Greetings. Welcome to the Triple-S Management Fourth Quarter and Full Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Garrett Edson, Senior Vice President, ICR. Mr. Edson. You may now begin.

Thank you, Rob, and good morning. Welcome to the Triple-S Management fourth quarter and full year 2018 earnings conference call. With us today are your host, Bobby Garcia, President and Chief Executive Officer of Triple-S; and Juan Jose Roman, the Executive Vice President and Chief Financial Officer. In addition, Madeline Hernandez, Chief Operating Officer and President of Managed Care will be available during Q&A. By now, everyone should have access to the earnings announcement, which was released prior to this call and which may also be found on the Company's website at triplesmanagement.com. Before we begin formal remarks, we need to remind everyone that each quarter, Triple-S Management executives will provide their current view of the Company's future and thus they will be sharing forward-looking information. These statements can be affected by risks and uncertainties involved in the business despite management's best efforts, actual results may differ materially from such forward-looking statements and what you hear on today's call. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. For further information on factors that could impact the Company and the statements and projections contained herein, please refer to the safe harbor section of today's news release and the Company's filings with the Securities and Exchange Commission. Each forward-looking statement and projection of financial information made during this call is based on information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law. In addition, this call is being webcast and archived version will be available shortly after the call ends on the Investor Relations portion of the Company's website at www.triplesmanagement.com. If you cannot download a copy of the release, you can contact us at 787-792-6488 and we will get one to you immediately and can add you to the distribution list moving forward. With that, I'd now like to turn the call over to Bobby Garcia. Please go ahead.

