##### 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, 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
(State or other jurisdiction of
incorporation or organization)
    
    66-0555678
(I.R.S. Employer Identification No.)1441 F.D. Roosevelt Avenue
San Juan, Puerto Rico
(Address of principal executive offices)
    
    00920
(Zip code)
 (787) 749-4949
 Not applicable
 þ o
 o þ
  Title of each class
    
    Outstanding at June 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 June 30, 2005 and December 31, 2004
    
    3Consolidated Statements of Operations for the three months and six
months ended June 30, 2005 and 2004
    
    4Consolidated Statements of Stockholders Equity and Comprehensive
Income for the six months ended June 30, 2005 and 2004
    
    5Consolidated Statements of Cash Flows for the six months ended June
30, 2005 and 2004
    
    6Notes to Consolidated Financial Statements
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of 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
    
    42Item 6. Exhibits
    
    43SIGNATURES
    
    44EX-3.1 BY-LAWS OF TRIPLE-S MANAGEMENT CORPORATIONEX-10.1 EMPLOYMENT CONTRACT WITH FRANCISCO JOGLAR-PESQUERA, MDEX-31.1 SECTION 302 CERTIFICATION OF THE PRESIDENT AND CEOEX-31.2 SECTION 302 CERTIFICATION OF THE VP OF FINANCE AND CFOEX-32.1 SECTION 906 CERTIFICATION OF THE PRESIDENT AND CEOEX-32.2 SECTION 906 CERTIFICATION OF THE VP OF FINANCE 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)June 30,
    
    
    December 31,2005
    
    
    2004ASSETSInvestments and cash:Securities held for trading, at fair value:Fixed maturities
    
    $
    46,786
    
    
    
    72,423Equity securities
    
    
    81,590
    
    
    
    86,596Securities available for sale, at fair value:Fixed maturities
    
    
    461,119
    
    
    
    444,637Equity securities
    
    
    52,793
    
    
    
    59,186Securities held to maturity, at amortized cost:Fixed maturities
    
    
    22,193
    
    
    
    14,280Cash and cash equivalents
    
    
    35,036
    
    
    
    35,115Total investments and cash
    
    
    699,517
    
    
    
    712,237Premiums and other receivables, net
    
    
    122,051
    
    
    
    113,323Deferred policy acquisition costs
    
    
    18,773
    
    
    
    18,712Property and equipment, net
    
    
    33,020
    
    
    
    32,364Other assets
    
    
    51,583
    
    
    
    43,021Total assets
    
    $
    924,944
    
    
    
    919,657LIABILITIES AND STOCKHOLDERS EQUITYClaim liabilities:Claims processed and incomplete
    
    $
    143,999
    
    
    
    137,282Unreported losses
    
    
    142,022
    
    
    
    127,324Unpaid loss-adjustment expenses
    
    
    14,676
    
    
    
    14,719Total claim liabilities
    
    
    300,697
    
    
    
    279,325Unearned premiums
    
    
    82,882
    
    
    
    84,583Annuity contracts
    
    
    37,281
    
    
    
    34,071Liability to Federal Employees Health Benefits Program
    
    
    6,806
    
    
    
    9,791Accounts payable and accrued liabilities
    
    
    100,904
    
    
    
    100,388Short-term borrowings
    
    
    
    
    
    
    1,700Income tax payable
    
    
    
    
    
    
    1,827Net deferred tax liability
    
    
    
    
    
    
    1,969Additional minimum pension liability
    
    
    9,999
    
    
    
    8,840Long-term borrowings
    
    
    92,547
    
    
    
    95,730Total liabilities
    
    
    631,116
    
    
    
    618,224Stockholders equity:Common stock, $40 par value. Authorized 12,500 shares;
issued and outstanding 8,904 at June 30, 2005 and
December 31, 2004
    
    
    356
    
    
    
    356Additional paid-in capital
    
    
    150,408
    
    
    
    150,408Retained earnings
    
    
    133,732
    
    
    
    134,531Accumulated other comprehensive income
    
    
    9,332
    
    
    
    16,138Total stockholders equity
    
    
    293,828
    
    
    
    301,433Total liabilities and stockholders equity
    
    $
    924,944
    
    
    
    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
    
    
    Six months endedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004REVENUE:Premiums earned, net
    
    $
    339,618
    
    
    
    322,896
    
    
    
    673,007
    
    
    
    641,542Amounts attributable to self-funded
arrangements
    
    
    52,439
    
    
    
    46,045
    
    
    
    104,354
    
    
    
    89,083Less amounts attributable to claims under
self-funded arrangements
    
    
    (49,302
    )
    
    
    (42,485
    )
    
    
    (97,842
    )
    
    
    (83,067
    )342,755
    
    
    
    326,456
    
    
    
    679,519
    
    
    
    647,558Net investment income
    
    
    7,217
    
    
    
    6,393
    
    
    
    14,281
    
    
    
    12,975Net realized investment gains
    
    
    1,363
    
    
    
    1,365
    
    
    
    4,677
    
    
    
    2,748Net unrealized investment loss on trading securities
    
    
    (634
    )
    
    
    (3,252
    )
    
    
    (6,427
    )
    
    
    (1,433
    )Other income, net
    
    
    (142
    )
    
    
    1,120
    
    
    
    490
    
    
    
    1,686Total revenue
    
    
    350,559
    
    
    
    332,082
    
    
    
    692,540
    
    
    
    663,534BENEFITS AND EXPENSES:Claims incurred
    
    
    297,901
    
    
    
    286,246
    
    
    
    600,824
    
    
    
