Investor Relation
Google Finance
SEC Filing
Oct 18, 2013
2014 Q2 Data
Check list:
1.Major Business.
Health insurance in Puerto Rico. 2.2m members. 28% of market share, the biggest in Puerto Rico. It has 3 main sub categories:
1. Commercial health insurance and Medicare:
Commercial: 650k customers
Medicare has around 110k customers, this is for elderly people. High premium PMPM(per member per month).
Meddium profit, the premium is high but can't be retained for long time. Thus investment income is lower.
2. Medicaid: for low income family. ASO(Administrative Service Only), the company charge the goverment around $5.5 PMPM for admin service only.
3. Life insurance: This is actually the bright spot of the company. Since acquired GA Life at 2006. It has been grown very well with 70% increase in premium and almost doubled investment income. Mainly because life insurance claims are paid way later than other insurance.
4. Property and other insurance:
2.Balance sheet.
As Oct. 18, 2013: Recent Price: $18, Tangible book value around $26.18, Share outstanding:27.5M, Market Cap: $490M. Current asset:$1.36B, Current liability, Debt: $130M, Inventory, Cash.
3.Credit facility.
4.Financial data by years.
5.Insider holding, options, Insider trading info, share buy back.
6.Management compensation.
7.Employee numbers. Revenue/Employee. Compensation/Employee.
8.Industry comparison.
9.Auditor
10.Major events.
(1) Oct. 2010, ASES(The Health Insurance Administration) launched miSalud project which is manage only style. Triple-S didn't participate in.
(2) Oct. 2011, Signed 20 month contract from Nov. 2011 to June 2013 with ASES and provide the miSalud for 5 of 8 region.
(3) June 2013, Signed new 12 month contract with ASES to provide miSalud for all 8 regions. However, the price is cut by $2 PMPM which makes it hardly be profitable.
11.Comments.
The main reason the company is cheap now is that Puerto Rico population is keep going down. Unemployment rate is over 13%. Crime rate gets higher. People leaving for U.S. at a rate around 20k/year with a total population of 3.7m. Thus affect the industry as a whole while seems lower the profit marin.
When checking the company's revenue, its more meaningful to the check after claim + ASO number. Income side, its insurance only generate 1/3 of the income, while investment income counts about 2/3 which is quite reasonable given its a insurance company.
The Puerto Rico goverment recently imposed tax hike to reduce deficit would drag down the company's margin in the near term. Current highest tax rate revert from 30% to 39%. This might cause extra $5m to $7m in tax.
There is also a new insurance premium tax which will apply to its business insurance premium only(not on Medicare and Medicaid). It seems occurred $2m/quarter extra expense. Not sure whether it can pass the expense to customers.
Previously its ASO with the government is quite profitable. However, since July,01. 2013, its price has been cut by around $2 PMPM. Let's assume the revenue can just cover the cost. It is not a good business for the company, don't know why the company accept such a low price. Maybe just to make the goverment happy or to just create a bigger foot print or something else.
The average pre-tax income from insurance business is around $25m
When checking investment income, the bond gain is not sustainable and should be removed. The stock gain is lower than it should be simply because of -$41m loss it suffered in 2008. If added it back, it should generate average 5.4% annual return.
I estimate around 4% interest income for bond. and 8% for stock (2% dividend + 6% gain). Based on this, it should be able to generate around $40m+$20m pre-tax income on current investment balance.
Interest expense is around $10m/year now. It should go down as debt goes down.
Added together, pre tax income is around $25+$60-$10=$75m/year. Using 25% tax rate, it comes around $56m after tax income. Compare to recently $500m market cap, it is quite cheaply priced.
Updated: Apr. 1, 2014
After Q4 release of a surprise small lose. Stock price go down to $15. Currently is around $16.30. The major contribution to the lose is $4.7m in U.S Virgin Island(USVI) , $1.6m in flu and dengue, $1.7m in preventive medication( vaccine, flu shot etc.)
The $4.7m USVI lose includes $3m non cash tax allowance charge. In my view, most of the lose are temporary which is quite normal for a insurance company. Also USVI is just $8m business which is quite small portion of its revenue. However, when checking its Q3 conference, the management obviousily overlooked the USVI issue which is already there at Q3. Also the preventive medication problem they foresee but failed to take action in advance.
On Feb 2014 the government decided to reverse the Medicaid back to at risk model begin July. 2014. Currently it is on the bidding process and will be known by end of April. I think the company will get some of the 8 regions but not all of them. In my view it is might be better than the ASO model because this might increase the cash in investment.
Oct. 27. 2014
Recent Price $21.15.
The company release that they got 2 of the 8 region Medicaid contract which will increase its revenue for about $700m/year starting Apr 01. 2015. The user base is about 430k which is about 1/3 of the total 1.4m. It is a good news for the company. However, I estimate it would contribute less to the premium income while it might increase quite some of the investment income depending how long they can keep the premium before pay out the claim.
Jan. 19, 2017
Recent price: $19.4
After some buyback, current shares outstanding is 24.5m, Market cap $475m. Its actually less than 2013 when I first write about it. Tangible book value is around $32.
The insurance business itself can hardly make any profit now. Claim ratio go beyond 86% which is too high. While expense ratio down a little bit from over 17% to around 16%. Added together, it should be 3% loss. On a historic view, it must reduce expense to 15% and claim to below 85% to make it income neutral.
Recent Price $21.15.
The company release that they got 2 of the 8 region Medicaid contract which will increase its revenue for about $700m/year starting Apr 01. 2015. The user base is about 430k which is about 1/3 of the total 1.4m. It is a good news for the company. However, I estimate it would contribute less to the premium income while it might increase quite some of the investment income depending how long they can keep the premium before pay out the claim.
Jan. 19, 2017
Recent price: $19.4
After some buyback, current shares outstanding is 24.5m, Market cap $475m. Its actually less than 2013 when I first write about it. Tangible book value is around $32.
The insurance business itself can hardly make any profit now. Claim ratio go beyond 86% which is too high. While expense ratio down a little bit from over 17% to around 16%. Added together, it should be 3% loss. On a historic view, it must reduce expense to 15% and claim to below 85% to make it income neutral.
