##### 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 June 30, 2010
 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: 001-33865
 Triple-S Management Corporation
 Puerto Rico
    
    66-0555678(State or other jurisdiction of 
incorporation 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 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
  Title of each class
    
    Outstanding at July 22, 2010Common Stock Class A, $1.00 par value
    
    9,042,809Common Stock Class B, $1.00 par value
    
    20,124,664




---



##### 



Triple-S Management Corporation
 FORM 10-Q
   
 Table of Contents
 Part I  Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    30Cautionary Statement Regarding Forward-Looking Information
    
    
    30Overview
    
    
    30Recent Developments
    
    
    31Recent Accounting Standards
    
    
    33Managed Care Membership
    
    
    33Consolidated Operating Results
    
    
    33Managed Care Operating Results
    
    
    36Life Insurance Operating Results
    
    
    39Property and Casualty Insurance Operating Results
    
    
    40Liquidity and Capital Resources
    
    
    42Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    43Item 4. Controls and Procedures
    
    
    43Part II  Other Information
    
    
    44Item 1. Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    44Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 3. Defaults Upon Senior Securities
    
    
    44Item 4. (Removed and Reserved)
    
    
    44Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    45SIGNATURES
    
    
    46EX-10.1EX-10.2EX-10.3EX-31.1EX-31.2EX-32.1EX-32.2
  2




---



##### Table of Contents



Part I  Financial Information
 
 Item 1. Financial Statements
 Triple-S Management Corporation
 Consolidated Balance Sheets (Unaudited)
(Dollar amounts in thousands,except per share data)
 June 30,
    
    
    December 31,2010
    
    
    2009AssetsInvestments and cash:Equity securities held for trading, at fair value
    
    $
    41,643
    
    
    $
    43,909Securities available for sale, at fair value:Fixed maturities
    
    
    998,419
    
    
    
    918,977Equity securities
    
    
    65,250
    
    
    
    64,689Securities held to maturity, at amortized cost:Fixed maturities
    
    
    14,942
    
    
    
    15,794Policy loans
    
    
    6,054
    
    
    
    5,940Cash and cash equivalents
    
    
    34,303
    
    
    
    40,376Total investments and cash
    
    
    1,160,611
    
    
    
    1,089,685Premiums and other receivables, net
    
    
    335,121
    
    
    
    272,932Deferred policy acquisition costs and value of   business acquired
    
    
    140,456
    
    
    
    139,917Property and equipment, net
    
    
    73,693
    
    
    
    68,803Deferred tax asset
    
    
    28,305
    
    
    
    37,551Other assets
    
    
    32,388
    
    
    
    39,816Total assets
    
    $
    1,770,574
    
    
    $
    1,648,704Liabilities and Stockholders EquityClaim liabilities
    
    
    411,410
    
    
    
    360,446Liability for future policy benefits
    
    
    229,097
    
    
    
    222,619Unearned premiums
    
    
    93,256
    
    
    
    108,342Policyholder deposits
    
    
    49,643
    
    
    
    47,563Liability to Federal Employees Health Benefits
Program (FEHBP)
    
    
    12,024
    
    
    
    13,002Accounts payable and accrued liabilities
    
    
    140,423
    
    
    
    139,161Deferred tax liability
    
    
    12,304
    
    
    
    11,088Short-term borrowings
    
    
    17,695
    
    
    
    Long-term borrowings
    
    
    166,847
    
    
    
    167,667Liability for pension benefits
    
    
    40,739
    
    
    
    41,044Total liabilities
    
    
    1,173,438
    
    
    
    1,110,932Stockholders equity:Common stock Class A, $1 par value. Authorized
100,000,000 shares; issued
and outstanding 9,042,809 at June 30, 2010
and December 31, 2009
    
    
    9,043
    
    
    
    9,043Common stock Class B, $1 par value. Authorized
100,000,000 shares; issued
and outstanding 20,110,391 shares at June
30, 2010 and
December 31, 2009, respectively
    
    
    20,110
    
    
    
    20,110Additional paid-in capital
    
    
    159,981
    
    
    
    159,303Retained earnings
    
    
    387,141
    
    
    
    360,892Accumulated other comprehensive income (loss)
    
    
    20,861
    
    
    
    (11,576
    )Total stockholders equity
    
    
    597,136
    
    
    
    537,772Total liabilities and stockholders equity
    
    $
    1,770,574
    
    
    $
    1,648,704
  3




---



##### Table of Contents



Triple-S Management Corporation
 Consolidated Statements of Earnings (Unaudited)
(Dollar amounts in thousands,except per share data)
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Premiums earned, net
    
    $
    502,761
    
    
    $
    463,072
    
    
    $
    996,938
    
    
    $
    914,509Administrative service fees
    
    
    12,166
    
    
    
    11,319
    
    
    
    24,664
    
    
    
    20,185Net investment income
    
    
    12,671
    
    
    
    13,360
    
    
    
    25,094
    
    
    
    25,901Total operating revenues
    
    
    527,598
    
    
    
    487,751
    
    
    
    1,046,696
    
    
    
    960,595Net realized investment losses:Total other-than-temporary impairment losses on securities
    
    
    (761
    )
    
    
    (3,052
    )
    
    
    (2,616
    )
    
    
    (5,713
    )Net realized gains, excluding other-than-temporary impairment
losses on securities
    
    
    2,194
    
    
    
    1,427
    
    
    
    2,670
    
    
    
    2,361Total net realized investment gains (losses)
    
    
    1,433
    
    
    
    (1,625
    )
    
    
    54
    
    
    
    (3,352
    )Net unrealized investment (loss) gain on trading securities
    
    
    (6,010
    )
    
    
    5,652
    
    
    
    (3,980
    )
    
    
    3,176Other (expense) income, net
    
    
    (324
    )
    
    
    704
    
    
    
    (172
    )
    
    
    325Total revenues
    
    
    522,697
    
    
    
    492,482
    
    
    
    1,042,598
    
    
    
    960,744Benefits and expenses:Claims incurred
    
    
    424,838
    
    
    
    395,271
    
    
    
    850,666
    
    
    
    788,756Operating expenses
    
    
    76,720
    
    
    
    68,603
    
    
    
    153,591
    
    
    
    136,855Total operating costs
    
    
    501,558
    
    
    
    463,874
    
    
    
    1,004,257
    
    
    
    925,611Interest expense
    
    
    3,372
    
    
    
    3,357
    
    
    
    6,600
    
    
    
    6,621Total benefits and expenses
    
    
    504,930
    
    
    
    467,231
    
    
    
    1,010,857
    
    
    
    932,232Income before taxes
    
    
    17,767
    
    
    
    25,251
    
    
    
    31,741
    
    
    
    28,512Income tax expense (benefit):Current
    
    
    4,877
    
    
    
    9,090
    
    
    
    8,421
    
    
    
    9,541Deferred
    
    
    (2,167
    )
    
    
    (2,499
    )
    
    
    (2,929
    )
    
    
    (3,621
    )Total income taxes
    
    
    2,710
    
    
    
    6,591
    
    
    
    5,492
    
    
    
    5,920Net income
    
    $
    15,057
    
    
    $
    18,660
    
    
    $
    26,249
    
    
    $
    22,592Basic net income per share
    
    $
    0.52
    
    
    $
    0.64
    
    
    $
    0.90
    
    
    $
    0.76Diluted net income per share
    
    $
    0.51
    
    
    $
    0.63
    
    
    $
    0.90
    
    
    $
    0.76
  4




---



##### Table of Contents



Triple-S Management Corporation
 Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) (Unaudited)
(Dollar amounts in thousands, except per share data)
 2010
    
    
    2009Balance at January 1
    
    $
    537,772
    
    
    $
    485,099Share-based compensation
    
    
    678
    
    
    
    2,452Grant of restricted Class B common stock
    
    
    
    
    
    
    27Repurchase and retirement of common stock
    
    
    
    
    
    
    (22,034
    )Comprehensive income (loss):Net income
    
    
    26,249
    
    
    
    22,592Net unrealized change in fair value of available for sale securities, net of taxes
    
    
    31,843
    
    
    
    (733
    )Defined benefit pension plan:Actuarial loss, net
    
    
    730
    
    
    
    664Prior service credit, net
    
    
    (136
    )
    
    
    (130
    )Total comprehensive income (loss)
    
    
    58,686
    
    
    
    22,393Balance at June 30
    
    $
    597,136
    
    
    $
    487,937
  5




---



##### Table of Contents



Triple-S Management Corporation
 Consolidated Statements of Cash Flows (Unaudited)
(Dollar amounts in thousands, except per share data)
 Six months endedJune 30,2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    26,249
    
    
    $
    22,592Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    6,964
    
    
    
    4,219Net amortization of investments
    
    
    1,683
    
    
    
    367Provision for doubtful receivables
    
    
    5,048
    
    
    
    7,012Deferred tax benefit
    
    
    (2,929
    )
    
    
    (3,621
    )Net realized investment (gain) loss on sale of securities
    
    
    (54
    )
    
    
    3,352Net unrealized loss (gain) on trading securities
    
    
    3,980
    
    
    
    (3,176
    )Share-based compensation
    
    
    678
    
    
    
    2,479Proceeds from trading securities sold:Equity securities
    
    
    2,706
    
    
    
    2,419Acquisition of securities in trading portfolio:Equity securities
    
    
    (4,124
    )
    
    
    (2,609
    )(Increase) decrease in assets:Premium and other receivables, net
    
    
    (67,174
    )
    
