Attached files
file | filename |
---|---|
EX-32.2 - EXHIBIT 32.2 - TRIPLE-S MANAGEMENT CORP | ex32_2.htm |
EX-32.1 - EXHIBIT 32.1 - TRIPLE-S MANAGEMENT CORP | ex32_1.htm |
EX-31.2 - EXHIBIT 31.2 - TRIPLE-S MANAGEMENT CORP | ex31_2.htm |
EX-31.1 - EXHIBIT 31.1 - TRIPLE-S MANAGEMENT CORP | ex31_1.htm |
EX-10.2 - EXHIBIT 10.2 - TRIPLE-S MANAGEMENT CORP | ex10_2.htm |
EX-10.1 - EXHIBIT 10.1 - TRIPLE-S MANAGEMENT CORP | ex10_1.htm |
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 June 30, 2018
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)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting 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’s classes of common stock, as of the latest practicable date.
Title of each class
|
Outstanding at June 30, 2018
|
Common Stock Class A, $1.00 par value
|
950,968
|
Common Stock Class B, $1.00 par value
|
22,242,836
|
Triple-S Management Corporation
FORM 10-Q
For the Quarter Ended June 30, 2018
3
|
|||
Item 1.
|
3
|
||
Item 2.
|
34
|
||
34
|
|||
34
|
|||
35
|
|||
36
|
|||
36
|
|||
37
|
|||
39
|
|||
42
|
|||
43
|
|||
44
|
|||
Item 3.
|
45
|
||
Item 4.
|
46
|
||
46
|
|||
Item 1.
|
46
|
||
Item 1A.
|
46
|
||
Item 2.
|
47
|
||
Item 3.
|
47
|
||
Item 4.
|
47
|
||
Item 5.
|
47
|
||
Item 6.
|
47
|
||
48
|
Triple-S Management Corporation
Condensed Consolidated Balance Sheets (Unaudited)
(dollar amounts in thousands, except share data)
June 30,
2018
|
December 31,
2017
|
|||||||
Assets
|
||||||||
Investments and cash:
|
||||||||
Fixed maturities available for sale, at fair value
|
$
|
1,232,689
|
$
|
1,216,788
|
||||
Fixed maturities held to maturity, at amortized cost
|
2,484
|
2,319
|
||||||
Equity investments, at fair value
|
313,042
|
342,309
|
||||||
Other invested assets, at net asset value
|
52,633
|
34,984
|
||||||
Policy loans
|
9,449
|
9,077
|
||||||
Cash and cash equivalents
|
255,979
|
198,941
|
||||||
Total investments and cash
|
1,866,276
|
1,804,418
|
||||||
Premiums and other receivables, net
|
742,056
|
899,327
|
||||||
Deferred policy acquisition costs and value of business acquired
|
205,268
|
200,788
|
||||||
Property and equipment, net
|
78,153
|
74,716
|
||||||
Deferred tax asset
|
79,404
|
65,123
|
||||||
Goodwill
|
25,397
|
25,397
|
||||||
Other assets
|
77,700
|
46,996
|
||||||
Total assets
|
$
|
3,074,254
|
$
|
3,116,765
|
||||
Liabilities and Stockholders’ Equity
|
||||||||
Claim liabilities
|
$
|
1,111,444
|
$
|
1,106,876
|
||||
Liability for future policy benefits
|
349,176
|
339,507
|
||||||
Unearned premiums
|
169,538
|
86,349
|
||||||
Policyholder deposits
|
175,592
|
176,534
|
||||||
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs
|
61,128
|
52,287
|
||||||
Accounts payable and accrued liabilities
|
291,294
|
354,894
|
||||||
Deferred tax liability
|
3,971
|
21,891
|
||||||
Long-term borrowings
|
30,478
|
32,073
|
||||||
Liability for pension benefits
|
33,093
|
33,672
|
||||||
Total liabilities
|
2,225,714
|
2,204,083
|
||||||
Stockholders’ equity:
|
||||||||
Triple-S Management Corporation stockholders’ equity
|
951
|
951
|
||||||
Common stock Class A, $1 par value. Authorized 100,000,000 shares; issued and outstanding 950,968 at June 30, 2018 and December 31, 2017, respectively
|
||||||||
Common stock Class B, $1 par value. Authorized 100,000,000 shares; issued and outstanding 22,242,836 and 22,627,077 shares at June 30, 2018 and December 31, 2017, respectively
|
22,243
|
22,627
|
||||||
Additional paid-in capital
|
39,050
|
53,142
|
||||||
Retained earnings
|
790,439
|
785,390
|
||||||
Accumulated other comprehensive (loss) income
|
(3,462
|
)
|
51,254
|
|||||
Total Triple-S Management Corporation stockholders’ equity
|
849,221
|
913,364
|
||||||
Non-controlling interest in consolidated subsidiary
|
(681
|
)
|
(682
|
)
|
||||
Total stockholders’ equity
|
848,540
|
912,682
|
||||||
Total liabilities and stockholders’ equity
|
$
|
3,074,254
|
$
|
3,116,765
|
See accompanying notes to unaudited condensed consolidated financial statements.
