Triple-S Management Corporation (GTS), is a leading insurance holding company in Puerto Rico. The company offers a wide range of insurance products and services throughout Puerto Rico. It was founded in 1959, as has grown to become the largest medical insurance provider in Puerto Rico. The company was a major player in the Puerto Rico Health Reform program, to provide free to low cost medical coverage to the impoverished citizens in Puerto Rico.
Company History & Operations
The company was founded in 1959 by a group of physicians and dentists who organized a free-choice health plan for people in Puerto Rico. Triple-S management grew steadily of the over about two decades unit 1979 when its was given a income tax exemption which lead to rapid growth over the course of 20 years until its income tax exemption was terminated in 2002. Major Historic Events:
- In 1961 the company serviced 100,000 members in Puerto Rico
- In 1965 the company became the exclusive license affiliates of Blue Cross and Blue Shield in Puerto Rico
- In 1984 the company entered the life insurance business
- In 1985 the company expanded its business into the property and casualty insurance market
- In 1995 the company was a major player in the Health Reform Program and formed Triple-C to be a third party administrator for the company
- In 1999 the company went through a restructuring creating a holding company above its subsidiaries
- In 2005 the company came the leader in the life insurance market in Puerto Rico
- In 2009 the company celebrated it 50 years in business.
List of the company subsidiaries:
- Triple-S - Is the company's main subsidiary and is dedicated to providing medical insurance to companies, organizations, governments, and individuals
- Seguros Triple-S - Is a property and casualty insurance provider in Puerto Rico
- Seguros de Vida Triple-S - Is a life and disability insurance and annuity product provider
- GA Life Puerto Rico - Is a life insurance company currently being merger with Seguros de Vida
- Triple-C - Is a third party administrator for Triple-S
- Interactive System - Provides processing services to the company and other subsidaries
Finances
Balance Sheet
| 2013 31/12 | 2012 31/12 | 2011 31/12 | 2010 31/12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Total Current Assets | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Assets | 2044.6 | 2059.34 | 1880.58 | 1759.37 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Total Current Liabilities | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Liabilities | 1260.86 | 1297.44 | 1203.62 | 1142.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Total Equity | 783.74 | 761.91 | 676.96 | 617.27 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Total Liabilities & Shareholders' Equity | 2044.6 | 2059.34 | 1880.58 | 1759.37 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Common Shares Outstanding | 27.47 | 28.36 | 28.36 | 28.82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Preferred Shares Outstanding | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For fiscal year 2013, the revenues decreased 2% to $2.38 billion and net income increased less than 1% to $54.3 million. The company revenues reflect the increased in medicare expenses and operating expenses increased 12% to $477.4 million. Triple-S has a 5 years EPS growth of about 20.4% and a 5 year sales growth of 6.55%.
Valuation
The company is undervalued and trades at 8.5x its earnings and also trades at 0.54x its book value. Other leading insurance companies trade above book value, and rightfully so because their return on assets are above 1.00 and deserve to trade at a premium to. Triple-S has return on assets of 2.64% well above the average for insurance holding company, and it should at least trade at book value and above it. The company has an average ten years earnings of $2.00 and if it trade at 12x its average ten year earnings it share price would be $24.00. If the company share traded at book value its would trade at $28.53 per share.
Ten Years Earnings
| 12/12 | 1.90 |
| 12/11 | 2.01 |
| 12/10 | 2.28 |
| 12/09 | 2.33 |
| 12/08 | 0.77 |
| 12/07 | 2.15 |
| 12/06 | 2.04 |
| 12/05 | 1.06 |
| 12/04 | 1.71 |
| 12/03 | 0.95 |
Compared Valuation of Leading Insurance Holding Companies
| Triple-S Management Corporation (GTS) | P/E of 8.5 | P/B of 0.54 | Return on Assets of 2.64% |
| Berkshire Hathaway (BRK.A) | P/E of 15.54 | P/B of 1.61 | Return on Assets of 4.31% |
| Markel Corporation (MKL) | P/E of 30.34 | P/B of 1.21 | Return on Assets of 1.89% |
| FairFax Financial (FFH) | P/E of 22.38 | P/B of 1.26 | Return on Assets of 3.8% |
Based on the compared valuation with leading insurance holding companies show that Triple-S is undervalued and should trade at a higher multiple. If the company traded at the same P/E as Berkshire Hathaway its share price would be $30.00 per share. I give a share price value range of $24.00 to $30.00 per share for the company.
