##### Table of Contents



United States Securities and Exchange Commission
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 COMMISSION FILE NUMBER: 0-49762
 Triple-S Management Corporation
  Puerto Rico
    
    66-0555678(State or other jurisdiction ofincorporation or organization)
    
    (I.R.S. Employer Identification No.)1441 F.D. Roosevelt AvenueSan Juan, Puerto Rico
    
    00920(Address of principal executive offices)
    
    (Zip code)
 (787) 749-4949
 Not applicable
 þ o
 o þ
 þ
  Title of each class
    
    Outstanding at September 30, 2005Common Stock, $40.00 par value
    
    8,904




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Triple-S Management Corporation
 FORM 10-Q
   PAGEPART I  FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations for the three months and nine
months ended September 30, 2005 and 2004
    
    
    4Consolidated Statements of Stockholders Equity and Comprehensive Income
for the nine months ended September 30, 2005 and 2004
    
    
    5Consolidated Statements of Cash Flows for the nine months ended September
30, 2005 and 2004
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Resultsof Operations
    
    
    26Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4.
    
    Controls and Procedures
    
    
    38PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    38Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3.
    
    Defaults Upon Senior Securities
    
    
    41Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    41Item 5.
    
    Other Information
    
    
    41Item 6.
    
    Exhibits
    
    
    41SIGNATURES
    
    
    42EX-10.1 EXTENSION TO THE PUERTO RICO HEALTH INSURANCE CONTRACT FOR THE METRO-NORTH REGIONEX-10.2 EXTENSION TO THE PUERTO RICO HEALTH INSURANCE CONTRACT FOR THE NORTH REGIONEX-10.3 EXTENSION TO THE PUERTO RICO HEALTH INSURANCE CONTRACT FOR THE SOUTH-WEST REGIONEX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF VICE PRESIDENT OF FINANCE AND CFOEX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF VICE PRESIDENT AND CFO
 2




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##### Table of Contents



Part I  Financial Information
 
 Item 1. Financial Statements
 TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 (Dollar amounts in thousands, except per share data)
 (Unaudited)September 30,
    
    December 31,2005
    
    2004ASSETSInvestments and cash:Securities held for trading, at fair value:Fixed maturities
    
    $
    -
    
    
    
    72,423Equity securities
    
    
    84,251
    
    
    
    86,596Securities available for sale, at fair value:Fixed maturities
    
    
    513,078
    
    
    
    444,637Equity securities
    
    
    54,455
    
    
    
    59,186Securities held to maturity, at amortized cost:Fixed maturities
    
    
    22,146
    
    
    
    14,280Cash and cash equivalents
    
    
    32,208
    
    
    
    35,115Total investments and cash
    
    
    706,138
    
    
    
    712,237Premiums and other receivables, net
    
    
    120,406
    
    
    
    113,323Deferred policy acquisition costs
    
    
    19,898
    
    
    
    18,712Property and equipment, net
    
    
    33,395
    
    
    
    32,364Other assets
    
    
    55,853
    
    
    
    43,021Total assets
    
    $
    935,690
    
    
    
    919,657LIABILITIES AND STOCKHOLDERS EQUITYClaim liabilities:Claims processed and incomplete
    
    $
    133,556
    
    
    
    137,282Unreported losses
    
    
    145,897
    
    
    
    127,324Unpaid loss-adjustment expenses
    
    
    14,609
    
    
    
    14,719Total claim liabilities
    
    
    294,062
    
    
    
    279,325Unearned premiums
    
    
    92,569
    
    
    
    84,583Annuity contracts
    
    
    40,207
    
    
    
    34,071Liability to Federal Employees Health Benefits Program
    
    
    8,148
    
    
    
    9,791Accounts payable and accrued liabilities
    
    
    98,963
    
    
    
    100,388Short-term borrowings
    
    
    4,605
    
    
    
    1,700Income tax payable
    
    
    
    
    
    
    1,827Net deferred tax liability
    
    
    
    
    
    
    1,969Additional minimum pension liability
    
    
    6,824
    
    
    
    8,840Long-term borrowings
    
    
    91,000
    
    
    
    95,730Total liabilities
    
    
    636,378
    
    
    
    618,224Stockholders equity:Common stock, $40 par value. Authorized 12,500 shares;issued and outstanding 8,904 at September 30, 2005 and
December 31, 2004
    
    
    356
    
    
    
    356Additional paid-in capital
    
    
    150,408
    
    
    
    150,408Retained earnings
    
    
    145,605
    
    
    
    134,531Accumulated other comprehensive income
    
    
    2,943
    
    
    
    16,138Total stockholders equity
    
    
    299,312
    
    
    
    301,433Total liabilities and stockholders equity
    
    $
    935,690
    
    
    
    919,657
  3




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Earnings (Unaudited)   (Dollar amounts in thousands, except per share data)
 Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004REVENUE:Premiums earned, net
    
    $
    345,728
    
    
    
    325,926
    
    
    
    1,018,735
    
    
    
    967,468Amounts attributable to self-funded
arrangements
    
    
    53,424
    
    
    
    46,044
    
    
    
    157,778
    
    
    
    135,127Less amounts attributable to claims under
self-funded arrangements
    
    
    (50,190
    )
    
    
    (42,925
    )
    
    
    (148,032
    )
    
    
    (125,992
    )348,962
    
    
    
    329,045
    
    
    
    1,028,481
    
    
    
    976,603Net investment income
    
    
    7,158
    
    
    
    6,516
    
    
    
    21,439
    
    
    
    19,491Net realized investment gains
    
    
    1,857
    
    
    
    4,237
    
    
    
    6,534
    
    
    
    6,985Net unrealized investment gain (loss) on trading securities
    
    
    905
    
    
    
    (435
    )
    
    
    (5,522
    )
    
    
    (1,868
    )Other income, net
    
    
    1,576
    
    
    
    728
    
    
    
    2,066
    
    
    
    2,414Total revenue
    
    
    360,458
    
    
    
    340,091
    
    
    
    1,052,998
    
    
    
    1,003,625BENEFITS AND EXPENSES:Claims incurred
    
    
    299,577
    
    
    
    283,946
    
    
    
    900,401
    
    
    
    845,940Operating expenses, net of reimbursement
for services
    
    
    44,568
    
    
    
    40,416
    
    
    
    133,787
    
    
    
    122,889Interest expense
    
    
    1,880
    
    
    
    1,018
    
    
    
    5,524
    
    
    
    2,850Total benefits and expenses
    
    
    346,025
    
    
    
    325,380
    
    
    
    1,039,712
    
    
    
    971,679Income before taxes
    
    
    14,433
    
    
    
    14,711
    
    
    
    13,286
    
    
    
    31,946INCOME TAX EXPENSE (BENEFIT):Current
    
    
    802
    
    
    
    2,756
    
    
    
    2,781
    
    
    
    7,302Deferred
    
    
    1,758
    
    
    
    (139
    )
    
    
    (569
    )
    
    
    (85
    )Total income taxes
    
    
    2,560
    
    
    
    2,617
    
    
    
    2,212
    
    
    
    7,217Net income
    
    $
    11,873
    
    
    
    12,094
    
    
    
    11,074
    
    
    
    24,729Basic net income per share
    
    $
    1,333
    
    
    
    1,361
    
    
    
    1,244
    
    
    
    2,769
  4




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Stockholders Equity and
Comprehensive Income (Unaudited)
 (Dollar amounts in thousands, except per share data)
 2005
    
    2004BALANCE AT JANUARY 1
    
    $
    301,433
    
    
    
    254,255Stock redemption
    
    
    
    
    
    
    (5
    )Comprehensive income:Net income
    
    
    11,074
    
    
    
    24,729Net unrealized change in investment securities
    
    
    (12,830
    )
    
    
    (1,136
    )Net change in minumum pension liability
    
    
    (755
    )
    
    
    (2,361
    )Net change in fair value of cash flow hedges
    
    
    390
    
    
    
    118Total comprehensive income (loss)
    
    
    (2,121
    )
    
    
    21,350BALANCE AT SEPTEMBER 30
    
    $
    299,312
    
    
    
    275,600
  5




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows (Unaudited)
 (Dollar amounts in thousands, except per share data)
 Nine months endedSeptember 30,2005
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Premiums collected
    
    $
    1,026,383
    
    
    
    963,274Cash paid to suppliers and employees
    
    
    (147,434
    )
    
    
    (130,355
    )Claims, losses and benefits paid
    
    
    (888,007
    )
    
    
    (816,399
    )Interest received
    
    
    20,689
    
    
    
    19,288Income taxes paid
    
    
    (8,632
    )
    
    
    (43,464
    )Proceeds from trading securities sold or matured:Fixed maturities sold
    
    
    102,667
    
    
    
    44,196Equity securities
    
    
    19,692
    
    
    
    19,686Acquisitions of investments in trading portfolio:Fixed maturities
    
    
    (30,502
    )
    
    
    (45,595
    )Equity securities
    
    
    (17,749
    )
    
    
    (32,336
    )Interest paid
    
    
    (4,624
    )
    
    
    (2,116
    )Expense reimbursement from Medicare
    
    
    9,730
    
    
    
