Greetings, and welcome to the Triple-S Management Third Quarter 2019 Earnings 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 is being recorded.It is now my pleasure to introduce your host, Mr. Garrett Edson, Senior Vice President, ICR. Mr. Edson, you may begin.

Thank you, Jerry and good morning. Welcome to the Triple-S Management third quarter 2019 earnings conference call. With us today are your hosts, Bobby García, President and Chief Executive Officer of Triple-S; and Juan José Román, Executive Vice President and Chief Financial Officer. In addition, Madeline Hernández, 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, 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 in 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obligation to update our forward-looking statements unless required by law.In addition, this call is being webcast and an archived version will be available shortly after the call ends on the Investor Relations portion of the company's website at www.triplesmanagement.com.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. Bobby García: Thanks, Garrett. Good morning everyone and thank you for joining us today. This morning we reported, total operating revenue of $836 million for the third quarter of 2019, up 9% from a year ago and adjusted net income of $0.51 per diluted share compared to an adjusted net loss of $0.97 per share a year ago.Overall, it was another solid quarter in all three of our business segments, as we stayed focused on executing our strategy and delivering operational results. The third quarter marked the second anniversary of Hurricane Maria's devastating pass through Puerto Rico. So I'd like to begin my prepared comments with the status of hurricane-related claims at our P&C segment.As is our norm, we conducted a thorough review of case reserves as of quarter's end. This review included the evaluation of developments involving outstanding claims, such as new information submitted by policyholders or adjusters and the status of settlement discussions.The company also evaluated as is customary, the status of discovery and court proceedings and lawsuits that our P&C subsidiary Triple-S Propiedad is litigating. This quarter the company also serves the public record to identify lawsuits that have been filed against Triple-S Propiedad, but not served and conducted additional analysis of case reserves for the claims underlying those lawsuits. Based on this review, we report the following as of September 30, 2019 with respect to Hurricane Maria.Estimated gross losses remain unchanged from the previous quarter at $967 million. Triple-S Propiedad has paid a total of $692 million in claims. It received only 10 new claims during the third quarter increasing the total number of Maria related claims to 17,746. It has closed approximately 96% of these claims, 709 remain open.Triple-S Propiedad has been served with process in 218 lawsuits related to these 709 claims. The company conducted a search of the Puerto Rico core system's electronic docket to identify lawsuits filed against Triple-S Propiedad that have not yet been served. This docket search identified an additional 178 lawsuits filed, but not served. All of them relate to claims previously registered with and evaluated by the company.The total number of lawsuits filed against Triple-S Propiedad relating to Hurricane Maria, including those that have been served and those identified in the public record that have not is 396. This total represents only 2% of all Maria-related claims filed by Triple-S property policyholders. Of these almost half involved personal claims which tend to be much smaller in dollar amount than commercial claims. And to our knowledge only 31 involve an assignment of benefits.While we adjusted our loss adjustment expense somewhat to include litigation costs of the new lawsuits filed during the third quarter, this additional expense was offset by the release of reserves during the same period that resulted from the settlement of claims below their reserved amounts. The company performed additional analysis of case reserves for the claims underlying the unserved lawsuits.Based on this analysis, as well as the customary review I described earlier for all claims outstanding, the company determined there is no need to increase its estimate of gross losses nor adjust reserves related to Hurricane Maria. As in the case for all claim liabilities, the gross losses related to Maria are based on our best estimate of the ultimate expected cost of claims with the information currently on hand and are subject to change. The company will continue to closely monitor all claims made as well as lawsuits where process is properly served and will adjust reserves if and when any new material information emerges.Moving to our core Managed Care segment. We were pleased with its continued top line growth and overall consistency during the third quarter. Managed Care premiums earned were $746.5 million, up 9.7% year-over-year. Medicare Advantage accounted for most of that growth with premiums increasing 29.4% from the prior year period to $367.1 million driven largely by an additional 52, 000 member months and higher average premium rates.Heightened competition marks the 2020 open enrollment season since this is the first AEP where new CMS supplemental benefit guidelines are