Triple-S Management Corporation
Condensed Consolidated Statements of Earnings (Unaudited)
(dollar amounts in thousands, except per share data)
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Revenues:
|
||||||||||||||||
Premiums earned, net
|
$
|
741,770
|
$
|
722,891
|
$
|
1,493,804
|
$
|
1,425,164
|
||||||||
Administrative service fees
|
4,066
|
4,548
|
7,414
|
8,927
|
||||||||||||
Net investment income
|
15,707
|
12,698
|
29,462
|
24,714
|
||||||||||||
Other operating revenues
|
1,588
|
1,121
|
2,659
|
2,086
|
||||||||||||
Total operating revenues
|
763,131
|
741,258
|
1,533,339
|
1,460,891
|
||||||||||||
Net realized investment (losses) gains
|
(921
|
)
|
4,054
|
2,021
|
4,390
|
|||||||||||
Net unrealized investment losses on equity investments
|
(776
|
)
|
-
|
(16,975
|
)
|
-
|
||||||||||
Other income, net
|
494
|
587
|
1,657
|
3,112
|
||||||||||||
Total revenues
|
761,928
|
745,899
|
1,520,042
|
1,468,393
|
||||||||||||
Benefits and expenses:
|
||||||||||||||||
Claims incurred
|
692,138
|
611,297
|
1,311,127
|
1,232,160
|
||||||||||||
Operating expenses
|
134,612
|
118,720
|
267,746
|
229,666
|
||||||||||||
Total operating costs
|
826,750
|
730,017
|
1,578,873
|
1,461,826
|
||||||||||||
Interest expense
|
1,825
|
1,721
|
3,515
|
3,407
|
||||||||||||
Total benefits and expenses
|
828,575
|
731,738
|
1,582,388
|
1,465,233
|
||||||||||||
(Loss) income before taxes
|
(66,647
|
)
|
14,161
|
(62,346
|
)
|
3,160
|
||||||||||
Income tax (benefit) expense
|
(27,901
|
)
|
1,456
|
(27,514
|
)
|
(5,202
|
)
|
|||||||||
Net (loss) income
|
(38,746
|
)
|
12,705
|
(34,832
|
)
|
8,362
|
||||||||||
Net income (loss) attributable to non-controlling interest
|
1
|
-
|
1
|
(1
|
)
|
|||||||||||
Net (loss) income attributable to Triple-S Management Corporation
|
$
|
(38,747
|
)
|
$
|
12,705
|
$
|
(34,833
|
)
|
$
|
8,363
|
||||||
Earnings per share attributable to Triple-S Management Corporation
|
||||||||||||||||
Basic net (loss) income per share
|
$
|
(1.68
|
)
|
$
|
0.52
|
$
|
(1.50
|
)
|
$
|
0.35
|
||||||
Diluted net (loss) income per share
|
$
|
(1.68
|
)
|
$
|
0.52
|
$
|
(1.50
|
)
|
$
|
0.34
|
See accompanying notes to unaudited condensed consolidated financial statements.
Triple-S Management Corporation
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
(dollar amounts in thousands)
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Net (loss) income
|
$
|
(38,746
|
)
|
$
|
12,705
|
$
|
(34,832
|
)
|
$
|
8,362
|
||||||
Other comprehensive (loss) income, net of tax:
|
||||||||||||||||
Net unrealized change in fair value of available for sale securities, net of taxes
|
(8,202
|
)
|
4,396
|
(15,096
|
)
|
12,868
|
||||||||||
Defined benefit pension plan:
|
||||||||||||||||
Actuarial loss, net
|
131
|
53
|
262
|
106
|
||||||||||||
Total other comprehensive (loss) income, net of tax
|
(8,071
|
)
|
4,449
|
(14,834
|
)
|
12,974
|
||||||||||
Comprehensive (loss) income
|
(46,817
|
)
|
17,154
|
(49,666
|
)
|
21,336
|
||||||||||
Comprehensive income (loss) attributable to non-controlling interest
|
1
|
-
|
1
|
(1
|
)
|
|||||||||||
Comprehensive (loss) income attributable to Triple-S Management Corporation
|
$
|
(46,818
|
)
|
$
|
17,154
|
$
|
(49,667
|
)
|
$
|
21,337
|
See accompanying notes to unaudited condensed consolidated financial statements.
Triple-S Management Corporation
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(dollar amounts in thousands)
2018
|
2017
|
|||||||
Balance at January 1
|
$
|
913,364
|
$
|
863,163
|
||||
Share-based compensation
|
2,543
|
170
|
||||||
Repurchase and retirement of common stock
|
(17,019
|
)
|
-
|
|||||
Comprehensive (loss) income
|
(49,667
|
)
|
21,337
|
|||||
Total Triple-S Management Corporation stockholders’ equity
|
849,221
|
884,670
|
||||||
Non-controlling interest in consolidated subsidiary
|
(681
|
)
|
(678
|
)
|
||||
Balance at June 30
|
$
|
848,540
|
$
|
883,992
|
See accompanying notes to unaudited condensed consolidated financial statements.
Triple-S Management Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollar amounts in thousands)
Six months ended
June 30,
|
||||||||
2018
|
2017
|
|||||||
Cash flows from operating activities:
|
||||||||
Net (loss) income
|
$
|
(34,832
|
)
|
$
|
8,362
|
|||
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
6,986
|
6,454
|
||||||
Net amortization of investments
|
3,116
|
4,787
|
||||||
Additions (reductions) to the allowance for doubtful receivables
|
1,729
|
(2,390
|
)
|
|||||
Deferred tax benefit
|
(29,292
|
)
|
(11,734
|
)
|
||||
Net realized investment gain on sale of securities
|
(2,021
|
)
|
(4,390
|
)
|
||||
Net unrealized loss on equity investments
|
16,975
|
-
|
||||||
Interest credited to policyholder deposits
|
2,157
|
2,144
|
||||||
Share-based compensation
|
2,543
|
170
|
||||||
Decrease (increase) in assets:
|
||||||||
Premium and other receivables, net
|
155,542
|
(25,078
|
)
|
|||||
Deferred policy acquisition costs and value of business acquired
|
(2,355
|
)
|
(5,621
|
)
|
||||
Deferred taxes
|
522
|
(280
|
)
|
|||||
Other assets
|
(32,997
|
)
|
(1,229
|
)
|
||||
(Decrease) increase in liabilities:
|
||||||||
Claim liabilities
|
4,568
|
16,297
|
||||||
Liability for future policy benefits
|
9,669
|
10,195
|
||||||
Unearned premiums
|
83,189
|
96,251
|
||||||
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs
|
8,841
|
5,993
|
||||||
Accounts payable and accrued liabilities
|
(63,617
|
)
|
33,774
|
|||||
Net cash provided by operating activities
|
130,723
|
133,705
|
(Continued)
Triple-S Management Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollar amounts in thousands)
Six months ended
June 30,
|
||||||||
2018
|
2017
|
|||||||
Cash flows from investing activities:
|
||||||||
