A.M. Best Co. has affirmed the financial strength rating of B++ (Good) and issuer credit ratings (ICR) of “bbb+” of Triple-S Salud, Inc. (TSS) and Triple-S Vida, Inc. (TSV). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a” of Triple-S Propiedad (TSP). Additionally, A.M. Best has withdrawn the debt rating of “bbb” on $50 million 6.30% senior unsecured notes due 2019 of TSS. A.M. Best also has affirmed the ICR of “bb+” of the holding company, Triple-S Management Corporation (TSM) (NYSE: GTS). The outlook for all ratings is stable. All companies are domiciled in San Juan, PR. The lead operating company’s, TSS, favorable earnings trend over the last five years served to strengthen the organization's level of capitalization, expanding its operating capacity and funding infrastructure upgrades while playing a key role in business acquisitions and provider network development strategies. Offsetting factors include a difficult economic business environment, ability of the company to sustain commercial membership and challenges in the public health insurance marketplace. Recently, TSS again recommitted to the Puerto Rico Medicaid (Health Reform) insurance market but has significantly lowered its risk exposure by limiting its focus to the administrative service only (ASO) side of the business. The organization's ongoing business acquisition strategy also led to approximately 40,000 new Medicare members in early 2011 due to the acquisition of American Health Inc. TSS remains the largest managed care insurer in Puerto Rico. TSS also repaid $50.0 million in outstanding senior unsecured notes. The unsecured obligation carried an interest rate of 6.3% and was scheduled to mature in 2019. Consequently, A.M. Best has withdrawn its rating. The ratings of TSV recognize its role as a core subsidiary of TSM, its strong market position with a broad range of complementary insurance products and its profitable operations. TSV is the leader distributor of life and cancer products in the Puerto Rico market through its home service, ordinary life and cancer distribution channels. It has no competition in the home service market due to the high entrance and delivery costs. The Triple-S brand has served the organization well, building gradual, sequential revenue development and providing a platform for the introduction of new products and services. The company has increased its capital balance for each of the past five years, expanding its operating capacity.
The ratings of TSP reflect its excellent capitalization, solid operating profitability that has historically benefitted from favorable reserve development, and well established market presence within Puerto Rico. Partially offsetting these positive rating factors are the company's geographic risk concentration, competitive operating environment and above average underwriting expense ratio relative to the commercial property composite.Factors that could result in upward movement of assigned ratings of TSS and TSV include sustained improvement in balance sheet quality with respect to receivables; increases in the absolute level of capital and surplus; persistent and profitable membership development trend; and continuing efforts of business diversification. A.M. Best believes that the Triple-S organization is well positioned at its current ratings. However, factors that could result in downward movement include revenue and cash flow contraction; intensified product concentration risk; reduced operating results; further deterioration in Puerto Rico’s economy; and challenges surrounding business integration. For TSP, factors that could result in upward movement of the assigned ratings include an improvement in operating earnings and resulting return on revenue measures, which can be sustained over a period of time. Accordingly, this would enhance the company’s ability to generate additional organic surplus growth while strengthening overall capitalization. A.M. Best believes that TSP is well positioned at its current ratings. However, factors that could result in downward rating movement over the near term include weakened operating earnings due to deteriorating underwriting performance or a material increase in catastrophe losses, which could weaken overall capitalization. The principal methodologies used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition , which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Rating Health Insurance Companies”; “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Life/Health Insurers”; Rating Members of Insurance Groups”; and “A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.