    
    (19,015
    )Deferred policy acquisition costs and value of business acquired
    
    
    (539
    )
    
    
    (4,964
    )Other assets
    
    
    13,049
    
    
    
    12,292Increase (decrease) in liabilities:Claim liabilities
    
    
    50,964
    
    
    
    40,204Liability for future policy benefits
    
    
    6,478
    
    
    
    7,681Unearned premiums
    
    
    (15,086
    )
    
    
    (13,361
    )Policyholder deposits
    
    
    267
    
    
    
    457Liability to FEHBP
    
    
    (978
    )
    
    
    (2,758
    )Accounts payable and accrued liabilities
    
    
    4,412
    
    
    
    (4,442
    )Net cash provided by operating activities
    
    
    31,594
    
    
    
    49,128(Continued)
 6




---



##### Table of Contents



Triple-S Management Corporation
 Consolidated Statements of Cash Flows (Unaudited)
(Dollar amounts in thousands, except per share data)
 Six months endedJune 30,2010
    
    
    2009Cash flows from investing activities:Proceeds from investments sold or matured:Securities available for sale:Fixed maturities sold
    
    $
    43,443
    
    
    $
    114,876Fixed maturities matured/called
    
    
    58,312
    
    
    
    123,995Equity securities
    
    
    14,685
    
    
    
    1,629Securities held to maturity:Fixed maturities matured/called
    
    
    1,276
    
    
    
    2,915Acquisition of investments:Securities available for sale:Fixed maturities
    
    
    (143,742
    )
    
    
    (250,641
    )Equity securities
    
    
    (17,285
    )
    
    
    (2,286
    )Fixed maturity securities held to maturity
    
    
    (250
    )
    
    
    Net outflows for policy loans
    
    
    (114
    )
    
    
    (70
    )Net capital expenditures
    
    
    (10,197
    )
    
    
    (8,876
    )Net cash used in investing activities
    
    
    (53,872
    )
    
    
    (18,458
    )Cash flows from financing activities:Change in outstanding checks in excess of bank balances
    
    
    (2,483
    )
    
    
    (10,143
    )Change in short-term borrowings
    
    
    17,695
    
    
    
    Repayments of long-term borrowings
    
    
    (820
    )
    
    
    (820
    )Repurchase and retirement of common stock
    
    
    
    
    
    
    (22,034
    )Proceeds from policyholder deposits
    
    
    5,772
    
    
    
    2,547Surrenders of policyholder deposits
    
    
    (3,959
    )
    
    
    (3,616
    )Net cash provided by (used in) financing activities
    
    
    16,205
    
    
    
    (34,066
    )Net decrease in cash and cash equivalents
    
    
    (6,073
    )
    
    
    (3,396
    )Cash and cash equivalents:Beginning of period
    
    
    40,376
    
    
    
    46,095End of period
    
    $
    34,303
    
    
    $
    42,699
  7




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (1) Basis of Presentation
    (2) Recent Accounting Standards
   8




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (3) Segment Information
   Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues:Managed Care:Premiums earned, net
    
    $
    451,688
    
    
    $
    414,077
    
    
    $
    894,747
    
    
    $
    816,701Administrative service fees
    
    
    12,166
    
    
    
    11,319
    
    
    
    24,664
    
    
    
    20,185Intersegment premiums /service fees
    
    
    1,516
    
    
    
    1,495
    
    
    
    3,068
    
    
    
    2,948Net investment income
    
    
    5,075
    
    
    
    5,376
    
    
    
    10,037
    
    
    
    10,518Total managed care
    
    
    470,445
    
    
    
    432,267
    
    
    
    932,516
    
    
    
    850,352Life Insurance:Premiums earned, net
    
    
    25,998
    
    
    
    25,148
    
    
    
    51,804
    
    
    
    49,553Intersegment premiums
    
    
    96
    
    
    
    94
    
    
    
    194
    
    
    
    185Net investment income
    
    
    4,240
    
    
    
    4,383
    
    
    
    8,446
    
    
    
    8,387Total life insurance
    
    
    30,334
    
    
    
    29,625
    
    
    
    60,444
    
    
    
    58,125Property and Casualty Insurance:Premiums earned, net
    
    
    25,075
    
    
    
    23,846
    
    
    
    50,387
    
    
    
    48,254Intersegment premiums
    
    
    154
    
    
    
    154
    
    
    
    307
    
    
    
    307Net investment income
    
    
    2,868
    
    
    
    2,984
    
    
    
    5,603
    
    
    
    5,785Total property and casualty insurance
    
    
    28,097
    
    
    
    26,984
    
    
    
    56,297
    
    
    
    54,346Other segments  intersegment service revenues *
    
    
    14,171
    
    
    
    13,210
    
    
    
    27,675
    
    
    
    25,114Total business segments
    
    
    543,047
    
    
    
    502,086
    
    
    
    1,076,932
    
    
    
    987,937TSM operating revenues from external sources
    
    
    488
    
    
    
    618
    
    
    
    1,008
    
    
    
    1,212Elimination of intersegment premiums
    
    
    (1,766
    )
    
    
    (1,743
    )
    
    
    (3,569
    )
    
    
    (3,440
    )Elimination of intersegment service fees
    
    
    (14,171
    )
    
    
    (13,210
    )
    
    
    (27,675
    )
    
    
    (25,114
    )Consolidated operating revenues
    
    $
    527,598
    
    
    $
    487,751
    
    
    $
    1,046,696
    
    
    $
    960,595
 
 *
    
    Includes segments that are not required to be reported separately. These segments include the data processing
services organization as well as the third-party administrator of managed care services. 9




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Operating income:Managed care
    
    $
    18,467
    
    
    
    16,207
    
    
    $
    31,115
    
    
    
    21,982Life insurance
    
    
    4,688
    
    
    
    3,912
    
    
    
    8,526
    
    
    
    6,946Property and casualty insurance
    
    
    1,971
    
    
    
    2,802
    
    
    
    1,069
    
    
    
    4,149Other segments *
    
    
    311
    
    
    
    235
    
    
    
    498
    
    
    
    362Total business segments
    
    
    25,437
    
    
    
    23,156
    
    
    
    41,208
    
    
    
    33,439TSM operating revenues from external sources
    
    
    488
    
    
    
    618
    
    
    
    1,008
    
    
    
    1,212TSM unallocated operating expenses
    
    
    (2,211
    )
    
    
    (2,166
    )
    
    
    (4,424
    )
    
    
    (4,470
    )Elimination of TSM intersegment charges
    
    
    2,326
    
    
    
    2,269
    
    
    
    4,647
    
    
    
    4,803Consolidated operating income
    
    
    26,040
    
    
    
    23,877
    
    
    
    42,439
    
    
    
    34,984Consolidated net realized investment gains (losses)
    
    
    1,433
    
    
    
    (1,625
    )
    
    
    54
    
    
    
    (3,352
    )Consolidated net unrealized gain (loss) on trading securities
    
    
    (6,010
    )
    
    
    5,652
    
    
    
    (3,980
    )
    
    
    3,176Consolidated interest expense
    
    
    (3,372
    )
    
    
    (3,357
    )
    
    
    (6,600
    )
    
    
    (6,621
    )Consolidated other income (expense), net
    
    
    (324
    )
    
    
    704
    
    
    
    (172
    )
    
    
    325Consolidated income before taxes
    
    $
    17,767
    
    
    
    25,251
    
    
    $
    31,741
    
    
    
    28,512Depreciation expense:Managed care
    
    
    3,162
    
    
    
    1,413
    
    
    
    5,390
    
    
    
    2,728Life insurance
    
    
    168
    
    
    
    165
    
    
    
    337
    
    
    
    310Property and casualty insurance
    
    
    406
    
    
    
    378
    
    
    
    805
    
    
    
    750Total business segments
    
    
    3,736
    
    
    
    1,956
    
    
    
    6,532
    
    
    
    3,788TSM depreciation expense
    
    
    216
    
    
    
    216
    
    
    
    432
    
    
    
    431Consolidated depreciation expense
    
    $
    3,952
    
    
    
    2,172
    
    
    $
    6,964
    
    
    
    4,219
 
 *
    
    Includes segments that are not required to be reported separately. These segments include the data processing services
organization as well as the third-party administrator of managed care services. 10




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 June 30,
    
    
    December 31,2010
    
    
    2009Assets:Managed care
    
    $
    836,985
    
    
    $
    746,674Life insurance
    
    
    518,084
    
    
    
    487,290Property and casualty insurance
    
    
    349,579
    
    
    
    351,793Other segments *
    
    
    14,605
    
    
    
    14,193Total business segments
    
    
    1,719,253
    
    
    
    1,599,950Unallocated amounts related to TSM:Cash, cash equivalents, and investments
    
    
    45,503
    
    
    
    39,029Property and equipment, net
    
    
    21,491
    
    
    
    21,577Other assets
    
    
    3,172
    
    
    
    4,78070,166
    
    
    
    65,386Elimination entries-intersegment receivables and others
    
    
    (18,845
    )
    
    
    (16,632
    )Consolidated total assets
    
    $
    1,770,574
    
    
    $
    1,648,704
 
 *
    
    Includes segments that are not required to be reported separately. These segments include
the data processing services organization as well as the third-party administrator of
managed care services. 11