    561,994Operating expenses, net of reimbursement
for services
    
    
    45,453
    
    
    
    42,635
    
    
    
    89,219
    
    
    
    82,473Interest expense
    
    
    1,856
    
    
    
    931
    
    
    
    3,644
    
    
    
    1,832Total benefits and expenses
    
    
    345,210
    
    
    
    329,812
    
    
    
    693,687
    
    
    
    646,299Income (loss) before taxes
    
    
    5,349
    
    
    
    2,270
    
    
    
    (1,147
    )
    
    
    17,235INCOME TAX EXPENSE (BENEFIT):Current
    
    
    758
    
    
    
    1,248
    
    
    
    1,979
    
    
    
    4,546Deferred
    
    
    183
    
    
    
    (457
    )
    
    
    (2,327
    )
    
    
    54Total income taxes
    
    
    941
    
    
    
    791
    
    
    
    (348
    )
    
    
    4,600Net income
    
    $
    4,408
    
    
    
    1,479
    
    
    
    (799
    )
    
    
    12,635Basic net income per share
    
    $
    495
    
    
    
    166
    
    
    
    (90
    )
    
    
    1,411
  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
    
    
    (799
    )
    
    
    12,635Net unrealized change in investment securities
    
    
    (6,983
    )
    
    
    (6,555
    )Net change in fair value of cash flow hedges
    
    
    177
    
    
    
    373Total comprehensive income (loss)
    
    
    (7,605
    )
    
    
    6,453BALANCE AT JUNE 30
    
    $
    293,828
    
    
    
    260,703
  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)
 Six months endedJune 30,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Premiums collected
    
    $
    664,493
    
    
    
    631,773Cash paid to suppliers and employees
    
    
    (96,566
    )
    
    
    (84,127
    )Claims, losses and benefits paid
    
    
    (578,955
    )
    
    
    (529,526
    )Interest received
    
    
    14,322
    
    
    
    13,487Income taxes paid
    
    
    (6,482
    )
    
    
    (40,638
    )Proceeds from trading securities sold or matured:Fixed maturities sold
    
    
    57,795
    
    
    
    31,611Equity securities
    
    
    14,021
    
    
    
    15,526Acquisitions of investments in trading portfolio:Fixed maturities
    
    
    (32,144
    )
    
    
    (33,686
    )Equity securities
    
    
    (11,784
    )
    
    
    (27,048
    )Interest paid
    
    
    (3,064
    )
    
    
    (1,362
    )Expense reimbursement from Medicare
    
    
    6,986
    
    
    
    7,547Net cash provided by (used in) operating activities
    
    
    28,622
    
    
    
    (16,443
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from investments sold or matured:Securities available for sale:Fixed maturities sold
    
    
    1,172
    
    
    
    21,464Fixed maturities matured
    
    
    7,920
    
    
    
    46,441Equity securities
    
    
    2,670
    
    
    
    1,476Securities held to maturity:Fixed maturities matured
    
    
    594
    
    
    
    2,762Acquisitions of investments:Securities available for sale:Fixed maturities
    
    
    (26,796
    )
    
    
    (55,415
    )Equity securities
    
    
    (2,822
    )
    
    
    (1,024
    )Securities held to maturity:Fixed maturities
    
    
    (8,494
    )
    
    
    (2,612
    )Capital expenditures
    
    
    (3,143
    )
    
    
    (1,676
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    6Net cash (used in) provided by investing activities
    
    
    (28,899
    )
    
    
    11,422CASH FLOWS FROM FINANCING ACTIVITIES:Change in outstanding checks in excess of bank balances
    
    
    2,451
    
    
    
    9,512Payments of short-term borrowings
    
    
    (77,285
    )
    
    
    (6,200
    )Proceeds from short-term borrowings
    
    
    75,585
    
    
    
    6,200Payments of long-term borrowings
    
    
    (3,183
    )
    
    
    (1,688
    )Redemption of common stock
    
    
    
    
    
    
    (5
    )Proceeds from annuity contracts
    
    
    5,740
    
    
    
    7,975Surrenders of annuity contracts
    
    
    (3,110
    )
    
    
    (2,265
    )Net cash provided by financing activities
    
    
    198
    
    
    
    13,529Net (decrease) increase in cash and cash equivalents
    
    
    (79
    )
    
    
    8,508Cash and cash equivalents at beginning of the period
    
    
    35,115
    
    
    
    48,280Cash and cash equivalents at end of the period
    
    $
    35,036
    
    
    
    56,788
  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 JUNE 30, 2005Premiums earned, net
    
    $
    190,138
    
    
    
    124,197
    
    
    
    21,102
    
    
    
    4,181
    
    
    
    339,618Amounts attributable to self-funded arrangements
    
    
    52,439
    
    
    
    
    
    

    
    
    
    
    
    
    
    
    
    52,439Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (49,302
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,302
    )Intersegment premiums earned/service revenues
    
    
    1,029
    
    
    
    
    
    
    
    
    
    
    
    11,439
    
    
    
    12,468194,304
    
    
    
    124,197
    
    
    
    21,102
    
    
    
    15,620
    
    
    
    355,223Net investment income
    
    
    3,410
    
    
    
    749
    
    
    
    2,180
    
    
    
    761
    
    
    
    7,100Realized gain (loss) on sale of securities
    
    
    1,445
    
    
    
    
    
    
    
    (105
    )
    
    
    23
    
    
    
    1,363Unrealized gain (loss) on trading securities
    
    
    (740
    )
    
    
    
    
    
    
    16
    
    
    