Proceeds from investments sold or matured:
|
||||||||
Securities available for sale:
|
||||||||
Fixed maturities sold
|
$
|
768,789
|
$
|
88,141
|
||||
Fixed maturities matured/called
|
10,656
|
8,938
|
||||||
Securities held to maturity:
|
||||||||
Fixed maturities matured/called
|
728
|
703
|
||||||
Equity investments sold
|
123,197
|
21,499
|
||||||
Other invested assets sold
|
1,788
|
-
|
||||||
Acquisition of investments:
|
||||||||
Securities available for sale:
|
||||||||
Fixed maturities
|
(829,010
|
)
|
(141,116
|
)
|
||||
Securities held to maturity:
|
||||||||
Fixed maturities
|
(893
|
)
|
(703
|
)
|
||||
Equity investments
|
(99,944
|
)
|
(20,424
|
)
|
||||
Other invested assets
|
(18,649
|
)
|
-
|
|||||
Decrease (increase) in other investments
|
1,817
|
(731
|
)
|
|||||
Net change in policy loans
|
(372
|
)
|
(152
|
)
|
||||
Net capital expenditures
|
(9,116
|
)
|
(8,704
|
)
|
||||
Net cash used in investing activities
|
(51,009
|
)
|
(52,549
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Change in outstanding checks in excess of bank balances
|
(1,564
|
)
|
(8,545
|
)
|
||||
Repayments of long-term borrowings
|
(1,618
|
)
|
(1,212
|
)
|
||||
Repurchase and retirement of common stock
|
(16,395
|
)
|
-
|
|||||
Proceeds from policyholder deposits
|
11,606
|
8,166
|
||||||
Surrenders of policyholder deposits
|
(14,705
|
)
|
(10,467
|
)
|
||||
Net cash used in financing activities
|
(22,676
|
)
|
(12,058
|
)
|
||||
Net increase in cash and cash equivalents
|
57,038
|
69,098
|
||||||
Cash and cash equivalents:
|
||||||||
Beginning of period
|
198,941
|
103,428
|
||||||
End of period
|
$
|
255,979
|
$
|
172,526
|
See accompanying notes to unaudited condensed consolidated financial statements.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
(1) |
Basis of Presentation
|
The accompanying condensed consolidated interim financial statements prepared by Triple-S Management Corporation 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 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. These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017.
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 six months ended June 30, 2018 are not necessarily indicative of the results for the full year ending December 31, 2018.
(2) |
Significant Accounting Policies
|
Investments
Fixed maturities and other invested assets
Investment in debt securities at June 30, 2018 and December 31, 2017 consists mainly of obligations of government‑sponsored enterprises, U.S. Treasury securities and obligations of U.S. government instrumentalities, obligations of the Commonwealth of Puerto Rico and its 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.
Triple-S Management Corporation
Notes to Condensed Consolidated 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 decline in value is deemed to be other-than-temporary and is recorded to other-than-temporary impairment losses recognized in earnings in the Company’s consolidated statements of earnings. For impaired fixed maturity securities that the Company does not intend to sell or it is more likely than not that such securities will not have to be sold, but the Company expects not to fully recover the amortized cost basis, the credit component of the other-than-temporary impairment is recognized in other-than-temporary impairment losses recognized in earnings in the Company’s consolidated statements of earnings and the non-credit component of the other-than-temporary 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.
The credit component of an other-than-temporary 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.
A decline in the fair value of any available-for-sale or held-to-maturity security below cost that is deemed to be other-than-temporary results in an impairment to reduce the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, market conditions, 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.
Other invested assets at June 30, 2018 and December 31, 2017 consist mainly of alternative investments in partnerships which 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 values 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 June 30, 2018 amounted to $108,312. The remaining average commitments period is approximately three years.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
Equity investments
Investment in equity securities at June 30, 2018 and December 31, 2017 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 based on quoted market prices. 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.
Recently Adopted Accounting Standards
On February 28, 2018, the Financial Accounting Standard Board (FASB) issued guidance for Technical Corrections and Improvement to Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. Areas for correction or improvement include (1) equity securities without a readily determinable fair value—discontinuation, (2) equity securities without a readily determinable fair value—adjustments, (3) forward contracts and purchased options, (4) presentation requirements for certain fair value option liabilities, (5) fair value option liabilities denominated in a foreign currency, and (6) transition guidance for equity securities without a readily determinable fair value. For public companies, these amendments, will be applied on a prospective basis, for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Public entities with fiscal years beginning between December 15, 2017 and June 15, 2018 are not required to adopt these amendments until the interim period beginning after June 15, 2018. The adoption of this guidance did not have a material impact on the presentation of the Company’s consolidated result of operations.
