | $ | 3,746 | | | $ | (180 | ) |
The gross losses from impaired securities during the nine months ended September 30, 2020 isare related to an equity method investment held by the Company.
| | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Changes in net unrealized gains (losses): | | | | | | | | | | | | |
Recognized in accumulated other comprehensive income (loss): | | | | | | | | | | | | |
Fixed maturities – available for sale | | $ | 4,705 | | | $ | 11,544 | | | $ | 44,943 | | | $ | 48,095 | |
Other invested assets | | | 1,498 | | | | 686 | | | | (2,700 | ) | | | 1,358 | |
| | $ | 6,203 | | | $ | 12,230 | | | $ | 42,243 | | | $ | 49,453 | |
Not recognized in the consolidated financial statements: | | | | | | | | | | | | | | | | |
Fixed maturities – held to maturity | | $ | (6 | ) | | $ | 14 | | | $ | 64 | | | $ | 50 | |
| Three months ended September 30, | | Nine months ended September 30, | |
| 2021 | | 2020 | | 2021 | | 2020 | |
Changes in net unrealized gains (losses): | | | | | | | | |
Recognized in accumulated other comprehensive income (loss): | | | | | | | | |
Fixed-maturities – available-for-sale | | $ | (3,742 | ) | | $ | 4,705 | | | $ | (29,555 | ) | | $ | 44,943 | |
Other invested assets | | | 4,136 | | | | 1,498 | | | | 11,511 | | | | (2,700 | ) |
| | $ | 394 | | | $ | 6,203 | | | $ | (18,044 | ) | | $ | 42,243 | |
Not recognized in the consolidated financial statements: | | | | | | | | | | | | | | | | |
Fixed-maturities – held-to-maturity | | $ | (11 | ) | | $ | (6 | ) | | $ | (56 | ) | | $ | 64 | |
The change in deferred tax liabilityasset (liability) on unrealized gains (losses) recognized in accumulated other comprehensive incomeAccumulated Other Comprehensive Income during the nine months ended September 30, 20202021 and 20192020 was $8,4463,212 and $9,8928,446, respectively.
As of September 30, 2020,2021 and December 31, 2019,2020, 0 individual investment in securities exceeded 10% of stockholders’ equity.
(5)5. | Premiums and Other Receivables, Net |
Premiums and other receivables, netOther Receivables, Net were as follows:
| | September 30, 2020 | | | December 31, 2019 | |
Premium | | $ | 135,133 | | | $ | 188,861 | |
Self-funded group receivables | | | 26,310 | | | | 28,672 | |
FEHBP | | | 14,499 | | | | 13,894 | |
Agent balances | | | 34,224 | | | | 30,784 | |
Accrued interest | | | 9,753 | | | | 11,307 | |
Reinsurance recoverable | | | 222,966 | | | | 239,767 | |
Other | | | 153,839 | | | | 110,952 | |
| | | 596,724 | | | | 624,237 | |
Less allowance for doubtful receivables: | | | | | | | | |
Premium | | | 37,489 | | | | 36,622 | |
Other | | | 12,276 | | | | 19,923 | |
| | | 49,765 | | | | 56,545 | |
Total premium and other receivables, net | | $ | 546,959 | | | $ | 567,692 | |
| | September 30, 2021 | | | December 31, 2020 | |
Premiums | | $ | 177,298 | | | $ | 106,322 | |
Self-funded group receivables | | | 27,767 | | | | 26,412 | |
FEHBP | | | 15,002 | | | | 12,830 | |
Agent balances | | | 30,235 | | | | 31,509 | |
Accrued interest | | | 9,206 | | | | 10,418 | |
Reinsurance recoverable | | | 157,665 | | | | 216,314 | |
Other | | | 128,988 | | | | 135,774 | |
| | | 546,161 | | | | 539,579 | |
Less allowance for doubtful receivables: | | | | | | | | |
Premiums | | | 34,433 | | | | 37,231 | |
Other | | | 15,251 | | | | 13,508 | |
| | | 49,684 | | | | 50,739 | |
Total premium and other receivables, net | | $ | 496,477 | | | $ | 488,840 | |
As of September 30, 2020,2021 and December 31, 2019,2020, the Company had premiums and other receivables of $71,322$70,372 and $49,176,$53,397, respectively, from the Government of Puerto Rico, including its agencies, municipalities and public corporations. The related allowance for doubtful receivables as of September 30, 20202021 and December 31, 20192020 were $24,268$20,164 and $22,091,$23,752, respectively.
(6) | Property and Equipment, Net |
Reinsurance recoverable as of September 30, 2021 and December 31, 2020 includes $115,160 and $172,021, respectively, related to catastrophe losses covered by the Property and Casualty segment’s reinsurance program.
Property and equipment, net are composed of the following:
| | September 30, | | | December 31, | |
| | 2020 | | | 2019 | |
| | | | | | |
Land | | $ | 15,867 | | | $ | 10,976 | |
Buildings and leasehold improvements | | | 125,239 | | | | 92,752 | |
Office furniture and equipment | | | 32,062 | | | | 27,878 | |
Computer equipment and software | | | 135,456 | | | | 133,922 | |
Automobiles | | | 671 | | | | 761 | |
| | | 309,295 | | | | 266,289 | |
Less accumulated depreciation and amortization | | | 179,075 | | | | 177,701 | |
Property and equipment, net | | $ | 130,220 | | | $ | 88,588 | |
On June 19, 2020, the Company acquired a 9-story office building (the Building), located at 1451 F.D. Roosevelt Avenue, in San Juan, Puerto Rico, as well as the adjoining multi-level parking structure and a parking lot. See Note 9 for further information on the credit agreement obtained to partially finance the acquisition of the Building.
|
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
(7)6. | Fair Value Measurements |
Our condensed consolidated balance sheetsConsolidated Balance Sheets include the following financial instruments: securities available for sale,fixed-maturities available-for-sale, equity investments, policy loans, policyholder deposits, short-term borrowings and long-term borrowings. We consider the carrying amounts of policy loans, policyholder deposits, short-term borrowings and long-term borrowings to approximate their fair value and are considered Level 2 financial instruments. Certain assets are measured at fair value on a recurring basis and are disclosed below. These assets are classified into one of three levels of a hierarchy defined by GAAP. For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see the consolidated financial statements and notes thereto included in our 20192020 Annual Report on Form 10-K.
The following tables summarize fair value measurements by level for assets measured at fair value on a recurring basis:
| | September 30, 2020 | | | September 30, 2021 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Fixed maturity securities available for sale | | | | | | | | | | | | | |
Fixed-maturities available-for-sale | | | | | | | | | | | | | |
Obligations of government-sponsored enterprises | | $ | 0 | | | $ | 37,517 | | | $ | 0 | | | $ | 37,517 | | | $ | 0 | | | $ | 21,544 | | | $ | 0 | | | $ | 21,544 | |
U.S. Treasury securities and obligations of U.S government instrumentalities | | | 112,230 | | | | 0 | | | | 0 | | | | 112,230 | | |
U.S. Treasury securities and obligations of U.S. government instrumentalities | | | | 109,909 | | | | 0 | | | | 0 | | | | 109,909 | |
Municipal securities | | | 0 | | | | 684,572 | | | | 0 | | | | 684,572 | | | | 0 | | | | 650,956 | | | | 0 | | | | 650,956 | |
Corporate bonds | | | 0 | | | | 227,156 | | | | 0 | | | | 227,156 | | | | 0 | | | | 201,081 | | | | 0 | | | | 201,081 | |
Residential agency mortgage-backed securities | | | 0 | | | | 280,569 | | | | 0 | | | | 280,569 | | | | 0 | | | | 301,006 | | | | 0 | | | | 301,006 | |
Collateralized mortgage obligations | | | 0 | | | | 19,956 | | | | 0 | | | | 19,956 | | | | 0 | | | | 5,738 | | | | 0 | | | | 5,738 | |
Total fixed maturities | | $ | 112,230 | | | $ | 1,249,770 | | | $ | 0 | | | $ | 1,362,000 | | |
Total fixed-maturities available-for-sale | | | $ | 109,909 | | | $ | 1,180,325 | | | $ | 0 | | | $ | 1,290,234 | |
Equity investments | | $ | 197,864 | | | $ | 186,048 | | | $ | 5,166 | | | $ | 389,078 | | | $ | 276,531 | | | $ | 236,893 | | | $ | 5,341 | | | $ | 518,765 | |
| | December 31, 2019 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| | | | | | | | | | | | |
Fixed maturity securities available for sale | | | | | | | | | | | | |
Obligations of government-sponsored enterprises | | $ | 0 | | | $ | 17,686 | | | $ | 0 | | | $ | 17,686 | |
U.S. Treasury securities and obligations of U.S government instrumentalities | | | 107,009 | | | | 0 | | | | 0 | | | | 107,009 | |
Municipal securities | | | 0 | | | | 629,764 | | | | 0 | | | | 629,764 | |
Corporate bonds | | | 0 | | | | 208,743 | | | | 0 | | | | 208,743 | |
Residential agency mortgage-backed securities | | | 0 | | | | 270,536 | | | | 0 | | | | 270,536 | |
Collateralized mortgage obligations | | | 0 | | | | 9,145 | | | | 0 | | | | 9,145 | |
Total fixed maturities | | $ | 107,009 | | | $ | 1,135,874 | | | $ | 0 | | | $ | 1,242,883 | |
Equity investments | | $ | 177,136 | | | $ | 105,180 | | | $ | 5,209 | | | $ | 287,525 | |
There were 0 transfers between Levels 1 and 2 during the three and nine months ended September 30, 2020 and the year ended December 31, 2019.
|
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months and nine months ended September 30 is as follows:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | | | | | | |
| | Three months ended | | | Nine months ended | |
| | September 30, 2020 | | | September 30, 2020 | |
Beginning Balance | | $ | 5,237 | | | $ | 5,209 | |
Unrealized in other accumulated comprehensive income | | | (71 | ) | | | (43 | ) |
Ending Balance | | $ | 5,166 | | | $ | 5,166 | |
| | December 31, 2020 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| | | | | | | | | | | | |
Fixed-maturities available-for-sale | | | | | | | | | | | | |
Obligations of government-sponsored enterprises | | $ | 0 | | | $ | 25,152 | | | $ | 0 | | | $ | 25,152 | |
U.S. Treasury securities and obligations of U.S. government instrumentalities | | | 111,687 | | | | 0 | | | | 0 | | | | 111,687 | |
Municipal securities | | | 0 | | | | 701,028 | | | | 0 | | | | 701,028 | |
Corporate bonds | | | 0 | | | | 219,796 | | | | 0 | | | | 219,796 | |
Residential agency mortgage-backed securities | | | 0 | | | | 271,231 | | | | 0 | | | | 271,231 | |
Collateralized mortgage obligations | | | 0 | | | | 13,571 | | | | 0 | | | | 13,571 | |
Total fixed-maturities available-for-sale | | $ | 111,687 | | | $ | 1,230,778 | | | $ | 0 | | | $ | 1,342,465 | |
Equity investments | | $ | 220,118 | | | $ | 179,108 | | | $ | 5,102 | | | $ | 404,328 | |
The fair value of investment securities is estimated based on quoted market prices for those or similar investments. Additional information pertinent to the estimated fair value of investment in securities is included in Note 3.
There were 0 transfers between Levels 1 and 2 during the three and nine months ended September 30, 2021 and the year ended December 31, 2020.