    9,620Contingency reserve funds from FEHBP
    
    
    1,059
    
    
    
    5,217Net cash provided by (used in) operating activities
    
    
    83,272
    
    
    
    (8,984
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from investments sold or matured:Securities available for sale:Fixed maturities sold
    
    
    5,373
    
    
    
    39,859Fixed maturities matured
    
    
    17,847
    
    
    
    68,942Equity securities
    
    
    3,487
    
    
    
    6,544Securities held to maturity:Fixed maturities matured
    
    
    721
    
    
    
    3,161Acquisitions of investments:Securities available for sale:Fixed maturities
    
    
    (97,818
    )
    
    
    (112,821
    )Equity securities
    
    
    (6,821
    )
    
    
    (1,024
    )Securities held to maturity:Fixed maturities
    
    
    (8,499
    )
    
    
    (2,612
    )Capital expenditures
    
    
    (5,031
    )
    
    
    (2,731
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    12Net cash used in investing activities
    
    
    (90,741
    )
    
    
    (670
    )CASH FLOWS FROM FINANCING ACTIVITIES:Change in outstanding checks in excess of bank balances
    
    
    1,151
    
    
    
    8,545Payments of short-term borrowings
    
    
    (104,635
    )
    
    
    (48,600
    )Proceeds from short-term borrowings
    
    
    107,540
    
    
    
    11,600Payments of long-term borrowings
    
    
    (4,730
    )
    
    
    (2,098
    )Proceeds from long-term borrowings
    
    
    
    
    
    
    50,000Redemption of common stock
    
    
    
    
    
    
    (5
    )Proceeds from annuity contracts
    
    
    9,315
    
    
    
    9,259Surrenders of annuity contracts
    
    
    (4,079
    )
    
    
    (3,659
    )Net cash provided by financing activities
    
    
    4,562
    
    
    
    25,042Net (decrease) increase in cash and cash equivalents
    
    
    (2,907
    )
    
    
    15,388Cash and cash equivalents at beginning of the period
    
    
    35,115
    
    
    
    48,280Cash and cash equivalents at end of the period
    
    $
    32,208
    
    
    
    63,668
  6




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
  (Dollar amounts in thousands, except per share data)
  (1) Basis of Presentation
   (2) Segment Information
  7




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES  Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 Operating SegmentsHealth
    
    HealthInsurance
    
    Insurance
    
    PropertyCommercial
    
    Reform
    
    and CasualtyProgram
    
    Program
    
    Insurance
    
    Other *
    
    TotalTHREE MONTHS ENDED SEPTEMBER 30, 2005Premiums earned, net
    
    $
    190,119
    
    
    
    129,933
    
    
    
    21,762
    
    
    
    3,914
    
    
    
    345,728Amounts attributable to self-funded arrangements
    
    
    53,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,424Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (50,190
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,190
    )Intersegment premiums earned/service revenues
    
    
    1,080
    
    
    
    
    
    
    
    
    
    
    
    12,473
    
    
    
    13,553194,433
    
    
    
    129,933
    
    
    
    21,762
    
    
    
    16,387
    
    
    
    362,515Net investment income
    
    
    3,360
    
    
    
    732
    
    
    
    2,176
    
    
    
    772
    
    
    
    7,040Realized gain (loss) on sale of securities
    
    
    1,761
    
    
    
    
    
    
    
    128
    
    
    
    (32
    )
    
    
    1,857Unrealized gain on trading securities
    
    
    556
    
    
    
    
    
    
    
    295
    
    
    
    54
    
    
    
    905Other
    
    
    1,388
    
    
    
    (6
    )
    
    
    160
    
    
    
    17
    
    
    
    1,559Total revenue
    
    $
    201,498
    
    
    
    130,659
    
    
    
    24,521
    
    
    
    17,198
    
    
    
    373,876Net income
    
    $
    6,436
    
    
    
    1,991
    
    
    
    2,807
    
    
    
    339
    
    
    
    11,573Claims incurred
    
    $
    164,831
    
    
    
    121,501
    
    
    
    10,826
    
    
    
    2,419
    
    
    
    299,577Operating expenses
    
    $
    25,046
    
    
    
    8,951
    
    
    
    10,479
    
    
    
    14,088
    
    
    
    58,564Depreciation expense, included in operating expenses
    
    $
    1,103
    
    
    
    
    
    
    
    105
    
    
    
    34
    
    
    
    1,242Interest expense
    
    $
    1,127
    
    
    
    256
    
    
    
    
    
    
    
    320
    
    
    
    1,703Income tax expense (benefit)
    
    $
    4,058
    
    
    
    (2,040
    )
    
    
    409
    
    
    
    32
    
    
    
    2,459
 
 *
    
    Includes a business segment which is not required to be reported separately. This column includes the results of operations for the
life and disability insurance segment as well as the data processing services organization and the third-party administrator of health
insurance services. 8




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 Operating SegmentsHealth
    
    HealthInsurance
    
    Insurance
    
    PropertyCommercial
    
    Reform
    
    and CasualtyProgram
    
    Program
    
    Insurance
    
    Other *
    
    TotalTHREE MONTHS ENDED SEPTEMBER 30, 2004Premiums earned, net
    
    $
    178,164
    
    
    
    121,980
    
    
    
    21,557
    
    
    
    4,225
    
    
    
    325,926Amounts attributable to self-funded arrangements
    
    
    46,044
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,044Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (42,925
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,925
    )Intersegment premiums earned/service revenues
    
    
    906
    
    
    
    
    
    
    
    
    
    
    
    11,611
    
    
    
    12,517182,189
    
    
    
    121,980
    
    
    
    21,557
    
    
    
    15,836
    
    
    
    341,562Net investment income
    
    
    3,026
    
    
    
    793
    
    
    
    1,906
    
    
    
    705
    
    
    
    6,430Realized gain on sale of securities
    
    
    2,973
    
    
    
    
    
    
    
    530
    
    
    
    734
    
    
    
    4,237Unrealized gain (loss) on trading securities
    
    
    (483
    )
    
    
    
    
    
    
    (49
    )
    
    
    97
    
    
    
    (435
    )Other
    
    
    (10
    )
    
    
    (7
    )
    
    
    643
    
    
    
    54
    
    
    
    680Total revenue
    
    $
    187,695
    
    
    
    122,766
    
    
    
    24,587
    
    
    
    17,426
    
    
    
    352,474Net income
    
    $
    5,216
    
    
    
    2,381
    
    
    
    3,128
    
    
    
    1,253
    
    
    
    11,978Claims incurred
    
    $
    157,186
    
    
    
    111,141
    
    
    
    13,007
    
    
    
    2,612
    
    
    
    283,946Operating expenses
    
    $
    23,209
    
    
    
    8,618
    
    
    
    8,469
    
    
    
    13,001
    
    
    
    53,297Depreciation expense, included in operating expenses
    
    $
    934
    
    
    
    
    
    
    
    90
    
    
    
    35
    
    
    
    1,059Interest expense
    
    $
    343
    
    
    
    113
    
    
    
    
    
    
    
    265
    
    
    
    721Income tax expense (benefit)
    
    $
    1,741
    
    
    
    513
    
    
    
    (17
    )
    
    
    295
    
    
    
    2,532
 
 *
    
    Includes a business segment which is not required to be reported separately. This column includes the results of operations for thelife and disability insurance segment as well as the data processing services organization and the third-party administrator of health
insurance services. 9




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 Operating SegmentsHealth
    
    HealthInsurance
    
    Insurance
    
    PropertyCommercial
    
    Reform
    
    and CasualtyProgram
    
    Program
    
    Insurance
    
    Other *
    
    TotalNINE MONTHS ENDED SEPTEMBER 30, 2005Premiums earned, net
    
    $
    564,557
    
    
    
    377,270
    
    
    
    64,960
    
    
    
    11,948
    
    
    
    1,018,735Amounts attributable to self-funded arrangements
    
    
    157,778
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157,778Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (148,032
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148,032
    )Intersegment premiums earned/service revenues
    
    
    3,185
    
    
    
    
    
    
    
    
    
    
    
    37,550
    
    
    
    40,735577,488
    
    
    
    377,270
    
    
    
    64,960
    
    
    
    49,498
    
    
    
    1,069,216Net investment income
    
    
    10,183
    
    
    
    2,222
    
    
    
    6,461
    
    
    
    2,244
    
    
    
    21,110Realized gain (loss) on sale of securities
    
    
    5,309
    
    
    
    (25
    )
    
    
    1,199
    
    
    
    51
    
    
    
    6,534Unrealized loss on trading securities
    
    
    (4,990
    )
    
    
    
    
    
    
    (482
    )
    
    
    (50
    )
    
    
    (5,522
    )Other
    
    
    1,497
    
    
    
    (17
    )
    
    
    330
    
    
    
    137
    
    
    
    1,947Total revenue
    
    $
    589,487
    
    
    
    379,450
    
    
    
    72,468
    
    
    
    51,880
    
    
    
    1,093,285Net income (loss)
    
    $
    4,909
    
    
    
    (3,200
    )
    
    
    8,409
    
    
    
    426
    
    
    
    10,544Claims incurred
    
    $
    501,980
    
    
    
    358,412
    
    
    