    90
    
    
    
    (634
    )Other
    
    
    (79
    )
    
    
    (6
    )
    
    
    (168
    )
    
    
    58
    
    
    
    (195
    )Total revenue
    
    $
    198,340
    
    
    
    124,940
    
    
    
    23,025
    
    
    
    16,552
    
    
    
    362,857Net income (loss)
    
    $
    5,276
    
    
    
    (4,280
    )
    
    
    2,944
    
    
    
    432
    
    
    
    4,372Claims incurred
    
    $
    164,320
    
    
    
    120,823
    
    
    
    10,247
    
    
    
    2,511
    
    
    
    297,901Operating expenses
    
    $
    25,899
    
    
    
    9,722
    
    
    
    9,108
    
    
    
    13,290
    
    
    
    58,019Depreciation expense, included in operating expenses
    
    $
    858
    
    
    
    
    
    
    
    90
    
    
    
    20
    
    
    
    968Interest expense
    
    $
    1,114
    
    
    
    232
    
    
    
    
    
    
    
    300
    
    
    
    1,646Income tax expense (benefit)
    
    $
    1,731
    
    
    
    (1,557
    )
    
    
    726
    
    
    
    19
    
    
    
    919
 *
    
    Includes segments which are not required to be reported separately. These segments include
the life and disability insurance segment, the data processing services organization as well
as the third-party administrator of health insurance services.
 8




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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 *
    
    
    TotalTHREE MONTHS ENDED JUNE 30, 2004Premiums earned, net
    
    $
    179,017
    
    
    
    119,601
    
    
    
    20,209
    
    
    
    4,069
    
    
    
    322,896Amounts attributable to self-funded arrangements
    
    
    46,045
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,045Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (42,485
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,485
    )Intersegment premiums earned/service revenues
    
    
    1,077
    
    
    
    
    
    
    
    
    
    
    
    12,316
    
    
    
    13,393183,654
    
    
    
    119,601
    
    
    
    20,209
    
    
    
    16,385
    
    
    
    339,849Net investment income
    
    
    3,025
    
    
    
    768
    
    
    
    1,834
    
    
    
    680
    
    
    
    6,307Realized gain (loss) on sale of securities
    
    
    1,494
    
    
    
    (83
    )
    
    
    (14
    )
    
    
    (32
    )
    
    
    1,365Unrealized loss on trading securities
    
    
    (3,158
    )
    
    
    
    
    
    
    (24
    )
    
    
    (70
    )
    
    
    (3,252
    )Other
    
    
    142
    
    
    
    (7
    )
    
    
    710
    
    
    
    95
    
    
    
    940Total revenue
    
    $
    185,157
    
    
    
    120,279
    
    
    
    22,715
    
    
    
    17,058
    
    
    
    345,209Net income (loss)
    
    $
    (130
    )
    
    
    727
    
    
    
    1,445
    
    
    
    (502
    )
    
    
    1,540Claims incurred
    
    $
    162,616
    
    
    
    109,605
    
    
    
    10,501
    
    
    
    3,524
    
    
    
    286,246Operating expenses
    
    $
    22,619
    
    
    
    9,050
    
    
    
    10,719
    
    
    
    13,559
    
    
    
    55,947Depreciation expense, included in operating expenses
    
    $
    934
    
    
    
    
    
    
    
    121
    
    
    
    28
    
    
    
    1,083Interest expense
    
    $
    286
    
    
    
    80
    
    
    
    
    
    
    
    248
    
    
    
    614Income tax expense (benefit)
    
    $
    (234
    )
    
    
    817
    
    
    
    50
    
    
    
    229
    
    
    
    862
 *
    
    Includes segments which are not required to be reported separately. These segments include
the life and disability insurance segment, the data processing services organization as well
as 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 *
    
    
    TotalSIX MONTHS ENDED JUNE 30, 2005Premiums earned, net
    
    $
    374,438
    
    
    
    247,337
    
    
    
    43,198
    
    
    
    8,034
    
    
    
    673,007Amounts attributable to self-funded arrangements
    
    
    104,354
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,354Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (97,842
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97,842
    )Intersegment premiums earned/service revenues
    
    
    2,105
    
    
    
    
    
    
    
    
    
    
    
    25,077
    
    
    
    27,182383,055
    
    
    
    247,337
    
    
    
    43,198
    
    
    
    33,111
    
    
    
    706,701Net investment income
    
    
    6,823
    
    
    
    1,490
    
    
    
    4,285
    
    
    
    1,472
    
    
    
    14,070Realized gain (loss) on sale of securities
    
    
    3,548
    
    
    
    (25
    )
    
    
    1,071
    
    
    
    83
    
    
    
    4,677Unrealized loss on trading securities
    
    
    (5,546
    )
    
    
    
    
    
    
    (777
    )
    
    
    (104
    )
    
    
    (6,427
    )Other
    
    
    109
    
    
    
    (11
    )
    
    
    170
    
    
    
    120
    
    
    
    388Total revenue
    
    $
    387,989
    
    
    
    248,791
    
    
    
    47,947
    
    
    
    34,682
    
    
    
    719,409Net income (loss)
    
    $
    (1,527
    )
    
    
    (5,191
    )
    
    
    5,602
    
    
    
    87
    
    
    
    (1,029
    )Claims incurred
    
    $
    337,149
    
    
    
    236,911
    
    
    
    21,620
    
    
    
    5,144
    
    
    
    600,824Operating expenses
    
    $
    50,139
    
    
    
    18,636
    
    
    
    19,449
    
    
    
    28,677
    
    
    