A reconciliation of the beginning and ending balances of claim liabilitiesassets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30 is as follows:
| | Nine months ended September 30, 2020 | |
| | Managed Care | | | Other Business Segments * | | | Consolidated | |
| | | | | | | | | |
| | | | | | | | | |
Claim liabilities at beginning of period | | $ | 341,277 | | | $ | 367,981 | | | $ | 709,258 | |
Reinsurance recoverable on claim liabilities | | | 0 | | | | (137,017 | ) | | | (137,017 | ) |
Net claim liabilities at beginning of period | | | 341,277 | | | | 230,964 | | | | 572,241 | |
Claims incurred | | | | | | | | | | | | |
Current period insured events | | | 2,000,825 | | | | 84,358 | | | | 2,085,183 | |
Prior period insured events | | | 24,297 | | | | (7,885 | ) | | | 16,412 | |
Total | | | 2,025,122 | | | | 76,473 | | | | 2,101,595 | |
Payments of losses and loss-adjustment expenses | | | | | | | | | | | | |
Current period insured events | | | 1,678,400 | | | | 45,815 | | | | 1,724,215 | |
Prior period insured events | | | 267,427 | | | | 41,081 | | | | 308,508 | |
Total | | | 1,945,827 | | | | 86,896 | | | | 2,032,723 | |
Net claim liabilities at end of period | | | 420,572 | | | | 220,541 | | | | 641,113 | |
Reinsurance recoverable on claim liabilities | | | 0 | | | | 145,807 | | | | 145,807 | |
Claim liabilities at end of period | | $ | 420,572 | | | $ | 366,348 | | | $ | 786,920 | |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
| | Three months ended | | | Nine months ended | |
| | September 30, 2021 | | | September 30, 2021 | |
Beginning Balance | | $ | 5,199 | | | $ | 5,102 | |
Unrealized in other accumulated comprehensive income | | | 142 | | | | 239 | |
Ending Balance
| | $ | 5,341 | | | $ | 5,341 | |
* Other Business Segments includeThe tables below present a reconciliation of the Life Insurancebeginning and Property and Casualty segments, as well as intersegment eliminations.ending balances of Claim Liabilities during the nine months ended September 30:
| | Nine months ended September 30, 2021 | |
| | Managed Care | | | Other Business Segments * | | | Consolidated | |
| | | | | | | | | |
Claim liabilities at beginning of period | | $ | 445,655 | | | $ | 341,447 | | | $ | 787,102 | |
Reinsurance recoverable on claim liabilities | | | 0 | | | | (138,816 | ) | | | (138,816 | ) |
Net claim liabilities at beginning of period | | | 445,655 | | | | 202,631 | | | | 648,286 | |
Claims incurred | | | | | | | | | | | | |
Current period insured events | | | 2,485,095 | | | | 92,526 | | | | 2,577,621 | |
Prior period insured events | | | (35,986 | ) | | | 982 | | | | (35,004 | ) |
Total | | | 2,449,109 | | | | 93,508 | | | | 2,542,617 | |
Payments of losses and loss-adjustment
| | | | | | | | | | | | |
expenses | | | | | | | | | | | | |
Current period insured events | | | 2,124,676 | | | | 47,360 | | | | 2,172,036 | |
Prior period insured events | | | 236,405 | | | | 63,086 | | | | 299,491 | |
Total | | | 2,361,081 | | | | 110,446 | | | | 2,471,527 | |
Net claim liabilities at end of period | | | 533,683 | | | | 185,693 | | | | 719,376 | |
Reinsurance recoverable on claim liabilities | | | 0 | | | | 79,132 | | | | 79,132 | |
Claim liabilities at end of period | | $ | 533,683 | | | $ | 264,825 | | | $ | 798,508 | |
* | Other Business Segments include the Life Insurance and Property and Casualty segments, as well as intersegment eliminations. |
| | Nine months ended September 30, 2019 | |
| | Managed Care | | | Other Business Segments * | | | Consolidated | |
| | | | | | | | | |
| | | | | | | | | |
Claim liabilities at beginning of period | | $ | 394,226 | | | $ | 542,563 | | | $ | 936,789 | |
Reinsurance recoverable on claim liabilities | | | 0 | | | | (315,543 | ) | | | (315,543 | ) |
Net claim liabilities at beginning of period | | | 394,226 | | | | 227,020 | | | | 621,246 | |
Claims incurred | | | | | | | | | | | | |
Current period insured events | | | 1,934,859 | | | | 85,726 | | | | 2,020,585 | |
Prior period insured events | | | (29,038 | ) | | | (8,254 | ) | | | (37,292 | ) |
Total | | | 1,905,821 | | | | 77,472 | | | | 1,983,293 | |
Payments of losses and loss-adjustment expenses | | | | | | | | | | | | |
Current period insured events | | | 1,606,458 | | | | 41,849 | | | | 1,648,307 | |
Prior period insured events | | | 303,289 | | | | 32,145 | | | | 335,434 | |
Total | | | 1,909,747 | | | | 73,994 | | | | 1,983,741 | |
Net claim liabilities at end of period | | | 390,300 | | | | 230,498 | | | | 620,798 | |
Reinsurance recoverable on claim liabilities | | | 0 | | | | 181,193 | | | | 181,193 | |
Claim liabilities at end of period | | $ | 390,300 | | | $ | 411,691 | | | $ | 801,991 | |
* Other Business Segments include the Life InsuranceTriple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and Property and Casualty segments, as well as intersegment eliminations.share information)
(Unaudited)
| | Nine months ended September 30, 2020 | |
| | Managed Care | | | Other Business Segments * | | | Consolidated | |
| | | | | | | | | |
| | | | | | | | | |
Claim liabilities at beginning of period | | $ | 341,277 | | | $ | 367,981 | | | $ | 709,258 | |
Reinsurance recoverable on claim liabilities | | | 0 | | | | (137,017 | ) | | | (137,017 | ) |
Net claim liabilities at beginning of period | | | 341,277 | | | | 230,964 | | | | 572,241 | |
Claims incurred | | | | | | | | | | | | |
Current period insured events | | | 2,000,825 | | | | 84,358 | | | | 2,085,183 | |
Prior period insured events | | | 24,297 | | | | (7,885 | ) | | | 16,412 | |
Total | | | 2,025,122 | | | | 76,473 | | | | 2,101,595 | |
Payments of losses and loss-adjustment
| | | | | | | | | | | | |
expenses
| | | | | | | | | | | | |
Current period insured events | | | 1,678,400 | | | | 45,815 | | | | 1,724,215 | |
Prior period insured events | | | 267,427 | | | | 41,081 | | | | 308,508 | |
Total | | | 1,945,827 | | | | 86,896 | | | | 2,032,723 | |
Net claim liabilities at end of period | | | 420,572 | | | | 220,541 | | | | 641,113 | |
Reinsurance recoverable on claim liabilities | | | 0 | | | | 145,807 | | | | 145,807 | |
Claim liabilities at end of period | | $ | 420,572 | | | $ | 366,348 | | | $ | 786,920 | |
* | Other Business Segments include the Life Insurance and Property and Casualty segments, as well as intersegment eliminations. |
The actual amounts of claims incurred in connection with insured events occurring in a prior period typically differ from estimates of such claims made in the prior period. Amounts included as incurred claims for prior period insured events reflect the aggregate net amount of these differences.
The unfavorable prior period developmentfavorable developments in the claims incurred and loss-adjustment expenses for prior periodprior-period insured events for the nine months ended September 30, 2021 and 2020 arewere primarily due primarily to higher than expected utilization trends in the Managed Care segment. The favorable development in the claims incurred and loss-adjustment expenses for prior period insured events for the nine months ended September 30, 2019 are due primarily to better than expected utilization trends. Reinsurance recoverable on unpaid claims is reported as premiumsPremium and other receivables, netOther Receivables, Net in the accompanying condensed consolidated interim financial statements.
The claims incurred disclosed in thisthe table above exclude the portion of the change in the liability for future policy benefits expense, which amountedamounting to $27,806 $9,539 and $26,211 $30,952 during the three months and nine months ended September 30, 2021, respectively, and $13,737 and $27,806 during the three months and nine months ended September 30, 2020, and 2019, respectively.respectively, which is included within the consolidated Claims Incurred.
|
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
The following is information about incurred and paid claims development, net of reinsurance, as of September 30, 2021, as well as cumulative claim frequency. Additional information presented includes total incurred but not reported (IBNR)incurred-but-not-reported liabilities plus expected development on reported claims which is included inwithin the liability for unpaidnet incurred claims adjustment expenses for the Managed Care segment as of September 30, 2020.
Incurred Year | | Total of IBNR Liabilities Plus Expected Development on Reported Claims | |
2019 | | $ | 29,283 | |
2020 | | | 322,425 | |
amounts.
Incurred Year | | Total of IBNR Liabilities Plus Expected Development on Reported Claims | |
2020 | | $ | 119,675 | |
2021 | | | 360,419 | |
Long-Term Borrowings
A summary of the borrowings entered by the Company are as follows:
| | September 30, 2020 | | | December 31, 2019 | |
| | | | | | |
Secured loan payable of $11,187, payable in monthly installments of $137 through October 1, 2023, plus interest at a rate reset periodically of 100 basis points over selected LIBOR maturity (which was 1.16% at September 30, 2020). | | $ | 5,037 | | | $ | 6,267 | |
Secured loan payable of $20,150, payable in monthly installments of $84 through January 1, 2024, plus interest at a rate reset periodically of 275 basis points over selected LIBOR maturity (which was 3.05% at September 30, 2020). | | | 16,456 | | | | 17,211 | |
Secured loan payable of $4,116, payable in monthly installments of $49 through January 1, 2024, plus interest at a rate reset periodically of 325 basis points over selected LIBOR maturity (which was 3.55% at September 30, 2020). | | | 1,960 | | | | 2,401 | |
Secured loan payable of $31,350, payable in monthly installments of $105 through May 1, 2025, plus interest at prime rate (which was 3.22% at September 30, 2020). Last payment of $25,185 due on June 19, 2025. | | | 31,036 | | | | 0 | |
Total borrowings | | | 54,489 | | | | 25,879 | |
| | | | | | | | |
Less: unamortized debt issuance costs | | | 653 | | | | 185 | |
| | $ | 53,836 | | | $ | 25,694 | |
|
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
Aggregate maturities of the Company’s borrowings as of September 30, 2020 are summarized as follows:
Remaining of 2020 | | $ | 1,122 | |
2021 | | | 4,490 | |
2022 | | | 4,490 | |
2023 | | | 4,196 | |
2024 | | | 14,484 | |
Thereafter | | | 25,707 | |
| | $ | 54,489 | |
On June 19, 2020, TSM entered into a $31,350 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 the Building (see Note 6).
The Loan is guaranteed by a mortgage over the Building, a pledge of all collateral related to the Building and an assignment of the rents collected for the lease of office space in the Building. Pursuant to the 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 commencing on July 1, 2020 until the principal of the Loan has been paid in full.
The Company may, at its option and at any time, upon written notice as specified in the credit agreement, prepay prior to maturity, all or any part of the 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 four term loans underOur credit agreements with commercial banks in Puerto Rico include certain customary financial and non-financial covenants, including negative covenants imposing certain restrictions on the Corporation’sCompany’s business. TheFor one of our credit agreements, covering 3 term loans, the Company was not in compliance with all these covenants asthe Debt Service Coverage Ratio covenant of the credit agreement during the quarter ended September 30, 2021. As of September 30, 2020.2021 and December 31, 2020, the outstanding balance of the debt was $20,217 and $22,644, respectively. On November 1, 2021, the financial banking institution waived the Company’s obligation to comply with this covenant for the quarter ended September 30, 2021 and quarters ending on December 31, 2021 and March 31, 2022.
Short-term Borrowings
The Company has several short-term facilities available to address timing differences between cash receipts and disbursements, consisting of collateralized advances from FHLBNY and a revolving credit facility.
In August 2019, Triple-S Salud, Inc. (TSS)TSS and Triple-S Vida, Inc. (TSV)TSV became members of the FHLBNY, which provides access to collateralized advances. The borrowing capacity of TSS and TSV is up to 30%15% and 10%, respectively, of their admitted assets as disclosed in the most recent filing with the Commissioner of Insurance but is constrained by the amount of collateral held at the FHLBNY (see Note 3). As of September 30, 2021 and December 31, 2020, the borrowing capacity was approximately $119,329 for TSS$192,430 and $87,940 for TSV. As of December 31, 2019, the borrowing capacity$200,338, respectively. There was approximately $82,200 for TSS and $48,900 for TSV. The0 outstanding balance as of September 30, 2020 for TSS is $62,500 and TSV is $20,000. The outstanding balance as2021. As of December 31, 2019 for TSS and TSV2020 the outstanding balance was $25,000 and $29,000, respectively.$30,000. The average interest rate of the outstanding balance is 0.34% and 1.79%was 0.33% as of September 30, 2020 and December 31, 2019, respectively.
2020.
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 matures on June 30, 2021. As of September 30, 2020, there is 0 outstanding balance.
|
• | Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amountsTSA has a $10,000 revolving loan agreement with a commercial bank in thousands, except per share data)
(Unaudited)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 September 30, 2021.
|
The components of net periodic benefit cost were as follows:
| | Three months ended September 30, | | | Nine months ended September 30, | | | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Components of net periodic benefit cost (income): | | | | | | | | | | | | | |
Components of net periodic benefit cost: | | | | | | | | | | | | | |
Interest cost | | $ | 1,474 | | | $ | 1,748 | | | $ | 4,554 | | | $ | 5,230 | | | $ | 1,370 | | | $ | 1,474 | | | $ | 4,120 | | | $ | 4,554 | |
Expected return on assets | | | (2,211 | ) | | | (2,209 | ) | | | (6,629 | ) | | | (6,643 | ) | | | (1,098 | ) | | | (2,211 | ) | | | (3,298 | ) | | | (6,629 | ) |
Amortization of actuarial loss | | | 396 | | | | 98 | | | | 884 | | | | 277 | | | | 994 | | | | 396 | | | | 2,944 | | | | 884 | |
Settlement loss | | | 356 | | | | 555 | | | | 1,068 | | | | 1,305 | | | | 1,359 | | | | 356 | | | | 3,359 | | | | 1,068 | |
Net periodic benefit cost (income) | | $ | 15 | | | $ | 192 | | | $ | (123 | ) | | $ | 169 | | | $ | 2,625 | | | $ | 15 | | | $ | 7,125 | | | $ | (123 | ) |
Employer Contributions: The Company disclosed in its audited consolidated financial statements for the year ended December 31, 20192020 that it expected to contribute $2,000$10,000 to the pension program in 2020.2021. As of September 30, 2020,2021, the Company has contributed $10,000 to the pension program.
(11) | Stock Repurchase Program |
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 September 30, 2020, 0 stocks were repurchased under a repurchase program. During the nine months ended September 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 nine months ended September 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 $14,920$14,791 and $12,355$14,920 for the three months ended September 30, 20202021 and 2019,2020, respectively, and $45,637$44,245 and $36,028$45,637 for the nine months ended September 30, 2020,2021 and 2019,2020, respectively. Ceded incurred losses and loss adjustment expenses during the three months and nine months ended September 30, 2021 and 2020 were $3,926 and 2019 were $5,419 and $1,089,$5,419, respectively, and $45,802$3,167 and $6,531,$45,802, respectively. The ceded incurred losses and loss adjustment expenses for the nine months ended September 30, 2020 include $40,000$40,000 related to earthquake losses 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 0.2 to 14.2 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 assets21 and accounts payables and accrued liabilities, respectively. As of September 30, 2020, the right -of -use asset and lease liabilities balance was $13,929 and $14,171, 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 5.9 years as of September 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 by using an interest rate index and add a credit spread to this rate based on financing transactions with a similar credit risk profile. The weighted-average discount rate of our operating leases is 5.2% as of September 30, 2020.