---



##### Table of Contents



Triple-S Management Corporation
 (4) Investment in Securities
  June 30, 2010Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    EstimatedCost
    
    
    gains
    
    
    losses
    
    
    fair valueTrading securities:Equity securities
    
    $
    43,789
    
    
    $
    4,912
    
    
    $
    (7,058
    )
    
    $
    41,643
 December 31, 2009Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    EstimatedCost
    
    
    gains
    
    
    losses
    
    
    fair valueTrading securities:Equity securities
    
    $
    42,075
    
    
    $
    7,064
    
    
    $
    (5,230
    )
    
    $
    43,909
 June 30, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities available for sale:Fixed maturities:Obligations of government-
sponsored enterprises
    
    $
    197,377
    
    
    $
    11,010
    
    
    $
    
    
    
    $
    208,387U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    47,813
    
    
    
    6,502
    
    
    
    
    
    
    
    54,315Obligations of the
Commonwealth of Puerto Rico
and its instrumentalities
    
    
    152,102
    
    
    
    4,090
    
    
    
    (146
    )
    
    
    156,046Municipal securities
    
    
    200,999
    
    
    
    6,929
    
    
    
    (275
    )
    
    
    207,653Corporate bonds
    
    
    101,061
    
    
    
    10,033
    
    
    
    (31
    )
    
    
    111,063Residential mortgage-backed securities
    
    
    15,089
    
    
    
    1,003
    
    
    
    (3
    )
    
    
    16,089Collateralized mortgage obligations
    
    
    236,839
    
    
    
    8,490
    
    
    
    (463
    )
    
    
    244,866Total fixed maturities
    
    
    951,280
    
    
    
    48,057
    
    
    
    (918
    )
    
    
    998,419Equity securities:Common stocks
    
    
    900
    
    
    
    2,920
    
    
    
    
    
    
    
    3,820Preferred stocks
    
    
    4,386
    
    
    
    67
    
    
    
    (1,285
    )
    
    
    3,168Perpetual preferred stocks
    
    
    1,075
    
    
    
    
    
    
    
    (146
    )
    
    
    929Mutual funds
    
    
    57,676
    
    
    
    2,036
    
    
    
    (2,379
    )
    
    
    57,333Total equity securities
    
    
    64,037
    
    
    
    5,023
    
    
    
    (3,810
    )
    
    
    65,250Total
    
    $
    1,015,317
    
    
    $
    53,080
    
    
    $
    (4,728
    )
    
    $
    1,063,669
 12




---



##### Table of Contents



Triple-S Management Corporation
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities available for sale:Fixed maturities:Obligations of government-
sponsored enterprises
    
    $
    252,513
    
    
    $
    2,240
    
    
    $
    (3,325
    )
    
    $
    251,428U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    48,190
    
    
    
    3,148
    
    
    
    
    
    
    
    51,338Obligations of the
Commonwealth of Puerto Rico
and its instrumentalities
    
    
    154,754
    
    
    
    3,113
    
    
    
    (1,919
    )
    
    
    155,948Municipal securities
    
    
    107,441
    
    
    
    1,117
    
    
    
    (1,851
    )
    
    
    106,707Corporate bonds
    
    
    102,547
    
    
    
    3,546
    
    
    
    (728
    )
    
    
    105,365Residential mortgage-backed securities
    
    
    16,605
    
    
    
    677
    
    
    
    (1
    )
    
    
    17,281Collateralized mortgage obligations
    
    
    229,312
    
    
    
    4,237
    
    
    
    (2,639
    )
    
    
    230,910Total fixed maturities
    
    
    911,362
    
    
    
    18,078
    
    
    
    (10,463
    )
    
    
    918,977Equity securities:Common stocks
    
    
    4,074
    
    
    
    3,435
    
    
    
    
    
    
    
    7,509Preferred stocks
    
    
    4,000
    
    
    
    
    
    
    
    (1,325
    )
    
    
    2,675Perpetual preferred stocks
    
    
    2,849
    
    
    
    
    
    
    
    (270
    )
    
    
    2,579Mutual funds
    
    
    50,608
    
    
    
    4,150
    
    
    
    (2,832
    )
    
    
    51,926Total equity securities
    
    
    61,531
    
    
    
    7,585
    
    
    
    (4,427
    )
    
    
    64,689Total
    
    $
    972,893
    
    
    $
    25,663
    
    
    $
    (14,890
    )
    
    $
    983,666
 June 30, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities held to maturity:Obligations of government-
sponsored enterprises
    
    $
    2,303
    
    
    $
    172
    
    
    $
    
    
    
    $
    2,475U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    1,480
    
    
    
    265
    
    
    
    
    
    
    
    1,745Corporate bonds
    
    
    9,250
    
    
    
    561
    
    
    
    
    
    
    
    9,811Residential mortgage-backed securities
    
    
    893
    
    
    
    47
    
    
    
    
    
    
    
    940Certificates of deposit
    
    
    1,016
    
    
    
    
    
    
    
    
    
    
    
    1,016Total
    
    $
    14,942
    
    
    $
    1,045
    
    
    $
    
    
    
    $
    15,987
 13




---



##### Table of Contents



Triple-S Management Corporation
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities held to maturity:Obligations of government-
sponsored enterprises
    
    $
    925
    
    
    $
    6
    
    
    $
    
    
    
    $
    931U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    3,786
    
    
    
    132
    
    
    
    
    
    
    
    3,918Corporate bonds
    
    
    9,063
    
    
    
    534
    
    
    
    
    
    
    
    9,597Residential mortgage-backed securities
    
    
    1,256
    
    
    
    25
    
    
    
    (1
    )
    
    
    1,280Certificates of deposit
    
    
    764
    
    
    
    
    
    
    
    
    
    
    
    764Total
    
    $
    15,794
    
    
    $
    697
    
    
    $
    (1
    )
    
    $
    16,490
  June 30, 2010Less than 12 months
    
    
    12 months or longer
    
    
    TotalGross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossEstimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number ofFair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    SecuritiesSecurites available for sale:Fixed maturities:Obligations of the
Commonwealth of Puerto
Rico and its instrumentalities
    
    
    2,135
    
    
    
    (1
    )
    
    
    6
    
    
    
    7,318
    
    
    
    (145
    )
    
    
    5
    
    
    
    9,453
    
    
    
    (146
    )
    
    
    11Municipal securities
    
    
    15,642
    
    
    
    (274
    )
    
    
    13
    
    
    
    183
    
    
    
    (1
    )
    
    
    1
    
    
    
    15,825
    
    
    
    (275
    )
    
    
    14Corporate bonds
    
    
    1,998
    
    
    
    (31
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,998
    
    
    
    (31
    )
    
    
    1Residential mortgage-backed
securities
    
    
    389
    
    
    
    (1
    )
    
    
    1
    
    
    
    36
    
    
    
    (2
    )
    
    
    1
    
    
    
    425
    
    
    
    (3
    )
    
    
    2Collateralized mortgage
obligations
    
    
    14,255
    
    
    
    (201
    )
    
    
    8
    
    
    
    4,468
    
    
    
    (262
    )
    
    
    4
    
    
    
    18,723
    
    
    
    (463
    )
    
    
    12Total fixed maturities
    
    
    34,419
    
    
    
    (508
    )
    
    
    29
    
    
    
    12,005
    
    
    
    (410
    )
    
    
    11
    
    
    
    46,424
    
    
    
    (918
    )
    
    
    40Equity securities:Preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,715
    
    
    
    (1,285
    )
    
    
    1
    
    
    
    2,715
    
    
    
    (1,285
    )
    
    
    1Perpetual preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    854
    
    
    
    (146
    )
    
    
    1
    
    
    
    854
    
    
    
    (146
    )
    
    
    1Mutual funds
    
    
    18,443
    
    
    
    (1,604
    )
    
    
    11
    
    
    
    18,542
    
    
    
    (775
    )
    
    
    10
    
    
    
    36,985
    
    
    
    (2,379
    )
    
    
    21Total equity securities
    
    
    18,443
    
    
    
    (1,604
    )
    
    
    11
    
    
    
    22,111
    
    
    
    (2,206
    )
    
    
    12
    
    
    
    40,554
    
    
    
    (3,810
    )
    
    
    23Total for securities available for sale
    
    $
    52,862
    
    
    $
    (2,112
    )
    
    
    40
    
    
    $
    34,116
    
    
    $
    (2,616
    )
    
    
    23
    
    
    $
    86,978
    
    
    $
    (4,728
    )
    
    
    63
 14




---



##### Table of Contents



Triple-S Management Corporation
 December 31, 2009Less than 12 months
    
    
    12 months or longer
    
    
    TotalGross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossEstimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number ofFair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    SecuritiesSecurites available for sale:Fixed maturities:Obligations of government-
sponsored enterprises
    
    $
    110,602
    
    
    $
    (2,264
    )
    
    
    21
    
    
    $
    25,468
    
    
    $
    (1,061
    )
    
    
    5
    
    
    $
    136,070
    
    
    $
    (3,325
    )
    
    
    26Obligations of the
Commonwealth of Puerto
Rico and its instrumentalities
    
    
    12,944
    
    
    
    (201
    )
    
    
    10
    
    
    
    58,866
    
    
    
    (1,718
    )
    
    
    22
    
    
    
    71,810
    
    
    
    (1,919
    )
    
    
    32Municipal securities
    
    
    62,292
    
    
    
    (1,841
    )
    
    
    39
    
    
    
    173
    
    
    
    (10
    )
    
    
    1
    
    
    