playing an important role in Medicare Advantage. In our case, we are offering quarterly visits to nutritionists on all products without prior diagnosis, home support assistance after hospitalization to a targeted population and more transportation services for health-related needs among others.Given the regulatory change, it is still too early to tell how the open enrollment season will play out, since we are seeing eligible consumers take more time than in the past to evaluate their options. We are confident however that our products will compete well in the market since we have maintained consistency in product design, while enhancing many of the benefits we offered in the 2019 season.In our Commercial business, we've started to see an inflection in fully insured membership generating a second consecutive quarter of membership growth. This reflects a more competitive product offering and a more strategic approach to market.Finally, with respect to Medicaid, I'd like to highlight five main points as we enter the second year of the new Vital program. First, this quarter, our Vital membership dropped sequentially by approximately 10,000 from 364,000 to 354,000 members reflecting an overall reduction in the eligible population. Our market share however remained stable at around 31%.Second, we experienced a decrease in PMPM payments compared to last quarter resulting from a timing difference in the recognition of member acuity by the Puerto Rico Health Insurance Administration or ASES. Juan José will address this point in more detail.Third, Vital's 2020 open enrollment began on November 1 and will run through December 15. We expect that the quality of our service, the breadth of our network, our brand recognition and many years of experience in this program across the entire island will again serve us well to retain and grow our membership in this business.Fourth, just yesterday we issued an 8-K disclosing that our Managed Care subsidiary Triple-S Salud extended its agreement with the Puerto Rico Health Insurance Administration for 15 days until November 15 to allow the parties additional time to complete their ongoing revision of the per member per month payments for the second rating period, which runs from November 1st to June 30th, 2020.The agreement provides for a periodic review of these rates. And the initial rating period expired on October 31st, 2019. Once the parties agree on the new rates, these rates will apply retroactively to November 1st of this year.Fifth, I'd like to provide a brief update regarding Medicaid funding for Puerto Rico. We are cautiously optimistic with the latest news coming out of Congress, as there is now a senate proposal that would provide $9.8 billion in funding over four years for the island's Medicaid program.Earlier in the quarter, the U.S. House of Representatives' Committee on Energy and Commerce approved a bill that would pride -- provide approximately $12 billion in funding.Conversations between the house and the senate regarding the Medicaid spending cliff are ongoing. And our expectation is that, a final agreement will be included in an extender's package likely to be enacted in the first quarter of 2020.This is not the permanent solution, that Puerto Rico is seeking, yet it provides the program with greater stability over the next four years. Meanwhile, the continuing resolution approved by Congress, that included an extension of temporary funding for Medicaid in Puerto Rico is to expire on, November 21st.A continuing resolution extending funding for an additional term is expected to be approved in the following weeks, which would allow additional time for Congress to reach a final agreement, on federal funding, -- government spending generally, including, for Medicaid in Puerto Rico.In terms of our 2019, full year guidance, we are maintaining our expectations for full year operating revenue to be between $3.29 billion and $3.33 billion, which includes Managed Care premiums earned net, between $2.95 billion and $2.99 billion.We are maintaining expectations for our consolidated claims incurred ratio to be between 81.3% and 83.3%, and MLR to be between 84% and 86%. We now expect our operating expenses as a percentage of total premiums earned and administrative fees, to be between 16.75% and a 17.25%, an improvement from the previous range of 17% to 17.5%.We're maintaining our effective tax rate expectations of between 29% and 33%. And on the bottom line, we're raising 2019 adjusted net income per diluted share guidance. And now expect to be between $2.50 and $2.70.