Undiscounted cash flows of operating leases are summarized as follows:
Remaning of 2020 | | $ | 1,062 | |
2021 | | | 3,998 | |
2022 | | | 3,420 | |
2023 | | | 2,329 | |
2024 | | | 1,855 | |
Thereafter | | | 3,590 | |
Total lease payments | | | 16,254 | |
Less: imputed interest | | | (2,083 | ) |
Total | | $ | 14,171 | |
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:
| | Nine months ended | |
| | September 30, 2020 | |
Operating lease cost | | $ | 3,570 | |
Short-term lease cost | | | 801 | |
Total lease cost | | $ | 4,371 | |
Also, the Company leases certain floors of one of its buildings and generates rental income. Maturity analysis of lease payments to be received from its lessees as of September 30, 2020, is summarized as follows:
Remaining of 2020 | | $ | 473 | |
2021 | | | 1,909 | |
2022 | | | 1,947 | |
2023 | | | 1,986 | |
2024 | | | 2,026 | |
Thereafter | | | 2,624 | |
Total | | $ | 10,965 | |
Triple-S Management Corporation
26Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(Unaudited)
|
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
(14)11. | Comprehensive Income (Loss)
|
The accumulated balances for each classification of other comprehensive income (loss), net of tax, are as follows:
| | Three months ended | | | Nine months ended | |
| | September 30, | | | September 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Net Unrealized Gain on Securities | | | | | | | | | | | | |
Beginning Balance | | $ | 85,110 | | | $ | 55,678 | | | $ | 57,830 | | | $ | 27,308 | |
Other comprehensive income before reclassifications | | | 5,149 | | | | 10,160 | | | | 31,879 | | | | 41,473 | |
Amounts reclassified from accumulated other comprehensive (loss) income | | | (406 | ) | | | (870 | ) | | | 144 | | | | (3,813 | ) |
Net current period change | | | 4,743 | | | | 9,290 | | | | 32,023 | | | | 37,660 | |
Ending Balance | | | 89,853 | | | | 64,968 | | | | 89,853 | | | | 64,968 | |
Liability for Pension Benefits | | | | | | | | | | | | | | | | |
Beginning Balance | | | (28,161 | ) | | | (24,134 | ) | | | (28,467 | ) | | | (24,246 | ) |
Amounts reclassified from accumulated other comprehensive income | | | 247 | | | | 61 | | | | 553 | | | | 173 | |
Ending Balance | | | (27,914 | ) | | | (24,073 | ) | | | (27,914 | ) | | | (24,073 | ) |
Accumulated Other Comprehensive Income (Loss) | | | | | | | | | | | | | | | | |
Beginning Balance | | | 56,949 | | | | 31,544 | | | | 29,363 | | | | 3,062 | |
Other comprehensive income before reclassifications | | | 5,149 | | | | 10,160 | | | | 31,879 | | | | 41,473 | |
Amounts reclassified from accumulated other comprehensive (loss) income | | | (159 | ) | | | (809 | ) | | | 697 | | | | (3,640 | ) |
Net current period change | | | 4,990 | | | | 9,351 | | | | 32,576 | | | | 37,833 | |
Ending Balance | | $ | 61,939 | | | $ | 40,895 | | | $ | 61,939 | | | $ | 40,895 | |
| | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Net Unrealized Gain on Securities | | | | | | | | | | | | |
Beginning Balance | | $ | 77,399 | | | $ | 85,110 | | | $ | 91,689 | | | $ | 57,830 | |
Other comprehensive income (loss)
| | | | | | | | | | | | | | | | |
before reclassifications | | | 1,233 | | | | 5,149 | | | | (10,872 | ) | | | 31,879 | |
Amounts reclassified from accumulated | | | | | | | | | | | | | | | | |
other comprehensive (loss) income | | | (812 | ) | | | (406 | ) | | | (2,997 | ) | | | 144
| |
Net current period change | | | 421 | | | | 4,743 | | | | (13,869 | ) | | | 32,023 | |
Ending Balance | | | 77,820 | | | | 89,853 | | | | 77,820 | | | | 89,853 | |
Liability for Pension Benefits | | | | | | | | | | | | | | | | |
Beginning Balance | | | (100,291 | ) | | | (28,161 | ) | | | (101,509 | ) | | | (28,467 | ) |
Amounts reclassified from accumulated | | | | | | | | | | | | | | | | |
other comprehensive income
| | | 621 | | | | 247 | | | | 1,839 | | | | 553 | |
Ending Balance | | | (99,670 | ) | | | (27,914 | ) | | | (99,670 | ) | | | (27,914 | ) |
Accumulated Other Comprehensive (Loss) Income
| | | | | | | | | | | | | | | | |
Beginning Balance | | | (22,892 | ) | | | 56,949 | | | | (9,820 | ) | | | 29,363 | |
Other comprehensive income (loss) | | | | | | | | | | | | | | | | |
before reclassifications | | | 1,233 | | | | 5,149 | | | | (10,872 | ) | | | 31,879 | |
Amounts reclassified from accumulated | | | | | | | | | | | | | | | | |
other comprehensive (loss) income | | | (191 | ) | | | (159 | ) | | | (1,158 | ) | | | 697 | |
Net current period change | | | 1,042 | | | | 4,990 | | | | (12,030 | ) | | | 32,576 | |
Ending Balance | | $ | (21,850 | ) | | $ | 61,939 | | | $ | (21,850 | ) | | $ | 61,939 | |
(15)12. | Share-Based Compensation |
Share-based compensation expense recorded during the three months ended September 30, 2020 and 2019 was $1,8492021 and 2020 was $2,817,3,031 and $1,849, respectively. Share-based compensation expense recorded during the nine months ended September 30, 2021 and 2020 and 2019 was $$8,4436,964 and $$8,723,8,443, respectively. During the three months ended September 30, 2021, and 2020, 2,063 and 14,040 shares were repurchased and retired as the result of non-cash tax withholdings upon vesting of shares. During the nine months ended September 30, 2020 and 2019,20,9222021 and 2020, 60222,886 and 20,922 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 September 30, 201922.
(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 September 30, | | | Nine months ended September 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Numerator for earnings per share: | | | | | | | | | | | | |
Net income attributable to TSM available to stockholders | | $ | 23,581 | | | $ | 13,948 | | | $ | 41,035 | | | $ | 79,665 | |
Denominator for basic earnings per share: | | | | | | | | | | | | | | | | |
Weighted average of common shares | | | 23,073,511 | | | | 23,830,106 | | | | 23,215,840 | | | | 23,143,361 | |
Effect of dilutive securities | | | 120,469 | | | | 63,701 | | | | 102,229 | | | | 73,937 | |
Denominator for diluted earnings per share | | | 23,193,980 | | | | 23,893,807 | | | | 23,318,069 | | | | 23,217,298 | |
Basic net income per share attributable to TSM | | $ | 1.02 | | | $ | 0.59 | | | $ | 1.77 | | | $ | 3.44 | |
Diluted net income per share attributable to TSM | | $ | 1.02 | | | $ | 0.58 | | | $ | 1.76 | | | $ | 3.43 | |
| | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Numerator for earnings per share: | | | | | | | | | | | | |
Net income attributable to TSM available to stockholders | | $ | 8,167 | | | $ | 23,581 | | | $ | 55,037 | | | $ | 41,035 | |
Denominator for basic earnings per share: | | | | | | | | | | | | | | | | |
Weighted average of common shares | | | 23,494,415 | | | | 23,073,511 | | | | 23,402,622 | | | | 23,215,840 | |
Effect of dilutive securities | | | 116,257 | | | | 120,469 | | | | 143,655 | | | | 102,229 | |
Denominator for diluted earnings per share | | | 23,610,672 | | | | 23,193,980 | | | | 23,546,277 | | | | 23,318,069 | |
Basic net income per share attributable to TSM | | $ | 0.35 | | | $ | 1.02 | | | $ | 2.35 | | | $ | 1.77 | |
Diluted net income per share attributable to TSM | | $ | 0.35 | | | $ | 1.02 | | | $ | 2.34 | | | $ | 1.76 | |
14. |
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited) Contingencies |
(17) Contingencies
The following information supplements and amends, as applicable, the disclosures in Note 2425 to the Consolidated Financial Statements of the Company’s 20192020 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’sCompany'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 on September 30, 2021, the range of possible losses for such proceedings in excess of established reserves is, in the aggregate, from $0 to approximately $10,000 at September 30, 2020.$10,000. 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.
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.
|
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)
(Unaudited)
|
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 Company intends to file a motion for summary judgment to dismiss all claims once new discovery matters are completed.
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.
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’sits 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’sCourt’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. TheOn July 29, 2020, the Defendants have reached a tentative settlement agreement with subscribers. The agreement remainssubscribers, which was subject to approval by the BCBSA and Member Plans boards, as well as from the Federal District Court for the Northern District of Alabama. However, basedFollowing the BCBSA Board of Directors and Members Plans’ August 14, 2020 approval, on this agreement,September 30, 2020, the Company hasCompany’s Board of Directors voted to approve the Settlement Agreement. On November 30, 2020, the Federal District Court for the Northern District of Alabama issued its Memorandum Opinion and Preliminary Order approving settlement terms. The Settlement Agreement requires a monetary settlement payment from defendants. On March 1, 2021, the plans finished producing the data for settlement notice and allocation. The deadline for class members to opt-out or file objections to Settlement was July 28, 2021. The Company's portion of the monetary settlement payment was estimated at $32,000, which was accrued $32,000during the year ended December 31, 2020. As of September 30, 2021 the accrued amount related to this legal proceeding during the nine months ended September 30, 2020.contingency was $27,364.
Following the suspension of negotiation efforts with providers and the stay of litigation proceedings from July 2019 to October 2020, providers resumed their mediation efforts with Defendants in October 2021.
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 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.
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(Unaudited)
(18)15. | 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)
(Unaudited)
|
The following tables summarize the operations by reportable segment for the three months and nine months ended September 30, 20202021 and 2019:2020:
| | Three months ended September 30, | | | Nine months ended September 30, | | | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Operating revenues: | | | | | | | | | | | | | |
Operating revenues | | | | | | | | | | | | | |
Managed Care: | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net | | $ | 849,529 | | | $ | 746,043 | | | $ | 2,447,588 | | | $ | 2,244,448 | | | $ | 939,210 | | | $ | 849,529 | | | $ | 2,779,869 | | | $ | 2,447,588 | |
Administrative service fees | | | 3,013 | | | | 2,607 | | | | 8,755 | | | | 7,695 | | | | 3,875 | | | | 3,013 | | | | 9,316 | | | | 8,755 | |
Intersegment premiums/service fees | | | 644 | | | | 1,483 | | | | 2,624 | | | | 4,612 | | | | 598 | | | | 644 | | | | 2,319 | | | | 2,624 | |
Net investment income | | | 5,065 | | | | 5,624 | | | | 14,763 | | | | 16,981 | | | | 8,088 | | | | 5,065 | | | | 19,088 | | | | 14,763 | |
Total managed care | | | 858,251 | | | | 755,757 | | | | 2,473,730 | | | | 2,273,736 | | |
Total Managed Care | | | | 951,771 | | | | 858,251 | | | | 2,810,592 | | | | 2,473,730 | |
Life Insurance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net | | | 49,616 | | | | 45,365 | | | | 143,325 | | | | 133,598 | | | | 54,394 | | | | 49,616 | | | | 159,783 | | | | 143,325 | |
Intersegment premiums | | | 516 | | | | 471 | | | | 1,552 | | | | 1,457 | | | | 636 | | | | 516 | | | | 1,811 | | | | 1,552 | |
Net investment income | | | 6,900 | | | | 6,709 | | | | 20,625 | | | | 20,091 | | | | 6,785 | | | | 6,900 | | | | 19,851 | | | | 20,625 | |
Total life insurance | | | 57,032 | | | | 52,545 | | | | 165,502 | | | | 155,146 | | |
Total Life Insurance | | | | 61,815 | | | | 57,032 | | | | 181,445 | | | | 165,502 | |
Property and Casualty Insurance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net | | | 23,789 | | | | 23,613 | | | | 66,453 | | | | 64,470 | | | | 26,092 | | | | 23,789 | | | | 76,360 | | | | 66,453 | |
Intersegment premiums | | | 153 | | | | 153 | | | | 460 | | | | 460 | | | | 153 | | | | 153 | | | | 460 | | | | 460 | |
Net investment income | | | 2,103 | | | | 2,533 | | | | 6,551 | | | | 7,404 | | | | 2,569 | | | | 2,103 | | | | 6,847 | | | | 6,551 | |
Total property and casualty insurance | | | 26,045 | | | | 26,299 | | | | 73,464 | | | | 72,334 | | |
Total Property and Casualty insurance | | | | 28,814 | | | | 26,045 | | | | 83,667 | | | | 73,464 | |
Other segments: * | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Intersegment service revenues | | | 2,595 | | | | 2,076 | | | | 7,637 | | | | 6,049 | | | | 2,229 | | | | 2,595 | | | | 9,678 | | | | 7,637 | |
Operating revenues from external sources | | | 2,052 | | | | 3,167 | | | | 6,394 | | | | 6,335 | | | | 3,925 | | | | 2,052 | | | | 8,518 | | | | 6,394 | |
Total other segments | | | 4,647 | | | | 5,243 | | | | 14,031 | | | | 12,384 | | | | 6,154 | | | | 4,647 | | | | 18,196 | | | | 14,031 | |
Total business segments | | | 945,975 | | | | 839,844 | | | | 2,726,727 | | | | 2,513,600 | | | | 1,048,554 | | | | 945,975 | | | | 3,093,900 | | | | 2,726,727 | |
TSM operating revenues from external sources | | | 100 | | | | 310 | | | | 355 | | | | 1,138 | | | | 130 | | | | 100 | | | | 392 | | | | 355 | |
Elimination of intersegment premiums/service fees | | | (574 | ) | | | (2,107 | ) | | | (4,636 | ) | | | (6,529 | ) | | | (1,387 | ) | | | (574 | ) | | | (4,590 | ) | | | (4,636 | ) |
Elimination of intersegment service revenues | | | (2,595 | ) | | | (2,076 | ) | | | (7,637 | ) | | | (6,049 | ) | | | (2,229 | ) | | | (2,595 | ) | | | (9,678 | ) | | | (7,637 | ) |
Consolidated operating revenues | | $ | 942,906 | | | $ | 835,971 | | | $ | 2,714,809 | | | $ | 2,502,160 | | | $ | 1,045,068 | | | $ | 942,906 | | | $ | 3,080,024 | | | $ | 2,714,809 | |
* | Includes segments that are not required to be reported separately, primarily the health clinics. |
*25 Includes segments that are not required to be reported separately, primarily the health clinics.
| | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Operating income (loss): | | | | | | | | | | | | |
Managed care | | $ | 13,006 | | | $ | 5,393 | | | $ | 56,495 | | | $ | 56,805 | |
Life insurance | | | 5,682 | | | | 6,686 | | | | 20,188 | | | | 17,541 | |
Property and casualty insurance | | | 4,386 | | | | 6,620 | | | | 10,921 | | | | 14,958 | |
Other segments * | | | (1,639 | ) | | | (690 | ) | | | (4,552 | ) | | | (1,812 | ) |
Total business segments | | | 21,435 | | | | 18,009 | | | | 83,052 | | | | 87,492 | |
TSM operating revenues from external sources | | | 100 | | | | 310 | | | | 355 | | | | 1,138 | |
TSM unallocated operating expenses | | | (1,633 | ) | | | (1,643 | ) | | | (4,877 | ) | | | (6,812 | ) |
Elimination of TSM intersegment charges | | | 2,403 | | | | 2,403 | | | | 7,209 | | | | 7,209 | |
Consolidated operating income | | | 22,305 | | | | 19,079 | | | | 85,739 | | | | 89,027 | |
Consolidated net realized investment gains (losses) | | | 507 | | | | 1,087 | | | | (180 | ) | | | 4,766 | |
Consolidated net unrealized investment gains (losses) on equity investments | | | 11,040 | | | | 1,267 | | | | (17,428 | ) | | | 24,259 | |
Consolidated interest expense | | | (2,096 | ) | | | (2,062 | ) | | | (5,813 | ) | | | (5,681 | ) |
Consolidated other income, net | | | 1,811 | | | | 485 | | | | 6,217 | | | | 3,359 | |
Consolidated income before taxes | | $ | 33,567 | | | $ | 19,856 | | | $ | 68,535 | | | $ | 115,730 | |
| | | | | | | | | | | | | | | | |
Depreciation and amortization expense: | | | | | | | | | | | | | | | | |
Managed care | | $ | 2,085 | | | $ | 2,931 | | | $ | 8,061 | | | $ | 8,480 | |
Life insurance | | | 289 | | | | 268 | | | | 869 | | | | 813 | |
Property and casualty insurance | | | 93 | | | | 86 | | | | 296 | | | | 266 | |
Other segments* | | | 240 | | | | 249 | | | | 913 | | | | 627 | |
Total business segments | | | 2,707 | | | | 3,534 | | | | 10,139 | | | | 10,186 | |
TSM depreciation expense | | | 404 | | | | 150 | | | | 716 | | | | 543 | |
Consolidated depreciation and amortization expense | | $ | 3,111 | | | $ | 3,684 | | | $ | 10,855 | | | $ | 10,729 | |
* Includes segments that are not required to be reported separately, primarily the health clinics.
| | September 30, 2020 | | | December 31, 2019 | |
Assets: | | | | | | |
Managed care | | $ | 1,406,356 | | | $ | 1,190,538 | |
Life insurance | | | 1,039,765 | | | | 981,370 | |
Property and casualty insurance | | | 603,728 | | | | 592,758 | |
Other segments * | | | 30,408 | | | | 28,346 | |
Total business segments | | | 3,080,257 | | | | 2,793,012 | |
Unallocated amounts related to TSM: | | | | | | | | |
Cash, cash equivalents, and investments | | | 19,881 | | | | 28,167 | |
Property and equipment, net | | | 67,316 | | | | 25,623 | |
Other assets | | | 45,927 | | | | 37,176 | |
| | | 133,124 | | | | 90,966 | |
Elimination entries-intersegment receivables and others | | | (93,094 | ) | | | (65,152 | ) |
Consolidated total assets | | $ | 3,120,287 | | | $ | 2,818,826 | |
* Includes segments that are not required to be reported separately, primarily the health clinics.
Triple-S Management Corporation
32Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(Unaudited)
| | Three months ended September 30, | | | Nine months ended September 30, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Operating income (loss): | | | | | | | | | | | | |
Managed Care | | $ | 8,532 | | | $ | 13,006 | | | $ | 34,496 | | | $ | 56,495 | |
Life Insurance | | | 5,591 | | | | 5,682 | | | | 17,772 | | | | 20,188 | |
Property and Casualty insurance | | | 1,975 | | | | 4,386 | | | | 7,763 | | | | 10,921 | |
Other segments * | | | (2,161 | ) | | | (1,639 | ) | | | (6,593 | ) | | | (4,552 | ) |
Total business segments | | | 13,937 | | | | 21,435 | | | | 53,438 | | | | 83,052 | |
TSM operating revenues from external sources | | | 130 | | | | 100 | | | | 392 | | | | 355 | |
TSM unallocated operating expenses | | | (4,875 | ) | | | (1,633 | ) | | | (11,464 | ) | | | (4,877 | ) |
Elimination of TSM intersegment charges | | | 2,403 | | | | 2,403 | | | | 7,209 | | | | 7,209 | |
Consolidated operating income | | | 11,595 | | | | 22,305 | | | | 49,575 | | | | 85,739 | |
Consolidated net realized investment gains (losses) | | | 1,015 | | | | 507 | | | | 3,746 | | | | (180 | ) |
Consolidated net unrealized investment (losses) gains on equity investments | | | (7,912 | ) | | | 11,040 | | | | 13,383 | | | | (17,428 | ) |
Consolidated interest expense | | | (2,016 | ) | | | (2,096 | ) | | | (6,225 | ) | | | (5,813 | ) |
Consolidated other income, net | | | 11,085 | | | | 1,811 | | | | 19,047 | | | | 6,217 | |
Consolidated income before taxes | | $ | 13,767 | | | $ | 33,567 | | | $ | 79,526 | | | $ | 68,535 | |
| | | | | | | | | | | | | | | | |
Depreciation and amortization expense: | | | | | | | | | | | | | | | | |
Managed Care | | $ | 2,319 | | | $ | 2,085 | | | $ | 7,111 | | | $ | 8,061 | |
Life Insurance | | | 320 | | | | 289 | | | | 965 | | | | 869 | |
Property and Casualty insurance | | | 72 | | | | 93 | | | | 216 | | | | 296 | |
Other segments* | | | 355 | | | | 240 | | | | 1,057 | | | | 913 | |
Total business segments | | | 3,066 | | | | 2,707 | | | | 9,349 | | | | 10,139 | |
TSM depreciation expense | | | 488 | | | | 404 | | | | 1,318 | | | | 716 | |
Consolidated depreciation and amortization expense | | $ | 3,554 | | | $ | 3,111 | | | $ | 10,667 | | | $ | 10,855 | |
* | Includes segments that are not required to be reported separately, primarily the health clinics. |
| | September 30, 2021 | | | December 31, 2020 | |
Assets: | | | | | | |
Managed Care | | $ | 1,456,710 | | | $ | 1,319,389 | |
Life Insurance | | | 1,095,884 | | | | 1,051,819 | |
Property and Casualty Insurance | | | 508,783 | | | | 583,404 | |
Other segments * | | | 35,854 | | | | 34,020 | |
Total business segments | | | 3,097,231 | | | | 2,988,632 | |
Unallocated amounts related to TSM: | | | | | | | | |
Cash, cash equivalents, and investments | | | 16,945 | | | | 16,489 | |
Property and equipment, net | | | 74,209 | | | | 68,678 | |
Other assets | | | 90,257 | | | | 88,684 | |
| | | 181,411 | | | | 173,851 | |
Elimination entries-intersegment receivables and others | | | (86,976 | ) | | | (74,065 | ) |
Consolidated total assets | | $ | 3,191,666 | | | $ | 3,088,418 | |
* | Includes segments that are not required to be reported separately, primarily the health clinics. |
26
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(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 |
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 nine months ended September 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 nine months ended September 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.issues, the risk that a condition of closing of the Merger may not be satisfied or that the closing of the Merger might otherwise not occur; the risk that a regulatory approval or a Blue Cross and Blue Shield Association approval that may be required for the Merger is not obtained or is obtained subject to conditions that are not anticipated; the diversion of management time on Merger-related issues; risks related to disruption of management time from ongoing business operations due to the proposed Merger; and unexpected costs, charges or expenses resulting from the proposed Merger.
Overview
Triple-S Management Corporation is a healthcarehealth services company and one of the top players in the Puerto Rico healthcarehealth care industry. With more than 60 years of experience, we are the premier healthcarehealth 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, Medicare Advantage and Medicaid 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).
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 healthcare arena. Our progressive use of technology and clinical data, value-based partnerships with care providers and initial investments in ambulatory and primary care assets are a strong foundation for differentiation and growth through the development of an 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 business well into the future.
As of September 30, 2020,2021, we served approximately 951,0001 million managed care members across all regions ofin Puerto Rico. For the nine months ended September 30, 2021 and 2020, and 2019, our managed careManaged Care segment represented approximately 92% of our total consolidated premiums earned, respectively.earned.
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 BCBSBlue Cross Blue Shield Association (BCBSA) licensees.
Triple-S is also a well-known brand in the life insurance and property and casualty insurance markets, with 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 revenuerevenues 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.net income. See Note 18 to15 of the unaudited condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q.
Our revenue primarily consists 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 management’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.
Triple-S Management-GuideWell Merger Agreement
On August 24, 2021, Triple-S Management Corporation and GuideWell Mutual Holding Corporation, a Florida not-for-profit mutual insurance holding company (GuideWell) announced that on August 23, 2021, Triple-S, GuideWell and GuideWell Merger, Inc., a Delaware corporation and a wholly owned subsidiary of GuideWell (Merger Sub), entered into an Agreement and Plan of Merger (the Merger Agreement) pursuant to which, subject to the satisfaction or waiver of certain conditions and on the terms set forth therein, Merger Sub will be merged with and into Triple-S, with Triple-S surviving the merger as a wholly-owned subsidiary of GuideWell (the Merger).
At the effective time of the Merger, except as otherwise provided under the Merger Agreement, each share of Triple-S common stock, par value $1.00 per share will be automatically canceled and retired and converted into the right to receive $36.00 in cash, without interest and less any applicable withholding taxes.
COVID-19
COVID-19 Situation in Puerto Rico
As of November 4, 2020,1, 2021, the Puerto Rico Department of Health reported 35,807a cumulative total of 151,819 and 33,21333,407 confirmed (RT-PCR+) and probable (antigen) COVID-19 cases, respectively, and a total of 8503,234 confirmed and probable COVID-19-related deaths in Puerto Rico. According to the Puerto Rico Department of Health, as of November 1, 2021, the positivity rate was 1.98%.
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 provided thatto July 4, 2021. As of July 5, 2021 the riskGovernor delegated all authority to issue guidelines and protocols to address the COVID-19 emergency to the Puerto Rico Secretary of contagion does not increase significantly. TheHealth. However, the Governor has issued several othercontinues to issue executive orders establishing COVID-19 related restrictions as deemed necessary.
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 rules to continue the gradual re-openingvaccine. The Puerto Rico Department of Health reported as of October 20, 2021 that over 80% of the economy,eligible population had received the latestfull dose of whichthe COVID-19 vaccine and over 88% of the eligible population had received at least the first dose. According to data from the Centers for Disease Control and Prevention, Puerto Rico has the highest COVID-19 vaccination rate in the United States, with 73.4% of its population fully vaccinated. A COVID-19 vaccine third dose or booster is effective until November 13, 2020.available for eligible populations.
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.
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
ItAs 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. However, 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 impactaffect 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 million available for Puerto Rico’s Medicaid Program and increases the percentage of federal government funding for its Medicaid program expendituresFMAP (as defined below) 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”operations. in this Quarterlyincluded 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. The Planning Board projected that the negative effects of COVID-19 would continue through fiscal year 2021, resulting in a contraction in real GNP of approximately -2%, followed by 0.8% real GNP growth in fiscal year 2022.