    116,901Depreciation expense, included in operating expenses
    
    $
    1,683
    
    
    
    
    
    
    
    197
    
    
    
    59
    
    
    
    1,939Interest expense
    
    $
    2,172
    
    
    
    436
    
    
    
    
    
    
    
    579
    
    
    
    3,187Income tax expense (benefit)
    
    $
    56
    
    
    
    (2,001
    )
    
    
    1,276
    
    
    
    195
    
    
    
    (474
    )
 *
    
    Includes segments which are not required to be reported separately. These segments include
the life and disability insurance segment, the data processing services organization as well
as the third-party administrator of health insurance services.
 10




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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 *
    
    
    TotalSIX MONTHS ENDED JUNE 30, 2004Premiums earned, net
    
    $
    353,522
    
    
    
    238,999
    
    
    
    40,992
    
    
    
    8,029
    
    
    
    641,542Amounts attributable to self-funded arrangements
    
    
    89,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,083Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (83,067
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,067
    )Intersegment premiums earned/service revenues
    
    
    1,981
    
    
    
    
    
    
    
    
    
    
    
    23,853
    
    
    
    25,834361,519
    
    
    
    238,999
    
    
    
    40,992
    
    
    
    31,882
    
    
    
    673,392Net investment income
    
    
    6,170
    
    
    
    1,608
    
    
    
    3,688
    
    
    
    1,338
    
    
    
    12,804Realized gain (loss) on sale of securities
    
    
    2,643
    
    
    
    128
    
    
    
    21
    
    
    
    (44
    )
    
    
    2,748Unrealized gain (loss) on trading securities
    
    
    (1,756
    )
    
    
    
    
    
    
    258
    
    
    
    65
    
    
    
    (1,433
    )Other
    
    
    194
    
    
    
    (17
    )
    
    
    1,272
    
    
    
    128
    
    
    
    1,577Total revenue
    
    $
    368,770
    
    
    
    240,718
    
    
    
    46,231
    
    
    
    33,369
    
    
    
    689,088Net income
    
    $
    5,917
    
    
    
    2,371
    
    
    
    4,773
    
    
    
    (263
    )
    
    
    12,798Claims incurred
    
    $
    315,856
    
    
    
    218,820
    
    
    
    21,128
    
    
    
    6,190
    
    
    
    561,994Operating expenses
    
    $
    44,613
    
    
    
    17,802
    
    
    
    19,428
    
    
    
    26,621
    
    
    
    108,464Depreciation expense, included in operating expenses
    
    $
    1,903
    
    
    
    
    
    
    
    242
    
    
    
    56
    
    
    
    2,201Interest expense
    
    $
    575
    
    
    
    149
    
    
    
    
    
    
    
    470
    
    
    
    1,194Income tax expense
    
    $
    1,809
    
    
    
    1,576
    
    
    
    902
    
    
    
    351
    
    
    
    4,638
 *
    
    Includes segments which are not required to be reported separately. These segments include the
life and disability insurance segment, the data processing services organization as well as the
third-party administrator of health insurance services.
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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 *
    
    
    TotalAS OF JUNE 30, 2005Segment assets
    
    $
    454,872
    
    
    
    75,019
    
    
    
    289,079
    
    
    
    93,554
    
    
    
    912,524Significant noncash item:Net change in unrealized gain on securities
available for sale
    
    $
    (5,142
    )
    
    
    (324
    )
    
    
    (957
    )
    
    
    (568
    )
    
    
    (6,991
    )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
    )
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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
    
    
    Six months endedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004TOTAL REVENUETotal revenues for reportable segments
    
    $
    346,305
    
    
    
    328,151
    
    
    
    684,727
    
    
    
    655,719Total revenues for other segments
    
    
    16,552
    
    
    
    17,058
    
    
    
    34,682
    
    
    
    33,369362,857
    
    
    
    345,209
    
    
    
    719,409
    
    
    
    689,088Elimination of intersegment earned premiums
    
    
    (1,029
    )
    
    
    (1,077
    )
    
    
    (2,105
    )
    
    
    (1,981
    )Elimination of intersegment service revenues
    
    
    (11,439
    )
    
    
    (12,316
    )
    
    
    (25,077
    )
    
    
    (23,853
    )Unallocated amount  revenues from external sources
    
    
    170
    
    
    
    266
    
    
    
    313
    
    
    
    280(12,298
    )
    
    
    (13,127
    )
    
    
    (26,869
    )
    
    
    (25,554
    )Consolidated total revenue
    
    $
    350,559
    
    
    
    332,082
    
    
    
    692,540
    
    
    
    663,534NET INCOMENet income (loss) for reportable segments
    
    $
    3,940
    
    
    
    2,042
    
    
    
    (1,116
    )
    
    
    13,061Net income (loss) for other segments
    
    
    432
    
    
    
    (502
    )
    
    
    87
    
    
    
    (263
    )4,372
    
    
    
    1,540
    
    
    
    (1,029
    )
    
    
    12,798Elimination of TSM charges:Rent expense
    
    
    1,617
    
    
    
    1,310
    
    
    
    3,241
    
    
    
    2,883Interest expense
    
    
    300
    
    
    
    158
    
    
    
    556
    
    
    
    3171,917
    
    
    
    1,468
    
    
    
    3,797
    
    
    
    3,200Unallocated amounts related to TSM:General and administrative expenses
    
    
    (1,519
    )
    
    
    (1,391
    )
    
    
    (2,741
    )
    
    
    (2,726
    )Income tax expense
    
    
    (22
    )
    