    62,465
    
    
    
    (1,851
    )
    
    
    40Corporate bonds
    
    
    10,997
    
    
    
    (215
    )
    
    
    4
    
    
    
    7,975
    
    
    
    (513
    )
    
    
    6
    
    
    
    18,972
    
    
    
    (728
    )
    
    
    10Residential mortgage-backed
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    (1
    )
    
    
    1
    
    
    
    36
    
    
    
    (1
    )
    
    
    1Collateralized mortgage
obligations
    
    
    101,265
    
    
    
    (1,732
    )
    
    
    21
    
    
    
    7,171
    
    
    
    (907
    )
    
    
    10
    
    
    
    108,436
    
    
    
    (2,639
    )
    
    
    31Total fixed maturities
    
    
    298,100
    
    
    
    (6,253
    )
    
    
    95
    
    
    
    99,689
    
    
    
    (4,210
    )
    
    
    45
    
    
    
    397,789
    
    
    
    (10,463
    )
    
    
    140Equity securities:Preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,675
    
    
    
    (1,325
    )
    
    
    1
    
    
    
    2,675
    
    
    
    (1,325
    )
    
    
    1Perpetual preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    730
    
    
    
    (270
    )
    
    
    1
    
    
    
    730
    
    
    
    (270
    )
    
    
    1Mutual funds
    
    
    9,994
    
    
    
    (907
    )
    
    
    4
    
    
    
    21,667
    
    
    
    (1,925
    )
    
    
    15
    
    
    
    31,661
    
    
    
    (2,832
    )
    
    
    19Total equity securities
    
    
    9,994
    
    
    
    (907
    )
    
    
    4
    
    
    
    25,072
    
    
    
    (3,520
    )
    
    
    17
    
    
    
    35,066
    
    
    
    (4,427
    )
    
    
    21Total for securities available for sale
    
    $
    308,094
    
    
    $
    (7,160
    )
    
    
    99
    
    
    $
    124,761
    
    
    $
    (7,730
    )
    
    
    62
    
    
    $
    432,855
    
    
    $
    (14,890
    )
    
    
    161Securities held to maturity:Residential mortgage-backed
securities
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    55
    
    
    $
    (1
    )
    
    
    1
    
    
    $
    55
    
    
    $
    (1
    )
    
    
    1
  15




---



##### Table of Contents



Triple-S Management Corporation
  
    
    Identification and evaluation of securities that have possible
indications of other-than-temporary impairment, which includes an
analysis of all investments with gross unrealized investment losses
that represent 20% or more of their cost and all investments with an
unrealized loss greater than $50.
    
    Review and evaluation of any other security based on the investees
current financial condition, liquidity, near-term recovery prospects,
implications of rating agency actions, the outlook for the business
sectors in which the investee operates and other factors. This
evaluation is in addition to the evaluation of those securities with a
gross unrealized investment loss representing 20% or more of their
cost.
    
    Consideration of evidential matter, including an evaluation of factors
or triggers that may or may not cause individual investments to
qualify as having other-than-temporary impairments; and
    
    Determination of the status of each analyzed security as
other-than-temporary or not, with documentation of the rationale for
the decision.
  Obligations of States of the United States and Political Subdivisions of the States, and
Obligations of the Commonwealth of Puerto Rico and its Instrumentalities:
 Corporate Bonds:
 Residential Mortgage-Backed Securities and Collateralized Mortgage Obligations:
 16




---



##### Table of Contents



Triple-S Management Corporation
 Preferred Stocks:
 Perpetual Preferred Stocks:
 Mutual Funds:
 
    
    Mutual funds invested in fixed income securities: The unrealized loss
of each position in this category represents 6% or less of its book
value. The Corporation evaluated the invested assets that compose the
funds, which are mostly fixed income obligations of the Puerto Rico
and U.S. government or its agencies. In Puerto Rico these mutual
funds are exempt and have a higher dividend yield than investments in
other Puerto Rico securities. As these mutual funds are invested in
fixed income securities, they are susceptible to fluctuations in
interest rates as well as supply and demand. Earlier in the year the
mutual funds showed a relative underperformance when compared to the
underlying assets because of a decrease in supply and demand, which
caused the market price to be closer to the net asset value compared
to where this relationship had been historically. Lately, the demand
for these mutual funds has increased because of the high yield the
funds offer. Because the current valuations are close to the funds
underlying assets, the funds underlying assets are mostly on
investment grade fixed income securities (mostly U.S. and Puerto Rico
government and its agencies, which have been affected by general
market conditions), and the Corporation has the intent and ability to
hold the investments until a market price recovery, these investments
are not considered other-than-temporarily impaired.
    
    Broad market indices securities: The unrealized loss of each position
in this category is less than 15% of its book value and is the result
of fluctuations in equity markets. These positions are designed to mirror
the behavior of the Standard &Poors 500 and the Russell 1000 Value
indices and have been with an unrealized loss for a period less than
three months. Because there has been an improvement in the market
price of these positions in the period subsequent to June 30, 2010,
these positions have been with an unrealized loss for a very short
time period, and the Corporation has the intent and ability to hold
the investments until a market price recovery, these investments are
not considered other-than-temporarily impaired.
 17




---



##### Table of Contents



Triple-S Management Corporation
  Amortized
    
    
    Estimatedcost
    
    
    fair valueSecurities available for sale:Due in one year or less
    
    $
    15,512
    
    
    $
    15,652Due after one year through five years
    
    
    80,603
    
    
    
    84,048Due after five years through ten years
    
    
    254,302
    
    
    
    267,586Due after ten years
    
    
    348,935
    
    
    
    370,178Residential mortgage-backed securities
    
    
    15,089
    
    
    
    16,089Collateralized mortgage obligations
    
    
    236,839
    
    
    
    244,866$
    951,280
    
    
    $
    998,419Securities held to maturity:Due in one year or less
    
    $
    1,016
    
    
    $
    1,016Due after one year through five years
    
    
    9,249
    
    
    
    9,810Due after five years through ten years
    
    
    510
    
    
    
    519Due after ten years
    
    
    3,274
    
    
    
    3,702Residential mortgage-backed securities
    
    
    893
    
    
    
    940$
    14,942
    
    
    $
    15,987
  18




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Realized gains (losses):Fixed maturity securities:Securities available for sale:Gross gains from sales
    
    $
    37
    
    
    $
    1,814
    
    
    $
    69
    
    
    $
    3,057Gross losses from sales
    
    
    (84
    )
    
    
    (3
    )
    
    
    (124
    )
    
    
    (3
    )Gross losses from other-than-temporary impairments
    
    
    
    
    
    
    
    
    
    
    (95
    )
    
    
    (1,152
    )Total debt securities
    
    
    (47
    )
    
    
    1,811
    
    
    
    (150
    )
    
    
    1,902Equity securities:Trading securities:Gross gains from sales
    
    
    212
    
    
    
    102
    
    
    
    825
    
    
    
    320Gross losses from sales
    
    
    (320
    )
    
    
    (452
    )
    
    
    (529
    )
    
    
    (730
    )(108
    )
    
    
    (350
    )
    
    
    296
    
    
    
    (410
    )Securities available for sale:Gross gains from sales
    
    
    2,906
    
    
    
    
    
    
    
    2,986
    
    
    
    Gross losses from sales
    
    
    (557
    )
    
    
    (34
    )
    
    
    (557
    )
    
    
    (283
    )Gross losses from other-than-temporary impairments
    
    
    (761
    )
    
    
    (3,052
    )
    
    
    (2,521
    )
    
    
    (4,561
    )1,588
    
    
    
    (3,086
    )
    
    
    (92
    )
    
    
    (4,844
    )Total equity securities
    
    
    1,480
    
    
    
    (3,436
    )
    
    
    204
    
    
    
    (5,254
    )Net realized gains (losses) on securities
    
    $
    1,433
    
    
    $
    (1,625
    )
    
    $
    54
    
    
    $
    (3,352
    )
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Changes in net unrealized gains (losses):Recognized in income:Equity securities  trading
    
    $
    (6,010
    )
    
    $
    5,652
    
    
    $
    (3,980
    )
    
    $
    3,176Recognized in accumulated other comprehensive income (loss):Fixed maturities  available for sale
    
    
    27,950
    
    
    
    4,405
    
    
    
    39,524
    
    
    
    (349
    )Equity securities  available for sale
    
    
    (6,325
    )
    
    
    7,205
    
    
    
    (1,945
    )
    
    
    (509
    )$
    21,625
    
    
    $
    11,610
    
    
    $
    37,579
    
    
    $
    (858
    )Not recognized in the consolidated financial statements:Fixed maturities  held to maturity
    
    $
    251
    
    
    $
    (369
    )
    
    $
    349
    
    
    $
    (531
    )
   19




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Fixed maturities
    
    $
    11,406
    
    
    $
    11,745
    
    
    $
    22,596
    
    
    $
    22,869Equity securities
    
    
    943
    
    
    
    1,165
    
    
    
    1,839
    
    
    
    2,093Policy loans
    
    
    111
    
    
    
    99
    
    
    
    217
    
    
    
    197Cash equivalents and interest-bearing deposits
    
    
    33
    
    
    
    152
    
    
    
    102
    
    
    
    359Other
    
    
    178
    
    
    
    199
    
    
    
    340
    
    
    