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 11.8%, or approximately 440,000 people, from 2010 to 2020. 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 23% 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 August 2021 was 982,000, a 1% increase from total employment of 972,000 as of August 2020. The DLHR also reported an average unemployment rate of approximately 8.4% as of August 2021, a 0.1% increase from 8.3%unemployment rate reported by the DLHR as of August 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) in June 2016. PROMESA, among other things, created a federal fiscal oversight board (the 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). 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 because ofbut estimates the COVID-19 pandemic, with a limited recovery of 0.5% inGNP contraction adjusted for short-term income effects to have been approximately 1.1%. For fiscal year 2021. This new economic outlook exacerbatesyears 2021 and 2022, 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 30, 2021, the Oversight Board filed an amended planthe Seventh 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 (thePROMESA. 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).debt and other claims against the Commonwealth, the Public Building Administration and the Employee Retirement System. In lightOctober of 2021, the COVID-19 pandemic, however,Puerto Rico government approved legislation establishing the Oversight Board requested thatframework for the court adjourn proceedings related todebt restructuring under the Proposed Plan. The Proposed Plan is expected to be amended to reflect certain changes required by such legislation. The final hearings for the confirmation of Adjustmenta plan of adjustment are scheduled to allow the Governmentbegin on November 8, 2021 and the Oversight Board to prioritize the health and safety of the people of Puerto Rico and to gain a better understanding of the economic and fiscal impact of the pandemic.continue as necessary until November 23, 2021.
Property & Casualty Litigation
As of September 30, 2020,2021, our Property and Casualty subsidiary had been served in a total of 471490 cases relating to Hurricane Maria. Of those, 329255 remained open as of September 30, 2020. TSP closed 75 claims during the third quarter of 2020, increasing the number of claims closed to 97.5%.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 outagesHealth Insurance Administration (ASES by its Spanish acronym) has notified us of its exercise of its right to extend our agreement for the provision of health coverage to the medically indigent in Puerto Rico under the Puerto Rico Health Reform Program (similar to Medicaid) for an additional year, from October 1, 2021 to September 30, 2022. The renewal is subject to premium negotiations for the extended term, which are under way.
Medicaid Cliff
Medicaid is jointly funded by the federal government and extensive damagestate governments. States receive a percentage of their Medicaid program expenditures from the federal government, through a formula known as the Federal Medical Assistance Percentage (FMAP). The FMAP varies by state based on factors such as per capita income. However, unlike states, the FMAP for Puerto Rico and other U.S. territories is fixed, and federal funding is capped per funding period.
The Further Consolidated Appropriations Act of 2019, assigned to infrastructurePuerto Rico an FMAP of 76% and propertyup to approximately $5.342 billion in Medicaid funding. It was understood among the federal government, Congress, the territories, and members of the healthcare system that the 2019 legislation allocated federal contributions and matching rates to run the Medicaid program until September 30, 2021. Efforts were being made in Congress to address the expiration of funding. However, the Centers for Medicare and Medicaid Services (CMS) determined that the 2019 legislation granted the territories with a baseline amount to run the Medicaid program for perpetuity, including an inflation adjustment.
Based on CMS’ determination, the allocation of $2.9B assigned to Puerto Rico for Fiscal Year 2020 will be used as a baseline to run the Medicaid program in perpetuity along with the inflation adjustment. However, CMS’ interpretation is that the FMAP was not addressed in the southwest regionsame way. Therefore, without Congressional action, Puerto Rico’s FMAP will revert to 55 percent. In addition, Puerto Rico will continue to qualify for the temporary 6.2 percentage point increase (to approximately 82%) under the FFCRA through the end of the island. The 6.4 magnitude earthquakequarter in which the public health emergency ends, if Puerto Rico continues to meet the applicable statutory requirements. As an administrative interpretation of a statute, CMS’ determination is susceptible to legal challenges by anyone with standing, as well as to a change in interpretation with a new government administration.
On September 30, 2021, the current FMAP of 76% was precededextended until December 3, 2021 by foreshocks and followed by aftershocks. During the three months ended March 31, 2020,Continuing Resolution that was approved to fund the Company recognized $5 million in incurred losses related to this event, which is its maximum exposurefederal government for a single event under its current reinsurance program. We also incurred in $3.0 million in reinstatement reinsurance premiums related2022. In addition, as part of the negotiations relating to the event.
reconciliation package, Congress is proposing to increase Puerto Rico’s FMAP to 76% for 2022 and to 83% for 2023 and going forward. See “Item 1A. Risk Factors—Factors – Risks Related to Ourour Business – OurWe are dependent on a small number of government contracts to generate a significant amount of the revenues for our Managed Care segment included in our Annual Report on Form 10-K for the year ended December 31, 2020. See alsoItem 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 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.
Puerto Rico Health Insurance Administration (ASES by its Spanish Acronym) Contract Amendment
On September 24, 2020, we entered into an amendment to our contract with ASES for the provision of health coverage to the medically indigent in Puerto Rico under the Puerto Rico Health Reform Program known as Vital (similar to Medicaid). The amendment, which is effective as of September 15, 2020, provides, among other things, for the revision of the premium rates payable by ASES. The new premium rates are effective retroactively from July 1, 2020 and will apply through the expiration of the contract on September 30, 2021. In addition, the amendment clarifies certain aspects related to the payment and identification of high-cost high-need enrollees under the agreement.
Legislative Initiatives
On July 20, 2020, the Governor of Puerto Rico announced she would call the Legislative Assembly to an extraordinary session for the consideration of legislation affecting the healthcare insurance industry, among other measures. Of note are House Bill 2583, now Act 138-2020, and Senate Bill 1658, now Act 142-2020, both of which apply to our Commercial and Medicaid lines of business. Act 138-2020, signed on September 1, 2020, purports to reduce applicable periods for insurers to process and pay claims, and to further regulate the utilization review process. The new law orders the Commissioner of Insurance and ASES to adopt related regulation. Act 142-2020, signed on October 9, 2020, limits insurers’ ability to review the course of treatment or medication prescribed by a physician and requires insurers to provide immediate, temporary coverage for prescribed medication to patients while their claims are resolved, among other matters.
Both measures would enter into force this year; however, adoption of related regulation and guidance from implementing agencies is still pending. Legal challenges are possible against these new laws. We are nonetheless assessing the operational and financial impact these laws may have on our business.
See “Item 1A. Risk Factors—Risks Relating to the Regulation of Our Industry – Changes in governmental regulations, or the application thereof, may adversely affect our business, financial condition and results of operations” included in our Annual Report on Form 10-K for the year ended December 31, 2019.
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 million in annualized premiums.
STARS Rating
On October 8, 2020, the Centers for Medicare and Medicaid Services (CMS) announced STARS Ratings for contract product offerings in year 2021. Our Medicare Advantage PPO plan achieved an overall rating of 3.5 stars, our HMO plan achieved an overall 4-star rating and our Part D (Pharmacy) offering received 4.5 stars. STARS Ratings for plans are calculated based on the results achieved by the plan on a contract in terms of measures spanning four categories: Healthcare Effectiveness Data and Information Set (HEDIS) measures, Consumer Assessment of Healthcare Providers and Systems (CAHPS) and Health Outcomes Survey (HOS) measures, Administrative measures, and Part D measures.
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.
Managed Care Membership
| | As of September 30, | |
| | 2020 | | | 2019 | |
Managed care enrollment: | | | | | | |
Commercial 1 | | | 429,503 | | | | 442,069 | |
Medicare | | | 136,135 | | | | 128,660 | |
Medicaid | | | 385,344 | | | | 354,230 | |
Total | | | 950,982 | | | | 924,959 | |
Managed care enrollment by funding arrangement: | | | | | | | | |
Fully insured | | | 843,152 | | | | 805,882 | |
Self-insured | | | 107,830 | | | | 119,077 | |
Total | | | 950,982 | | | | 924,959 | |
| | As of September 30, | |
| | 2021 | | | 2020 | |
Managed Care enrollment: | | | | | | |
Commercial 1 | | | 416,033 | | | | 429,503 | |
Medicare | | | 136,459 | | | | 136,135 | |
Medicaid | | | 449,474 | | | | 385,344 | |
Total | | | 1,001,966 | | | | 950,982 | |
Managed Care enrollment by funding arrangement: | | | | | | | | |
Fully insured | | | 907,705 | | | | 843,152 | |
Self-insured | | | 94,261 | | | | 107,830 | |
Total | | | 1,001,966 | | | | 950,982 | |
(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 September 30, | | | Nine months ended September 30, | | | Three months ended September 30, | | Nine months ended September 30, | |
(dollar amounts in millions) | | 2020 | | | 2019 | | | 2020 | | | 2019 | | |
(dollar in millions) | | | 2021 | | 2020 | | 2021 | | 2020 | |
Revenues: | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net | | $ | 923.0 | | | $ | 815.0 | | | $ | 2,657.4 | | | $ | 2,442.5 | | | $ | 1,019.7 | | $ | 923.0 | | $ | 3,016.0 | | $ | 2,657.4 | |
Administrative service fees | | | 3.7 | | | | 2.6 | | | | 8.7 | | | | 7.7 | | | 3.9 | | 3.7 | | 9.3 | | 8.7 | |
Net investment income | | | 14.2 | | | | 15.2 | | | | 42.3 | | | | 45.6 | | | 17.6 | | 14.2 | | 46.2 | | 42.3 | |
Other operating revenues | | | 2.0 | | | | 3.1 | | | | 6.4 | | | | 6.3 | | | | 3.8 | | | 2.0 | | | 8.5 | | | 6.4 | |
Total operating revenues | | | 942.9 | | | | 835.9 | | | | 2,714.8 | | | | 2,502.1 | | | | 1,045.0 | | | 942.9 | | | 3,080.0 | | | 2,714.8 | |
Net realized investment gains (losses) | | | 0.5 | | | | 1.1 | | | | (0.2 | ) | | | 4.8 | | | 1.0 | | 0.5 | | 3.7 | | (0.2 | ) |
Net unrealized investment gains (losses) on equity investments | | | 11.1 | | | | 1.3 | | | | (17.4 | ) | | | 24.3 | | |
Net unrealized investment (losses) gains on equity investments | | | (7.9 | ) | | 11.1 | | 13.4 | | (17.4 | ) |
Other income, net | | | 1.8 | | | | 0.5 | | | | 6.2 | | | | 3.4 | | | | 11.1 | | | 1.8 | | | 19.1 | | | 6.2 | |
Total revenues | | | 956.3 | | | | 838.8 | | | | 2,703.4 | | | | 2,534.6 | | | | 1,049.2 | | | 956.3 | | | 3,116.2 | | | 2,703.4 | |
Benefits and expenses: | | | | | | | | | | | | | | | | | | | | | | | | | |
Claims incurred | | | 761.8 | | | | 680.0 | | | | 2,129.4 | | | | 2,009.5 | | | 879.0 | | 761.8 | | 2,573.6 | | 2,129.4 | |
Operating expenses | | | 158.8 | | | | 136.9 | | | | 499.7 | | | | 403.6 | | | | 154.5 | | | 158.8 | | | 456.9 | | | 499.7 | |
Total operating expenses | | | 920.6 | | | | 816.9 | | | | 2,629.1 | | | | 2,413.1 | | | 1,033.5 | | 920.6 | | 3,030.5 | | 2,629.1 | |
Interest expense | | | 2.1 | | | | 2.1 | | | | 5.8 | | | | 5.7 | | | | 2.0 | | | 2.1 | | | 6.2 | | | 5.8 | |
Total benefits and expenses | | | 922.7 | | | | 819.0 | | | | 2,634.9 | | | | 2,418.8 | | | | 1,035.5 | | | 922.7 | | | 3,036.7 | | | 2,634.9 | |
Income before taxes | | | 33.6 | | | | 19.8 | | | | 68.5 | | | | 115.8 | | | 13.7 | | 33.6 | | 79.5 | | 68.5 | |
Income tax expense | | | 10.0 | | | | 5.9 | | | | 27.5 | | | | 36.1 | | | | 5.6 | | | 10.0 | | | 24.5 | | | 27.5 | |
Net income attributable to TSM | | $ | 23.6 | | | $ | 13.9 | | | $ | 41.0 | | | $ | 79.7 | | | $ | 8.1 | | $ | 23.6 | | $ | 55.0 | | $ | 41.0 | |
Three Months Ended September30, 20202021 Compared to Three Months Ended September30, 20192020
Operating Revenues
Consolidated premiums earned, net increased by $108.0$96.7 million, or 13.3%10.5%, to $923.0 million during the three months ended September 30, 2020.$1,019.7 million. This increase primarily reflects higher premiums in the Managed Care segment of $103.5by $89.7 million. The growth in Managed Care premiums reflects higher average premium rates and fully insured member months across all Managed Care lines of business.business and an increase in Medicaid and Medicare membership.
Net Unrealized Investment (Losses) Gains on Equity Investments
The $7.9 million in consolidated net unrealized investment gainslosses on equity investments reflect the impact of changes in equity markets.
Claims Incurred
Consolidated claims incurred increased by $117.2 million, or 15.4%, to $879.0 million, and the consolidated loss ratio increased 370 basis points, to 86.2%, when compared to the prior-year period primarily reflecting a more normalized utilization of Managed Care services compared to the lower utilization in the prior-year quarter due to the pandemic, COVID-19-related testing and treatments costs, increased benefits in the Medicare product offering in 2021 and the effect of the elimination of the Health Insurance Providers Fee (HIP fee) pass-through in 2021.
In the 2020 period, following the government-enforced lockdown related to the COVID-19 pandemic, we experienced a decrease in utilization of Managed Care services as members and providers deferred non-emergent or elective health services.
Operating Expenses
Consolidated operating expenses decreased by $4.3 million, or 2.7%, to $154.5 million. The decrease in operating expenses primarily reflects the elimination in 2021 of the HIP fee of $12.1 million and lower business promotion expenses related to COVID-19 relief efforts incurred in 2020, offset in part by higher personnel costs. The consolidated operating expense ratio decreased 200 basis points, to 15.1%.
Income Taxes
Consolidated income tax expense for the three months ended September 30, 2021 decreased by $4.4 million, to $5.6 million, primarily reflecting lower taxable income in 2021.