    
    71
    
    
    
    (126
    )
    
    
    38Interest expense
    
    
    (510
    )
    
    
    (475
    )
    
    
    (1,013
    )
    
    
    (955
    )Other revenues from external sources
    
    
    170
    
    
    
    266
    
    
    
    313
    
    
    
    280(1,881
    )
    
    
    (1,529
    )
    
    
    (3,567
    )
    
    
    (3,363
    )Consolidated net income
    
    $
    4,408
    
    
    
    1,479
    
    
    
    (799
    )
    
    
    12,635
 13




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements
 RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS
 Three months ended June 30, 2005Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsClaims incurred
    
    $
    297,901
    
    
    
    
    
    
    
    297,901Operating expenses
    
    
    58,019
    
    
    
    (12,566
    )
    
    
    45,453Depreciation expense
    
    
    968
    
    
    
    272
    
    
    
    1,240Interest expense
    
    
    1,646
    
    
    
    210
    
    
    
    1,856Income tax expense
    
    
    919
    
    
    
    22
    
    
    
    941
 Three months ended June 30, 2004Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsClaims incurred
    
    $
    286,246
    
    
    
    
    
    
    
    286,246Operating expenses
    
    
    55,947
    
    
    
    (13,312
    )
    
    
    42,635Depreciation expense
    
    
    1,083
    
    
    
    281
    
    
    
    1,364Interest expense
    
    
    614
    
    
    
    317
    
    
    
    931Income tax expense (benefit)
    
    
    862
    
    
    
    (71
    )
    
    
    791
 Six months ended June 30, 2005Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsClaims incurred
    
    $
    600,824
    
    
    
    
    
    
    
    600,824Operating expenses
    
    
    116,901
    
    
    
    (27,682
    )
    
    
    89,219Depreciation expense
    
    
    1,939
    
    
    
    549
    
    
    
    2,488Interest expense
    
    
    3,187
    
    
    
    457
    
    
    
    3,644Income tax expense (benefit)
    
    
    (474
    )
    
    
    126
    
    
    
    (348
    )
 Six months ended June 30, 2004Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsClaims incurred
    
    $
    561,994
    
    
    
    
    
    
    
    561,994Operating expenses
    
    
    108,464
    
    
    
    (25,991
    )
    
    
    82,473Depreciation expense
    
    
    2,201
    
    
    
    560
    
    
    
    2,761Interest expense
    
    
    1,194
    
    
    
    638
    
    
    
    1,832Income tax expense (benefit)
    
    
    4,638
    
    
    
    (38
    )
    
    
    4,600
 *
    
    Adjustments represent TSM operations and the elimination of intersegment charges.
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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
 June 30,
    
    
    December 31,2005
    
    
    2004ASSETSTotal assets for reportable segments
    
    $
    818,970
    
    
    
    810,730Total assets for other segments
    
    
    93,554
    
    
    
    90,713912,524
    
    
    
    901,443Elimination entries  intersegment receivables and others
    
    
    (27,931
    )
    
    
    (21,717
    )Unallocated amounts related to TSM:Parent cash, cash equivalents and investments
    
    
    12,014
    
    
    
    12,236Parent net property and equipment
    
    
    25,213
    
    
    
    25,577Parent other assets
    
    
    3,124
    
    
    
    2,11840,351
    
    
    
    39,931Consolidated assets
    
    $
    924,944
    
    
    
    919,657
 OTHER SIGNIFICANT ITEMS
 As of June 30, 2005Segment
    
    
    
    
    
    
    ConsolidatedTotals
    
    
    Adjustments *
    
    
    TotalsSignificant noncash item  net change in unrealized
gain on securities available for sale
    
    $
    (6,991
    )
    
    
    8
    
    
    
    (6,983
    )
 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
    )
 15




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands)
 (3) Investment in Securities
  June 30, 2005 (Unaudited)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimated faircost
    
    
    gains
    
    
    losses
    
    
    valueTrading securities:Fixed maturities
    
    $
    45,993
    
    
    
    1,024
    
    
    
    (231
    )
    
    
    46,786Equity securities
    
    
    75,283
    
    
    
    9,346
    
    
    
    (3,039
    )
    
    
    81,590$
    121,276
    
    
    
    10,370
    
    
    
    (3,270
    )
    
    
    128,376
 June 30, 2005 (Unaudited)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimated faircost
    
    
    gains
    
    
    losses
    
    
    valueSecurities available for sale:Fixed maturities
    
    $
    461,974
    
    
    
    1,791
    
    
    
    (2,646
    )
    
    
    461,119Equity securities
    
    
    34,794
    
    
    
    18,444
    
    
    
    (445
    )
    
    
    52,793$
    496,768
    
    
    
    20,235
    
    
    
    (3,091
    )
    
    
    513,912
 June 30, 2005 (Unaudited)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimated faircost
    
    
    gains
    
    
    losses
    
    
    valueSecurities held to maturity:Fixed maturities
    
    $
    22,193
    
    
    
    295
    
    
    
    (200
    )
    
    
    22,288
 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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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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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)June 30,
    
    
    December 31,2005
    
    
    2004Premiums
    
    $
    51,141
    
    
    
    45,451Self-funded group receivables
    
    
    22,471
    
    
    
    17,717FEHBP
    
    
    9,371
    
    
    
    9,346Accrued interest
    
    
    5,072
    
    
    
    5,080Reinsurance recoverable on paid losses
    
    
    29,999
    
    
    
    30,496Other
    
    
    14,921
    
    
    
    16,406132,975
    
    
    