Other than the accounting pronouncement disclosed above, there were no other new accounting pronouncements issued during the three months ended June 30, 2018 that could have a material impact on the Corporation’s financial position, operating results or financials statement disclosures.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
(3) |
Investment in Securities
|
The amortized cost for debt securities and cost for equity securities, gross unrealized gains, gross unrealized losses, and estimated fair value for the Company’s investments in securities by major security type and class of security at June 30, 2018 and December 31, 2017, were as follows:
June 30, 2018
|
||||||||||||||||
Amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Estimated
fair value
|
|||||||||||||
Fixed maturities available for sale
|
||||||||||||||||
Obligations of government- sponsored enterprises
|
$
|
11,450
|
$
|
2
|
$
|
(45
|
)
|
$
|
11,407
|
|||||||
U.S. Treasury securities and obligations of U.S. government instrumentalities
|
211,872
|
156
|
(565
|
)
|
211,463
|
|||||||||||
Obligations of the Commonwealth of Puerto Rico and its instrumentalities
|
8,175
|
-
|
(6
|
)
|
8,169
|
|||||||||||
Municipal securities
|
713,271
|
18,520
|
(2,804
|
)
|
728,987
|
|||||||||||
Corporate bonds
|
191,745
|
11,428
|
(1,327
|
)
|
201,846
|
|||||||||||
Residential mortgage-backed securities
|
60,492
|
33
|
(1,094
|
)
|
59,431
|
|||||||||||
Collateralized mortgage obligations
|
11,804
|
2
|
(420
|
)
|
11,386
|
|||||||||||
Total fixed maturities available for sale
|
$
|
1,208,809
|
$
|
30,141
|
$
|
(6,261
|
)
|
$
|
1,232,689
|
June 30, 2018
|
||||||||||||||||
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
|
$
|
617
|
$
|
121
|
$
|
-
|
$
|
738
|
||||||||
Residential mortgage-backed securities
|
191
|
2
|
-
|
193
|
||||||||||||
Certificates of deposit
|
1,676
|
-
|
-
|
1,676
|
||||||||||||
Total
|
$
|
2,484
|
$
|
123
|
$
|
-
|
$
|
2,607
|
June 30, 2018
|
||||||||||||||||
Amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Estimated
fair value
|
|||||||||||||
Equity investments - Mutual funds
|
$
|
280,168
|
$
|
34,105
|
$
|
(1,231
|
)
|
$
|
313,042
|
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
June 30, 2018
|
||||||||||||||||
Amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Estimated
fair value
|
|||||||||||||
Other invested assets - Alternative investments
|
$
|
51,879
|
$
|
1,107
|
$
|
(353
|
)
|
$
|
52,633
|
December 31, 2017
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair
Value
|
|||||||||||||
Securities available for sale
|
||||||||||||||||
Fixed maturities
|
||||||||||||||||
Obligations of government- sponsored enterprises
|
$
|
1,431
|
$
|
13
|
$
|
-
|
$
|
1,444
|
||||||||
U.S. Treasury securities and obligations of U.S. government instrumentalities
|
118,858
|
41
|
(550
|
)
|
118,349
|
|||||||||||
Obligations of the Commonwealth of Puerto Rico and its instrumentalities
|
8,059
|
34
|
-
|
8,093
|
||||||||||||
Municipal securities
|
771,789
|
30,468
|
(1,467
|
)
|
800,790
|
|||||||||||
Corporate bonds
|
217,046
|
17,767
|
(489
|
)
|
234,324
|
|||||||||||
Residential mortgage-backed securities
|
32,465
|
2
|
(355
|
)
|
32,112
|
|||||||||||
Collateralized mortgage obligations
|
22,003
|
10
|
(337
|
)
|
21,676
|
|||||||||||
Total fixed maturities
|
1,171,651
|
48,335
|
(3,198
|
)
|
1,216,788
|
|||||||||||
Equity securities
|
||||||||||||||||
Mutual funds
|
292,460
|
50,072
|
(223
|
)
|
342,309
|
|||||||||||
Alternative investments
|
34,669
|
559
|
(244
|
)
|
34,984
|
|||||||||||
Total equity securities
|
327,129
|
50,631
|
(467
|
)
|
377,293
|
|||||||||||
Total
|
$
|
1,498,780
|
$
|
98,966
|
$
|
(3,665
|
)
|
$
|
1,594,081
|
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
December 31, 2017
|
||||||||||||||||
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
|
$
|
617
|
$
|
154
|
$
|
-
|
$
|
771
|
||||||||
Residential mortgage-backed securities
|
191
|
2
|
-
|
193
|
||||||||||||
Certificates of deposit
|
1,511
|
-
|
-
|
1,511
|
||||||||||||
Total
|
$
|
2,319
|
$
|
156
|
$
|
-
|
$
|
2,475
|
Gross unrealized losses on investment securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2018 and December 31, 2017 were as follows:
June 30, 2018
|
||||||||||||||||||||||||||||||||||||
Less than 12 months
|
12 months or longer
|
Total
|
||||||||||||||||||||||||||||||||||
Estimated
Fair Value
|
Gross
Unrealized
Loss
|
Number of
Securities
|
Estimated
Fair Value
|
Gross
Unrealized
Loss
|
Number of
Securities
|
Estimated
Fair Value
|
Gross
Unrealized
Loss
|
Number of
Securities
|
||||||||||||||||||||||||||||
Fixed maturities available for sale
|
||||||||||||||||||||||||||||||||||||
Obligations of government- sponsored enterprises
|
$
|
9,955
|
$
|
(45
|
)
|
1
|
$
|
-
|
$
|
-
|
-
|
$
|
9,955
|
$
|
(45
|
)
|
1
|
|||||||||||||||||||
U.S. Treasury securities and obligations of U.S. governmental instrumentalities
|
150,885
|
(565
|
)
|
12
|
-
|
-
|
-
|
150,885
|
(565
|
)
|
12
|
|||||||||||||||||||||||||
Obligations of the Commonwealth of Puerto Rico and its instrumentalities
|
6,691
|
(6
|
)
|
3
|
-
|
-
|
-
|
6,691
|
(6
|
)
|
3
|
|||||||||||||||||||||||||
Municipal securities
|
278,677
|
(2,796
|
)
|
41
|
701
|
(8
|
)
|
1
|
279,378
|
(2,804
|
)
|
42
|
||||||||||||||||||||||||
Corporate bonds
|
96,306
|
(1,327
|
)
|
25
|
-
|
-
|
-
|
96,306
|
(1,327
|
)
|
25
|
|||||||||||||||||||||||||
Residential mortgage-backed securities
|
41,498
|
(1,094
|
)
|
22
|
-
|
-