    32,446
    
    
    
    7,563
    
    
    
    900,401Operating expenses
    
    $
    75,185
    
    
    
    27,587
    
    
    
    29,928
    
    
    
    42,765
    
    
    
    175,465Depreciation expense, included in operating expenses
    
    $
    2,786
    
    
    
    
    
    
    
    302
    
    
    
    93
    
    
    
    3,181Interest expense
    
    $
    3,299
    
    
    
    692
    
    
    
    
    
    
    
    899
    
    
    
    4,890Income tax expense (benefit)
    
    $
    4,114
    
    
    
    (4,041
    )
    
    
    1,685
    
    
    
    227
    
    
    
    1,985
 
 *
    
    Includes a business segment which is not required to be reported separately. This column includes the results of operations for thelife and disability insurance segment as well as the data processing services organization and the third-party administrator of health
insurance services. 10




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 Operating SegmentsHealth
    
    HealthInsurance
    
    Insurance
    
    PropertyCommercial
    
    Reform
    
    and CasualtyProgram
    
    Program
    
    Insurance
    
    Other *
    
    TotalNINE MONTHS ENDED SEPTEMBER 30, 2004Premiums earned, net
    
    $
    531,686
    
    
    
    360,979
    
    
    
    62,549
    
    
    
    12,254
    
    
    
    967,468Amounts attributable to self-funded arrangements
    
    
    135,127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135,127Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (125,992
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (125,992
    )Intersegment premiums earned/service revenues
    
    
    2,887
    
    
    
    
    
    
    
    
    
    
    
    35,464
    
    
    
    38,351543,708
    
    
    
    360,979
    
    
    
    62,549
    
    
    
    47,718
    
    
    
    1,014,954Net investment income
    
    
    9,196
    
    
    
    2,401
    
    
    
    5,594
    
    
    
    2,043
    
    
    
    19,234Realized gain (loss) on sale of securities
    
    
    5,616
    
    
    
    128
    
    
    
    551
    
    
    
    690
    
    
    
    6,985Unrealized gain (loss) on trading securities
    
    
    (2,239
    )
    
    
    
    
    
    
    209
    
    
    
    162
    
    
    
    (1,868
    )Other
    
    
    184
    
    
    
    (24
    )
    
    
    1,915
    
    
    
    182
    
    
    
    2,257Total revenue
    
    $
    556,465
    
    
    
    363,484
    
    
    
    70,818
    
    
    
    50,795
    
    
    
    1,041,562Net income
    
    $
    11,133
    
    
    
    4,752
    
    
    
    7,901
    
    
    
    990
    
    
    
    24,776Claims incurred
    
    $
    473,042
    
    
    
    329,961
    
    
    
    34,135
    
    
    
    8,802
    
    
    
    845,940Operating expenses
    
    $
    67,822
    
    
    
    26,420
    
    
    
    27,897
    
    
    
    39,622
    
    
    
    161,761Depreciation expense, included in operating expenses
    
    $
    2,837
    
    
    
    
    
    
    
    332
    
    
    
    91
    
    
    
    3,260Interest expense
    
    $
    918
    
    
    
    262
    
    
    
    
    
    
    
    735
    
    
    
    1,915Income tax expense
    
    $
    3,550
    
    
    
    2,089
    
    
    
    885
    
    
    
    646
    
    
    
    7,170
 
 *
    
    Includes a business segment which is not required to be reported separately. This column includes the results of operations for the
life and disability insurance segment as well as the data processing services organization and the third-party administrator of health
insurance services. 11




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 Operating SegmentsHealth
    
    HealthInsurance
    
    Insurance
    
    PropertyCommercial
    
    Reform
    
    and CasualtyProgram
    
    Program
    
    Insurance
    
    Other *
    
    TotalAS OF SEPTEMBER 30, 2005Segment assets
    
    $
    455,379
    
    
    
    80,736
    
    
    
    298,473
    
    
    
    96,127
    
    
    
    930,715Significant noncash item:Net change in unrealized gain on securities
available for sale
    
    $
    (8,480
    )
    
    
    (828
    )
    
    
    (2,289
    )
    
    
    (1,139
    )
    
    
    (12,736
    )Net change in minimum pension liability
    
    
    (553
    )
    
    
    
    
    
    
    (41
    )
    
    
    (142
    )
    
    
    (736
    )AS OF DECEMBER 31, 2004Segment assets
    
    $
    443,710
    
    
    
    84,627
    
    
    
    282,393
    
    
    
    90,713
    
    
    
    901,443Significant noncash item:Net change in unrealized gain on securities
available for sale
    
    $
    523
    
    
    
    (151
    )
    
    
    867
    
    
    
    (156
    )
    
    
    1,083Net change in minimum pension liability
    
    
    313
    
    
    
    
    
    
    
    (60
    )
    
    
    (314
    )
    
    
    (61
    )
 
 *
    
    Includes a business segment which is not required to be reported separately. This column includes the life and disability insurance
segment as well as the data processing services organization and the third-party administrator of health insurance services. 12




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 RECONCILIATION OF REPORTABLE SEGMENT TOTALS
WITH FINANCIAL STATEMENTS
 Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004TOTAL REVENUETotal revenues for reportable segments
    
    $
    356,678
    
    
    
    335,048
    
    
    
    1,041,405
    
    
    
    990,767Total revenues for other segments
    
    
    17,198
    
    
    
    17,426
    
    
    
    51,880
    
    
    
    50,795373,876
    
    
    
    352,474
    
    
    
    1,093,285
    
    
    
    1,041,562Elimination of intersegment earned premiums
    
    
    (1,080
    )
    
    
    (906
    )
    
    
    (3,185
    )
    
    
    (2,887
    )Elimination of intersegment service revenues
    
    
    (12,473
    )
    
    
    (11,611
    )
    
    
    (37,550
    )
    
    
    (35,464
    )Unallocated amount  revenues from external sources
    
    
    135
    
    
    
    134
    
    
    
    448
    
    
    
    414(13,418
    )
    
    
    (12,383
    )
    
    
    (40,287
    )
    
    
    (37,937
    )Consolidated total revenue
    
    $
    360,458
    
    
    
    340,091
    
    
    
    1,052,998
    
    
    
    1,003,625NET INCOMENet income (loss) for reportable segments
    
    $
    11,234
    
    
    
    10,725
    
    
    
    10,118
    
    
    
    23,786Net income (loss) for other segments
    
    
    339
    
    
    
    1,253
    
    
    
    426
    
    
    
    99011,573
    
    
    
    11,978
    
    
    
    10,544
    
    
    
    24,776Elimination of TSM charges:Rent expense
    
    
    1,666
    
    
    
    1,445
    
    
    
    4,907
    
    
    
    4,328Interest expense
    
    
    330
    
    
    
    194
    
    
    
    886
    
    
    
    5111,996
    
    
    
    1,639
    
    
    
    5,793
    
    
    
    4,839Unallocated amounts related to TSM:General and administrative expenses
    
    (1,223)
    
    
    (1,081
    )
    
    
    (3,964
    )
    
    
    (3,807
    )Income tax expense
    
    
    (101
    )
    
    
    (85
    )
    
    
    (227
    )
    
    
    (47
    )Interest expense
    
    
    (507
    )
    
    
    (491
    )
    
    
    (1,520
    )
    
    
    (1,446
    )Other revenues from external sources
    
    135
    
    
    134
    
    
    
    448
    
    
    
    414(1,696
    )
    
    
    (1,523
    )
    
    
    (5,263
    )
    
    
    (4,886
    )Consolidated net income
    
    $
    11,873
    
    
    
    12,094
    
    
    
    11,074
    
    
    
    24,729
 13




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES  Notes to Consolidated Financial Statements
 RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS
 Three months ended September 30, 2005Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsClaims incurred
    
    $
    299,577
    
    
    
    
    
    
    
    299,577Operating expenses
    
    
    58,564
    
    
    
    (13,996
    )
    
    
    44,568Depreciation expense
    
    
    1,242
    
    
    
    271
    
    
    
    1,513Interest expense
    
    
    1,703
    
    
    
    177
    
    
    
    1,880Income tax expense
    
    
    2,459
    
    
    
    101
    
    
    
    2,560
 Three months ended September 30, 2004Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsClaims incurred
    
    $
    283,946
    
    
    
    
    
    
    
    283,946Operating expenses
    
    
    53,297
    
    
    
    (12,881
    )
    
    
    40,416Depreciation expense
    
    
    1,059
    
    
    
    281
    
    
    
    1,340Interest expense
    
    
    721
    
    
    
    297
    
    
    
    1,018Income tax expense
    
    
    2,532
    
    
    
    85
    
    
    
    2,617
 Nine months ended September 30, 2005Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsClaims incurred
    
    $
    900,401
    
    
    
    
    
    
    
    900,401Operating expenses
    
    
    175,465
    
    
    
    (41,678
    )
    
    
    133,787Depreciation expense
    
    
    3,181
    
    
    
    820
    
    
    
    4,001Interest expense
    
    
    4,890
    
    
    
    634
    
    
    
    5,524Income tax expense
    
    
    1,985
    
    
    
    227
    
    
    
    2,212
 Nine months ended September 30, 2004Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsClaims incurred
    