Thanks, Garrett, and good morning, everyone. Thanks for joining us today as we review our results for the fourth quarter of 2018. Overall, Triple-S' financial performance improved conservatively in the fourth quarter after Hurricane Maria has prompted two rough quarters in our P&C segment. Despite the expected decline in Medicaid revenue following implementation of the new Medicaid program on November 1st, total operating revenue for the fourth quarter was $724 million, up 2% from a year ago. This increase reflects continued premium trend improvements in Medicare Advantage, as well as solid performance in our Life and P&C segments. All in, we recorded a loss per share of $0.48 in the fourth quarter, compared to diluted earnings per share of $1.03 in the prior-year period. This loss was due to unrealized losses on equity investments during the quarter as a result of a year-end market correction and the change in the effective tax rate of certain deferred tax assets and liabilities. Our adjusted net income, which excludes the impact of the realized and unrealized losses, was $0.44 per diluted share compared to adjusted net income of $0.94 per diluted share a year ago. Excluding the P&C hurricane-related portion of the deferred tax adjustment I mentioned a moment ago, as well as the cost of the retroactive P&C reinsurance, adjusted net income in the quarter was $17.8 million or $0.78 per diluted share compared to 2017 fourth quarter adjusted net income of $15.2 million or $0.65 per diluted share after excluding the net favorable impact of the hurricanes in that period. This points to continued improvement in our underlying businesses. Most importantly, we had no additional hurricane-related adverse reserve development in P&C during the quarter and our underlying business in this segment is performing well. New hurricane-related claim activity has been minimal since to September spike we discussed during our last call, and we continue settling and closing out claims. As of February 26, 2019, we have paid $589 million in gross hurricane-related claims and expenses and have closed 94% of total cases. Based on all the information we have at our disposal, including the status of outstanding individual case reserves, we are comfortable maintaining our current reserve estimate levels. And overall, we remain positive on the future of this segment given the favorable conditions at Puerto Rico's P&C market and our increase in reinsurance coverage. To restore our P&C segment's capital, we made a $10 million contribution in the fourth quarter and generated operating net income of $4.7 million. Together with the retroactive portion of the reinsurance agreement discussed on our previous call, this has improved our P&C segment's statutory capital and surplus, as well as its RBC ratio. As of December 31, 2018, this ratio was approximately 150%. While still under the 200% minimum regulatory requirement, we expect to contribute up to $12 million in additional capital by the second quarter of 2019 to ensure we returned to the minimum RBC ratio as noted on our last call. Turning to Managed Care, we fared well in the initial stage of the new Medicaid program, increasing our market share by about 20% since its launch on November 1st. We gained the trust of some 53,000 beneficiaries that the Puerto Rico government had initially signed to the four other carriers, and effective February 1st, now serve around 29% of the government health plan's total membership, very similar to our share under the prior model, but with an extra player in the market, as we had expected Medicaid members recognize the value of the Triple-S brand, the breadth of our network and the quality of our services. We also had a solid 2019 enrollment season in Medicare Advantage, growing about 16% in total membership and increasing our market share by about 300 basis points since October. With a 4-star rating, our HMO products are now competing on a level playing field. Medicare Advantage is driving our Managed Care segment's top-line growth and overall financial results, and we expect that trend to continue into 2020 when our HMO contract will earn 4.5 stars and our PPO contract will reach 4. Also in the fourth quarter, we completed the successful consolidation of our commercial and MA pharmacy benefits management onto a single platform effective January 1, 2019, which will allow us to generate efficiencies over these next three years and deploy clinical initiatives in partnership with our PBM across these lines of business. This should help Triple-S become more competitive in both markets. One rough spot in the fourth quarter was an increasing inventory of claims adjustments and prior authorization requests in our MA business that stem from the migration of its claims processing and clinical management systems beginning in April to the same platforms on which we run our commercial and Medicaid businesses. This migration was part of a broader set of initiatives aimed at improving the Managed Care segment's operational and clinical infrastructure controls and analytics capabilities. The stabilization of these new platforms took longer than expected affecting service levels and creating certain regulatory concerns. Thanks to diligent efforts by the team, however, automatic claims processing levels have returned to expected levels and the adjustment inventory backlog is on track to be eliminated by the end of April. They have also worked to minimize the impact of member access and provider satisfaction. During the fourth quarter, we also continued developing our ambulatory clinic network. We have substantially completed the conditioning of several urgent care clinics, recently executed an agreement to acquire three other sites, are now operating additional workplace clinics and have other similar expansion projects in the pipeline. We see the clinic network is laying foundational capabilities for population health management as part of a longer-term strategy to improve the patient experience and medical outcomes through an integrated care-delivery model in partnership with our provider community. All things considered, we are pleased with the fourth quarter's financial performance, our end-of-year enrollment numbers and the overall progress of our transformation initiatives. In terms of guidance with the uncertainty of Maria now mainly behind us, we are comfortable providing a range of both top- and bottom-line guidance for 2019 along with a couple of other metrics. Specifically, we are initiating the following guidance: overall for 2019, we expect operating revenue between $3.04 billion and $3.08 billion, which includes Managed Care premiums earned net between $2.71 billion and $2.75 billion. Growing Medicare Advantage revenue will be offset by decline in Medicaid revenues, due to the changes in the program. Beyond our Managed Care segment, we are expecting premium growth at both Life and P&C for the full year. The consolidated claims incurred ratio is expected to be between 81.3% and 83.3%, while we expect MLR to be between 84% and 86%. Operating expenses as a percentage of total premiums earned and administrative service fees is expected to be between 17.6% and 18.6%, which reflects higher cost to implement the revised Medicaid model, the implementation of our clinical management strategy, and investment in growth initiatives, offset by the elimination of the HIP fee in 2019. We're expecting an effective tax rate between 25% and 30%. And on the bottom line, we are expecting 2019 adjusted net income per diluted share of between $1.85 and $2.05. As a reminder, adjusted net income per diluted share excludes realized and unrealized investment gains and losses, as well as any private equity investment income and does not account for any potential share repurchase activity during 2019. To sum up, while navigating through a difficult 2018, we kept focused on improving our business fundamentals and building for the future. We remained well capitalized and a three-prong strategy we've laid out on our previous calls remains unchanged. Win and retain in our core Managed Care business, modernize and optimize our infrastructure and continue expanding our clinic network as a cornerstone of an integrated care strategy. 2019 promises to be a pivotal year in which we expect to complete some time-sensitive projects that should enable sustainable long-term growth and profitability for the Company. Juan Jose will provide you now with more specific financials by business segment. Juan Jose?