|
-
|
41,498
|
(1,094
|
)
|
22
|
|||||||||||||||||||||||||
Collateralized mortgage obligations
|
3,289
|
(115
|
)
|
1
|
5,628
|
(305
|
)
|
2
|
8,917
|
(420
|
)
|
3
|
||||||||||||||||||||||||
Total fixed maturities
|
$
|
587,301
|
$
|
(5,948
|
)
|
105
|
$
|
6,329
|
$
|
(313
|
)
|
3
|
$
|
593,630
|
$
|
(6,261
|
)
|
108
|
||||||||||||||||||
Other invested assets - Alternative investments
|
$
|
13,991
|
$
|
(121
|
)
|
3
|
$
|
7,327
|
$
|
(232
|
)
|
2
|
$
|
21,318
|
$
|
(353
|
)
|
5
|
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
December 31, 2017
|
||||||||||||||||||||||||||||||||||||
Less than 12 months
|
12 months or longer
|
Total
|
||||||||||||||||||||||||||||||||||
Estimated
Fair Value
|
Gross
Unrealized
Loss
|
Number of
Securities
|
Estimated
Fair Value
|
Gross
Unrealized
Loss
|
Number of
Securities
|
Estimated
Fair Value
|
Gross
Unrealized
Loss
|
Number of
Securities
|
||||||||||||||||||||||||||||
Securites available for sale
|
||||||||||||||||||||||||||||||||||||
Fixed maturities
|
||||||||||||||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. governmental instrumentalities
|
$
|
96,617
|
$
|
(550
|
)
|
7
|
$
|
-
|
$
|
-
|
-
|
$
|
96,617
|
$
|
(550
|
)
|
7
|
|||||||||||||||||||
Municipal securities
|
162,731
|
(1,467
|
)
|
27
|
-
|
-
|
-
|
162,731
|
(1,467
|
)
|
27
|
|||||||||||||||||||||||||
Corporate bonds
|
80,374
|
(489
|
)
|
16
|
-
|
-
|
-
|
80,374
|
(489
|
)
|
16
|
|||||||||||||||||||||||||
Residential mortgage backed securities
|
31,736
|
(355
|
)
|
19
|
-
|
-
|
-
|
31,736
|
(355
|
)
|
19
|
|||||||||||||||||||||||||
Collateralized mortgage obligations
|
13,630
|
(239
|
)
|
3
|
7,294
|
(98
|
)
|
2
|
20,924
|
(337
|
)
|
5
|
||||||||||||||||||||||||
Total fixed maturities
|
385,088
|
(3,100
|
)
|
72
|
7,294
|
(98
|
)
|
2
|
392,382
|
(3,198
|
)
|
74
|
||||||||||||||||||||||||
Equity securities
|
||||||||||||||||||||||||||||||||||||
Mutual funds
|
42,983
|
(223
|
)
|
6
|
-
|
-
|
-
|
42,983
|
(223
|
)
|
6
|
|||||||||||||||||||||||||
Alternative investments
|
9,986
|
(212
|
)
|
5
|
3,162
|
(32
|
)
|
1
|
13,148
|
(244
|
)
|
6
|
||||||||||||||||||||||||
Total equity securities
|
52,969
|
(435
|
)
|
11
|
3,162
|
(32
|
)
|
1
|
56,131
|
(467
|
)
|
12
|
||||||||||||||||||||||||
Total for securities available for sale
|
$
|
438,057
|
$
|
(3,535
|
)
|
83
|
$
|
10,456
|
$
|
(130
|
)
|
3
|
$
|
448,513
|
$
|
(3,665
|
)
|
86
|
The Company reviews the available for sale and other invested assets portfolios under the Company’s impairment review policy. Given market conditions and the significant judgments involved, there is a continuing risk that declines in fair value may occur and material other-than-temporary impairments may be recorded in future periods. The Corporation from time to time may sell investments as part of its asset/liability management process or to reposition its investment portfolio based on current and expected market conditions.
Obligations of Government-Sponsored Enterprises, U.S. Treasury Securities and Obligations of U.S. Government Instrumentalities, and Municipal Securities: The unrealized losses of these securities were mainly caused by fluctuations in interest rates and general market conditions. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment. In addition, these investments have investment grade ratings. Because the decline in fair value is attributable to changes in interest rates and not credit quality; because 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 maturity; and because the Company expects to collect all contractual cash flows, these investments are not considered other-than-temporarily impaired.
Corporate Bonds: The unrealized losses of these bonds were principally caused by fluctuations in interest rates and general market conditions. All corporate bonds with an unrealized loss have investment grade ratings. Because the decline in estimated fair value is principally attributable to changes in interest rates; because 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 maturity; and because the Company expects to collect all contractual cash flows, these investments are not considered other-than-temporarily impaired.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
Residential mortgage-backed securities and Collateralized mortgage obligations: The unrealized losses on investments in residential mortgage-backed securities and collateralized mortgage obligations (“CMOs”) were mostly caused by fluctuations in interest rates and credit spreads. The contractual cash flows of these securities, other than private CMOs, 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 other-than-temporarily impaired because 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 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 maturity; and because the Company expects to collect all contractual cash flows.
Obligations of the Commonwealth of Puerto Rico and its Instrumentalities: As of June 30, 2018, our holdings in Puerto Rico municipals consist of escrowed bonds. 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 maturity; and because the Company expects to collect all contractual cash flows.
Alternative Investments: As of June 30, 2018, alternative investments with unrealized losses are not considered other-than-temporarily impaired based on market conditions and the length of time the funds have been in a loss position. There were no impaired positions for the six-month period ending June 30, 2018.