    124,496Less allowance for doubtful receivables:Premiums
    
    
    6,585
    
    
    
    6,456Other
    
    
    4,339
    
    
    
    4,71710,924
    
    
    
    11,173Total premiums and other receivables
    
    $
    122,051
    
    
    
    113,323
 (5) Claim Liabilities
  (Unaudited)Three months ended June 30,2005
    
    
    2004Claim liabilities at beginning of period
    
    $
    304,632
    
    
    
    260,922Reinsurance recoverable on claim liabilities
    
    
    (25,285
    )
    
    
    (21,463
    )Net claim liabilities at beginning of period
    
    
    279,347
    
    
    
    239,459Incurred claims and loss-adjustment expenses:Current period insured events
    
    
    295,216
    
    
    
    278,354Prior period insured events
    
    
    2,685
    
    
    
    7,892Total
    
    
    297,901
    
    
    
    286,246Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    277,796
    
    
    
    214,788Prior period insured events
    
    
    25,352
    
    
    
    52,134Total
    
    
    303,148
    
    
    
    266,922Net claim liabilities at end of period
    
    
    274,100
    
    
    
    258,783Reinsurance recoverable on claim liabilities
    
    
    26,597
    
    
    
    21,605Claim liabilities at end of period
    
    $
    300,697
    
    
    
    280,388
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
  (Unaudited)Six months ended June 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
    
    
    592,733
    
    
    
    559,107Prior period insured events
    
    
    8,091
    
    
    
    2,887Total
    
    
    600,824
    
    
    
    561,994Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    415,147
    
    
    
    354,857Prior period insured events
    
    
    164,347
    
    
    
    176,917Total
    
    
    579,494
    
    
    
    531,774Net claim liabilities at end of period
    
    
    274,100
    
    
    
    258,783Reinsurance recoverable on claim liabilities
    
    
    26,597
    
    
    
    21,605Claim liabilities at end of period
    
    $
    300,697
    
    
    
    280,388
  (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
    
    
    (6,983
    )
    
    
    
    
    
    
    177
    
    
    
    (6,806
    )BALANCE AT JUNE 30
    
    $
    15,066
    
    
    
    (5,825
    )
    
    
    91
    
    
    
    9,332
 (7) Income Taxes
   19




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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
    
    Six months endedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Components of net periodic benefit cost:Service cost
    
    $
    1,187
    
    
    
    1,035
    
    
    
    2,330
    
    
    
    2,070Interest cost
    
    
    1,038
    
    
    
    929
    
    
    
    2,068
    
    
    
    1,858Expected return on assets
    
    
    (868
    )
    
    
    (626
    )
    
    
    (1,711
    )
    
    
    (1,252
    )Amortization of prior service cost
    
    
    12
    
    
    
    12
    
    
    
    24
    
    
    
    24Amortization of actuarial loss
    
    
    505
    
    
    
    401
    
    
    
    995
    
    
    
    802Net periodic benefit cost
    
    $
    1,874
    
    
    
    1,751
    
    
    
    3,706
    
    
    
    3,502
 Employer contributions
  (9) Net Income (Loss) Available to Stockholders and Net Income (Loss) per Share
   (Unaudited)
    
    (Unaudited)Three months ended
    
    Six months endedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Numerator for basic earnings per share:Net income (loss) available to stockholders
    
    $
    4,408
    
    
    
    1,479
    
    
    
    (799
    )


    
    
    12,635Denominator for basic earnings per share:Weighted average of outstanding common
shares
    
    
    8,904
    
    
    
    8,905
    
    
    
    8,904
    
    
    
    8,954Basic net income (loss) per share
    
    $
    495
    
    
    
    166
    
    
    
    (90
    )
    
    
    1,411
 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 June 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.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 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.
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 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 and the parties
are conducting discovery. 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 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
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 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.(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.(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 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
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 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.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.On June 25, 2004, the plaintiffs amended the complaint but the allegations against TSI did
not vary.Management believes that TSI was made a party to this litigation for the sole reason that
TSI is associated with the BCBSA. 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.
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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)Six months endedJune 30,2005
    
    2004Net income (loss)
    
    $
    (799
    )
    
    
    12,635Adjustments to reconcile net income to net cash
provided by (used in) operating expenses:Depreciation and amortization
    
    
    2,488
    
    
    
    2,761Amortization of investment discounts
    
    
    321
    
    
    
    586Accretion in value of securities
    
    
    (288
    )
    
    
    (214
    )Increase (decrease) in provision for doubtful
receivables
    
    
    (249
    )
    
    
    909Increase (decrease) in net deferred taxes
    
    
    (2,327
    )
    
    
    53Gain on sale of securities
    
    
    (4,677
    )
    
    
    (2,748
    )Unrealized loss of trading securities
    
    
    6,427
    
    
    
    1,433Proceeds from trading securities sold:Fixed maturities
    
    
    57,795
    
    

    
    31,611Equity securities
    
    
    14,021
    
    
    
    15,526Acquisition of securities in trading portfolio:Fixed maturities
    
    
    (32,144
    )
    
    
    (33,686
    )Equity securities
    
    
    (11,784
    )
    
    
    (27,048
    )Loss on sale of property and equipment
    
    
    (1
    )
    
    
    (6
    )(Increase) decrease in assets:Premiums receivable
    
    
    (10,469
    )
    
    
    (11,111
    )Accrued interest receivable
    
    
    8
    
    
    
    140Reinsurance receivable
    
    
    497
    
    
    
    (1,606
    )Other receivables
    
    
    1,996
    
    
    