Thank you, Bobby, and welcome to everyone on this call. I'm going to discuss our fourth quarter results emphasizing the result of our Managed Care segment. Before getting into the details, I would like to remind everyone that the 2017 fourth quarter results for the Managed Care segment benefit from the hurricanes Irma and Maria. This is consistent with our experience following all the catastrophic events, as hurricanes Irma and Maria temporarily reduced the utilization of Managed Care services until our membership and provider network build with the fallout from the storm. The hurricanes also disrupted the entire claims submission, adjudication and payment process. Let me now discuss the Managed Care results. Managed Care premiums for the quarter were $9 million higher than a year ago, primarily reflecting increased Medicare premium rates. In our Medicare business, earned premiums were 13% higher than last year, largely reflecting the increase in the fee-for-service benchmark for Puerto Rico in 2018, an increase in premium rates related to the 4-star rating we achieved for our 2018 HMO product and higher average risk scores. These increases were offset impart by a decrease in member month when compared to last year. The 10% decrease in our Medicaid earned premiums mostly reflects lower membership due to the implementation of the new Medicaid model on November 1st, which was partially offset by nearly $4 million related to the reinstatement of the HIP fee pass-through in 2018 and higher premium rates. As we have previously mentioned, at the effective date of the new agreement, we were originally assigned approximately 280,000 members, a decrease of approximately [indiscernible] from the membership reported at the end of the third quarter. As Bobby mentioned, following this membership assignment, we entered a successful three month open enrollment period and added approximately 53,000 members over those assigned by [SS]. In our commercial business, earned premiums were 4 million lower than last year, mostly due to lower fully insured membership and partially offset by the reinstatement of the HIP fee pass-through and slightly higher average premium rates. The lower enrollment has been largely driven by attrition within existing accounts, reflecting the prolonged weakness in the Puerto Rico economy. Managed Care claims were up 26 million year-over-year primarily driven by the normalization of utilization pattern in 2018 when compared to the reduced utilization experienced in 2017 as a result of you hurricanes Irma and Maria, which we estimate lower fourth quarter 2017 Managed Care claims and MLR by approximately $21 million and 320 basis points, Care claims and MLR by approximately $21 million and 320 basis points, respectively. After adjusting for reserve development, risk of revenue and the hurricanes impact, the adjusted MLR of the Managed Care segment is similar to last year. Let me give you more details regarding the MLR for each of the Managed Care businesses. Medicare MLR of 79.7% improved 260 basis points when compared to the same period last year even with the hurricane-related reduced utilization in the prior-year period, which we estimate lowered the prior-year MLR by approximately 350 basis points. Excluding the impact in both periods of prior period reserve development, moving risk of revenue to its corresponding period and adjusting for the 2017 hurricane-related impact in utilization, Medicare MLR in the first quarter 2018 would have been 82.6%, a 510 basis point decrease from the prior-year period. The lower adjusted MLR mostly reflects higher premium rates and cost containment initiatives. Medicaid MLR was 90.7%, a 310 basis point increase when compared to the prior-year period. We estimate that the hurricane-related drop in utilization caused fourth quarter 2017 Medicaid MLR to be reduced by approximately 50 basis points. Excluding the impact in both periods of prior period reserve development and adjusting for the 2017 hurricane-related impact in utilization, the recasted Medicaid MLR would has been 90.7%, 80 basis points higher than last year. Our commercial MLR of 83.6% is over 1100 basis points higher than last year. We estimate that the fourth quarter 2017 commercial MLR was 560 basis points lower as a result of the hurricane-related impact on utilization. Excluding the impact in both periods of prior period reserve development and adjusting for 2017 hurricane-related impact in utilization, the re-casted fourth quarter 2018 MLR would have been 83.6%, 620 basis points higher than a year ago, mostly reflecting claims trends higher premium trends. Let's move on to the Managed Care segment's quarterly operating expenses. This segment operating expenses were up $20 million from a year ago. The increase reflects a $13 million increase from the restated HIP-fee higher professional services mostly related to our ongoing operational and clinical Managed Care initiatives, as well as expenses related to implementation of the new Medicaid model. Moving toward Life and Property and Casualty segments. Life premiums earned were up approximately 7% from the prior-year period, primarily reflecting premium growth in the segments individual and cancer lines of businesses. The segment's operating income was $5.3 million or $0.7 million lower year-over-year, reflecting elevated fourth quarter 2018 claims trends in the aforementioned line of businesses. The Property and Casualty segment's operating income this quarter was $5 million, a $6 million improvement from a $1 million operating loss experienced during the same quarter last year. The improved operating income result from the combination of higher earned premiums and a lower loss ratio during this quarter, showing the strength of this segment's underlying business. As Bobby mentioned, our Property and Casualty segment saw [very] new claims activity related to Hurricane Maria has placed its efforts on settling and closing of these hurricane-related claims. As of December 31, 2018, the estimated gross losses related to this event remain unchanged. As is the case for all claim liabilities, the gross losses related to Hurricane Maria are based on our best estimate of the ultimate expected cost of claims with information currently on hand and are subject to uncertainty. Returning to our overall results, consolidated income tax expense was 1 million compared to an expense of 18 million in the prior-year period, due to a change in the effective tax rate of certain deferred tax liabilities in the Property and Casualty segment to reflect the expected tax rate at which they will reverse and a change in the enacted tax rates from 39% to 37.5% following the Puerto Rico income tax reform enacted in December 2018. Together, these changes increased the deferred tax expense by approximately 9.5 million. The consolidated income tax expense also reflects the tax impact of the net unrealized losses on equity investments and the lower operating income in the Managed Care segment. Total cash and investments at the parent company level was 58 million as of December 31, 2018. As Bobby mentioned, although 2018 was a challenging year, we performed well in our core Managed Care operations throughout the year. All in all, we continue to focus on our overall long-term growth strategy, making progress on our key initiative and position the Company for the future. We will now proceed to our Q&A section. Operator, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Peter Costa with Wells Fargo Advisors. Please proceed with your question.