Nine Months Ended September30, 2021 Compared to Nine Months Ended September30, 2020
Operating Revenues
Consolidated premiums earned, net increased by $358.6 million, or 13.5%, to $3,016.0 million during the nine months ended September 30, 2021. This increase primarily reflects higher premiums in the Managed Care segment by $332.4 million due to higher average premium rates in all lines of business and an increase in Medicaid and Medicare membership.
Net Unrealized Investment Gains (Losses) on Equity Investments
The $11.1$13.4 million in consolidated net unrealized investment gains on equity investments reflect the impact of changes in equity markets.
Claims Incurred
Consolidated claims incurred increased by $81.8$444.2 million, or 12.0%20.9%, to $761.8$2,573.6 million, andduring the nine months ended September 30, 2021. The consolidated loss ratio decreased 90increased 520 basis points, to 82.5%85.3%, when compared tofrom the prior-year period. The increase in claims incurred primarily reflectsperiod, reflecting higher claims in the Managed Care segment resulting from an increase in fully insured members, unfavorable prior-period reserve developmentclaim trends and otherutilization of services because of COVID-19-related testing and treatments costs, such as COVID-19 related treatment and testing, the waiver of medical and payment policies and the assistance we are providing to(see Recent Developments – COVID-19 – Measures Impacting our elderly population and other vulnerable members. The decreaseBusiness included in this quarterly report on Form 10-Q), increased benefits in the consolidated loss ratio reflects lower Managed Care2021 Medicare product and a more normalized utilization of services since mid-March ascompared to the result of the government-enforced lockdown during the COVID-19 pandemic, an increaselow utilization in the average membership risk score, andprior year due to the reinstatement ofpandemic.
In the HIP fee pass-through in 2020.
Following2020 period, following the government-enforced lockdown related to the COVID-19 pandemic, in mid-March, we have seenexperienced 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 our claim costs, during this third quarter we saw an increase in utilization closer to normal as demand for deferred non-emergent or elective health services resumed. The access to and demand for care was most constrained from mid-March through April, and began to recover in late May, gradually increasing close to expected levels in the third quarter.
Operating Expenses
Consolidated operating expenses increaseddecreased by $21.9$42.8 million, or 16.0%8.6%, to $158.8$456.9 million. The increasedecrease in operating expenses mostly resulted from the reinstatement in 2020 of the HIP fee of $12.1 million, and higher business promotion expenses, mainly related to COVID-19 relief efforts. For the three months ended September 30, 2020, the consolidated operating expense ratio increased 40 basis points, to 17.1%.
Income Taxes
Consolidated income tax expense for the three months ended September 30, 2020 increased by $4.1 million, to $10.0 million, primarily reflecting higher taxable income in the Managed Care segment in 2020.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
Operating Revenues
Consolidated premiums earned, net increased by $214.9 million, or 8.8%, to $2,657.4 million during the nine months ended September 30, 2020. This increase primarily reflects higher premiums in the Managed Care segment by $203.3 million due to higher average premium rates in the Medicare and Medicaid lines of business and an increase in Medicare, Medicaid and Commercial fully insured member months.
Net unrealized investment gains (losses) on equity investments
The $17.4 million in consolidated net unrealized investment losses on equity investments reflect the impact of changes in equity markets.
Claims Incurred
Consolidated claims incurred increased by $119.9 million, or 6.0%, to $2,129.4 million, during the nine months ended September 30, 2020. The consolidated loss ratio decreased 220 basis points, to 80.1%, from the prior-year period, mostly reflecting lower Managed Care utilization of services since mid-March as the result of the government-enforced lockdown during 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, unfavorable prior-period reserve development in the Managed Care segment and $5 million of earthquake losses recorded by the Property and Casualty segment.
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 our claim costs, we are experiencing an increase in these costs during the second half of the year, that affect our medical cost trends as the demand for deferred non-emergent or elective health services resumes. The access to and demand for care was most constrained from mid-March through April, and began to recover in late May, gradually increasing close to expected levels in the third quarter.
Operating Expenses
Consolidated operating expenses increased by $96.1 million, or 23.8%, to $499.7 million. The increase in operating expenses mostly results from the reinstatementelimination of the HIP fee in 2020 of2021 by $43.4 million and the recognitionaccrual in the prior year of a $32 million contingency reserve related to a legal proceeding in ourthe Managed Care segment (see Note 17amounting to the unaudited condensed consolidated interim financial statements included in this quarterly report on Form 10-Q), higher amortization of deferred acquisition costs and higher business promotion expenses, mainly related to COVID-19 relief efforts.$32.0 million. These increasesdecreases were partially offset by lowerhigher personnel costs and professional fees and provision for doubtful accounts.fees. The consolidated operating expense ratio increased 220decreased 360 basis points, to 18.7%15.1%.
Income Taxes
Consolidated income taxes decreased by $3.0 million, or 10.9%, to $24.5 million, primarily reflecting the impact of the unrealized investment gains on equity investments in the 2021 income tax expense compared with the impact of the unrealized investment loss in the 2020 income tax expense.
Income Taxes
Consolidated income tax expense for the nine months ended September 30, 2020 decreased by $8.6 million to $27.5 million primarily reflecting a lower taxable income in all segments in 2020.
Managed Care Operating Results
| | Three months ended September 30, | | | Nine months ended September 30, | | | Three months ended September 30, | | Nine months ended September 30, | |
(dollar amounts in millions) | | 2020 | | | 2019 | | | 2020 | | | 2019 | | |
(dollar in millions) | | | 2021 | | 2020 | | 2021 | | 2020 | |
Operating revenues: | | | | | | | | | | | | | | | | | | | | | |
Medical premiums earned, net: | | | | | | | | | | | | | | | | | | | | | |
Medicare | | $ | 400.7 | | | $ | 367.1 | | | $ | 1,160.9 | | | $ | 1,065.7 | | | $ | 423.1 | | $ | 400.7 | | $ | 1,233.8 | | $ | 1,160.9 | |
Medicaid | | | 240.9 | | | | 176.3 | | | | 682.9 | | | | 577.7 | | | 302.2 | | 240.9 | | 916.7 | | 682.9 | |
Commercial | | | 208.4 | | | | 203.1 | | | | 605.3 | | | | 602.4 | | | | 214.4 | | | 208.4 | | | 631.0 | | | 605.3 | |
Medical premiums earned, net | | | 850.0 | | | | 746.5 | | | | 2,449.1 | | | | 2,245.8 | | | 939.7 | | 850.0 | | 2,781.5 | | 2,449.1 | |
Administrative service fees | | | 3.1 | | | | 3.6 | | | | 9.8 | | | | 10.9 | | | 3.9 | | 3.1 | | 10.0 | | 9.8 | |
Net investment income | | | 5.1 | | | | 5.7 | | | | 14.8 | | | | 17.0 | | | | 8.1 | | | 5.1 | | | 19.1 | | | 14.8 | |
Total operating revenues | | | 858.2 | | | | 755.8 | | | | 2,473.7 | | | | 2,273.7 | | | | 951.7 | | | 858.2 | | | 2,810.6 | | | 2,473.7 | |
Medical operating costs: | | | | | | | | | | | | | | | | | | | | | | | | | |
Medical claims incurred | | | 720.3 | | | | 645.2 | | | | 2,025.1 | | | | 1,905.9 | | | 833.8 | | 720.3 | | 2,449.1 | | 2,025.1 | |
Medical operating expenses | | | 124.9 | | | | 105.2 | | | | 392.1 | | | | 311.0 | | | | 109.4 | | | 124.9 | | | 327.0 | | | 392.1 | |
Total medical operating costs | | | 845.2 | | | | 750.4 | | | | 2,417.2 | | | | 2,216.9 | | | | 943.2 | | | 845.2 | | | 2,776.1 | | | 2,417.2 | |
Medical operating income | | $ | 13.0 | | | $ | 5.4 | | | $ | 56.5 | | | $ | 56.8 | | | $ | 8.5 | | $ | 13.0 | | $ | 34.5 | | $ | 56.5 | |
Additional data: | | | | | | | | | | | | | | | | | | | | | | | | | |
Member months enrollment: | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | | |
Fully insured | | | 966,906 | | | | 964,321 | | | | 2,920,460 | | | | 2,872,836 | | | 966,002 | | 966,906 | | 2,871,788 | | 2,920,460 | |
Self-funded | | | 324,372 | | | | 356,059 | | | | 981,634 | | | | 1,072,510 | | | | 281,153 | | | 324,372 | | | 875,844 | | | 981,634 | |
Total commercial | | | 1,291,278 | | | | 1,320,380 | | | | 3,902,094 | | | | 3,945,346 | | | | 1,247,155 | | | 1,291,278 | | | 3,747,632 | | | 3,902,094 | |
Medicare | | | 407,170 | | | | 386,995 | | | | 1,220,280 | | | | 1,156,438 | | | | 410,939 | | | 407,170 | | | 1,228,732 | | | 1,220,280 | |
Medicaid | | | 1,132,626 | | | | 1,065,885 | | | | 3,278,098 | | | | 3,187,753 | | | | 1,342,953 | | | 1,132,626 | | | 3,972,136 | | | 3,278,098 | |
Total member months | | | 2,831,074 | | | | 2,773,260 | | | | 8,400,472 | | | | 8,289,537 | | | | 3,001,047 | | | 2,831,074 | | | 8,948,500 | | | 8,400,472 | |
Medical loss ratio | | | 84.7 | % | | | 86.4 | % | | | 82.7 | % | | | 84.9 | % | | 88.7 | % | | 84.7 | % | | 88.0 | % | | 82.7 | % |
Operating expense ratio | | | 14.6 | % | | | 14.0 | % | | | 15.9 | % | | | 13.8 | % | | | 11.6 | % | | | 14.6 | % | | | 11.7 | % | | | 15.9 | % |
Three Months Ended September30, 20202021 Compared to Three Months Ended September30, 20192020
Managed Care Operating RevenuesMedical Premiums Earned, Net
Managed CareMedical premiums earned increased by $103.5$89.7 million, or 13.9%10.6%, to $850.0$939.7 million. This increase is principally the result of the following:
Premiums generated by the Medicare business increased by $33.6 million, or 9.2%, to $400.7 million, mostly due to an increase in enrollment by approximately 20,000 member months, primarily reflecting a more competitive product offering, and higher average premium rates due to an increase in the average membership risk score. This quarter we also lowered the estimated MLR rebate accrual as utilization of services have continued to trend up to almost-normal levels following the reduction noted in the second quarter related to the lockdown as the result of the COVID-19 pandemic.
Premiums generated by the Medicaid business increased by $64.6$61.3 million, or 36.6%25.4%, to $240.9$302.2 million, primarily reflecting higheran increase in enrollment of approximately 210,000 member months of approximately 67,000 and higher average premium ratesrates. In addition, following three separate premium ratea reconciliation process with ASES this quarter we recognized premiums corresponding to prior periods. These increases that became effective on November 1, 2019, May 1, 2020 and July 1, 2020.
Premiums generatedwere partially offset by the Commercial business increased by $5.3 million, or 2.6%, to $208.4 million, mainly reflecting higher average premium rates, an increase in fully insured member months during the quarter by approximately 3,000 and the reinstatementelimination of the HIP fee pass-through in 2020.2021.
• | Premiums generated by the Medicare business increased by $22.4 million, or 5.6%, to $423.1 million, primarily due to higher average premium rates resulting from an increase in the premium rate benchmark, higher average membership risk score and higher enrollment of approximately 3,800 members months when compared with the prior-year period. |
• | Premiums generated by the Commercial business increased by $6.0 million, or 2.9%, to $214.4 million, primarily reflecting higher average premium rates. This increase was partially offset by the elimination of the HIP Fee pass-through in 2021. |
Managed CareMedical Claims Incurred
Managed CareMedical claims incurred increased by $75.1$113.5 million, or 11.6%15.8%, to $720.3$833.8 million when compared to the three months ended September 30, 2019.2020. The medical loss ratio (MLR) of the segment decreased 170increased 400 basis points during the 20202021 period, to 84.7%88.7%. This fluctuation is primarilyprincipally attributed to the net effect of the following:
Claims incurred in the Medicare business increased by $25.5 million, or 8.6%, during the 2020 period and its MLR decreased 50 basis points to 80.6%. The increase in claims incurred is the result of higher membership offset by lower MLR. The lower MLR mostly reflects the increase in the average membership risk score and lower utilization resulting from the government-enforced lockdown during the COVID-19 pandemic, partially offset by unfavorable prior-period reserve development and a more competitive product offering.
Claims incurred in the Medicaid business increased by $50.9$61.2 million, or 29.0%27.1%, during the 20202021 period. The MLR, at 94.0%95.2%, was 560120 basis points lowerhigher than the same period last year. The increase in claims incurredcost is the resultdue to higher member months, a more normalized utilization of higher membership offset by lower MLR. The lower MLR mostly reflectsservices compared to the impact of the premium increases mentioned above, lower utilization resulting fromexperienced in the government-enforced lockdown duringprior-year quarter due to the COVID-19 pandemic, and COVID-19-related testing and treatment costs. In addition, the reinstatement2021 MLR was impacted by the elimination of the HIP fee pass-through in 2020.2021.
Claims incurred in the Medicare business increased by $26.1 million, or 8.1%, during the 2021 period and its MLR increased 190 basis points to 82.5%. These effects wereincreases reflect a more normalized utilization of services compared to the lower 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 unfavorable prior-periodfavorable prior period reserve development.development in the 2021 period.
