|[October 03, 2013]
A.M. Best Affirms Ratings of Triple-S Management Corporation and Its Subsidiaries
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the issuer credit rating (ICR) of
"bb+" of Triple-S Management Corporation (TSM). In addition, A.M.
Best has affirmed the financial strength rating (FSR) of B++ (Good) and
(ICRs of "bbb+" of Triple-S Salud Inc. (TSS) and its affiliate, Triple-S
Vida Inc. (TSV). The outlook for these ratings is positive.
Concurrently, A.M. Best affirmed the FSR of A- (Excellent) and ICR of
"a-" of Triple-S Propiedad, Inc. (TSP). The outlook for these
ratings is stable. TSS, TSV, and TSP are all subsidiaries of TSM, and
all companies are domiciled in San Juan, PR.
The rating affirmations for TSS and TSV reflect their improved
profitability over the last several years due to better operating
performance, which is largely driven by TSS' managed health care
operations. All of the Triple-S companies have strong brand recognition
and provide coverage for their 1.7 million members in the Commonwealth
of Puerto Rico (Commonwealth) and the U.S. Virgin Islands.
TSM is well diversified by offering managed health care through TSS,
life and ancillary products through TSV and property/casualty through
TSP. The organization exhibited significant revenue growth over the last
five years. Net premiums written grew sharply in 2012, and the rate of
premium development was sustained into 2013, allowing the organization
to narrow its focus on expanding operating margins through realized
operating efficiencies and reliable investment returns.
Offsetting rating factors include the Triple-S companies' concentration
in government programs, both Medicare Advantage and Mi Salud, which is
the Commonwealth's Medicaid program. Given the sustained weakness in the
Puerto Rican economy and pressures on Medicare Advantage funding, the
organization is exposed to business concentrtion risk in the public
sector. Moreover, Triple-S companies are pursuing a business expansion
strategy outside of Puerto Rico, demonstrating continuing efforts to
mitigate geographic concentration risk. Initial operations in the U.S.
Virgin Islands already have begun. The business expansion strategy
exposes the entire organization to operational risks.
The rating affirmations of TSP recognize its excellent capitalization,
solid operating profitability, which has historically benefited from
favorable reserve development on prior accident years, and its strong
market presence within Puerto Rico. Partially offsetting these positive
rating factors are TSP's geographic risk concentration, competitive
operating environment and above average underwriting expense ratio
relative to the commercial casualty composite. While TSP's underwriting
expense ratio reflects high commission costs, the ratio remains in line
with its local market peers. With all business written in Puerto Rico,
the company remains exposed to the potential for frequent and severe
weather-related events, as well as judicial and regulatory concerns.
Despite these concerns and ongoing competitive market pressures, the
outlook reflects A.M. Best's expectations for continued strong
capitalization and profitable operating results over the near term.
Factors that could result in upward movement for TSS and TSV's ratings
include a consistent earnings trend, improvement in risk-adjusted
capital strength and the successful integration of an acquired business.
Factors that could result in downward ratings movement include further
deterioration in Puerto Rico's economy, disruption in the government
health business sector and an unfavorable decline in capital strength.
Factors that could result in upward movement for TSP's ratings include
an improvement in its 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 further strengthening its overall capitalization.
However, factors that could result in downward rating pressures over the
near term include weakened operating earnings due to deteriorating
underwriting performance, or a material increase in catastrophe losses,
which would weaken overall capitalization. A.M. Best believes that TSP
is well positioned at its current rating level.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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