My first question is not going to be about the P&C business for the first time in a while. I want to talk about the commercial medical loss ratio and how it stepped up. Fourth quarter is usually a seasonally good quarter for you guys. And if I look at the fully adjusted number and MLR, your loss ratio in the fourth quarter was 20 basis points higher than it was for the full year as opposed to last year where it was 270 basis points lower than it was for the full year. Can you explain why you didn't have the seasonal improvement? Is that the economy picking up because everything I read it's just that the economy is picking up pretty well in Puerto Rico. Do you think this extra utilization coming back is people now are back to work and starting to utilize much more services again?

This is Juan Jose. In general, what we believe is that Q4 of 2017 maybe didn't capture all of the hurricane impact, the positive impact in the quarter. When we actually look at Q4 2018 and we look back at previous years, actually, the 83% is actually lower than our experience in '16 or even '15. So, 2017 really is more of a outlier and might be -- really, the impact of that, we didn't capture all the benefit from the hurricane or even that their regular utilization [reduced] again because of the hurricane was lower, but 2018 is more in line really with previous years, actually slightly lower than previous year. So now, we don't expect really that there will be any negative trend for 2019.

So, you think there is nothing unusual in the quarter or forecasted going into next year? You just think that that's the more normal run rate for you guys?

Yes. Yes. Bobby García: And also, we had a positive development.

Yes. I have looked at the adjusted numbers after development, I believe. Okay. Moving onto the guide for 2018 given some strength here in the quarter and sort of looking at the way the year played out, it looks like your guidance is relatively conservative. Is there something in there that we should be thinking about in terms of a headwind going into 2019?

Not really. We feel very strong in term of our guidance. Probably, the only changes as you compared to previous year will be higher premiums in the MA because of the successful enrollment period, but also it takes into consideration the change in our Medicaid membership because of the new program. Probably, those are the two, we will have a positive and minus in terms of membership, but out of that, we believe this a more regular or normalized year now that we get out of hurricane impact as well as Maria-related impact related to the P&C segment. Bobby García: And if I could add, Peter. We're assuming relatively flat economy. It was expected that 2019 we'll see a lot of the federal funding coming in for hurricane relief and recovery, more so for recovery and reconstruction, and that's taken longer than expected. So, we are assuming that economy will remain flat so that as funds do come in, we'll be seeing those play out maybe a little later than it was originally forecasted by the government, which would take us into 2020.

And looking at the P&C business, you said gross loss was unchanged, that was in the third quarter I think $968 million, is that correct?

Yes.

It stayed the same?

Yes. The same, no changes there.