    $
    845,940
    
    
    
    
    
    
    
    845,940Operating expenses
    
    
    161,761
    
    
    
    (38,872
    )
    
    
    122,889Depreciation expense
    
    
    3,260
    
    
    
    841
    
    
    
    4,101Interest expense
    
    
    1,915
    
    
    
    935
    
    
    
    2,850Income tax expense
    
    
    7,170
    
    
    
    47
    
    
    
    7,217
 
 *
    
    Adjustments represent TSM operations and the elimination of intersegment charges. 14




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES  Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS
 September 30,
    
    
    December 31,2005
    
    
    2004ASSETSTotal assets for reportable segments
    
    $
    834,588
    
    
    
    810,730Total assets for other segments
    
    
    96,127
    
    
    
    90,713930,715
    
    
    
    901,443Elimination entries  intersegment receivables and others
    
    
    (38,003
    )
    
    
    (21,717
    )Unallocated amounts related to TSM:Parent cash, cash equivalents and investments
    
    
    11,410
    
    
    
    12,236Parent net property and equipment
    
    
    25,009
    
    
    
    25,577Parent other assets
    
    
    6,559
    
    
    
    2,11842,978
    
    
    
    39,931Consolidated assets
    
    $
    935,690
    
    
    
    919,657
 OTHER SIGNIFICANT ITEMS
 As of September 30, 2005Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsSignificant noncash item  net change in unrealized
gain on securities available for sale
    
    $
    (12,736
    )
    
    
    (94
    )
    
    
    (12,830
    )Net change in minimum pension liability
    
    
    (736
    )
    
    
    (19
    )
    
    
    (755
    )
 As of December 31, 2004Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsSignificant noncash items:Net change in unrealized gain on securities
available for sale
    
    $
    1,083
    
    
    
    18
    
    
    
    1,101Net change in minimum pension liability
    
    
    (61
    )
    
    
    58
    
    
    
    (3
    )
 
 *
    
    Adjustments represent principally TSM operations and the elimination of intersegment charges. 15




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands)
 (3) Investment in Securities
  September 30, 2005 (Unaudited)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimated faircost
    
    
    gains
    
    
    losses
    
    
    valueTrading securities:Equity securities
    
    $
    76,246
    
    
    
    11,415
    
    
    
    (3,410
    )
    
    
    84,251
 September 30, 2005 (Unaudited)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimated faircost
    
    
    gains
    
    
    losses
    
    
    valueSecurities available for sale:Fixed maturities
    
    $
    518,992
    
    
    
    1,042
    
    
    
    (6,956
    )
    
    
    513,078Equity securities
    
    
    38,621
    
    
    
    16,851
    
    
    
    (1,017
    )
    
    
    54,455$
    557,613
    
    
    
    17,893
    
    
    
    (7,973
    )
    
    
    567,533
 September 30, 2005 (Unaudited)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimated faircost
    
    
    gains
    
    
    losses
    
    
    valueSecurities held to maturity:Fixed maturities
    
    $
    22,146
    
    
    
    248
    
    
    
    (530
    )
    
    
    21,864
 December 31, 2004Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimated faircost
    
    
    gains
    
    
    losses
    
    
    valueTrading securities:Fixed maturities
    
    $
    70,668
    
    
    
    2,045
    
    
    
    (290
    )
    
    
    72,423Equity securities
    
    
    74,824
    
    
    
    13,496
    
    
    
    (1,724
    )
    
    
    86,596$
    145,492
    
    
    
    15,541
    
    
    
    (2,014
    )
    
    
    159,019
 16




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 December 31, 2004Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimated faircost
    
    
    gains
    
    
    losses
    
    
    valueSecurities available for sale:Fixed maturities
    
    $
    444,135
    
    
    
    2,659
    
    
    
    (2,157
    )
    
    
    444,637Equity securities
    
    
    34,309
    
    
    
    24,913
    
    
    
    (36
    )
    
    
    59,186$
    478,444
    
    
    
    27,572
    
    
    
    (2,193
    )
    
    
    503,823
 December 31, 2004Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimated faircost
    
    
    gains
    
    
    losses
    
    
    valueSecurities held to maturity:Fixed maturities
    
    $
    14,280
    
    
    
    247
    
    
    
    (24
    )
    
    
    14,503
    17




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 (4) Premiums and Other Receivables
  (Unaudited)September 30,
    
    
    December 31,2005
    
    
    2004Premiums
    
    $
    48,948
    
    
    
    45,451Self-funded group receivables
    
    
    23,479
    
    
    
    17,717FEHBP
    
    
    8,211
    
    
    
    9,346Accrued interest
    
    
    5,756
    
    
    
    5,080Reinsurance recoverable on paid losses
    
    
    32,839
    
    
    
    30,496Other
    
    
    12,801
    
    
    
    16,406132,034
    
    
    
    124,496Less allowance for doubtful receivables:Premiums
    
    
    7,198
    
    
    
    6,456Other
    
    
    4,430
    
    
    
    4,71711,628
    
    
    
    11,173Total premiums and other receivables
    
    $
    120,406
    
    
    
    113,323
 (5) Claim Liabilities
  (Unaudited)Three months ended September 30,2005
    
    
    2004Claim liabilities at beginning of period
    
    $
    300,697
    
    
    
    280,388Reinsurance recoverable on claim liabilities
    
    
    (26,597
    )
    
    
    (21,605
    )Net claim liabilities at beginning of period
    
    
    274,100
    
    
    
    258,783Incurred claims and loss-adjustment expenses:Current period insured events
    
    
    296,815
    
    
    
    282,194Prior period insured events
    
    
    2,762
    
    
    
    1,752Total
    
    
    299,577
    
    
    
    283,946Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    287,921
    
    
    
    277,953Prior period insured events
    
    
    18,728
    
    
    
    10,057Total
    
    
    306,649
    
    
    
    288,010Net claim liabilities at end of period
    
    
    267,028
    
    
    
    254,719Reinsurance recoverable on claim liabilities
    
    
    27,034
    
    
    
    22,742Claim liabilities at end of period
    
    $
    294,062
    
    
    
    277,461
 18




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
  (Unaudited)Nine months ended September 30,2005
    
    
    2004Claim liabilities at beginning of period
    
    $
    279,325
    
    
    
    247,920Reinsurance recoverable on claim liabilities
    
    
    (26,555
    )
    
    
    (19,357
    )Net claim liabilities at beginning of period
    
    
    252,770
    
    
    
    228,563Incurred claims and loss-adjustment expenses:Current period insured events
    
    
    889,548
    
    
    
    841,301Prior period insured events
    
    
    10,853
    
    
    
    4,639Total
    
    
    900,401
    
    
    
    845,940Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    703,068
    
    
    
    664,276Prior period insured events
    
    
    183,075
    
    
    
    155,508Total
    
    
    886,143
    
    
    
    819,784Net claim liabilities at end of period
    
    
    267,028
    
    
    
    254,719Reinsurance recoverable on claim liabilities
    
    
    27,034
    
    
    
    22,742Claim liabilities at end of period
    
    $
    294,062
    
    
    
    277,461
  (6) Comprehensive Income
  (Unaudited)AccumulatedUnrealized
    
    
    Minimum
    
    
    
    
    
    
    othergains on
    
    
    pension
    
    
    Cash flow
    
    
    comprehensivesecurities
    
    
    liability
    
    
    hedges
    
    
    incomeBALANCE AT JANUARY 1
    
    $
    22,049
    
    
    
    (5,825
    )
    
    
    (86
    )
    
    
    16,138Net current period change
    
    
    (12,830
    )
    
    
    (755
    )
    
    
    390
    
    
    
    (13,195
    )BALANCE AT SEPTEMBER 30
    
    $
    9,219
    
    
    
    (6,580
    )
    
    
    304
    
    
    
    2,943
 (7) Income Taxes
   19




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
  (8) Pension Plan
  (Unaudited)
    
    
    (Unaudited)Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Components of net periodic benefit cost:Service cost
    
    $
    1,186
    
    
    
    1,025
    
    
    
    3,516
    
    
    
    3,095Interest cost
    
    
    1,038
    
    
    
    961
    
    
    
    3,106
    
    
    
    2,819Expected return on assets
    
    
    (868
    )
    
    
    (637
    )
    
    
    (2,579
    )
    
    
    (1,889
    )Amortization of prior service cost
    
    
    12
    
    
    
    12
    
    
    
    36
    
    
    
    36Amortization of actuarial loss
    
    
    505
    
    
    
    426
    
    
    
    1,500
    
    
    
    1,228Net periodic benefit cost
    
    $
    1,873
    
    
    
    1,787
    
    
    
    5,579
    
    
    
    5,289
 Employer contributions
  (9) Net Income Available to Stockholders and Net Income per Share
   (Unaudited)
    
    
    (Unaudited)Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Numerator for basic earnings per share:Net income available to stockholders
    
    $
    11,873
    
    
    
    12,094
    
    
    
    11,074
    
    
    
    24,729Denominator for basic earnings per share:Weighted average of outstanding
common shares
    
    
    8,904
    
    
    
    8,883
    
    
    
    8,904
    
    
    
    8,930Basic net income per share
    
    $
    1,333
    
    
    