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, accounts for the most -- for the recently issued share dividend. And does not account for any potential share repurchase activity during 2019.Importantly, given the, disconnect, between our recent stock performance and the company's consistent execution of its strategic and operational objectives, our Board has authorized the expansion of our share repurchase program's availability, to $25 million.We remain confident in our business to deliver shareholder value over the long-term. And expect to be active in repurchasing shares either through a 10b5-1 program or in the open market.Let me close by saying, once again, this was a solid quarter. Results across the company validate the hard work, consumer focus and strategic intent of the entire Triple-S team.I am proud of each and every employee. And thank them for recognizing the company, as one of Puerto Rico's 20 best employers, earlier this week. Juan Jose will now provide you with more specific financials, by business segment. Juan Jose? Juan José Román: Thank you, Bobby. And good morning to everyone, on this call. As we reported in our press release earlier today, we continue to show strong operating results, during this third quarter.We reported GAAP diluted net income per share of $0.58. And adjusted diluted net income per share of $0.51 compared to GAAP net loss per share of $0.77 and adjusted net loss per share of $0.97, in the prior year period.As a reminder, last year's third quarter results were impacted by the $36 million after-tax unfavorable prior period reserve development, related to Hurricane Maria, experienced by our P&C segment.Let me now discuss the Managed Care results, in detail. Managed Care premiums earned for the quarter rose $66 million or 10% over the same period last year, primarily reflecting increased membership in the Medicare and at-risk commercial businesses.And higher average premium rate, in the Medicare line of business. The higher average premium rate in the Medicare business, primarily reflect an increase in the average membership risk score.These premium increases were partially offset by the impact of this year's HIP Fee moratorium and a decrease of approximately, 126,000-member months in our Medicaid membership, year-over-year, resulting from the change in the program's model and a new entrant to the program effective November 1st, 2018 and the overall reduction in the eligible population.Also, this quarter Medicaid premiums were negatively impacted by adverse reconciliation of a portion of the high cost, high need population, into lower premium tiers.We have raised this issue with ASES. And the agency has acknowledged several challenges in how it is recognizing and paying, for the high cost, high need members. As a result, ASES has extended their reconciliation process, for all MCOs until, February 2020.We expect the premiums to align with the relative acuity of our membership, one -- once this process is stable. Managed Care claims were up $79 million year-over-year, while the MLR of 86.4% was 320 basis points higher than last year. The higher MLR largely reflects the improved benefits in our 2019 Medicare product offering.The impact of the 2019 HIP Fee moratorium higher target MLR of the current Medicaid contract, and due to the challenges ASES experiencing with recognition of member acuity that I just explained, a timing difference in the recognition of Medicaid premiums.The resultant MLR for this business 99.6% is approximately 14,000 basis point, higher than the prior year figure, reflecting, lower premium PMPM. And not higher-than-expected, PMPM medical costs. Once rates are aligned with member acuity, we expect MLR to approximate target.Moving on to Managed Care segment quarterly operating expenses, the segment's operating expenses declined $7 million from a year ago, reflecting a $13 million decrease in the HIP Fee due to the 2019 moratorium, that was partially offset by higher personnel cost and commission expense.While we do not provide specific quarterly guidance, we expect operating expenses in the fourth quarter, to be higher than others -- other quarters in 2019, due mainly to the enrollment season for the Medicare and Medicaid businesses, as well as for individual, small groups and federal employee program, in the Commercial business.Let me comment briefly on our life and Property and Casualty segments. Life premiums earned were up approximately 8% from the prior year period, primarily reflecting premium growth in the segment's individual and cancer lines of business, the segment operating income increased by $1 million to $6.6 million.Property and Casualty premiums written were up $7 million during the third quarter of 2019, mostly reflecting -- mostly resulting from increased sales and higher premium rates, particularly in Commercial accounts.The segment's operating income this quarter was $7 million compared to an operating loss of $47 million during the same quarter last year, which was caused by the $52 million in federal prior period reserve development, related to Hurricane Maria claim.Returning to our overall results, consolidated income tax expense was $6 million compared to a benefit of $3 million in the prior year period. The income tax benefit in 2018 mainly reflects the loss before tax reported in that period by the Property and Casualty segment.Total cash and investments at the parent company level was $35 million as of September 30 2019. As Bobby noted, our Board of Directors authorized the expansion and the availability of our share repurchase program to $25 million and we will be able to repurchase these shares through a 10b5-1 program or through open market purchases. We are pleased with our strong operating results thus far in 2019 and continued focus on our overall long-term growth strategy, further progressing our key initiatives and positioning the company for the future.We will now proceed to our Q&A section. Operator, please open the call for questions.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] The first question is from Peter Costa, Wells Fargo. Please go ahead, sir.