Claims incurred in the Commercial business decreasedincreased by $1.3$26.2 million, or 0.7%15.3%, during 20202021 and its MLR decreased 280increased 1,000 basis points, to 81.9%91.9%. The lowerhigher MLR mostlyprincipally reflects higher claim trends, a more normalized utilization of services compared to the reinstatementlow 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 2020, offset in part by unfavorable prior-period reserve development.2021.
Managed CareMedical Operating Expenses
Managed CareMedical operating expenses increaseddecreased by $19.7$15.5 million, or 18.7%12.4%, to $124.9 million.$109.4 million, primarily reflecting the elimination of the HIP fee in 2021 and lower business promotion expenses driven by the COVID-19 relief efforts incurred in 2020, partially offset by higher personnel costs. The operating expense ratio increased 60decreased 300 basis points to 14.6%11.6% in 2020. The higher operating expenses and expense ratio are mostly driven by a $12.1 million increase in the HIP fee following the reinstatement of the fee in 2020 and expenses related to providing much-needed assistance to seniors to help them manage through the COVID-19 pandemic.2021.
Nine Months Ended September30, 20202021 Compared to Nine Months Ended September 30, 20192020
Managed Care Operating RevenuesMedical Premiums Earned, Net
Managed CareMedical premiums earned increased by $203.3$332.4 million, or 9.1%13.6%, to $2,449.1$2,781.5 million. This increase is principally the result of the following:
Premiums generated by the Medicare business increased by $95.2 million, or 8.9%, to $1,160.9 million, mostly due to higher average premium rates, reflecting an increase in the average membership risk score revenue in 2020, and higher member months enrollment by approximately 64,000. These increases were partially offset by the recognition of an MLR rebate related to lower utilization following the government-enforced lock-down during the COVID-19 pandemic.
Premiums generated by the Medicaid business increased by $105.2$233.8 million, or 18.2%34.2%, to $682.9$916.7 million, primarily reflecting higher average premium rates following thetwo premium rates increases that were effective in May 2020 mentioned above,and July 2020 and an increase in enrollment of approximately 90,000694,000 member months,months. In addition, following a reconciliation process with ASES this year, we recognized premiums corresponding to prior periods in the reinstatementfirst and third quarter of 2021. These increases were partially offset by the elimination of the HIP fee pass-through in 2020, and a profit-sharing accrual recorded in 2019.2021.
• | Premiums generated by the Medicare business increased by $72.9 million, or 6.3%, to $1,233.8 million, primarily due to higher average premium ratesreflecting an increase in the premium rate benchmark and membership risk score. Member months increased by approximately 8,500 when compared with the prior-year period. |
• | Premiums generated by the Commercial business increased by $25.7 million, or 4.2%, to $631.0 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 49,000 fully insured member months. |
Premiums generated by the Commercial business increased by $2.9 million, or 0.5%, to $605.3 million. This fluctuation primarily reflects higher fully insured enrollment during the year by approximately 48,000 member months and the reinstatement of the HIP fee pass-through in 2020. These increases were partially offset by lower average premium rates and the recognition of an MLR rebate related to lower utilization following the government-enforced lockdown during the COVID-19 pandemic.
Managed CareMedical Claims Incurred
Managed Care Medical claims incurred increased by $119.2$424.0 million, or 6.3%20.9%, to $2,025.1$2,449.1 million when compared to the nine months ended September 30, 2019.2020. The MLR of the segment decreased 220increased 530 basis points during 2020,2021, to 82.7%88.0%. This fluctuation is primarilyprincipally attributed to the net effect of the following:
Claims incurred in the MedicareMedicaid business increased by $64.3$211.7 million, or 7.4%33.4%, during the 2020 period2021 and its MLR decreased 12060 basis points, to 80.2%92.1%. The increase in claim cost is due to higher member months, improved benefits in product offerings, and unfavorable prior-period reserve development, partially offset by the lower MLR. The lower MLR mostly reflects lower utilization of services as the result of the government-enforced lockdown during the COVID-19 pandemic, which was in force from mid-March to mid-June, when it was significantly reduced.
Claims incurred in the Medicaid business increased by $93.2 million, or 17.3%, during 2020 and its MLR decreased 70 basis points, to 92.7%. The increase in claim cost is due to higher claims trend and member months and an unfavorable prior-period reserve development in 2020, partially offset by the lower MLR.months. The lower MLR reflects the higher premium rates inincreases and prior period premiums recognized this year, partially offset by COVID-19-related testing and treatment costs, the 2020 period as well aswaiver of medical and payment policies and the reinstatementelimination of the HIP fee pass-through in 2020. In addition,2021.
Claims incurred in the 2020Medicare business increased by $118.3 million, or 12.7%, during the 2021 period and its MLR increased 490 basis points, to 85.1%. The higher MLR reflects lowera more normalized utilization of services ascompared to the resultlow 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 government-enforced lockdown during the COVID-19 pandemic.2021 period.
Claims incurred in the Commercial business decreasedincreased by $38.3$94.0 million, or 7.7%20.4%, during 20202021 and its MLR decreased 670increased 1,180 basis points, to 76.1%87.9%. These decreases mostlyincreases primarily result from lowerhigher claim trends, a more normalized utilization relatedof services compared to low utilization in the prior year due to the COVID-19 lockdownpandemic, COVID-19-related testing and treatment costs, the waiver of medical and payment 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 an unfavorable change in prior-period reserve developments when compared to the 2019 period.2021.
Managed CareMedical Operating Expenses
Managed CareMedical operating expenses increaseddecreased by $81.1$65.1 million, or 26.1%16.6%, to $392.1 million. The operating expense ratio increased 210 basis points to 15.9% in 2020. The higher operating expenses mostly result from$327.0 million, primarily reflecting the reinstatement in 2020elimination of the HIP fee of $43.4 million,in 2021, the recognitionaccrual in prior year of a contingency reserve related to a legal proceeding and lower business promotion expenses related to providing much-needed assistance to seniors to help them manage throughdriven by the COVID-19 pandemic,relief efforts incurred in 2020, offset in part by a decreasean increase in the provision for doubtful accounts and professional fees.personnel costs. The operating expense ratio decreased 420 basis points to 11.7% in 2021.
Life Insurance Segment Operating Results
| | Three months ended September 30, | | | Nine months ended September 30, | | | Three months ended September 30, | | Nine months ended September 30, | |
(dollar amounts in millions) | | 2020 | | | 2019 | | | 2020 | | | 2019 | | |
(dollar in millions) | | | 2021 | | 2020 | | 2021 | | 2020 | |
Operating revenues: | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net: | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 52.6 | | | $ | 47.3 | | | $ | 152.2 | | | $ | 139.7 | | | $ | 57.9 | | $ | 52.6 | | $ | 170.0 | | $ | 152.2 | |
Assumed earned premiums | | | 0.1 | | | | 0.6 | | | | 0.1 | | | | 1.6 | | | - | | 0.1 | | - | | 0.1 | |
Ceded premiums earned | | | (2.6 | ) | | | (2.1 | ) | | | (7.4 | ) | | | (6.2 | ) | | | (2.8 | ) | | | (2.6 | ) | | | (8.4 | ) | | | (7.4 | ) |
Premiums earned, net | | | 50.1 | | | | 45.8 | | | | 144.9 | | | | 135.1 | | | 55.1 | | 50.1 | | 161.6 | | 144.9 | |
Net investment income | | | 6.9 | | | | 6.7 | | | | 20.6 | | | | 20.0 | | | | 6.8 | | | 6.9 | | | 19.9 | | | 20.6 | |
Total operating revenues | | | 57.0 | | | | 52.5 | | | | 165.5 | | | | 155.1 | | | | 61.9 | | | 57.0 | | | 181.5 | | | 165.5 | |
Operating costs: | | | | | | | | | | | | | | | | | | | | | | | | | |
Policy benefits and claims incurred | | | 30.6 | | | | 25.9 | | | | 78.6 | | | | 79.2 | | | 30.8 | | 30.6 | | 89.8 | | 78.6 | |
Underwriting and other expenses | | | 20.7 | | | | 20.0 | | | | 66.7 | | | | 58.4 | | | | 25.5 | | | 20.7 | | | 73.9 | | | 66.7 | |
Total operating costs | | | 51.3 | | | | 45.9 | | | | 145.3 | | | | 137.6 | | | | 56.3 | | | 51.3 | | | 163.7 | | | 145.3 | |
Operating income | | $ | 5.7 | | | $ | 6.6 | | | $ | 20.2 | | | $ | 17.5 | | | $ | 5.6 | | $ | 5.7 | | $ | 17.8 | | $ | 20.2 | |
Additional data: | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss ratio | | | 61.1 | % | | | 56.6 | % | | | 54.2 | % | | | 58.6 | % | | 55.9 | % | | 61.1 | % | | 55.6 | % | | 54.2 | % |
Operating expense ratio | | | 41.3 | % | | | 43.7 | % | | | 46.0 | % | | | 43.2 | % | | | 46.3 | % | | | 41.3 | % | | | 45.7 | % | | | 46.0 | % |
Three Months Ended September30, 20202021 Compared to Three Months Ended September30, 20192020
Operating Revenues
Premiums earned, net increased by $4.3$5.0 million, or 9.4%10.0%, to $50.1$55.1 million, mainlyprimarily as the result of higher sales across all lines of business, mainlyparticularly in the Cancer, Individual Life and GroupCancer lines of business, aided bybusiness. Last year premium growth slowed down due to the acquisition of an insurance portfolio during the second quarter of 2020.COVID-19 government-enforced lockdown and restrictions, which severely affected sales and increased policy cancellations.
Policy Benefits and Claims Incurred
Policy benefits and claims incurred increased by $4.7$0.2 million, or 18.1%0.7%, to $30.6$30.8 million, mostly as the result of higher actuarial reserves following an increase in collections and policy retention efforts that resulted in the reinstatement of most policies that were cancelled during the second quarter of 2020 due to the COVID-19 lockdown. As a result,while the segment’s loss ratio increased 450decreased 520 basis points, to 61.1%.55.9% following the segment’s increased premiums.
Underwriting and Other Expenses
Underwriting and other expenses increased $0.7$4.8 million, or 3.5%23.2%, to $20.7$25.5 million, while the segment’s operatingprimarily reflecting an increase in commissions expense ratio decreased 240 basis points to 41.3%.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
Operating Revenues
Premiums earned, net increased by $9.8 million, or 7.3%, to $144.9 million, mainly as the result ofresulting from higher sales across all lines of business, mainly in the Individual Life and Cancer lines of business aided by the acquisition of an insurance portfolio during the second quarter of 2020.
Policy Benefitsperiod, and Claims Incurred
Policy benefits and claims incurred decreased by $0.6 million, or 0.8%, to $78.6 million, mostly as the result of a slowdown in claim trends in the Cancer line of business due to the COVID-19 lockdown. As a result, the segment’s loss ratio decreased 440 basis points to 54.2%.
Underwriting and Other Expenses
Underwriting and other expenses increased $8.3 million, or 14.2%, to $66.7 million, mostly reflecting higher amortization of deferred acquisition costs. The segment’s operating expense ratio increased 280500 basis points, to 46.0%46.3%.
Nine Months Ended September30, 2021 Compared to Nine Months Ended September30, 2020
Operating Revenues
Premiums earned, net increased by $16.7 million, or 11.5%, to $161.6 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 of 2020, this segment acquired an insurance portfolio that contributed additional premiums in the Cancer and Group Life lines of business.
Policy Benefits and Claims Incurred
Policy benefits and claims incurred increased by $11.2 million, or 14.2%, to $89.8 million, primarily as the result of higher actuarial reserves, due to improved persistency during the period, and higher benefits paid driven by the lower volume of claim submissions in the prior year following the government-enforced lockdown due to COVID-19 pandemic. As a result, the segment’s loss ratio increased 140 basis points, to 55.6%.
Underwriting and Other Expenses
Underwriting and other expenses increased $7.2 million, or 10.8%, to $73.9 million, primarily reflecting an increase in commissions expense resulting from higher sales during the period and higher amortization of deferred acquisition costs. The segment’s operating expense ratio decreased 30 basis points to 45.7%.