    383Total
    
    $
    12,671
    
    
    $
    13,360
    
    
    $
    25,094
    
    
    $
    25,901
 (5) Premiums and Other Receivables
  June 30,
    
    
    December 31,2010
    
    
    2009Premium
    
    $
    162,146
    
    
    $
    98,429Self-funded group receivables
    
    
    74,585
    
    
    
    70,315FEHBP
    
    
    10,884
    
    
    
    10,297Agents balances
    
    
    30,442
    
    
    
    37,888Accrued interest
    
    
    9,601
    
    
    
    9,287Reinsurance recoverable
    
    
    49,730
    
    
    
    43,951Other
    
    
    28,015
    
    
    
    27,999365,403
    
    
    
    298,166Less allowance for doubtful receivables:Premiums
    
    
    23,417
    
    
    
    20,280Other
    
    
    6,865
    
    
    
    4,95430,282
    
    
    
    25,234Total premiums and other receivables
    
    $
    335,121
    
    
    $
    272,932
 20




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (6) Claim Liabilities
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Claim liabilities at beginning of period
    
    $
    397,634
    
    
    $
    362,583
    
    
    $
    360,446
    
    
    $
    323,710Reinsurance recoverable on claim liabilities
    
    
    (31,955
    )
    
    
    (29,387
    )
    
    
    (30,712
    )
    
    
    (30,432
    )Net claim liabilities at beginning of period
    
    
    365,679
    
    
    
    333,196
    
    
    
    329,734
    
    
    
    293,278Incurred claims and loss-adjustment expenses:Current period insured events
    
    
    421,912
    
    
    
    392,433
    
    
    
    841,876
    
    
    
    786,714Prior period insured events
    
    
    574
    
    
    
    (655
    )
    
    
    3,335
    
    
    
    (4,603
    )Total
    
    
    422,486
    
    
    
    391,778
    
    
    
    845,211
    
    
    
    782,111Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    389,179
    
    
    
    379,223
    
    
    
    567,609
    
    
    
    550,331Prior period insured events
    
    
    20,645
    
    
    
    11,991
    
    
    
    228,995
    
    
    
    191,298Total
    
    
    409,824
    
    
    
    391,214
    
    
    
    796,604
    
    
    
    741,629Net claim liabilities at end of period
    
    
    378,341
    
    
    
    333,760
    
    
    
    378,341
    
    
    
    333,760Reinsurance recoverable on claim liabilities
    
    
    33,069
    
    
    
    30,154
    
    
    
    33,069
    
    
    
    30,154Claim liabilities at end of period
    
    $
    411,410
    
    
    $
    363,914
    
    
    $
    411,410
    
    
    $
    363,914
    21




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (7) Fair Value Measurements
  Level Input:
    
    Input Definition:Level 1
    
    Inputs are unadjusted, quoted prices for identical assets or
liabilities in active markets at the measurement date.Level 2
    
    Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability through corroboration
with market data at the measurement date.Level 3
    
    Unobservable inputs that reflect managements best estimate
of what market participants would use in pricing the asset or
liability at the measurement date.
  (i) Cash and Cash Equivalents
  (ii) Investment in Securities
  (iii) Policy Loans
  (iv) Receivables, Accounts Payable and Accrued Liabilities
  (v) Policyholder Deposits
  (vi) Borrowings
  June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fairamount
    
    
    value
    
    
    amount
    
    
    valueLoans payable to bank
    
    $
    21,847
    
    
    $
    21,847
    
    
    $
    22,667
    
    
    $
    22,6676.3% senior unsecured notes payable
    
    
    50,000
    
    
    
    49,725
    
    
    
    50,000
    
    
    
    48,0006.6% senior unsecured notes payable
    
    
    60,000
    
    
    
    59,025
    
    
    
    60,000
    
    
    
    57,4206.7% senior unsecured notes payable
    
    
    35,000
    
    
    
    34,470
    
    
    
    35,000
    
    
    
    33,320Totals
    
    $
    166,847
    
    
    $
    165,067
    
    
    $
    167,667
    
    
    $
    161,407
 22




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  (vii) Derivative Instruments
   June 30, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity securities held for trading
    
    $
    41,643
    
    
    $
    
    
    
    $
    
    
    
    $
    41,643Securities available for sale:Fixed maturity securities
Obligations of government-sponsored
    
    
    
    
    
    
    208,387
    
    
    
    
    
    
    
    208,387U.S. Treasury securities and obligations of U.S
government instrumentalities
    
    
    54,315
    
    
    
    
    
    
    
    
    
    
    
    54,315Obligations of the Commonwealth of Puerto
and its instrumentalities
    
    
    
    
    
    
    156,046
    
    
    
    
    
    
    
    156,046Municipal securities
    
    
    
    
    
    
    207,653
    
    
    
    
    
    
    
    207,653Corporate bonds
    
    
    
    
    
    
    111,063
    
    
    
    
    
    
    
    111,063Residential agency mortgage-backed securities
    
    
    
    
    
    
    16,089
    
    
    
    
    
    
    
    16,089Collateralized mortgage obligations
    
    
    
    
    
    
    244,866
    
    
    
    
    
    
    
    244,866Total fixed maturities
    
    
    54,315
    
    
    
    944,104
    
    
    
    
    
    
    
    998,419Equity securitiesCommon stocks
    
    
    3,820
    
    
    
    
    
    
    
    
    
    
    
    3,820Preferred stocks
    
    
    3,168
    
    
    
    
    
    
    
    
    
    
    
    3,168Perpetual preferred stocks
    
    
    929
    
    
    
    
    
    
    
    
    
    
    
    929Mutual funds
    
    
    10,527
    
    
    
    46,107
    
    
    
    699
    
    
    
    57,333Total equity securities
    
    
    18,444
    
    
    
    46,107
    
    
    
    699
    
    
    
    65,250Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    735
    
    
    
    
    
    
    
    735Total
    
    $
    114,402
    
    
    $
    990,211
    
    
    $
    699
    
    
    $
    1,105,312
 23




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 December 31, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity securities held for trading
    
    $
    43,909
    
    
    $
    
    
    
    $
    
    
    
    $
    43,909Securities available for sale:Fixed maturity securitiesObligations of government-sponsored
    
    
    
    
    
    
    251,428
    
    
    
    
    
    
    
    251,428U.S. Treasury securities and obligations of U.S
government instrumentalities
    
    
    51,338
    
    
    
    
    
    
    
    
    
    
    
    51,338Obligations of the Commonwealth of Puerto
and its instrumentalities
    
    
    
    
    
    
    155,948
    
    
    
    
    
    
    
    155,948Municipal securities
    
    
    
    
    
    
    106,707
    
    
    
    
    
    
    
    106,707Corporate bonds
    
    
    
    
    
    
    105,365
    
    
    
    
    
    
    
    105,365Residential agency mortgage-backed securities
    
    
    
    
    
    
    17,281
    
    
    
    
    
    
    
    17,281Collateralized mortgage obligations
    
    
    
    
    
    
    230,910
    
    
    
    
    
    
    
    230,910Total fixed maturities
    
    
    51,338
    
    
    
    867,639
    
    
    
    
    
    
    
    918,977Equity securitiesCommon stocks
    
    
    7,509
    
    
    
    
    
    
    
    
    
    
    
    7,509Preferred stocks
    
    
    2,675
    
    
    
    
    
    
    
    
    
    
    
    2,675Perpetual preferred stocks
    
    
    2,579
    
    
    
    
    
    
    
    
    
    
    
    2,579Mutual funds
    
    
    6,961
    
    
    
    44,190
    
    
    
    775
    
    
    
    51,926Total equity securities
    
    
    19,724
    
    
    
    44,190
    
    
    
    775
    
    
    
    64,689Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    1,608
    
    
    
    
    
    
    
    1,608Total
    
    $
    114,971
    
    
    $
    913,437
    
    
    $
    775
    
    
    $
    1,029,183
  Three months endedJune 30, 2010
    
    
    June 30, 2009Fixed
    
    
    
    
    
    
    
    
    
    
    FixedMaturity
    
    
    Equity
    
    
    
    
    
    
    Maturity
    
    
    EquitySecurities
    
    
    Securities
    
    
    Total
    
    
    Securities
    
    
    Securities
    
    
    TotalBeginning balance
    
    $
    
    
    
    $
    775
    
    
    $
    775
    
    
    $
    560
    
    
    $
    1,086
    
    
    $
    1,646Total gains or losses -Unrealized
in other accumulated comprehensive income
    
    
    
    
    
    
    (76
    )
    
    
    (76
    )
    
    
    
    
    
    
    661
    
    
    
    661Ending balance
    
    $
    
    
    
    $
    699
    
    
    $
    699
    
    
    $
    560
    
    
    $
    1,747
    
    
    $
    2,307
 Six months endedJune 30, 2010
    
    
    June 30, 2009Fixed
    
    
    
    
    
    
    
    
    
    
    FixedMaturity
    
    
    Equity
    
    
    
    
    
    
    Maturity
    
    
    EquitySecurities
    
    
    Securities
    
    
    Total
    
    
    Securities
    
    
    Securities
    
    
    TotalBeginning balance
    
    $
    
    
    
    $
    775
    
    
    $
    775
    
    
    $
    1,281
    
    
    $
    1,086
    
    
    $
    2,367Total gains or losses:Realized in earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,024
    )
    
    
    
    
    
    
    (1,024
    )Unrealized
in other accumulated comprehensive income
    
    
    
    
    
    
    (76
    )
    
    
    (76
    )
    
    
    303
    
    
    