    1,361
    
    
    
    1,244
    
    
    
    2,769
 20




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 (10) Contingencies
 (a)
    
    As of September 30, 2005, the Corporation is defendant in various lawsuits arising in
the ordinary course of business. Management believes, based on the opinion of its legal
counsel, that the aggregate liabilities, if any, arising from such actions would not have
a material adverse effect on the consolidated financial position and results of operations
of the Corporation.(b)
    
    Drs. Carlyle Benavent and Ibrahim Pérez (the plaintiffs) caused the initiation of an
administrative proceeding before the Puerto Rico Insurance Commissioner (the Commissioner
of Insurance) against Triple-S, Inc. (TSI) and TSM alleging the illegality of the
repurchase and subsequent sale of 1,582 shares of TSIs common stock due to the fact that
the ultimate purchasers of said shares were selected on an improper and selective basis by
the Corporation in violation of the Puerto Rico Insurance Code. The plaintiffs alleged
that they were illegally excluded from participation in the sale of shares by TSI due to
the illegally selective nature of the sale of shares and that, consequently the sale of
shares should be eliminated.
    21




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
    (c)
    
    On September 4, 2003, José Sánchez and others filed a putative class action complaint
against the Corporation, present and former directors of TSM and TSI, and others, in the
United States District Court for the District of Puerto Rico, alleging violations under
the Racketeer Influenced and Corrupt Organizations Act, better known as the RICO Act. The
suit, among other allegations, alleges a scheme to defraud the plaintiffs by acquiring
control of TSI through illegally capitalizing TSI and later converting it to a for-profit
corporation and depriving the stockholders of their ownership rights. The plaintiffs base
their later allegations on the supposed decisions of TSIs board of directors and
stockholders, allegedly made in 1979, to operate with certain restrictions in order to
turn TSI into a charitable corporation, basically forever. On March 4, 2005 the Court
issued an Opinion and Order. In this Opinion and Order, of the twelve counts included in
the complaint, eight counts were dismissed for failing to assert an actionable injury; six
of them for lack of standing and two for failing to plead with sufficient particularity in
compliance with the Rules. All shareholder allegations, including those described above,
were dismissed in the Opinion and Order. The remaining four counts were found standing,
in a limited way, in the Opinion and Order. Finally, the Court ordered that by March 24,
2005 one of the counts left standing be replead to conform to the Rules and that by March
28, 2005 a proposed schedule for discovery and other submissions be filed. The count was
amended and accepted by the Court, the discovery schedule was submitted. The parties just
finished class certification discovery. Plaintiffs have until November 30, 2005 to file
their briefs in support of their request for class certification. Defendants intend to
file their opposition by December 15, 2005. This case is still pending before the United
States District Court for the District of Puerto Rico.(d)
    
    On April 24, 2002, Octavio Jordán, Agripino Lugo, Ramón Vidal, and others filed a
suit against TSM, TSI and others in the Court of First Instance for San Juan, Superior
Section, alleging, among other things, violations by the defendants of provisions of the
Puerto Rico Insurance Code, anti-monopolistic practices, unfair business practices and
damages in the amount of $12.0 million. They also requested that TSM sell shares to them.
After a preliminary review of the complaint, it appears that many of the allegations
brought by the plaintiffs have been resolved in favor of TSM and TSI in previous cases
brought by the same plaintiffs in the United States District Court for the
 22




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
  (e)
    
    On May 22, 2003 a putative class action suit was filed by Kenneth A. Thomas, M.D. and
Michael Kutell, M.D., on behalf of themselves and all other similarly situated and the
Connecticut State Medical Society against the Blue Cross and Blue Shield Association
(BCBSA) and multiple other insurance companies, including TSI. The case is pending before
the United States District Court for the Southern District of Florida, Miami District.
      (f)
    
    On December 8, 2003 a putative class action was filed by Jeffrey Solomon, MD, and
Orlando Armstrong, MD, on behalf of themselves and all other similarly situated and the
American Podiatric Medical Association, Florida Chiropractic Association, California
Podiatric Medical Association, Florida Podiatric Medical Association, Texas Podiatric
Medical Association, and Independent Chiropractic Physicians, against the BCBSA and
multiple other insurance companies, including TSI, all members of the BCBSA. The case is
still pending before the United States District Court for the Southern District of
Florida, Miami District.
 23




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
       24




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 (11) Reconciliation of Net Income to Net Cash Provided by (Used in) Operating Activities
  (Unaudited)Nine months endedSeptember 30,2005
    
    2004Net income
    
    $
    11,074
    
    
    
    24,729Adjustments to reconcile net income to net cash
provided by (used in) operating expenses:Depreciation and amortization
    
    
    4,001
    
    
    
    4,101Amortization of investment discounts
    
    
    400
    
    
    
    801Accretion in value of securities
    
    
    (474
    )
    
    
    (327
    )Increase in provision for doubtful
receivables
    
    
    455
    
    
    
    2,141Increase (decrease) in net deferred taxes
    
    
    (339
    )
    
    
    33Gain on sale of securities
    
    
    (6,534
    )
    
    
    (6,985
    )Unrealized loss of trading securities
    
    
    5,522
    
    
    
    1,868Proceeds from trading securities sold:Fixed maturities
    
    
    102,667
    
    
    
    44,196Equity securities
    
    
    19,692
    
    
    
    19,686Acquisition of securities in trading portfolio:Fixed maturities
    
    
    (30,502
    )
    
    
    (45,595
    )Equity securities
    
    
    (17,749
    )
    
    
    (32,336
    )Loss on sale of property and equipment
    
    
    (1
    )
    
    
    (12
    )(Increase) decrease in assets:Premiums receivable
    
    
    (8,124
    )
    
    
    (6,496
    )Accrued interest receivable
    
    
    (676
    )
    
    
    (677
    )Reinsurance receivable
    
    
    (2,343
    )
    
    
    (3,724
    )Other receivables
    
    
    4,185
    
    
    
    (1,532
    )Deferred policy acquisition costs
    
    
    (1,186
    )
    
    
    (2,004
    )Prepaid income tax
    
    
    (4,254
    )
    
    
    (4,058
    )Other assets
    
    
    (6,881
    )
    
    
    (4,152
    )Increase (decrease) in liabilities:Claims processed and incomplete
    
    
    (3,726
    )
    
    
    623Unreported losses
    
    
    18,573
    
    
    
    28,489Unpaid loss-adjustment expenses
    
    
    (110
    )
    
    
    429Unearned premiums
    
    
    7,986
    
    
    
    746Annuity contracts
    
    
    900
    
    
    
    734Liability to FEHBP
    
    
    (1,643
    )
    
    
    1,362Accounts payable and accrued liabilities
    
    
    (5,814
    )
    
    
    1,198Income tax payable
    
    
    (1,827
    )
    
    
    (32,222
    )Net cash provided by (used in)
operating activities
    
    $
    83,272
    
    
    
    (8,984
    )
 25




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary Statement Regarding Forward-Looking Information
  Structure of the Organization
  
    
    TSI, a health insurance company serving two major segments: the Commercial Program and
the Commonwealth of Puerto Rico Healthcare Reform Program (the Healthcare Reform);
    
    Seguros Triple-S, Inc. (STS), a property and casualty insurance company; and
    
    Seguros de Vida Triple-S, Inc. (SVTS), a life and disability insurance and annuity
products company.
  26




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##### Table of Contents



Recent Developments
 Puerto Ricos Economy
 st
 Healthcare Reform Segment
   Adoption of Accounting Standard
 Exchanges of Nonmonetary Assets
 Accounting Changes and Error Corrections
 27




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##### Table of Contents



General Information
   Consolidated Operating Results
  Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,(dollar amounts in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Consolidated earned premiums, net
and fee revenue
    
    $
    348,962
    
    
    
    329,045
    
    
    
    1,028,481
    
    
    
    976,603Consolidated claims incurred
    
    $
    299,577
    
    
    
    283,946
    
    
    
    900,401
    
    
    
    845,940Consolidated operating expenses
    
    
    44,568
    
    
    
    40,416
    
    
    
    133,787
    
    
    
    122,889Consolidated operating costs
    
    $
    344,145
    
    
    
    324,362
    
    
    
    1,034,188
    
    
    
    968,829Consolidated loss ratio
    
    
    85.8
    %
    
    
    86.3
    %
    
    
    87.5
    %
    
    
    86.6
    %Consolidated expense ratio
    
    
    12.8
    %
    
    
    12.3
    %
    
    
    13.0
    %
    
    
    12.6
    %Consolidated combined ratio
    
    
    98.6
    %
    
    
    98.6
    %
    
    
    100.6
    %
    
    
    99.2
    %Consolidated net investment income
    
    $
    7,158
    
    
    
    6,516
    
    
    
    21,439
    
    
    
    19,491Consolidated realized gain on sale of securities
    
    
    1,857
    
    
    
    4,237
    
    
    
    6,534
    
    
    
    6,985Consolidated unrealized gain (loss) on
trading securities
    
    
    905
    
    
    
    (435
    )
    
    
    (5,522
    )
    
    
    (1,868
    )Total consolidated net investment income
    
    $
    9,920
    
    
    
    10,318
    
    
    
    22,451
    
    
    
    24,608Consolidated income tax expense
    
    $
    2,560
    
    
    
    2,617
    
    
    
    2,212
    
    
    
    7,217Consolidated net income
    
    $
    11,873
    
    
    
    12,094
    
    
    
    11,074
    
    
    
    24,729
 Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
  28




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##### Table of Contents




    
    The earned premiums, net and fee revenue corresponding to the Health Insurance -
Commercial segment increased by $12.2 million, or 6.7%, during the period. This increase
is attributed to an increase in average enrollment together with increases in premium
rates during the period.
 