Property and Casualty Insurance Operating Results
| | Three months ended September 30, | | | Nine months ended September 30, | | | Three months ended September 30, | | Nine months ended September 30, | |
(dollar amounts in millions) | | 2020 | | | 2019 | | | 2020 | | | 2019 | | |
(dollar in millions) | | | 2021 | | 2020 | | 2021 | | 2020 | |
Operating revenues: | | | | | | | | | | | | | | | | | | | | | |
Premiums earned, net: | | | | | | | | | | | | | | | | | | | | | |
Premiums written | | $ | 44.0 | | | $ | 40.0 | | | $ | 115.6 | | | $ | 107.4 | | | $ | 46.0 | | $ | 44.0 | | $ | 123.8 | | $ | 115.6 | |
Premiums ceded | | | (14.9 | ) | | | (12.3 | ) | | | (45.6 | ) | | | (36.0 | ) | | (14.8 | ) | | (14.9 | ) | | (44.2 | ) | | (45.6 | ) |
Change in unearned premiums | | | (5.2 | ) | | | (4.0 | ) | | | (3.1 | ) | | | (6.5 | ) | | | (4.9 | ) | | | (5.2 | ) | | | (2.7 | ) | | | (3.1 | ) |
Premiums earned, net | | | 23.9 | | | | 23.7 | | | | 66.9 | | | | 64.9 | | | 26.3 | | 23.9 | | 76.9 | | 66.9 | |
Net investment income | | | 2.2 | | | | 2.5 | | | | 6.6 | | | | 7.4 | | | | 2.5 | | | 2.2 | | | 6.8 | | | 6.6 | |
Total operating revenues | | | 26.1 | | | | 26.2 | | | | 73.5 | | | | 72.3 | | | | 28.8 | | | 26.1 | | | 83.7 | | | 73.5 | |
Operating costs: | | | | | | | | | | | | | | | | | | | | | | | | | |
Claims incurred | | | 10.4 | | | | 10.2 | | | | 27.8 | | | | 28.3 | | | 13.5 | | 10.4 | | 34.6 | | 27.8 | |
Underwriting and other expenses | | | 11.3 | | | | 9.4 | | | | 34.8 | | | | 29.1 | | | | 13.3 | | | 11.3 | | | 41.3 | | | 34.8 | |
Total operating costs | | | 21.7 | | | | 19.6 | | | | 62.6 | | | | 57.4 | | | | 26.8 | | | 21.7 | | | 75.9 | | | 62.6 | |
Operating income | | $ | 4.4 | | | $ | 6.6 | | | $ | 10.9 | | | $ | 14.9 | | | $ | 2.0 | | $ | 4.4 | | $ | 7.8 | | $ | 10.9 | |
Additional data: | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss ratio | | | 43.5 | % | | | 43.0 | % | | | 41.6 | % | | | 43.6 | % | | 51.3 | % | | 43.5 | % | | 45.0 | % | | 41.6 | % |
Operating expense ratio | | | 47.3 | % | | | 39.7 | % | | | 52.0 | % | | | 44.8 | % | | | 50.6 | % | | | 47.3 | % | | | 53.7 | % | | | 52.0 | % |
Three Months Ended September30, 20202021 Compared to Three Months Ended September30, 20192020
Operating Revenues
Total premiums written increased by $4.0$2.0 million, or 10.0%4.5%, to $44.0$46.0 million, mainlyprimarily driven by higher premiums in Personal Package, Commercial Liability, Commercial Auto Personal Package and Commercial Property policies,products, partially offset by a decrease in Commercial Package policies.products.
The premiums ceded to reinsurersClaims Incurred
Claims incurred increased by $2.6$3.1 million, or 21.1%29.8%, to $13.5 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 and an increase in premiums written and the impact of an unfavorable reinsurance premiumloss adjustment in the current period when comparedexpenses related to the same period last year.
The change in unearned premiums is $1.2 million higher than the same period in the prior year mostly resulting from the higher volume of premiums, and the effect of changes in the current year’s reinsurance program.
Claims Incurred
Claims incurred increased by $0.2 million, or 2.0%, to $10.4 million, and ascatastrophe claims. As a result, the loss ratio increased 50780 basis points, from 43.0% to 43.5%.51.3% during this period.
Underwriting and Other Expenses
Underwriting and other operating expenses increased by $1.9$2.0 million, or 20.2%17.7%, to $11.3$13.3 million mostlyprimarily due to higher net commission expense following the increase in net premiums earned. The net commission expense for the current period iswas also unfavorably impacted by a lower capitalization of deferred acquisition costs. The operating expense ratio was 47.3%50.6%, 760330 basis points higher than the prior year.
Nine Months Ended September30, 20202021 Compared to Nine Months Ended September30, 20192020
Operating Revenues
Total premiums written increased by $8.2 million, or 7.6%7.1%, to $115.6$123.8 million, mostlyprimarily driven by higher premiums, particularly in Personal Package, Commercial Property, Commercial Auto and Commercial Liability products, partially offset by a decrease in Commercial Package products.
The premiums ceded to reinsurers increaseddecreased by $9.6$1.4 million, or 26.7%3.1%, mostlyprimarily due to approximately $3.0 million of reinsurance reinstatement premiums in 2020 following the losses recorded after the earthquakes in the southwest region of Puerto Rico in January 2020, as well as higher premiums written and the impact ofoffset in part by an unfavorable reinsurance premium adjustmentincrease in the current period when compared to the same period last year.cost of catastrophe reinsurance protection.
The lower change in unearned premiums had a favorable impact on premiums earned of $3.4 million when compared to prior year, mostly reflecting higher premiums written and the effect of changes in the current year’s reinsurance program.
Claims Incurred
Claims incurred decreasedincreased by $0.5$6.8 million, or 1.8%24.5%, to $27.8$34.6 million mostlyprimarily resulting from lower losses in the 2020 period because of betterthe COVID-19 pandemic and an increase in loss experienceadjustment expenses related to catastrophe claims, offset in the segment’s on-going business from the effects of COVID-19 measures and lockdown, partially offsetpart by the recognition of $5.0 million of earthquake losses after the January 2020 events. As a result, the loss ratio improvedincreased by 200340 basis points, to 41.6%45.0% during this period.
Underwriting and Other Expenses
Underwriting and other operating expenses increased by $5.7$6.5 million, or 19.6%18.7%, to $34.8$41.3 million, mostly because of higher net commission expense following the increase in net premiums earned. Current year net commission expense iswas also affected by a lower capitalization of deferred acquisition costs. The operating expense ratio was 52.0%53.7%, 720170 basis points higher than the 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:
| | Nine months ended September 30, | | | Nine months ended September 30, | |
(dollar amounts in millions) | | 2020 | | | 2019 | | |
(dollar in millions) | | | 2021 | | 2020 | |
Sources (uses) of cash: | | | | | | | | | | | |
Cash provided by (used in) operating activities | | $ | 223.7 | | | $ | (3.5 | ) | |
Net (purchases) proceeds of investment securities | | | (211.7 | ) | | | 0.7 | | |
Cash provided by operating activities | | | $ | 100.7 | | | $ | 223.7 | |
Net purchases of investment securities | | | | (63.2 | ) | | (211.7 | ) |
Net capital expenditures | | | (52.5 | ) | | | (14.7 | ) | | | (16.9 | ) | | (52.5 | ) |
Capital contribution on equity method investees | | | (7.1 | ) | | | - | | | | - | | | (7.1 | ) |
Proceeds from long-term borrowings | | | 30.9 | | | | - | | | | - | | | 30.9 | |
Net change in short-term borrowings | | | 28.5 | | | | - | | | | (30.0 | ) | | 28.5 | |
Payments of long-term borrowings | | | (2.8 | ) | | | (2.4 | ) | | | (3.4 | ) | | (2.8 | ) |
Proceeds from policyholder deposits | | | 21.6 | | | | 15.1 | | | | 12.6 | | | 21.6 | |
Surrenders of policyholder deposits | | | (12.8 | ) | | | (16.5 | ) | | | (8.7 | ) | | (12.8 | ) |
Repurchase and retirement of common stock | | | (14.9 | ) | | | - | | | | - | | | (14.9 | ) |
Other | | | 16.9 | | | | 2.7 | | | | 20.6 | | | | 16.9 | |
Net increase (decrease) in cash and cash equivalents | | $ | 19.8 | | | $ | (18.6 | ) | |
Net increase in cash and cash equivalents | | | $ | 11.7 | | | $ | 19.8 | |
The increasedecrease of approximately $227.2$123 million in net cash provided by operating activities is mostly due to higher claims paid in the result of higher premium collections, partiallyManaged Care segments, offset in part by higher premiums collections, lower income taxes paid, and lower cash paid to suppliers and employees and income taxes paid.employees.
Net (purchases) proceeds from investmentThe net purchases of investments in securities are part of our asset/liability management strategy.
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, and the acquisition is included in the capital expenditures in the statement of cash flows. For further details, see Note 9 to the unaudited condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q.
The increasedecrease in capital contribution reflects capital contributions made in the 2020 period in exchange for a participation in equity method investees.
The net change in short-term borrowings represents the proceeds fromrepayments of short-term facilities available to address timing differences between cash receipts and disbursements.
The fluctuation in other sources of cash principally reflects the $3.8 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 ninethree months ended September 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 of cash mostly reflects the $13.0 million change in outstanding checks in excess of bank balances.
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 loanLoan 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. The Company was not in compliance with the Debt Service Coverage Ratio covenant of the credit agreement during the quarter ended September 30, 2021. As of September 30, 2021 and December 31, 2020, we are in compliancethe outstanding balance of the debt was $20,217 and $22,644, respectively. On November 1, 2021, the financial banking institution waived the Company’s obligation to comply with these covenants.this covenant for the quarter ended September 30, 2021 and quarters ending on December 31, 2021 and March 31, 2022.
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) 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), 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), 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.phase out.
On June 19, 2020, TSM entered into a $31.4 million Credit Agreement with a commercial bank in Puerto Rico. The proceeds were used by the Company to partially finance the acquisition of the Building.a building. The Credit Agreement is guaranteed by a mortgage over the Building,building, a pledge of all collateral related 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 third parties. The Company expects to move withinis in the next yearprocess of moving some of its offices currently leased to third parties to the 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, 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 whichMonthly 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, 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 September 30, 2020.2021.
SeeFor further details, see Note 913, Borrowings, of the Notes to the unaudited condensed consolidated interim financial statements includedConsolidated Financial Statements in this QuarterlyItem 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-Q10-K for a summary of long-term borrowings.the 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) and a revolving credit facility. See Note 9 to8 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 |
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 |
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 mistakes.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 September 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 our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended September 30, 20202021 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PartPart II – Other Information
Item 1. Legal Proceedings
For a description of legal proceedings that have experienced significant developments during this quarter, see Note 1714 to the unaudited condensed consolidated interim financial statements included in this quarterly report on Form 10-Q.
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, 2019.2020.
The following risk factor was updatedadded during the three months ended September 30, 2020.2021.
The COVID-19 pandemic and local, state and federal governments’ responseconditions to Merger may not be met, or the pandemicMerger Agreement 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. The Governor has issued several other executive orders establishing the rules to continue the gradual re-opening of the economy, the latest ofbe terminated, which is effective until November 13, 2020.
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 that 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. New sales were affected in all our segments and lines of business during the lockdown given that sales functions of all our businesses were not considered essential under the Order and therefore had to be performed remotely. Even though the government-mandated lockdown has been relaxed and most of our sales force has returned to our offices, new sales continue to be affected as social distancing measures continue to restrict certain sales activities. 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 the Merger not being completed and a material increasedecline in medical claims the share price of the Company, as COVID-19 cases increase 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 themwell 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 financial condition 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 exclusionIf the Company fails to obtain shareholder approval of coverage duethe Merger Agreement, or fails to virusobtain the required regulatory or bacteria. However, thereBlue Cross and Blue Shield Association approvals, or other conditions to the closing of the Merger are federalnot met, the Merger may not be consummated or may be significantly delayed, which could result in a decline in the price of our shares 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 and adverse effect on our Propertyresults of operations, financial position and Casualty Insurance segment. With respectcash flows. The Merger Agreement provides for the payment of a termination fee of $17,985,000 by the Company should the Merger Agreement be terminated pursuant to our Life segment, there is a risk thatcertain provisions. Should the pandemicMerger Agreement be terminated pursuant to an event triggering the payment of the termination fee by the Company, the termination of the Merger Agreement and the payment of such termination fee could result in a higher number of deaths,material 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.operations, financial position and cash flows.
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 |
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 | | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs | |
| | | | | | | | | | | | |
July 1, 2020 to July 31, 2020 | | | - | | | $ | - | | | | - | | | $ | - | |
August 1, 2020 to August 31, 2020 | | | - | | | | - | | | | - | | | | - | |
September 1, 2020 to September 30, 2020 | | | 14,040 | | | | 18.85 | | | | - | | | | - | |
(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 | |
| | | | | | | | | | | | |
July 1, 2021 to July 31, 2021 | | | - | | | $ | - | | | | - | | | $ | - | |
August 1, 2021 to August 31, 2021 | | | - | | | | - | | | | - | | | | - | |
September 1, 2021 to September 30, 2021 | | | 2,063 | | | | 21.90 | | | | - | | | | - | |
(1) Represents shares repurchased and retired as the result of non-cash tax witholdings upon vesting of shares of participants under the Company’s equity compensation plans. In September 2021, 2,063 shares were repurchased and retired as the result of non-cash tax witholdings upon vesting of shares.
Item 3. | Defaults Upon Senior Securities |
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. | Mine Safety Disclosures |
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
| Exhibits | Description |
| | |
| | Amendment to the contract between Administración de Seguros de Salud de Puerto Rico (ASES) and Triple-S Salud, Inc., to administer the Provision of Physical & Behavioral Health Services under the Provision of Physical and Behavioral Health Services Under the Government Health Plan dated as of August 28, 2020.September 9, 2021. |
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| | Amendment to the contract between Administración 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 September 9, 2020. |
| |
| Amendment to the contract between Administración de Seguros de Salud de Puerto Rico (ASES) and Triple-S Salud, Inc., to administer the Provision of Physical &and Behavioral Health Services underUnder the Government Health Plan dated as of September 24, 2020.29, 2021. |
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| |
| | Statement re computation of per share earnings; an exhibit describing the computation of the earnings per share for the three and nine months ended September 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). |
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| | Certification of the Executive Vice President and Chief Financial Officer required by Rule 13a-14(a)/15d-14(a). |
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| | Certification of the President and Chief Executive Officer required pursuant to 18 U.S.C Section 1350. |
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| | 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 |
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| | | Registrant |
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Date: | November 6, 20204, 2021
| | By: | /s/ Roberto García-Rodríguez | |
| | | | Roberto García-Rodríguez | |
| | | | President and Chief Executive Officer | |
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Date: | November 6, 20204, 2021 | | By: | /s/ JuanVictor J. Román-JiménezHaddock-Morales | |
| | | | JuanVictor J. Román-Jiménez | Haddock-Morales |
| | | | Executive Vice President and Chief Financial Officer | |