Maturities of investment securities classified as available for sale and held to maturity were as follows:
June 30, 2018
|
||||||||
Amortized
cost
|
Estimated
fair value
|
|||||||
Fixed maturities available for sale
|
||||||||
Due in one year or less
|
$
|
19,212
|
$
|
19,308
|
||||
Due after one year through five years
|
382,216
|
381,081
|
||||||
Due after five years through ten years
|
375,375
|
376,911
|
||||||
Due after ten years
|
359,710
|
384,572
|
||||||
Residential mortgage-backed securities
|
60,492
|
59,431
|
||||||
Collateralized mortgage obligations
|
11,804
|
11,386
|
||||||
$
|
1,208,809
|
$
|
1,232,689
|
|||||
Fixed maturities held to maturity
|
||||||||
Due in one year or less
|
$
|
1,676
|
$
|
1,676
|
||||
Due after ten years
|
617
|
738
|
||||||
Residential mortgage-backed securities
|
191
|
193
|
||||||
$
|
2,484
|
$
|
2,607
|
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.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
Information regarding realized and unrealized gains and losses from investments is as follows:
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Realized gains (losses)
|
||||||||||||||||
Fixed maturity securities:
|
||||||||||||||||
Securities available for sale:
|
||||||||||||||||
Gross gains
|
$
|
1,340
|
$
|
384
|
1,512
|
$
|
401
|
|||||||||
Gross losses
|
(2,873
|
)
|
(517
|
)
|
(10,803
|
)
|
(636
|
)
|
||||||||
Total fixed securities
|
(1,533
|
)
|
(133
|
)
|
(9,291
|
)
|
(235
|
)
|
||||||||
Equity investments:
|
||||||||||||||||
Gross gains
|
551
|
4,189
|
8,754
|
4,627
|
||||||||||||
Gross losses
|
(525
|
)
|
(2
|
)
|
(1,024
|
)
|
(2
|
)
|
||||||||
Total equity investments
|
26
|
4,187
|
7,730
|
4,625
|
||||||||||||
Other invested assets:
|
||||||||||||||||
Gross gains
|
586
|
-
|
3,793
|
-
|
||||||||||||
Gross losses
|
-
|
-
|
(211
|
)
|
-
|
|||||||||||
Total other invested assets
|
586
|
-
|
3,582
|
-
|
||||||||||||
Net realized investment (losses) gains
|
$
|
(921
|
)
|
$
|
4,054
|
$
|
2,021
|
$
|
4,390
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Changes in net unrealized (losses) gains:
|
||||||||||||||||
Recognized in accumulated other comprehensive (loss) income:
|
||||||||||||||||
Fixed maturities – available for sale
|
$
|
(11,035
|
)
|
$
|
3,252
|
$
|
(21,257
|
)
|
$
|
2,813
|
||||||
Other invested assets
|
464
|
2,768
|
439
|
13,911
|
||||||||||||
$
|
(10,571
|
)
|
$
|
6,020
|
$
|
(20,818
|
)
|
$
|
16,724
|
|||||||
Not recognized in the consolidated financial statements:
|
||||||||||||||||
Fixed maturities – held to maturity
|
$
|
(10
|
)
|
$
|
(10
|
)
|
$
|
(33
|
)
|
$
|
(8
|
)
|
The change in deferred tax liability on unrealized gains recognized in accumulated other comprehensive (loss) income during the six months ended June 30, 2018 and 2017 was $6,147 and $3,391, respectively.
As of June 30, 2018 and December 31, 2017, no individual investment in securities exceeded 10% of stockholders’ equity.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
(4) |
Premiums and Other Receivables, Net
|
Premiums and other receivables, net were as follows:
June 30,
|
December 31,
|
|||||||
2018
|
2017
|
|||||||
Premium
|
$
|
71,762
|
$
|
103,027
|
||||
Self-funded group receivables
|
39,483
|
39,859
|
||||||
FEHBP
|
13,470
|
13,346
|
||||||
Agent balances
|
33,468
|
32,818
|
||||||
Accrued interest
|
13,585
|
14,331
|
||||||
Reinsurance recoverable
|
525,896
|
661,679
|
||||||
Other
|
80,712
|
70,150
|
||||||
778,376
|
935,210
|
|||||||
Less allowance for doubtful receivables:
|
||||||||
Premium
|
27,518
|
26,490
|
||||||
Other
|
8,802
|
9,393
|
||||||
36,320
|
35,883
|
|||||||
Total premium and other receivables, net
|
$
|
742,056
|
$
|
899,327
|
As of June 30, 2018 and December 31, 2017, the Company had premiums and other receivables of $48,626 and $81,838, respectively, from the Government of Puerto Rico, including its agencies, municipalities and public corporations. The related allowance for doubtful receivables as of June 30, 2018 and December 31, 2017 were $18,185 and $16,436, respectively.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
(5) |
Fair Value Measurements
|
Our condensed consolidated balance sheets include the following financial instruments: securities available for sale, equity investments, policy loans, policyholder deposits, and long-term borrowings. We consider the carrying amounts of policy loans, policyholder deposits, and long-term borrowings to approximate their fair value due to the short period of time between the origination of these instruments and the expected realization or payment. 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 2017 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:
June 30, 2018
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Fixed maturity securities available for sale
|
||||||||||||||||
Obligations of government-sponsored enterprises
|
$
|
-
|
$
|
11,407
|
$
|
-
|
$
|
11,407
|
||||||||
U.S. Treasury securities and obligations of U.S government instrumentalities
|
211,463
|
-
|
-
|
211,463
|
||||||||||||
Obligations of the Commonwealth of Puerto Rico and its instrumentalities
|
-
|
8,169
|
-
|
8,169
|
||||||||||||
Municipal securities
|
-
|
728,987
|
-
|
728,987
|
||||||||||||
Corporate bonds
|
-
|
201,846
|
-
|
201,846
|
||||||||||||
Residential agency mortgage-backed securities
|
-
|
59,431
|
-
|
59,431
|
||||||||||||
Collateralized mortgage obligations
|
-
|
11,386
|
-
|
11,386
|
||||||||||||
Total fixed maturities
|
$
|
211,463
|
$
|
1,021,226
|
$
|
-
|
$
|
1,232,689
|
||||||||
Equity investments
|
$
|
141,123
|
$
|
171,919
|
$
|
-
|
$
|
313,042
|
December 31, 2017
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Securities available for sale:
|
||||||||||||||||
Fixed maturity securities
|
||||||||||||||||
Obligations of government-sponsored enterprises
|
$
|
-
|
$
|
1,444
|
$
|
-
|
$
|
1,444
|
||||||||
U.S. Treasury securities and obligations of U.S government instrumentalities
|
118,349
|
-
|
-
|
118,349
|
||||||||||||
Obligations of the Commonwealth of Puerto Rico and its instrumentalities
|
-
|
8,093
|
-
|
8,093
|
||||||||||||
Municipal securities
|
-
|
800,790
|
-
|
800,790
|
||||||||||||
Corporate bonds
|
-
|
234,324
|
-
|
234,324
|
||||||||||||
Residential agency mortgage-backed securities
|
-
|
32,112
|
-
|
32,112
|
||||||||||||
Collateralized mortgage obligations
|
-
|
21,676
|
-
|
21,676
|
||||||||||||
Total fixed maturities
|
118,349
|
1,098,439
|
-
|
1,216,788
|
||||||||||||
Equity securities - Mutual funds
|
193,160
|
149,149
|
-
|
342,309
|
||||||||||||
Alternative investments - measured at net asset value
|
-
|
-
|
-
|
34,984
|
||||||||||||
Total equity securities
|
193,160
|
149,149
|
-
|
377,293
|
||||||||||||
Total
|
$
|
311,509
|
$
|
1,247,588
|
$
|
-
|
$
|
1,594,081
|
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
There were no transfers between Levels 1 and 2 during the three months and six months ended June 30, 2018 and 2017.
