OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “bbb+” of Triple-S Salud, Inc. (TSS) and its affiliate, Triple-S Vida, Inc. (TSV) (Río Piedras, Puerto Rico). AM Best also has removed from under review with negative implications and affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb” of Triple-S Blue, Inc., I.I. (TSB). Additionally, AM Best has affirmed the FSR of B+ (Good) and the Long-Term ICR of “bbb-” of Triple-S Propiedad, Inc. (TSP) (Guaynabo, Puerto Rico). Furthermore, AM Best has removed from under review with negative implications and affirmed the Long-Term ICR of “bb+” of Triple-S Management Corporation (TSM) (NYSE:GTS), the ultimate parent of TSS, TSV, TSB and TSP. The outlook assigned to these Credit Ratings (ratings) is stable. All companies are domiciled in San Juan, PR, unless otherwise specified.
The ratings of TSP were downgraded previously and placed under review with negative implications on Nov. 16, 2018, in response to TSP reporting a significant loss in policyholder surplus largely driven by adverse claims development on Hurricane Maria losses of approximately $129 million in the second and third quarter of 2018. (See press release dated Nov. 16, 2018). Concurrent to TSP’s downgrades, TSM’s life/health subsidiaries were placed under review with negative implications.
The ratings of TSS and TSV reflect the group’s aggregate balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The group’s stable outlooks reflect some level of resilience of the capital balances to withstand deployment to other areas of the Triple-S organization while its core business of health insurance add generally favorable earnings stability. AM Best expects the margin from TSM’s managed care business to improve through projected premium growth, specifically in Medicare Advantage business, which is expected to increase driven by membership gains in 2019. AM Best also expects TSV’s suite of life and ancillary products to contribute to premium growth over the medium term. Earnings from TSV favorably offset the managed care earnings decline in 2018, which were due partially to unrealized losses from the investment portfolio, higher utilization and the inclusion of the health insurance fee. The Triple-S brand, market position in key business segments, product offerings and network strength are all favorable rating attributes; however, the Triple-S businesses continue to operate in an environment still feeling the effects of Hurricane Maria in more rural areas of Puerto Rico. More recently, there are indicators showing migration off the island has somewhat abated, and the economy is expected to benefit from federal relief programs and rebuilding projects throughout fiscal-year 2019 and into 2020.
The ratings of TSP reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and marginal ERM.
AM Best assesses TSP’s balance sheet strength as adequate, based on its strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). It also reflects TSP’s prudent investment portfolio, stable loss reserving trends (excluding Hurricane Maria claims) and strong liquidity measures that are enhanced by generally positive operating cash flows. The company’s adequate operating performance reflects its consistently profitable operating results, again excluding 2018. AM Best categorizes TSP’s ERM assessment as marginal, as the risk management capabilities do not align fully with the company’s risk profile. Demonstrated weakness has been observed given the level of catastrophe losses relative to prior reinsurance purchasing decisions for the enterprise. While the losses associated with Hurricane Maria were unprecedented in nature, the size of the loss lead to a marginal assessment. While management has been refining and enhancing the overall ERM framework and capabilities, the ultimate effectiveness of these changes remains uncertain.
The ratings of TSB reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its marginal operating performance, limited business profile and appropriate ERM. TSB’s capital has been supported through capital contributions from parent company, TSV. The company has not reported an operating profit since reorganizing the company as TSB; however, its projected trend of favorable premium growth and favorable earnings projected over the medium term may lessen the need for parental capital support.
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