    661
    
    
    
    964Ending balance
    
    $
    
    
    
    $
    699
    
    
    $
    699
    
    
    $
    560
    
    
    $
    1,747
    
    
    $
    2,307
 24




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
     (8) Share-Based Compensation
  (9) Comprehensive Income (Loss)
  AccumulatedNet unrealized
    
    
    Liability for
    
    
    othergain on
    
    
    pension
    
    
    comprehensivesecurities
    
    
    benefits
    
    
    income (loss)Balance at January 1
    
    $
    9,141
    
    
    $
    (20,717
    )
    
    $
    (11,576
    )Net current period change
    
    
    31,843
    
    
    
    594
    
    
    
    32,437Balance at June 30
    
    $
    40,984
    
    
    $
    (20,123
    )
    
    $
    20,861
 (10) Income Taxes
   25




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
   (11) Pension Plan
  Three months ended
    
    
    Six months endedJune 30, 2010
    
    
    June 30, 20102010
    
    
    2009
    
    
    2010
    
    
    2009Components of net periodic benefit cost:Service cost
    
    $
    1,214
    
    
    $
    1,197
    
    
    $
    2,554
    
    
    $
    2,420Interest cost
    
    
    1,472
    
    
    
    1,346
    
    
    
    3,019
    
    
    
    2,676Expected return on assets
    
    
    (1,040
    )
    
    
    (947
    )
    
    
    (2,104
    )
    
    
    (1,912
    )Amortization of prior service benefit
    
    
    (110
    )
    
    
    (106
    )
    
    
    (223
    )
    
    
    (213
    )Amortization of actuarial loss
    
    
    586
    
    
    
    547
    
    
    
    1,194
    
    
    
    1,090Net periodic benefit cost
    
    $
    2,122
    
    
    $
    2,037
    
    
    $
    4,440
    
    
    $
    4,061
 Employer contributions:
 (12) Net Income Available to Stockholders and Basic Net Income per Share
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator for earnings per share:Net income available to stockholders
    
    $
    15,057
    
    
    $
    18,660
    
    
    $
    26,249
    
    
    $
    22,592Denominator for basic earnings per share:Weighted average of common shares
    
    
    29,088,719
    
    
    
    29,344,031
    
    
    
    29,080,062
    
    
    
    29,781,636Effect of dilutive securities
    
    
    213,752
    
    
    
    59,058
    
    
    
    185,816
    
    
    
    51,993Denominator for diluted earnings per share
    
    
    29,302,471
    
    
    
    29,403,089
    
    
    
    29,265,878
    
    
    
    29,833,629Basic net income per share
    
    $
    0.52
    
    
    $
    0.64
    
    
    $
    0.90
    
    
    $
    0.76Diluted net income per share
    
    $
    0.51
    
    
    $
    0.63
    
    
    $
    0.90
    
    
    $
    0.76
 26




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  (13) Contingencies
    Hau et al Litigation (formerly known as Jordan et al)
  Dentists Association Litigation
   27




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
   Colón Litigation
  Puerto Rico Center for Municipal Revenue Collection
    Claims by Heirs of Former Shareholders
  28




---



##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  ACODESE Investigation
   (14) Subsequent Event
  29




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  
 Cautionary Statement Regarding Forward-Looking Information
  
 Overview
     30




---



##### Table of Contents



Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,(Dollar amounts in millions
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Premiums earned, net:Managed care
    
    $
    452.5
    
    
    $
    414.9
    
    
    $
    896.3
    
    
    $
    818.3Life insurance
    
    
    26.1
    
    
    
    25.1
    
    
    
    52.0
    
    
    
    49.6Property and casualty insurance
    
    
    25.2
    
    
    
    24.0
    
    
    
    50.7
    
    
    
    48.6Intersegment premiums earned
    
    
    (1.0
    )
    
    
    (0.9
    )
    
    
    (2.1
    )
    
    
    (2.0
    )Consolidated premiums earned, net
    
    $
    502.8
    
    
    $
    463.1
    
    
    $
    996.9
    
    
    $
    914.5Administrative service fees:Managed care
    
    $
    12.9
    
    
    $
    12.0
    
    
    $
    26.2
    
    
    $
    21.5Intersegment administrative service fees
    
    
    (0.7
    )
    
    
    (0.7
    )
    
    
    (1.5
    )
    
    
    (1.3
    )Consolidated administrative service fees
    
    $
    12.2
    
    
    $
    11.3
    
    
    $
    24.7
    
    
    $
    2 0.2Operating income:Managed care
    
    $
    18.5
    
    
    $
    16.2
    
    
    $
    31.1
    
    
    $
    22.0Life insurance
    
    
    4.7
    
    
    
    3.9
    
    
    
    8.5
    
    
    
    6.9Property and casualty insurance
    
    
    2.0
    
    
    
    2.8
    
    
    
    1.1
    
    
    
    4.2Intersegment and other
    
    
    0.9
    
    
    
    1.0
    
    
    
    1.7
    
    
    
    1.9Consolidated operating income
    
    $
    26.1
    
    
    $
    23.9
    
    
    $
    42.4
    
    
    $
    35.0
    
 Recent Developments
 Federal Health Reform Legislation
   31




---



##### Table of Contents




    
    Provisions requiring greater access to coverage for certain uninsured and under-insured populations and the elimination of
certain underwriting practices without adequate funding to health plans or other negative financial levy on health plans
such as restrictions in ability to charge additional premium for additional risk, including but not limited to provisions:
(i) extending dependent coverage for unmarried individuals until age 26 under their parents health coverage, (ii)
limiting a health plans ability to rescind coverage and restrict the plans ability to establish annual and lifetime
financial caps, and (iii) limiting a health plans ability to deny or limit coverage on grounds of an persons pre-existing
medical condition;
    
    Provisions restricting medical loss ratios and imposing significant penalties for non-compliance;
    
    Provisions requiring health plans to report to their members and the United States Department of Health and Human
Services (HHS) certain quality performance measures and their wellness promotion activities;
    
    Provisions that freeze premium payments to Medicare Advantage health plans beginning in 2011 and that tie such premium to
the local Medicare fee for service costs. The adjustment will be phased in over between 3 and 7 years depending on the
amount of the eventual adjustment;
    
    Provisions that tie Medicare Advantage premiums to achievement of certain quality performance measures;
    
    Other efforts or specific legislative changes to the Medicare and Medicaid programs, including changes in the bidding
process, authority of the Centers for Medicare and Medicaid Services (CMS) to deny bids, or other means of materially
reducing premiums such as through further adjustments to the risk adjustment methodology;
    
    Increased federal funding to the Reform program available for years 2014  2019;
    
    Funding provided to the Commonwealth of Puerto Rico to either establish health insurance exchanges or fund the Puerto Rico
Medicaid program at the discretion of the Governor;
    
    Increased government funding to enforcement agencies and/or changes in interpretation or application of fraud and abuse
laws;
    
    Expanded scope of authority and/or funding to audit Medicare Advantage health plans and recoup premiums or other funds by
the government or its representatives; and
    
    The increase in persons eligible for coverage under the Medicaid program in Puerto Rico may result in some persons
currently insured by us in our Commercial programs becoming eligible for, and thus moving to, the Medicaid program.
   Commonwealth of Puerto Rico Healthcare Reform Contracts (Medicaid)
  32




---



##### Table of Contents



Recent Accounting Standards
  
 Managed Care Membership
 As of June 30,2010
    
    
    2009Managed care enrollment:Commercial 1
    
    
    751,986
    
    
    
    615,138Medicaid 2
    
    
    544,887
    
    
    
    531,408Medicare3
    
    
    65,008
    
    
    
    70,802Total
    
    
    1,361,881
    
    
    
    1,217,348Managed care enrollment by funding arrangement:Fully-insured
    
    
    923,691
    
    
    
    838,828Self-insured
    
    
    438,190
    
    
    
    378,520Total
    
    
    1,361,881
    
    
    
    1,217,348
 
 (1)
    
    Commercial membership includes corporate accounts, self-funded employers, individual
accounts, Medicare Supplement, U.S. Federal government employees and local government
employees.(2)
    
    Includes rated and self-funded members.(3)
    
    Includes Medicare Advantage as well as stand-alone PDP plan membership. 
 Consolidated Operating Results
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,(Dollar amounts in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Premiums earned, net
    
    $
    502.8
    
    
    
    463.1
    
    
    $
    996.9
    
    
    
    914.5Administrative service fees
    
    
    12.2
    
    
    
    11.3
    
    
    
    24.7
    
    
    
    20.2Net investment income
    
    
    12.6
    
    
    
    13.4
    
    
    
    25.1
    
    
    
    25.9Total operating revenues
    
    
    527.6
    
    
    
    487.8
    
    
    
    1,046.7
    
    
    
    960.6Net realized investment gains (losses)
    
    
    1.4
    
    
    
    (1.6
    )
    
    
    0.1
    
    
    
    (3.3
    )Net unrealized investment (loss) gain on trading securities
    
    
    (6.0
    )
    
    
    5.6
    
    
    
    (4.0
    )
    
    
    3.2Other income (expense), net
    
    
    (0.3
    )
    
    
    0.7
    
    
    
    (0.2
    )
    
    
    0.3Total revenues
    
    
    522.7
    
    
    
    492.5
    
    
    
    1,042.6
    
    
    
    960.8Benefits and expenses:Claims incurred
    
    
    424.8
    
    
    