    337Deferred policy acquisition costs
    
    
    (61
    )
    
    
    (790
    )Prepaid income tax
    
    
    (2,676
    )
    
    
    (3,869
    )Other assets
    
    
    (4,233
    )
    
    
    (1,982
    )Increase (decrease) in liabilities:Claims processed and incomplete
    
    
    6,717
    
    
    
    13,684Unreported losses
    
    
    14,698
    
    
    
    18,523Unpaid loss-adjustment expenses
    
    
    (43
    )
    
    
    261Unearned premiums
    
    
    (1,701
    )
    
    
    88Annuity contracts
    
    
    580
    
    
    
    470Liability to FEHBP
    
    
    (2,985
    )
    
    
    (3,156
    )Accounts payable and accrued liabilities
    
    
    (662
    )
    
    
    2,978Income tax payable
    
    
    (1,827
    )
    
    
    (32,222
    )Net cash provided by (used in)
operating activities
    
    $
    28,622
    
    
    
    (16,443
    )
 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.
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##### Table of Contents



Recent Developments
 Healthcare Reform Segment
  Adoption of Accounting Standard
 Exchanges of Nonmonetary Assets
 General Information
   27




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Consolidated Operating Results
  Three months ended
    
    Six months endedJune 30,
    
    June 30,(dollar amounts in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Consolidated earned premiums, net
and fee revenue
    
    $
    342,755
    
    
    
    326,456
    
    
    
    679,519
    
    
    
    647,558Consolidated claims incurred
    
    $
    297,901
    
    
    
    286,246
    
    
    
    600,824
    
    
    
    561,994Consolidated operating expenses
    
    
    45,453
    
    
    
    42,635
    
    
    
    89,219
    
    
    
    82,473Consolidated operating costs
    
    $
    343,354
    
    
    
    328,881
    
    
    
    690,043
    
    
    
    644,467Consolidated loss ratio
    
    
    86.9
    %
    
    
    87.7
    %
    
    
    88.4
    %
    
    
    86.8
    %Consolidated expense ratio
    
    
    13.3
    %
    
    
    13.1
    %
    
    
    13.1
    %
    
    
    12.7
    %Consolidated combined ratio
    
    
    100.2
    %
    
    
    100.7
    %
    
    
    101.5
    %
    
    
    99.5
    %Consolidated net investment income
    
    $
    7,217
    
    
    
    6,393
    
    
    
    14,281
    
    
    
    12,975Consolidated realized gain on sale of securities
    
    
    1,363
    
    
    
    1,365
    
    
    
    4,677
    
    
    
    2,748Consolidated unrealized loss on
trading securities
    
    
    (634
    )
    
    
    (3,252
    )
    
    
    (6,427
    )
    
    
    (1,433
    )Total consolidated net
investment income
    
    $
    7,946
    
    
    
    4,506
    
    
    
    12,531
    
    
    
    14,290Consolidated income tax (benefit) expense
    
    $
    941
    
    
    
    791
    
    
    
    (348
    )
    
    
    4,600
 Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
  
    
    The earned premiums, net and fee revenue corresponding to the Health Insurance 
Commercial segment increased by $10.7 million, or 5.8%, 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 $4.6 million, or 3.8% during this period. The fluctuation in the earned
premiums, net of this segment is attributed to an increase in premium rates effective July
1, 2004.
    
    The earned premiums, net of the Property and Casualty Insurance segment increased by
$893 thousand, or 4.4%, during this period. This increase is mostly reflected in the
premiums written for the commercial multiperil line of business, net of a decrease in the
premiums written for the dwelling business and an increase in premiums ceded.
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##### Table of Contents




    
    During the 2005 period the Corporation sold certain investments with unrealized gains
within the equity securities portfolios. This caused the realization of such gains thus
reducing the unrealized gain of the portfolios.
    
    The equity securities portfolios are designed to replicate the Standard & Poors 500
Index, the Russell 1000 Growth Index and the Russell 1000 Value Index. These indexes
experienced positive returns in the 2005 period.
 Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
  
    
    The earned premiums, net and fee revenue corresponding to the Health Insurance 
Commercial segment increased by $21.5 million, or 6.0%, during this period. An increase
in the average 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 $8.3 million, or 3.5%, during this period. This increase is the net
result of an increase in premium rates effective July 1, 2004 and a reduction in the
average membership of the segment.
    
    The earned premiums, net of the Property and Casualty Insurance segment increased by
$2.2 million, or 5.4%, during this period. This increase is mostly reflected in the
premiums written for the commercial multiperil, auto physical damage and commercial auto
liability 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 $18.1 million, or 8.3%. This fluctuation results mostly from higher
utilization trends, particularly in risks assumed by the segment. Also, the claims
incurred by the segment in the 2005 period were increased by an unfavorable development of
the unreported losses reserve estimated as of the end of the year 2004.
 29




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##### Table of Contents




    
    The claims incurred for the Health Insurance  Commercial segment increased by $21.3
million, or 6.7%, during the 2005 period. This fluctuation is attributed to an increase
in utilization trends and costs. Also, a year to date recast of the segments reserves as
of December 31, 2004 reflected an unfavorable development that was considered in the
claims incurred during the six months ended June 30, 2005.
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##### Table of Contents



Health Insurance  Commercial Program Operating Results
 Three months ended
    
    Six months endedJune 30,
    
    June 30,(dollar amounts in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Average enrollment:Corporate accounts
    
    
    306,787
    
    
    
    301,786
    
    
    
    307,481
    
    
    
    302,845Self-funded employers
    
    
    152,838
    
    
    