    
    The earned premiums net of the Health Insurance  Healthcare Reform segment presented
an increase of $8.0 million, or 6.5% during this period. The fluctuation in the earned
premiums, net of this segment is attributed to an increase in its average enrollment as
well as to an increase in premium rates effective August 1, 2005.
      Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
  
    
    The earned premiums, net and fee revenue corresponding to the Health Insurance -
Commercial segment increased by $33.8 million, or 6.2%, during this period. An increase
in the average
 29




---



##### Table of Contents



enrollment together with increases in premium rates account for the segments fluctuation
in earned premiums and fee revenue for the period.
 
    
    The earned premiums, net corresponding to the Health Insurance  Healthcare Reform
segment increased by $16.3 million, or 4.5%, during this period. This increase is the net
result of increases in premium rates and an increment in the average membership of the
segment.
    
    The earned premiums, net of the Property and Casualty Insurance segment increased by
$2.4 million, or 3.9%, during this period. This increase is mostly reflected in the
premiums written for the commercial multi-peril and auto physical damage lines of
business, net of a decrease in the premiums written for the dwelling business and an
increase in premiums ceded.
  
    
    During the 2005 period the claims incurred for the Health Insurance -Healthcare Reform
segment increased by $28.5 million, or 8.6%. The loss ratio of this segment increased 3.6
percentage points during the 2005 period. The fluctuation noted in the claims incurred
and loss ratio results mostly from higher utilization trends, particularly in risks
assumed by the segment.
    
    The claims incurred for the Health Insurance  Commercial segment increased by $28.9
million, or 6.1%, during the 2005 period. This fluctuation is basically attributed to the
segments increased volume of business.
     30




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##### Table of Contents



Health Insurance  Commercial Program Operating Results
 Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,(dollar amounts in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Average enrollment:Corporate accounts
    
    
    308,551
    
    
    
    303,087
    
    
    
    309,839
    
    
    
    302,926Self-funded employers
    
    
    150,783
    
    
    
    144,921
    
    
    
    149,643
    
    
    
    139,224Individual accounts
    
    
    87,015
    
    
    
    84,647
    
    
    
    85,707
    
    
    
    84,687Federal employees
    
    
    48,856
    
    
    
    51,199
    
    
    
    49,412
    
    
    
    52,285Local government employees
    
    
    34,790
    
    
    
    38,613
    
    
    
    35,876
    
    
    
    41,459Total enrollment
    
    
    629,995
    
    
    
    622,467
    
    
    
    630,477
    
    
    
    620,581Earned premiums
    
    $
    190,990
    
    
    
    178,813
    
    
    
    566,954
    
    
    
    533,824Amounts attributable to self-funded arrangements
    
    
    53,633
    
    
    
    46,301
    
    
    
    158,566
    
    
    
    135,876Less: Amounts attributable to claims under
self-funded arrangements
    
    
    (50,190
    )
    
    
    (42,925
    )
    
    
    (148,032
    )
    
    
    (125,992
    )Earned premiums and fee revenue
    
    $
    194,433
    
    
    
    182,189
    
    
    
    577,488
    
    
    
    543,708Claims incurred
    
    $
    164,831
    
    
    
    157,186
    
    
    
    501,980
    
    
    
    473,042Operating expenses
    
    
    25,046
    
    
    
    23,209
    
    
    
    75,185
    
    
    
    67,822Total underwriting costs
    
    $
    189,877
    
    
    
    180,395
    
    
    
    577,165
    
    
    
    540,864Underwriting income
    
    $
    4,556
    
    
    
    1,794
    
    
    
    323
    
    
    
    2,844Loss ratio
    
    
    84.8
    %
    
    
    86.3
    %
    
    
    86.9
    %
    
    
    87.0
    %Expense ratio
    
    
    12.9
    %
    
    
    12.7
    %
    
    
    13.0
    %
    
    
    12.5
    %Combined ratio
    
    
    97.7
    %
    
    
    99.0
    %
    
    
    99.9
    %
    
    
    99.5
    %
 Three
Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
  
    
    In the 2005 period, the average enrollment of self-funded groups and rated corporate
accounts businesses presented an increase of 5,862 members, or 4.0%, and 5,464, or 1.8%,
respectively, which is mostly attributed to new groups acquired throughout 2005. This
increase was offset by a decrease in average enrollment in the Local government employees
and Federal employees of 3,823, or 9.9%, and 2,343, or 4.6%, respectively.
    
    Premiums generated by the segments Medicare Advantage program amounted to $8.9 million
during the 2005 quarter. This program was launched in the year 2005; therefore no
premiums were reflected in the three months ended September 30, 2004.
    
    On average, the segment increased premium rates by approximately 6.4% during the 2005
quarter.
   31




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##### Table of Contents



Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
  
    
    Average enrollment for the nine months ended September 30, 2005 increased by 9,896
members, or 1.6%, when compared to the enrollment as of the same period of 2004. The
increase in average enrollment is mostly reflected in self-funded employers and corporate
accounts businesses, which membership increased by 10,419 members, or 7.5%, and 6,913
members, or 2.3%, during this period, respectively. The increase in average enrollment is
mostly attributed to new groups acquired throughout 2005. The average enrollment of the
Local government employees and Federal employees businesses, on the other hand, reflected
a decrease in membership of 5,583, or 13.5%, and 2,873, or 5.5%, during this period,
respectively.
    
    Premiums for the segments Medicare Advantage program, which was launched in the 2005
period, amounted to $17.4 million. No Medicare Advantage premiums were reflected in the
nine months ended September 30, 2004.
    
    On average, this segment increased premiums rates in corporate accounts groups by
approximately 6.4% during the 2005 period.
   Health Insurance  Healthcare Reform Program Operating Results
 Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,(dollar amounts in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Average enrollment:North area
    
    
    236,713
    
    
    
    231,610
    
    
    
    234,799
    
    
    
    233,063Metro-north area
    
    
    221,522
    
    
    
    216,093
    
    
    
    219,310
    
    
    
    217,831Southwest area
    
    
    163,601
    
    
    
    162,783
    
    
    
    163,567
    
    
    
    164,744621,836
    
    
    
    610,486
    
    
    
    617,676
    
    
    
    615,638Earned premiums
    
    $
    129,933
    
    
    
    121,980
    
    
    
    377,270
    
    
    
    360,979Claims incurred
    
    $
    121,501
    
    
    
    111,141
    
    
    
    358,412
    
    
    
    329,961Operating expenses
    
    
    8,951
    
    
    
    8,618
    
    
    
    27,587
    
    
    
    26,420Total underwriting costs
    
    $
    130,452
    
    
    
    119,759
    
    
    
    385,999
    
    
    
    356,381Underwriting income (loss)
    
    $

    (519)
    
    
    
    2,221
    
    
    
    (8,729
    )
    
    
    4,598Loss ratio
    
    
    93.5
    %
    
    
    91.1
    %
    
    
    95.0
    %
    
    
    91.4
    %Expense ratio
    
    
    6.9
    %
    
    
    7.1
    %
    
    
    7.3
    %
    
    
    7.3
    %Combined ratio
    
    
    100.4
    %
    
    
    98.2
    %
    
    
    102.3
    %
    
    
    98.7
    %
 32




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##### Table of Contents



Three
Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
  
    
    The average enrollment of the segment during the 2005 quarter increased by 11,350
members, or 1.9%, when compared to the average enrollment during the 2004 quarter,
particularly in the membership of the Metro-north and North areas.
    
    Premium rates were increased by approximately 5.8% during the Healthcare Reform
contract renegotiation process. New premium rates were effective August 1st,
2005 for the eleven-month period ending June 30, 2006.
  Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
  
    
    Premium rates were increased by approximately 4.4% during the Healthcare Reform
contract renegotiation process for the twelve-month period ended on June 30, 2005. In
addition, effective August 1st, 2005, premium rates were increased by
approximately 5.8% for the eleven-month period ending June 30, 2006.
    