    395.3
    
    
    
    850.7
    
    
    
    788.7Operating expenses
    
    
    76.7
    
    
    
    68.6
    
    
    
    153.6
    
    
    
    136.9Total operating expenses
    
    
    501.5
    
    
    
    463.9
    
    
    
    1,004.3
    
    
    
    925.6Interest expense
    
    
    3.4
    
    
    
    3.3
    
    
    
    6.6
    
    
    
    6.6Total benefits and expenses
    
    
    504.9
    
    
    
    467.2
    
    
    
    1,010.9
    
    
    
    932.2Income before taxes
    
    
    17.8
    
    
    
    25.3
    
    
    
    31.7
    
    
    
    28.6Income tax expense
    
    
    2.7
    
    
    
    6.6
    
    
    
    5.5
    
    
    
    6.0Net income
    
    $
    15.1
    
    
    
    18.7
    
    
    $
    26.2
    
    
    
    22.6
 33




---



##### Table of Contents



Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
 Operating Revenues
    Net Realized Investment Gains
  Net Unrealized Investment Losses on Trading Securities and Other Expense, Net
  Claims Incurred
  Operating Expenses
  Income Tax Expense
  34




---



##### Table of Contents



Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
 Operating Revenues
    Net Realized Investment Gains
  Net Unrealized Investment Losses on Trading Securities and Other Expense, Net
  Claims Incurred
  Operating Expenses
  35




---



##### Table of Contents



Managed Care Operating Results
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,(Dollar amounts in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues:Medical premiums earned, net:Commercial
    
    $
    244.0
    
    
    $
    193.0
    
    
    $
    477.9
    
    
    $
    382.9Medicaid
    
    
    90.9
    
    
    
    83.4
    
    
    
    180.2
    
    
    
    168.3Medicare
    
    
    117.6
    
    
    
    138.5
    
    
    
    238.2
    
    
    
    267.1Medical premiums earned, net
    
    
    452.5
    
    
    
    414.9
    
    
    
    896.3
    
    
    
    818.3Administrative service fees
    
    
    12.9
    
    
    
    12.0
    
    
    
    26.2
    
    
    
    21.5Net investment income
    
    
    5.1
    
    
    
    5.4
    
    
    
    10.0
    
    
    
    10.5Total operating revenues
    
    
    470.5
    
    
    
    432.3
    
    
    
    932.5
    
    
    
    850.3Medical operating costs:Medical claims incurred
    
    
    400.4
    
    
    
    370.7
    
    
    
    800.0
    
    
    
    739.8Medical operating expenses
    
    
    51.6
    
    
    
    45.4
    
    
    
    101.4
    
    
    
    88.5Total medical operating costs
    
    
    452.0
    
    
    
    416.1
    
    
    
    901.4
    
    
    
    828.3Medical operating income
    
    $
    18.5
    
    
    $
    16.2
    
    
    $
    31.1
    
    
    $
    22.0Additional data:Member months enrollment:Commercial:Fully-insured
    
    
    1,535,176
    
    
    
    1,275,849
    
    
    
    3,042,290
    
    
    
    2,536,750Self-funded
    
    
    732,849
    
    
    
    563,125
    
    
    
    1,499,132
    
    
    
    1,142,217Total Commercial member months
    
    
    2,268,025
    
    
    
    1,838,974
    
    
    
    4,541,422
    
    
    
    3,678,967Medicaid:Fully-insured
    
    
    1,030,703
    
    
    
    1,007,915
    
    
    
    2,043,539
    
    
    
    1,986,506Self-funded
    
    
    593,594
    
    
    
    572,873
    
    
    
    1,182,778
    
    
    
    1,133,451Total Reform member months
    
    
    1,624,297
    
    
    
    1,580,788
    
    
    
    3,226,317
    
    
    
    3,119,957Medicare:Medicare Advantage
    
    
    167,640
    
    
    
    186,945
    
    
    
    341,295
    
    
    
    385,561Stand-alone PDP
    
    
    28,256
    
    
    
    29,314
    
    
    
    56,381
    
    
    
    58,971Total Medicare member months
    
    
    195,896
    
    
    
    216,259
    
    
    
    397,676
    
    
    
    444,532Total member months
    
    
    4,088,218
    
    
    
    3,636,021
    
    
    
    8,165,415
    
    
    
    7,243,456Medical loss ratio
    
    
    88.5
    %
    
    
    89.3
    %
    
    
    89.3
    %
    
    
    90.4
    %Operating expense ratio
    
    
    11.1
    %
    
    
    10.6
    %
    
    
    11.0
    %
    
    
    10.5
    %
 Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
 Medical Operating Revenues
  
    
    Medical premiums generated by the Commercial business increased by $51.0 million, or 26.4%,
to $244.0 million during the three months ended June 30, 2010. This fluctuation is primarily
the result of an increase in member months enrollment by 259,327, or 20.3%, and an increase in
average premium rates in rated group policies of approximately 5.4%. Increase in member
months was primarily attributed to new groups acquired during the period and new members
acquired from LCA effective July 1, 2009, which amounted to 88,782 member months, or 34.2% of
the increase in member months enrollment experienced during this quarter.
    
    Medical premiums earned in the Medicaid business increased by $7.5 million, or 9.0%, to $90.9
million during the three months ended June 30, 2010. This fluctuation is due to an increase
in member months enrollment in the fully-insured membership by 22,788, or 2.3%. In addition,
in the 2009 quarter, an adjustment to premiums
 36




---



##### Table of Contents



of approximately $4.2 million was recorded to
provide for unresolved reconciling items with the Government of Puerto Rico.
    
    Medical premiums generated by the Medicare business decreased during the three months ended
June 30, 2010 by $20.9 million, or 15.1%, to $117.6 million. The fluctuation in premiums is
primarily the result of lower final risk score adjustments received from CMS in 2010 as
compared to 2009. The three months ended June 30, 2010 and 2009 include the net effect of
approximately $4.0 million and $12.9 million, respectively, related to CMS final risk score
adjustments corresponding to prior periods. In addition, there was a decrease in the member
months enrollment of this business by 20,363, or 9.4%, when compared with the same period in
2009, mostly reflected in our dual-eligible product.
  Medical Claims Incurred
  
    
    The medical claims incurred of the Commercial business increased by $46.2 million, or 25.9%,
during the 2010 period and its MLR decreased by 0.4 percentage points. This fluctuation
relates primarily to the increase in member months enrollment of 259,327, or 20.3%. The lower
MLR is primarily due to the effect of prior period reserve developments in the 2010 and 2009
periods. Excluding the effect of prior period reserve developments, the MLR increased by 1.4
percentage points, mostly resulting from a higher utilization trend in the current quarter.
    
    The medical claims incurred of the Medicaid business increased by $5.1 million, or 6.7%, and
its MLR decreased by 1.9 percentage points during the three months ended June 30, 2010. The
decrease in MLR is primarily due to the effect of prior period reserve developments in the
2010 and 2009 periods and the 2009 premium adjustment to provide for unresolved reconciling
items with the Government of Puerto Rico. Excluding the effect of these items in the 2010 and
2009 periods, the MLR increased 4.1 percentage points mostly resulting from lower premium
yields during the 2010 period due to the extension of the prior years contract with the
government without premium rate increases.
    
    The medical claims incurred of the Medicare business decreased by $21.6 million, or 18.6%
during the 2010 period primarily due to a lower membership by 20,363 member months, or 9.4%,
and its MLR was 80.0%, 3.5 percentage points lower than the MLR for same period of the prior
year. Excluding the effect of prior period reserve developments in the 2010 and 2009 period
and risk-score premium adjustments, the MLR decreased by 2.2 percentage points. This decrease
results from higher premium rates in our Medicare products, lower utilization and a new
risk-sharing arrangement with our providers in the non-dual product.
 Medical Operating Expenses
  37




---



##### Table of Contents



Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
 Medical Operating Revenues
  
    
    Medical premiums generated by the Commercial business increased by $95.0 million, or 24.8%,
to $477.9 million during the six months ended June 30, 2010. This fluctuation is primarily
the result of an increase in member months enrollment by 505,540, or 19.9%, and an increase in
average premium rates in rated group policies of approximately 5.1%. Increase in member
months was attributed to new members acquired from LCA effective July 1, 2009, which amount to
190,600 member months, or 37.7% of the increase in member months enrollment experienced during
this quarter, and to new groups acquired during the period.
    
    Medical premiums earned in the Medicaid business increased by $11.9 million, or 7.1%, to
$180.2 million during the six months ended June 30, 2010. This fluctuation is due to an
increase in the member months enrollment in the fully-insured membership by 57,033, or 2.9%.
In addition, the 2009 period includes a premium reduction adjustment of approximately $5.5
million to provide for unresolved reconciling items with the Government of Puerto Rico.
    
    Medical premiums generated by the Medicare business decreased by $28.9 million, or 10.8%, to
$238.2 million, primarily due to a decrease in member month enrollment of 46,856, or 10.5%,
when compared with the same period in 2009. The fluctuation in premiums also results from a
lower final risk score adjustments received from CMS in 2010 as compared to 2009. The six
months ended June 30, 2010 and 2009 include the net effect of approximately $3.2 million and
$8.8 million, respectively, related to CMS final risk score adjustments corresponding to prior
periods. These fluctuations were offset in part by higher average premium rates, particularly
in our dual eligible product.
  Medical Claims Incurred
  
    
    The medical claims incurred of the Commercial business increased by $86.8 million, or 24.8%,
during the 2010 period and its MLR increased by 0.1 percentage points. This fluctuation
relates primarily to the increase in member months enrollment of 505,540, or 19.9%. The
higher MLR is primarily due to the effect of prior period reserve developments in the 2010 and
2009 periods. Excluding the effect of prior period reserve developments, the MLR decreased by
0.6 percentage points, mostly resulting from a higher overall trend in premium increases as
compared to cost trends.
    