A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on our condensed consolidated balance sheets at June 30, 2018 and December 31, 2017 are as follows:
|
June 30, 2018
|
|||||||||||||||||||
|
Carrying
|
Fair Value
|
||||||||||||||||||
|
Value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||||
Assets:
|
||||||||||||||||||||
Policy loans
|
9,449
|
$
|
-
|
$
|
9,449
|
$
|
-
|
$
|
9,449
|
|||||||||||
|
||||||||||||||||||||
Liabilities:
|
||||||||||||||||||||
Policyholder deposits
|
175,592
|
$
|
-
|
$
|
175,592
|
$
|
-
|
$
|
175,592
|
|||||||||||
Long-term borrowings:
|
||||||||||||||||||||
Loans payable to bank - variable
|
30,733
|
-
|
30,733
|
-
|
30,733
|
|||||||||||||||
Total liabilities
|
$
|
206,325
|
$
|
-
|
$
|
206,325
|
$
|
-
|
$
|
206,325
|
|
December 31, 2017
|
|||||||||||||||||||
|
Carrying
|
Fair Value
|
||||||||||||||||||
|
Value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||||
Assets:
|
||||||||||||||||||||
Policy loans
|
$
|
9,077
|
$
|
-
|
$
|
9,077
|
$
|
-
|
$
|
9,077
|
||||||||||
|
||||||||||||||||||||
Liabilities:
|
||||||||||||||||||||
Policyholder deposits
|
$
|
176,534
|
$
|
-
|
$
|
176,534
|
$
|
-
|
$
|
176,534
|
||||||||||
Long-term borrowings:
|
||||||||||||||||||||
Loans payable to bank - variable
|
32,350
|
-
|
32,350
|
-
|
32,350
|
|||||||||||||||
Total liabilities
|
$
|
208,884
|
$
|
-
|
$
|
208,884
|
$
|
-
|
$
|
208,884
|
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
(6) |
Claim Liabilities
|
A reconciliation of the beginning and ending balances of claim liabilities is as follows:
Three months ended
June 30, 2018
|
Six months ended
June 30, 2018
|
|||||||||||||||||||||||
Managed
Care
|
Other
Business
Segments *
|
Consolidated
|
Managed
Care
|
Other
Business
Segments *
|
Consolidated
|
|||||||||||||||||||
Claim liabilities at beginning of period
|
$
|
402,444
|
$
|
632,317
|
$
|
1,034,761
|
$
|
367,357
|
$
|
739,519
|
$
|
1,106,876
|
||||||||||||
Reinsurance recoverable on claim liabilities
|
-
|
(526,575
|
)
|
(526,575
|
)
|
-
|
(633,099
|
)
|
(633,099
|
)
|
||||||||||||||
Net claim liabilities at beginning of period
|
402,444
|
105,742
|
508,186
|
367,357
|
106,420
|
473,777
|
||||||||||||||||||
Claims incurred
|
||||||||||||||||||||||||
Current period insured events
|
594,742
|
26,527
|
621,269
|
1,198,689
|
57,434
|
1,256,123
|
||||||||||||||||||
Prior period insured events
|
(10,900
|
)
|
74,355
|
63,455
|
(31,126
|
)
|
72,537
|
41,411
|
||||||||||||||||
Total
|
583,842
|
100,882
|
684,724
|
1,167,563
|
129,971
|
1,297,534
|
||||||||||||||||||
Payments of losses and loss-adjustment expenses
|
||||||||||||||||||||||||
Current period insured events
|
512,768
|
15,670
|
528,438
|
873,736
|
22,690
|
896,426
|
||||||||||||||||||
Prior period insured events
|
36,060
|
11,324
|
47,384
|
223,726
|
34,071
|
257,797
|
||||||||||||||||||
Total
|
548,828
|
26,994
|
575,822
|
1,097,462
|
56,761
|
1,154,223
|
||||||||||||||||||
Net claim liabilities at end of period
|
437,458
|
179,630
|
617,088
|
437,458
|
179,630
|
617,088
|
||||||||||||||||||
Reinsurance recoverable on claim liabilities
|
-
|
494,356
|
494,356
|
-
|
494,356
|
494,356
|
||||||||||||||||||
Claim liabilities at end of period
|
$
|
437,458
|
$
|
673,986
|
$
|
1,111,444
|
$
|
437,458
|
$
|
673,986
|
$
|
1,111,444
|
*
|
Other Business Segments include the Life Insurance and Property and Casualty segments,as well as intersegment eliminations.