    The average monthly enrollment for this segment increased by 2,038 members, or 0.3%,
when comparing the average enrollment for the nine months ended September 30, 2005 with
the average enrollment for the nine months ended September 30, 2004.
   33




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##### Table of Contents



Property and Casualty Insurance Operating Results
 Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,(dollar amounts in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Premiums written:Commercial multiperil
    
    $
    16,738
    
    
    
    13,286
    
    
    
    45,414
    
    
    
    38,806Dwelling
    
    
    6,595
    
    
    
    8,150
    
    
    
    19,387
    
    
    
    21,686Auto physical damage
    
    
    5,734
    
    
    
    4,961
    
    
    
    15,323
    
    
    
    13,852Commercial auto liability
    
    
    4,465
    
    
    
    4,130
    
    
    
    11,425
    
    
    
    10,813Other liability
    
    
    2,377
    
    
    
    2,379
    
    
    
    6,732
    
    
    
    6,860Medical malpractice
    
    
    2,785
    
    
    
    2,808
    
    
    
    5,410
    
    
    
    5,325All other
    
    
    2,011
    
    
    
    2,690
    
    
    
    6,825
    
    
    
    6,938Total premiums written
    
    
    40,705
    
    
    
    38,404
    
    
    
    110,516
    
    
    
    104,280Premiums ceded
    
    
    (14,831
    )
    
    
    (14,182
    )
    
    
    (43,896
    )
    
    
    (39,912
    )Change in unearned premiums
    
    
    (4,112
    )
    
    
    (2,665
    )
    
    
    (1,660
    )
    
    
    (1,819
    )Net premiums earned
    
    $
    21,762
    
    
    
    21,557
    
    
    
    64,960
    
    
    
    62,549Claims incurred
    
    $
    10,826
    
    
    
    13,007
    
    
    
    32,446
    
    
    
    34,135Operating expenses
    
    
    10,479
    
    
    
    8,469
    
    
    
    29,928
    
    
    
    27,897Total underwriting costs
    
    $
    21,305
    
    
    
    21,476
    
    
    
    62,374
    
    
    
    62,032Underwriting income (loss)
    
    $
    457
    
    
    
    81
    
    
    
    2,586
    
    
    
    517Loss ratio
    
    
    49.7
    %
    
    
    60.3
    %
    
    
    49.9
    %
    
    
    54.6
    %Expense ratio
    
    
    48.2
    %
    
    
    39.3
    %
    
    
    46.1
    %
    
    
    44.6
    %Combined ratio
    
    
    97.9
    %
    
    
    99.6
    %
    
    
    96.0
    %
    
    
    99.2
    %
 Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
    34




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##### Table of Contents



Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
     Liquidity and Capital Resources
 Cash Flows
    35




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##### Table of Contents



Cash Flows from Operations
   
    
    The net proceeds of investments in the trading portfolio increased by $88.2 million for
the nine months ended September 30, 2005, when compared to the nine months ended September
30, 2004.
    
    Premiums collected increased by $63.1 million when comparing collections during the
nine months ended September 30, 2005 with collections for the nine months ended September
30, 2004. This increase is mostly related to the increased volume of business and
increases in premium rates of the operating segments.
    
    The amount of income taxes paid decreased by $34.8 million when comparing the payments
made in the 2005 and 2004 periods. The 2004 period includes the payment of the last
installment of the $51.8 million income tax liability related to the closing agreement
with the Puerto Rico Treasury Department upon the termination of TSIs tax exemption. The
first installment of $37.0 million was paid during the year 2003 and the second and last
installment, amounting to $14.8 million, was paid on April 15, 2004. In addition, on
April 15, 2004 TSI paid $22.1 million corresponding to its income tax liability for the
year 2003 and the first installment of the estimated tax corresponding to the year 2004.
In the 2005 period, the Corporation paid its regular estimated income tax installments.
    
    The amount of claims, losses and benefits paid for the nine months ended September 30,
2005 reflect an increase of $71.6 million when compared with the nine months ended
September 30, 2004. The increase in the amount of claims, losses and benefits paid is
mostly the result of the segments increased volume of business as well as to increased
utilization trends in both Health Insurance segments.
    
    The payments to suppliers and employees increased by $17.1 million when comparing the
amount paid during the 2005 and 2004 periods. This increase is basically attributed to
additional commission expense generated from the acquisition of new business and general
operating expenses.
    
    The contingency reserve funds payment from the Federal Employee Health Benefit Plan
decreased by $4.2 million when comparing the amount collected during the nine months ended
September 30, 2005 with the amount collected during the same period for 2004.
    
    Interest paid increased by $2.5 million during the 2005 period. This increase is
basically attributed to the interest paid related to the senior unsecured notes during the
2005 period; these senior unsecured notes were issued and sold on September 30, 2004.
  Cash Flows from Investing Activities
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Cash Flows from Financing Activities
  
    
    During the nine months ended September 30, 2004 the Corporation received the proceeds
from the issuance of the senior unsecured notes amounting to $50.0 million. No long-term
debt proceeds were received in the 2005 period.
    
    In the 2005 period the proceeds from short-term borrowings exceeded payments of
short-term borrowings by $2.9 million. On the other hand, in the 2004 period the payment
of short-term borrowings exceeded the proceeds of short-term borrowings by $37.0 million.
Short-term borrowings are used to address timing differences between cash receipts and
disbursements.
    
    The change in outstanding checks in excess of bank balances reflects a decrease of $7.4
million during the nine months ended September 30, 2005 compared to the 2004 period. The
amount of checks in excess of bank balances represents a timing difference between the
issuance of checks and the cash balance in the bank account at one point in time.
    
    The repayments of long-term debt increased by $2.6 million for the nine months period
ended September 30, 2005 when compared to the payments made in the 2004 period. This
fluctuation is due to an increase in the repayment for one of the credit agreements, which
amounted to $3.5 million in 2005 and $1.0 million in 2004.
 Financing and Financing Capacity
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
  
 Part II  Other Information
 
 Item 1. Legal Proceedings
 (a)
    
    As of September 30, 2005, the Corporation is a defendant in various lawsuits arising out
of the ordinary course of business. Management believes, based on the opinion of legal
counsel, that the aggregate liabilities, if any, arising from such actions would not have a
material adverse effect on the Corporations consolidated financial position or results of
operations.(b)
    
    Drs. Carlyle Benavent and Ibrahim Pérez (the plaintiffs) caused the initiation of an
administrative proceeding before the Puerto Rico Insurance Commissioner (the Commissioner of
Insurance) against TSI and TSM alleging the illegality of the repurchase and subsequent sale
of 1,582 shares of TSIs common stock due to the fact that the
ultimate purchasers of said shares were selected on an improper and selective basis by the Corporation in violation of the
Puerto Rico Insurance Code. The plaintiffs alleged that they were illegally excluded from
participation in the sale of shares by TSI due to the illegally selective nature of the sale
of shares and that, consequently the sale of shares should be eliminated.On December 1996, the Commissioner of Insurance issued an order to annul the sale of the 1,582
shares that TSI had repurchased from the estate of deceased stockholders. TSI contested such
orders through an administrative and judicial review process. Consequently, the sale of 1,582
shares was cancelled and the purchase price was returned to each former stockholder. In the
year 2000, the Commissioner of Insurance issued a pronouncement providing further clarification
of the content and effect of the order. This order also required that all corporate decisions
undertaken by TSI through the vote of its stockholders of record, be ratified in a
stockholders meeting or in a subsequent referendum. In November 2000, TSM, as the sole
stockholder of TSI, ratified all such decisions. Furthermore, on November 19, 2000, TSM held a
special stockholders meeting, where a ratification of these decisions was undertaken except
for the resolution related to the approval of the reorganization of TSI and its subsidiaries.
This resolution did not reach the two thirds majority required by the order because the number
of shares that were present and represented at the meeting was below such amount (total shares
present and represented in the stockholders meeting was 64%). As stipulated in the order, TSM
began the process to conduct a referendum among its stockholders in order to ratify such
resolution. The process was later suspended because upon further review of the scope of the
order, the Commissioner of Insurance issued an opinion in a letter dated January 8, 2002 which
indicated that the ratification of the corporate reorganization was not required.In another letter dated March 14, 2002, the Commissioner of Insurance stated that the
ratification of the corporate reorganization was not required and that TSI had complied with
the Commissioners
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order of December 6, 1996 related to the corporate reorganization. Thereafter, the plaintiffs
filed a petition for review of the Commissioners determination before the Puerto Rico Circuit
Court of Appeals. Such petition was opposed by TSI and by the Commissioner of Insurance.Pursuant to that review, on September 24, 2002, the Puerto Rico Circuit Court of Appeals issued
an order requiring the Commissioner of Insurance to order a meeting of stockholders to ratify
TSIs corporate reorganization and the change of name of TSI from Seguros de Servicio de Salud
de Puerto Rico, Inc. to Triple-S, Inc. The Puerto Rico Circuit Court of Appeals based its
decision on administrative and procedural issues directed at the Commissioner of Insurance.
The Commissioner of Insurance filed a motion of reconsideration with the Puerto Rico Circuit
Court of Appeals on October 11, 2002. TSI and TSM also filed a motion of reconsideration.On October 25, 2002, the Puerto Rico Circuit Court of Appeals dismissed the Commissioner of
Insurances Motion for Reconsideration and ordered the plaintiffs to reply to TSIs and TSMs
Motion of Reconsideration.On May 18, 2003, the Puerto Rico Circuit Court of Appeals granted TSIs and TSMs Motion of
Reconsideration. The Puerto Rico Circuit Court of Appeals held that the Commissioner of
Insurance had the authority to waive the celebration of a referendum to ratify TSIs
reorganization and that therefore the reorganization of TSI, inasmuch as the 1,582 shares
annulled were not decisive, was approved by the stockholders.On June 26, 2003, the two stockholders presented a writ of certiorari before the Supreme Court
of Puerto Rico. TSI and TSM filed a motion opposing the issuance of the writ. The writ was
issued by the Supreme Court on August 22, 2003, when it ordered the Puerto Rico Circuit Court
of Appeals to transmit the record of the case. On December 1, 2003, the plaintiffs filed a
motion submitting their case on the basis of their original petition. TSI and TSM filed its
brief on December 30, 2003, while the Commissioner of Insurance, in turn, filed a separate
brief on December 31, 2003. On June 24, 2004 the Supreme Court ordered the plaintiffs to file
a brief in support of their allegations. The case is still pending before the Supreme Court of
Puerto Rico. It is the opinion of management that the corporate reorganization as approved is
in full force and effect.(c)
    