Good morning everyone. A question on the Medicaid MLR. You had talked about the claim takes coming through are -- member takes I should say coming through with variation before. It seems like it was worse this quarter, than when you saw before. Is this some kind of catch-up going back to some of the prior quarters where there was variation? Or was this all in this quarter? And then beyond that, you talked about the extended time to renegotiate the contract here for the next month of November for yourselves. Is that looking at that sort of the variation of the contract? Or is all that taking place by February 2020? Juan José Román: Hi, Peter, this is Juan Jose. So, regarding the extension we're in the middle of reviewing the rates for next year. It will be retroactive to November 1. We just started the negotiation later in the month -- last month. So, it has been taking a little more time than expected, but we are waiting to the negotiation as well as our order infills and we do expect to complete this by mid of this month and we'll have a new rate for the next 12 months.

Okay. And then regarding the prior rate and I know there's been noise with the members moving back and forth between higher acuity and lower acuity where there's variation of rates. Did this quarter have some catch-up from prior quarters of the -- the way the members were moving back and forth? Or was this all tied to this quarter? Juan José Román: No, this wasn't tied to this quarter. So what we know is, is a reduction in Q3 of the classification of certain high cost high needs that happened during Q3. What we do expect is to catch up in moratorium premium on Q4 or before the end of February 2020.

And when you say catch-up, do you mean they'll go back and look at the Q3? Where clearly these members seem like they were in the wrong bucket where you're getting lower paid for them or will they just adjust them going forward? Bobby García: No, it will be retroactive. That's why -- and let me clarify, when I mentioned that the reconciliation process with ASES will be extended to February is the time they extended the time in order to provide us time to reconcile with ASES retroactive to the time where we believe, the reduction or the reclassification was wrongly done.

Got it. All right. Then moving on to the P&C claims spend a little time there. Back in September, you had 745 claims that were outstanding, now you're down to 709, so you resolved 36 in this time period. Were any of those claims that were litigated or claims that were say over $1 million? And in terms of what the members were claiming relative to what you settled them for? Bobby García: Of the 709 Peter, you're asking how many of them were in litigation.

Actually of the 36 that you resolved. Bobby García: Of the 36 that we've resolved. We don't have that number with us. I can tell you that we have looked at the cases at the claims that were closed. And overall, we've been able to close about one in five cases that were already in litigation historically. But I don't have the precise number of the 36.

Okay. When you -- we look at the court cases and some of the big damages that some of these cases are wedging relative to the relatively smaller amount of money that you have left to pay these claims within the loss reserve, what gives you the confidence that your lower number is the right number relative to sort of what the cases are wedging against you? Juan José Román: Peter. Well, first of all, we need to take into consideration that for many of those big cases, we actually have provided cash advances. So what is in the reserve is the difference between our estimate of the incurred loss, minus the advances. So for some of the -- it especially biggest cases, we have provided cash advances so that reveals our reserve right? So, even those -- many of those are in litigation now, they do have advances already provided in the past two years.So, that is an important critical data point to understand is that not every case that you see or have -- we have been sue or is outstanding or in process of settling, we don't necessarily owe them the whole amount because of the advances. We're very confident again, what we evaluate is the claim, the data that we receive from that claim and they were performed by our adjusters.So, at this point, the main majority of these cases, we have done an extensive work as to what the losses are. That's what provide us the confidence of our reserve. As Bobby said, as we go, we have been able to close cases under the reserve and we allocate that to other cases. So, as of September, as has been in the last year, we're confident with our reserve because of the extensive work that has been done with each of the most important claims -- of the biggest value of claims. And when we look back in average, we have been able -- when we look at only last two years in -- for the case we serve in average, we have been closing cases under the initial estimated reserve. Bobby García: Yes. And if I may add Peter, we don't really focus on what the stated amount is in the lawsuit just like we don't necessarily focus on what the stated amount is in the underlying claim. And that's been the case from day one. And that's why we have not in response to questions from you or investors stated what is the total sum of claims amounts, because that could be misleading. Some people claim very reasonable amounts and we settle very close to what is claimed. Other people claim what we consider exaggerated amounts, some could even be considered fraudulent.So that said, we don't look at it in the aggregate, but we go one by one. And we look at the underlying claim if the lawsuit brings in any new information; we need to consider we will do that. Focusing on cases served because that's what really triggers the beginning of litigation as once you're formally notified under law. So again, we don't look at it as there are these cases out there and according to the public record they amount to x amount of dollars, therefore you divide that into 709 or into 396 and you come up with an amount and you compare that to reserves. That's not the way we look at it.