And then what's left on the books at this point, you said you paid -- what was the number, $500 million, I don't have it in front of me?

$589 million.

$589 million in paid claims and what's left on the books?

And that's up to February 26th. So, it is after year-end. So, we have paid already $589 million. So, in the books, we still have $379 million.

$379 million. Okay. And that's after the $589 million, not at year-end?

That's…

$589 million is February 26th, right?

Right, yes.

And then how many claims came in the fourth quarter in total, you said --

It was -- total in Q4 was 99, and in Q1 of '19 up to yesterday, we have received 16 for the quarter. received 16 for the quarter.

That's a big drop off. All right, great. And then looking at the -- just from a modeling point of view, the $9.5 million charge in terms of the retroactive reinsurance agreement and the deferred tax charge. Can you explain -- will that continue going forward or is that one and done and that what's it look like going forward?

Yes. It's a one and done for the taxes. It's just a one-time adjustment. So for the deferred tax impact during the quarter, it was adjust in deferred taxes. So that's a one-timer. So, from a reinsurance agreement, what happened was that we entered into that agreement in November, but it was retroactive to April. So, it actually -- we recognized the expense, from April to December in Q4. So, each will be level-offed during 2019 and going forward.

So, that look like on a quarterly basis going forward [Indiscernible] retroactive.

Yes, it will be like $1.5 million more or less -- $1.5 million.

$1.5 million per quarter?

Per quarter, more or less, yes.

And what was cash at the parent the end of the quarter?

$58 million.

$58 million?

Yes.

And then, you picked on a lot of [Indiscernible] members from your competitors, did they come from any 1 competitor in particular, or do they come from a range of competitors or was it from a specific geography?

We gained mostly in the two regions where we had been before; what was back then the Metro North and the West regions and so we picked up about 30% -- we ended up with about 30% more members than we had at the beginning of the auto enrollment -- those regions and the other regions we retained about 90%. So, that tells you with respect to the regions, so basically we gained 3 to 1 for all regions versus what others regained for their regions and in gross terms. Now, with respect to carriers, we did lose -- we did win more with respect to some carriers than others .

Which carrier?

Yes. Molina and Menonita.

Those are the ones where you gained the most from?

Gained the most, yes.

And was there a carrier that you lost membership to in particular or you don't really know what numbers.

We don't know all the numbers. So, we believe we gained against all, but we know that there is at least one other that gained some market share. We just don't have the beginning point to follow them. So, these are our own estimates. We don't have official figures in that regard beginning to end numbers.

Got it. And the open enrollment period closed at the end of January, is that right -- the [Indiscernible].

It's January. I think, it's -- it was January 31st.

January 31st, yes.

And so members can't really switch now, but there is churn in the population, so you could pick up a little bit more but otherwise your membership should be relatively stable, is that the way to think about it?.

It should be relatively stable. They do have the opportunity to switch once during the year and I believe that will just cost.

And then, the claims and service levels, processing issues that you had in the quarter; help me understand a little bit more. You said that that maybe triggered some regulatory issues for you. Are there going to be fines forthcoming for that or is that resolved in front of the fines and did that has anything to do with the Optum switch over.

You asked several questions, so I'll try to address them in turn. It's not directly related to Optum. It's several things coincided, among them Hurricane Maria. So, we had planned to do a migration of our core processing platform and the clinical management platform since 2017. So, that was due to start beginning of 2018, a portion we did in 2017, so that not only pushed it back, but also compressed timing of that launch and then exacerbated by the intermittencies of the system route those initial months of the year. So, there were a series of factors that contributed initially and they were addressed diligently by the team, but it took longer to stabilize the system because as things were addressed other things popped up. And so this last quarter, we saw the inventory continue to decline to a point where we decided we needed to to disclose this and also bring it up to the regulator. So, we are in that stage. We do not have an outcome yet, because we are addressing it as we speak.

And is that the reason days claims payable was up at 63 days, what's going on there is that just claims it out.

Yes, that's related.

[Operator Instructions] At this time, there are no current questions in the queue. I'll turn the call over to Mr. Garcia for closing remarks.

Thank you, operator. We want to thank everyone for your time and ongoing support of Triple-S, and if you have any additional questions, please don't hesitate to reach out, and have a wonderful morning.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for participation.