The managers of Triple-S Management Corp. have included a grim description of the economic situation in Puerto Rico in the company’s annual report for investors for 2015.
Triple-S (NYSE:GTS), which holds the Blue Cross and Blue Shield licenses for Puerto Rico, accounts for about one-quarter of the health insurance premium revenue in the commonwealth. The company is also a top player in Puerto Rico’s life insurance market.
About 39 percent of the company’s 1.1 major medical plan enrollees are in Medicaid plans, 11 percent are in Medicare plans, and 50 percent are in commercial plans. Many of the commercial plan enrollees are in government health plans that cover employees of the government of Puerto Rico.
Triple-S notes in the general description of its business in its Form 10-K report that it does most of its business in Puerto Rico, and that the government of Puerto Rico “has faced a number of fiscal challenges,” including $69.9 billion in public sector debt as of Sept. 30, 2015.
In a discussion of risk factors, the company warns investors that the poor fiscal health of the government of Puerto Rico “has adversely impacted and may continue to adversely impact us.”
“The government of Puerto Rico is experiencing a profound fiscal crisis,” the company says.
Because of the high cost of energy, lack of access to capital, problems with the patents covering some products made in Puerto Rico, and other factors, the gross national product (GNP) of Puerto Rico has shrunk, in real terms, every year from 2007 through 2014 with the exception of 2012, the company says.
Projections show that GNP probably fell 0.9 percent in 2015 and will fall 1.2 percent this year, in constant dollars, according to the company.
Meanwhile, employment fell to 990,113 in 2015, from 1.2 million in 2007.
Triple-S notes that the government of Puerto Rico has been trying to renegotiate its debt with its lenders, and that it has been talking about the possibility of defaulting on its debt.
New tax rules the commonwealth has adopted to try to shore up its finances could increase Triple-S taxes in ways that are hard to predict, the company says.
“Continued weakness in Puerto Rico’s economy or the failure of the Puerto Rican government to manage its fiscal problems in an orderly manner could have an adverse effect on our insured customers, which may require [many] to forego insurance coverage or scale back on the amount of insurance coverage purchased,” Triple-S added.
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