Got it. Then help me understand the assignment of benefits a little bit those 31, where there's an assignment benefit. Is that all being assigned to a contractor, who's doing the work? Or is that being assigned to some other third-party that perhaps is just a financial interest in looking to pursue something against you guys? Bobby García: Yes, this is a very specific case. And we provided that data point, which we don't consider necessarily important in the scheme of things, but we wanted to provide it because there -- we imagine there are investors that look at say experience in Florida, right and they compare us to Florida. Well this is a very different market and the experience has been very different. So we know that that was a big issue in Florida where we signed with benefits to contractors and it's had repercussions there. So we just wanted to point out that that is not really a significant concern here.Those 31 cases are very specific. There -- if not a contractor it's a company here called Attenure. And it describes itself as a Puerto Rico company, but we understand based on its website it's funded by an asset management company out of the U.S. And so we just wanted to highlight that out of the total there are only 31 cases to-date that is -- where benefits have been assigned. And based on the lawsuit against them which we were able to see in the public record they take a cut of any claim adjustment paying off an amount and they take a portion of the claim and then they represent claim.

Got it. And does Puerto Rico have any laws like the recently passed law in Florida on assignment of benefits? Bobby García: Not to our knowledge. No.

Okay. Moving away from the claims for a minute before I pass on to others. You lowered your assumptions for the G&A ratio. What is behind that? Did you is it just the higher revenues? Or is there something more in terms of cost cutting that you've been doing? Juan José Román: No, it mostly is higher revenue.

Okay. And then you didn't talk very much about 2020 and color going into 2020 from headwinds and tailwinds perhaps you could go through a little bit of that for us? Bobby García: I would say Peter that the headwind that everyone is of course fairly closely watching as Medicaid funding which I mentioned. Of course there's also a lot of focus on what's happening with the recovery post-hurricane and the influx of Federal reconstruction funds. And -- because those will be driving the economic growth in the short to medium term. So that's what everyone is focused on. Of course we are closely watching anything that happens with P&C claims and very focused on that making sure we get that behind us. And as we mentioned Medicare Advantage it's a very interesting open enrollment season given all the changes in non-medical sub-benefits.So those are I think the main things coming on top of mind for me one of it. With respect to tailwinds, we continue really just focused on delivering on our strategy and we believe there's a lot of momentum in the company, a lot of energy around what we're doing and a lot of focus on continuing with our clinical initiatives with that longer-term goal of transforming health care through an integrated delivery model. We think there's a lot of interesting work going on within the company that will support better integration of care and better outcomes for our affiliates.

Thank you very much. Appreciate it.

The next question is from Austin Hopper, AWH Capital. Please go ahead.

Hey, guys. Thanks for taking my question. Bobby García: Good morning.

Good morning. It looks like you made about $33 million of payments to San Jorge Children's Hospital last two years. Was that all Hurricane Maria related? Bobby García: No. Actually that was not. I'd say the vast majority of that is basically related to payments for services by the hospital as a provider of our network. So I'd say all-in payments related to P&C claims as an insured of our P&C subsidiary is approximately $3 million. The remaining $30 million was all related to health care services and that's under a contract or contracts that are all arms-length. And they're disclosed in our proxies.

Great. Thank you.

This concludes today's Q&A session. I would like to turn the floor back over to Bobby Garcia for closing comments. Bobby García: Thank you, operator. I'd just like to sum-up by saying we've had a solid 2019 as we move into the final months of the year showing continued progress in our strategic operational and financial objectives. We continue to gain and retain membership in our core Managed Care business. We continue optimizing technology to further improve clinical outcomes, medical -- member experience and our cost structure and we're making progress in building out our clinical network all in a concerted effort to build out an integrated care delivery strategy over the next several years that transforms the health care experience in Puerto Rico.And with that, I'd like to thank you all for taking your time today and your ongoing support for Triple-S. If you have any questions additionally please reach out. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a good day.