    The medical claims incurred of the Medicaid business increased by $20.6 million, or 13.7%,
during the 2010 period and its MLR increased by 5.6 percentage points during the six months
ended June 30, 2010, to 94.8%. The MLR of this business is
affected by the 2009 premium
adjustment to provide for unresolved reconciling items with the Government of Puerto Rico and
prior period reserve developments. Considering the effect of these items in the 2009 and 2010
periods, the MLR increased by 3.8 percentage points during the 2010 period mostly resulting
from a lower premium yield during the 2010 period due to the extension of the prior years
contract with the government without premium rate increases.
    
    The medical claims incurred of the Medicare business decreased by $47.2 million, or 19.7%,
during the 2010 period primarily due to lower membership and MLR. The MLR was 80.9%, 8.9
percentage points lower than the MLR for same period in 2009. The lower MLR mostly results
from the effect of prior period reserve developments in 2010 and 2009 and risk score premium adjustments. Excluding the effect of prior
period reserve developments in the 2010 and 2009 period and risk-score premium adjustments, the
MLR decreased by
 38




---



##### Table of Contents



Medical Operating Expenses
  
 Life Insurance Operating Results
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,(Dollar amounts in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues:Premiums earned, net:Premiums earned
    
    $
    27.5
    
    
    $
    26.7
    
    
    $
    54.8
    
    
    $
    52.7Premiums earned ceded
    
    
    (1.4
    )
    
    
    (1.5
    )
    
    
    (2.8
    )
    
    
    (3.1
    )Net premiums earned
    
    
    26.1
    
    
    
    25.2
    
    
    
    52.0
    
    
    
    49.6Commission income on reinsurance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Premiums earned, net
    
    
    26.1
    
    
    
    25.2
    
    
    
    52.0
    
    
    
    49.7Net investment income
    
    
    4.2
    
    
    
    4.4
    
    
    
    8.4
    
    
    
    8.4Total operating revenues
    
    
    30.3
    
    
    
    29.6
    
    
    
    60.4
    
    
    
    58.1Operating costs:Policy benefits and claims incurred
    
    
    11.9
    
    
    
    13.0
    
    
    
    24.3
    
    
    
    25.7Underwriting and other expenses
    
    
    13.7
    
    
    
    12.7
    
    
    
    27.6
    
    
    
    25.5Total operating costs
    
    
    25.6
    
    
    
    25.7
    
    
    
    51.9
    
    
    
    51.2Operating income
    
    $
    4.7
    
    
    $
    3.9
    
    
    $
    8.5
    
    
    $
    6.9Additional data:Loss ratio
    
    
    45.6
    %
    
    
    51.6
    %
    
    
    46.7
    %
    
    
    51.7
    %Operating expense ratio
    
    
    52.5
    %
    
    
    50.4
    %
    
    
    53.1
    %
    
    
    51.3
    %
 Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
 Operating Revenues
  Policy Benefits and Claims Incurred
  39




---



##### Table of Contents



Underwriting and Other Expenses
  Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
 Operating Revenues
  Policy Benefits and Claims Incurred
  Underwriting and Other Expenses
  
 Property and Casualty Insurance Operating Results
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,(Dollar amounts in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues:Premiums earned, net:Premiums written
    
    $
    34.6
    
    
    $
    37.6
    
    
    $
    70.8
    
    
    $
    70.7Premiums ceded
    
    
    (14.9
    )
    
    
    (16.7
    )
    
    
    (29.4
    )
    
    
    (29.5
    )Change in unearned premiums
    
    
    5.5
    
    
    
    3.1
    
    
    
    9.3
    
    
    
    7.4Premiums earned, net
    
    
    25.2
    
    
    
    24.0
    
    
    
    50.7
    
    
    
    48.6Net investment income
    
    
    2.9
    
    
    
    3.0
    
    
    
    5.6
    
    
    
    5.8Total operating revenues
    
    
    28.1
    
    
    
    27.0
    
    
    
    56.3
    
    
    
    54.4Operating costs:Claims incurred
    
    
    12.5
    
    
    
    11.6
    
    
    
    26.3
    
    
    
    23.2Underwriting and other expenses
    
    
    13.6
    
    
    
    12.6
    
    
    
    28.9
    
    
    
    27.0Total operating costs
    
    
    26.1
    
    
    
    24.2
    
    
    
    55.2
    
    
    
    50.2Operating income
    
    $
    2.0
    
    
    $
    2.8
    
    
    $
    1.1
    
    
    $
    4.2Additional data:Loss ratio
    
    
    49.6
    %
    
    
    48.3
    %
    
    
    51.9
    %
    
    
    47.7
    %Operating expense ratio
    
    
    54.0
    %
    
    
    52.5
    %
    
    
    57.0
    %
    
    
    55.6
    %Combined ratio
    
    
    103.6
    %
    
    
    100.8
    %
    
    
    108.9
    %
    
    
    103.3
    %
 40




---



##### Table of Contents



Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
 Operating Revenues
   Claims Incurred
  Underwriting and Other Expenses
  Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
 Operating Revenues
    Claims incurred
  41




---



##### Table of Contents



Underwriting and other expenses
  
 Liquidity and Capital Resources
 Cash Flows
  Six months endedJune 30,(Dollar amounts in millions)
    
    2010
    
    
    2009Sources of cash:Cash provided by operating activities
    
    $
    31.6
    
    
    $
    49.1Net proceeds from short-term borrowings
    
    
    17.7
    
    
    
    Proceeds from policyholder deposits
    
    
    5.8
    
    
    
    2.5Total sources of cash
    
    
    55.1
    
    
    
    51.6Uses of cash:Net purchases of investment securities
    
    
    (43.7
    )
    
    
    (9.6
    )Capital expenditures
    
    
    (10.2
    )
    
    
    (8.9
    )Repurchase and retirement of common stock
    
    
    
    
    
    
    (22.0
    )Payments of long-term borrowings
    
    
    (0.8
    )
    
    
    (0.8
    )Surrenders of policyholder deposits
    
    
    (4.0
    )
    
    
    (3.6
    )Other
    
    
    (2.5
    )
    
    
    (10.1
    )Total uses of cash
    
    
    (61.2
    )
    
    
    (55.0
    )Net decrease in cash and cash equivalents
    
    $
    (6.1
    )
    
    $
    (3.4
    )
      Financing and Financing Capacity
  42




---



##### Table of Contents




    
    On January 31, 2006, we issued and sold $35.0 million of our 6.7% senior unsecured notes payable due January 2021 (the 6.7%
notes).
    
    On December 21, 2005, we issued and sold $60.0 million of our 6.6% senior unsecured notes due December 2020 (the 6.6%
notes).
    
    On September 30, 2004, we issued and sold $50.0 million of our 6.3% senior unsecured notes due September 2019 (the 6.3%
notes).
      
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  43




---



##### Table of Contents



Changes in Internal Controls Over Financial Reporting
  
 Part II  Other Information
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information
  44




---



##### Table of Contents



Item 6.
    
    Exhibits
 Exhibits
    
    DescriptionExhibit 3(ii)
    
    Amended Restated Bylaws of Triple-S
Management Corporation (incorporated herein by reference to Exhibit 3.1 to TSMs
Current Report on Form 8-K filed on June 11, 2010 (File
No. 001-33865)).Exhibit 10.1*
    
    Extension to the agreement between the Puerto Rico Health
Insurance Administration and TSS for the provision of health
insurance coverage to eligible population in the North and
South-West Regions until June 30, 2010.Exhibit 10.2*
    
    Extension to the agreement between the Puerto Rico Health
Insurance Administration and TSS to act as third party
administrator in the Metro-North Region until September 30,
2010.Exhibit 10.3*
    
    Extension to the agreement between the Puerto Rico Health
Insurance Administration and TSS for the provision of health
insurance coverage to eligible population in the North and
South-West Regions until September 30, 2010.11
    
    Statement re computation of per share earnings; an exhibit
describing the computation of the earnings per share for the
three months and six months ended June 30, 2010 and 2009 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.31.1*
    
    Certification of the President and Chief Executive Officer
required by Rule 13a-14(a)/15d-14(a).31.2*
    
    Certification of the Vice President of Finance and Chief
Financial Officer required by Rule 13a-14(a)/15d-14(a).32.1*
    
    Certification of the President and Chief Executive Officer
required pursuant to 18 U.S.C Section 1350.32.2*
    
    Certification of the Vice President of Finance and Chief
Financial Officer required pursuant to 18 U.S.C Section
1350.
  
 *
    
    Filed herein. 45




---



##### Table of Contents



SIGNATURES
  Triple-S Management Corporation
RegistrantDate:      August 4, 2010
    By:
    /s/ Ramón M. Ruiz-ComasRamón M. Ruiz-Comas, CPAPresident and
Chief Executive OfficerDate:      August 4, 2010
    By:
    /s/ Juan J. RománJuan J. Román, CPAVice President of Finance

and Chief Financial Officer

Principal Accounting Officer 46