|
Three months ended
June 30, 2017
|
Six months ended
June 30, 2017
|
|||||||||||||||||||||||
Managed
Care
|
Other
Business
Segments *
|
Consolidated
|
Managed
Care
|
Other
Business
Segments *
|
Consolidated
|
|||||||||||||||||||
Claim liabilities at beginning of period
|
$
|
393,525
|
$
|
136,779
|
$
|
530,304
|
$
|
349,047
|
$
|
138,896
|
$
|
487,943
|
||||||||||||
Reinsurance recoverable on claim liabilities
|
-
|
(35,898
|
)
|
(35,898
|
)
|
-
|
(38,998
|
)
|
(38,998
|
)
|
||||||||||||||
Net claim liabilities at beginning of period
|
393,525
|
100,881
|
494,406
|
349,047
|
99,898
|
448,945
|
||||||||||||||||||
Claims incurred
|
||||||||||||||||||||||||
Current period insured events
|
580,608
|
26,282
|
606,890
|
1,183,241
|
54,508
|
1,237,749
|
||||||||||||||||||
Prior period insured events
|
(1,355
|
)
|
(1,196
|
)
|
(2,551
|
)
|
(16,695
|
)
|
(2,529
|
)
|
(19,224
|
)
|
||||||||||||
Total
|
579,253
|
25,086
|
604,339
|
1,166,546
|
51,979
|
1,218,525
|
||||||||||||||||||
Payments of losses and loss-adjustment expenses
|
||||||||||||||||||||||||
Current period insured events
|
576,135
|
14,944
|
591,079
|
926,585
|
22,917
|
949,502
|
||||||||||||||||||
Prior period insured events
|
25,208
|
11,586
|
36,794
|
217,573
|
29,523
|
247,096
|
||||||||||||||||||
Total
|
601,343
|
26,530
|
627,873
|
1,144,158
|
52,440
|
1,196,598
|
||||||||||||||||||
Net claim liabilities at end of period
|
371,435
|
99,437
|
470,872
|
371,435
|
99,437
|
470,872
|
||||||||||||||||||
Reinsurance recoverable on claim liabilities
|
-
|
33,368
|
33,368
|
-
|
33,368
|
33,368
|
||||||||||||||||||
Claim liabilities at end of period
|
$
|
371,435
|
$
|
132,805
|
$
|
504,240
|
$
|
371,435
|
$
|
132,805
|
$
|
504,240
|
*
|
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 occuring 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.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
The unfavorable developments in the claims incurred and loss-adjustment expenses for prior period insured events for the three months and six months ended June 30, 2018 is driven by an adverse development of approximately $76,389 in losses related to Hurricane Maria, offset by better than expected utilization trends in the managed care segment. The favorable developments in the claims incurred and loss-adjustment expenses for prior period insured events for the three months and six months ended June 30, 2017 are due primarily to better than expected utilization trends in the Managed Care segment. Reinsurance recoverable on unpaid claims is reported as premium and other receivables, net in the accompanying consolidated financial statements. Claim liabilities as of June 30, 2018 include approximately $538,200 related to the impact of Hurricane María, which made landfall in Puerto Rico in September 2017.
The claims incurred disclosed in this table exclude the portion of the change in the liability for future policy benefits expense, which amounted to $7,414 and $13,593 during the three months and six months ended June 30, 2018, respectively. The change in the liability for future policy benefits during the three months and six months ended June 30, 2017 amounted to $6,945 and $13,635, respectively.
The following is information about total incurred but not reported (IBNR) liabilities plus expected development on reported claims included in the liability for unpaid claims adjustment expenses for the Managed Care segment as of June 30, 2018.
Incurred
Year
|
Total of IBNR Liabilities Plus Expected
Development on Reported Claims
|
||||
2017
|
$
|
36,590
|
|||
2018
|
324,953
|
(7) |
Pension Plan
|
The components of net periodic benefit cost were as follows:
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Components of net periodic benefit cost:
|
||||||||||||||||
Interest cost
|
$
|
1,693
|
$
|
1,798
|
$
|
3,386
|
$
|
3,596
|
||||||||
Expected return on assets
|
(2,281
|
)
|
(2,199
|
)
|
(4,562
|
)
|
(4,398
|
)
|
||||||||
Amortization of actuarial loss
|
215
|
86
|
430
|
172
|
||||||||||||
Settlement loss
|
325
|
631
|
650
|
631
|
||||||||||||
Net periodic benefit cost
|
$
|
(48
|
)
|
$
|
316
|
$
|
(96
|
)
|
$
|
1
|
Employer Contributions: The Company disclosed in its audited consolidated financial statements for the year ended December 31, 2017 that it expected to contribute $2,000 to the pension program in 2018. As of June 30, 2018, the Company has not made contributions to the pension program.
(8) |
Reinsurance
|
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 $12,688 and $16,580 for the three months ended June 30, 2018 and 2017, respectively, and $27,466 and $26,721 for the six months ended June 30, 2018, and 2017, respectively. During the six months ended June 30, 2018, TSP ceded claims incurred amounting to $69,594 related to losses caused by Hurricanes Irma and Maria.
Triple-S Management Corporation
Notes to Condensed Consolidated 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 $12,000, 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.
· Property reinsurance treaty includes proportional cessions and a per risk excess of loss contract limiting losses to $350 in $30,000 risks.
· Catastrophe protection is purchased limiting losses to $10,000 per event with losses up to approximately $915,000.
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, 2018 for a twelve months period ending March 31, 2019. Other contracts were renewed as expiring on January 1, 2018.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
(9) |
Comprehensive Income (Loss)
|
The accumulated balances for each classification of other comprehensive income (loss), net of tax, are as follows:
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Net Unrealized Gain on Securities Beginning Balance
|
$
|
29,462
|
$
|
70,843
|
$
|
76,238
|
$
|
62,371
|
||||||||
Unrealized loss reclassified to beginning retained earnings as a result of implementation new accounting pronouncement
|
-
|
-
|
(39,882
|
)
|
-
|
|||||||||||
Other comprehensive (loss) income before reclassifications
|
(8,939
|
)
|
7,639
|
(13,479
|
)
|
16,380
|
||||||||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
737
|
(3,243
|
)
|
(1,617
|
)
|
(3,512
|
)
|
|||||||||
Net current period change
|
(8,202
|
)
|
4,396
|
(15,096
|
)
|
12,868
|
||||||||||
Ending Balance
|
21,260
|
75,239
|
21,260
|
75,239
|
||||||||||||
Liability for Pension Benefits Beginning Balance
|
(24,853
|
)
|
(19,923
|
)
|
(24,984
|
)
|
(19,976
|
)
|
||||||||
Amounts reclassified from accumulated other comprehensive income
|
131
|
53
|