    On September 4, 2003, José Sánchez and others filed a putative class action complaint against
the Corporation, present and former directors of TSM and TSI, and others, in the United States
District Court for the District of Puerto Rico, alleging violations under the Racketeer
Influenced and Corrupt Organizations Act, better known as the RICO Act. The suit, among other
allegations, alleges a scheme to defraud the plaintiffs by acquiring control of TSI through
illegally capitalizing TSI and later converting it to a for-profit corporation and depriving
the stockholders of their ownership rights. The plaintiffs base their later allegations on
the supposed decisions of TSIs board of directors and stockholders, allegedly made in 1979,
to operate with certain restrictions in order to turn TSI into a charitable corporation,
basically forever. On March 4, 2005 the Court issued an Opinion and Order. In this Opinion
and Order, of the twelve counts included in the complaint, eight counts were dismissed for
failing to assert an actionable injury; six of them for lack of standing and two for failing
to plead with sufficient particularity in compliance with the Rules. All shareholder
allegations, including those described above, were dismissed in the Opinion and Order. The
remaining four counts were found standing, in a limited way, in the Opinion and Order.
Finally, the Court ordered that by March 24, 2005 one of the counts left standing be replead
to conform to the Rules and that by March 28, 2005 a proposed schedule for discovery and other
submissions be filed. The count was amended and accepted by the Court, the discovery schedule
was submitted. The parties just finished class certification discovery. Plaintiffs have
until November 30, 2005 to file their briefs in support of their request for class
certification. Defendants intend to file their opposition by December 15, 2005. This case is
still pending before the United States District Court for the District of Puerto Rico.(d)
    
    On April 24, 2002, Octavio Jordán, Agripino Lugo, Ramón Vidal, and others filed a suit
against TSM, TSI and others in the Court of First Instance for San Juan, Superior Section,
alleging, among other things, violations by the defendants of provisions of the Puerto Rico
Insurance Code, anti-monopolistic
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practices, unfair business practices and damages in the amount of $12.0 million. They also
requested that TSM sell shares to them. After a preliminary review of the complaint, it
appears that many of the allegations brought by the plaintiffs have been resolved in favor of
TSM and TSI in previous cases brought by the same plaintiffs in the United States District
Court for the District of Puerto Rico and by most of the plaintiffs in the local courts. The
defendants, including TSM and TSI answered the complaint, filed a counterclaim and filed
several motions to dismiss this claim. On February 18, 2005 the plaintiffs informed their
intention to amend the complaint and the Court granted then 45 days to do so and 90 days to
defendants to file the corresponding motion to dismiss. On May 9, 2005 the plaintiffs filed
the amended complaint and defendants are preparing the corresponding motions to dismiss this
amended complaint. The plaintiffs amended the complaint to allege similar causes of action
dismissed by the United States District Court for the District of Puerto Rico in the Sánchez
case. Defendants moved to dismiss the amended complaint. Plaintiffs have notified their
opposition to some of the defendants motions to dismiss. Defendants will reply once the
oppositions to all of the defendants motions are notified.
 (e)
    
    On May 22, 2003 a putative class action suit was filed by Kenneth A. Thomas, M.D. and Michael
Kutell, M.D., on behalf of themselves and all other similarly situated and the Connecticut
State Medical Society against the Blue Cross and Blue Shield Association (BCBSA) and multiple
other insurance companies, including TSI. The case is pending before the United States
District Court for the Southern District of Florida, Miami District.The individual plaintiffs bring this action on behalf of themselves and a class of similarly
situated physicians seeking redress for alleged illegal acts of the defendants which they
allege have resulted in a loss of their property and a detriment to their business, and for
declaratory and injunctive relief to end those practices and prevent further losses.
Plaintiffs alleged that the defendants, on their own and as part of a common scheme,
systematically deny, delay and diminish the payments due to doctors so that they are not paid
in a timely manner for the covered, medically necessary services they render.The class action complaint alleges that the health care plans are the agents of BCBSA licensed
entities, and as such have committed the acts alleged above and acted within the scope of their
agency, with the consent, permission, authorization and knowledge of the others, and in
furtherance of both their interest and the interests of other defendants.Management believes that TSI was brought to this litigation for the sole reason of being
associated with the BCBSA. However, on June 18, 2004, the plaintiffs moved to amend the
complaint to include the Colegio de Médicos Cirujanos de Puerto Rico (a compulsory association
grouping all physicians in Puerto Rico), Marissel Velázquez, MD, President of the Colegio de
Médicos y Cirujanos de Puerto Rico, and Andrés Meléndez, MD, as plaintiffs against TSI. Later
Marissel Velázquez, MD voluntarily dismissed her complaint against TSI.TSI, along with the other defendants, moved to dismiss the complaint under multiple grounds,
including but not limited to arbitration and applicability of the McCarran Ferguson Act.The Court will set a hearing to discuss the parties submissions by the week of December 5,
2005.(f)
    
    On December 8, 2003 a putative class action was filed by Jeffrey Solomon, MD, and Orlando
Armstrong, MD, on behalf of themselves and all other similarly situated and the American
Podiatric Medical Association, Florida Chiropractic Association, California Podiatric Medical
Association, Florida Podiatric Medical Association, Texas Podiatric Medical Association, and
Independent Chiropractic Physicians, against the BCBSA and multiple other insurance companies,
including TSI, all members of the BCBSA. The case is still pending before the United States
District Court for the Southern District of Florida, Miami District.The individual plaintiffs bring this action on behalf of themselves and a class of similarly
situated physicians seeking redress for alleged illegal acts of the defendants which are
alleged to have resulted in a loss of plaintiffs property and a detriment to their business,
and for declaratory and injunctive
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relief to end those practices and prevent further losses. Plaintiffs alleged that the
defendants, on their own and as part of a common scheme, systematically deny, delay and
diminish the payment due to the doctors so that they are not paid in a timely manner for the
covered, medically necessary services they render.
      
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submissions of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 (a)
    
    Exhibits:Exhibit 10.1 Extension to the Puerto Rico Health Insurance Contract for the Metro-North Region
(incorporated herein by reference to Exhibit 10.1 to TSMs Quarterly Report on Form 10-Q for
the Quarter Ended June 30, 2002 (File No. 0-49762)).Exhibit 10.2 Extension to the Puerto Rico Health Insurance Contract for the North Region
(incorporated herein by reference to Exhibit 10.2 to TSMs Quarterly Report on Form 10-Q for
the Quarter Ended June 30, 2002 (File No. 0-49762)).Exhibit 10.3 Extension to the Puerto Rico Health Insurance Contract for the South-West Region
(incorporated herein by reference to Exhibit 10.3 to TSMs Quarterly Report on Form 10-Q for
the Quarter Ended June 30, 2002 (File No. 0-49762)).Exhibit 11 Statement re computation of per share earnings; an exhibit describing the
computation of the earnings per share for the three months and nine months ended September 30,
2005 and 2004 has been omitted as the detail necessary to determine the computation of earnings
per share can be clearly determined from the material contained in Part I of this Quarterly
Report on Form 10-Q.Exhibit 12 Statements re computation of ratios; an exhibit describing the computation of the
loss ratio, expense ratio and combined ratio for the three months and nine months ended
September 30, 2005 and 2004 has been omitted as the detail necessary to determine the
computation of
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the loss ratio, expense ratio and combined ratio can be clearly determined from
the material contained in Part I of this Quarterly Report on Form 10-Q.Exhibit 31.1 Certification of the President and Chief Executive
Officer required by Rule 13a-14(a)/15d-14(a).Exhibit 31.2 Certification of the Vice President of Finance and
Chief Financial Officer required by Rule
13a-14(a)/15d-14(a).Exhibit 32.1 Certification of the President and Chief Executive
Officer required pursuant to 18 U.S.C Section 1350.Exhibit 32.2 Certification of the Vice President of Finance and
Chief Financial Officer required pursuant to 18 U.S.C
Section 1350.All other exhibits for which provision is made in the applicable accounting regulation of the
United States Securities and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been omitted.
 
 SIGNATURES
  Triple-S Management CorporationRegistrantDate:
    
    November 10, 2005
    
    By:
    
    /s/ Ramón M. Ruiz-Comas, CPARamón M. Ruiz-Comas, CPAPresident andChief Executive OfficerDate:
    
    November 10, 2005
    
    By:
    
    /s/ Juan J. Román, CPAJuan J. Román, CPAVice President of Financeand Chief Financial Officer
 42