    139,994
    
    
    
    152,076
    
    
    
    136,376Individual accounts
    
    
    85,593
    
    
    
    84,779
    
    
    
    85,139
    
    
    
    84,707Federal employees
    
    
    49,227
    
    
    
    52,440
    
    
    
    49,690
    
    
    
    52,828Local government employees
    
    
    36,276
    
    
    
    42,811
    
    
    
    36,419
    
    
    
    42,882Total enrollment
    
    
    630,721
    
    
    
    621,810
    
    
    
    630,805
    
    
    
    619,638Earned premiums
    
    $
    190,907
    
    
    
    179,820
    
    
    
    375,964
    
    
    
    355,011Amounts attributable to self-funded arrangements
    
    
    52,699
    
    
    
    46,319
    
    
    
    104,933
    
    
    
    89,575Less: Amounts attributable to claims under
self-funded arrangements
    
    
    (49,302
    )
    
    
    (42,485
    )
    
    
    (97,842
    )
    
    
    (83,067
    )Earned premiums and fee
revenue
    
    $
    194,304
    
    
    
    183,654
    
    
    
    383,055
    
    
    
    361,519Claims incurred
    
    $
    164,320
    
    
    
    162,616
    
    
    
    337,149
    
    
    
    315,856Operating expenses
    
    
    25,899
    
    
    
    22,619
    
    
    
    50,139
    
    
    
    44,613Total underwriting costs
    
    $
    190,219
    
    
    
    185,235
    
    
    
    387,288
    
    
    
    360,469Underwriting income (loss)
    
    $
    4,085
    
    
    
    (1,581
    )
    
    
    (4,233
    )
    
    
    1,050Loss ratio
    
    
    84.6
    %
    
    
    88.5
    %
    
    
    88.0
    %
    
    
    87.4
    %Expense ratio
    
    
    13.3
    %
    
    
    12.3
    %
    
    
    13.1
    %
    
    
    12.3
    %Combined ratio
    
    
    97.9
    %
    
    
    100.9
    %
    
    
    101.1
    %
    
    
    99.7
    %
 Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
  
    
    In the 2005 period, average enrollment of self-funded groups and rated corporate
accounts businesses presented an increase of 12,844 members, or 9.2%, and 5,001, or 1.7%,
respectively, that is mostly attributed to new groups acquired during late 2004 and
throughout 2005. This increase was offset by a decrease in average enrollment in the
Local government employees and Federal employees of 6,535, or 15.3%, and 3,213, or 6.1%,
respectively.
    
    On average, the segment increased premium rates by approximately 3.0% during the 2005
period, particularly in the corporate accounts business.
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##### Table of Contents



Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
  
    
    Average enrollment for the six months ended June 30, 2005 increased by 11,167 members,
or 1.8%, 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 15,700 members, or 11.5%, and 4,636 members, or
1.5%, during this period, respectively. The increase in average enrollment is mostly
attributed to new groups acquired during late 2004 and throughout 2005. In addition, the
segment sustained a renewal retention rate of 95% in the 2005 period. The average
enrollment of the Local government employees and Federal employees businesses, on the
other hand, reflect a decrease in membership of 6,463, or 15.1%, and 3,138, or 5.9%,
during this period, respectively.
    
    On average, this segment increased premiums rates in corporate accounts groups by
approximately 3.3% during the 2005 period.
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##### Table of Contents



Health Insurance  Healthcare Reform Program Operating Results
 Three months ended
    
    Six months endedJune 30,
    
    June 30,(dollar amounts in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Average enrollment:North area
    
    
    235,680
    
    
    
    234,238
    
    
    
    233,843
    
    
    
    233,789Metro-north area
    
    
    220,129
    
    
    
    218,401
    
    
    
    218,205
    
    
    
    218,701Southwest area
    
    
    163,498
    
    
    
    165,603
    
    
    
    163,235
    
    
    
    165,725619,307
    
    
    
    618,242
    
    
    
    615,283
    
    
    
    618,215Earned premiums
    
    $
    124,197
    
    
    
    119,601
    
    
    
    247,337
    
    
    
    238,999Claims incurred
    
    $
    120,823
    
    
    
    109,605
    
    
    
    236,911
    
    
    
    218,820Operating expenses
    
    
    9,722
    
    
    
    9,050
    
    
    
    18,636
    
    
    
    17,802Total underwriting
costs
    
    $
    130,545
    
    
    
    118,655
    
    
    
    255,547
    
    
    
    236,622Underwriting income (loss)
    
    $
    (6,348
    )
    
    
    946
    
    
    
    (8,210
    )
    
    
    2,377Loss ratio
    
    
    97.3
    %
    
    
    91.6
    %
    
    
    95.8
    %
    
    
    91.6
    %Expense ratio
    
    
    7.8
    %
    
    
    7.6
    %
    
    
    7.5
    %
    
    
    7.4
    %Combined ratio
    
    
    105.1
    %
    
    
    99.2
    %
    
    
    103.3
    %
    
    
    99.0
    %
 Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
    Six Months Ended June 30, 2005 Compared to Six Months Ended June 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.
    
    The average monthly enrollment for this segment decreased by 2,932 members, or 0.5%,
when comparing the average enrollment for the six months ended June 30, 2005 with the
average enrollment for the six months ended June 30, 2004. This decrease is attributed to
the continuous review and screening performed by the government over the persons eligible
to participate in the Healthcare Reform program.
  33




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##### Table of Contents



Property and Casualty Insurance Operating Results
 Three months ended
    
    Six months endedJune 30,
    
    June 30,(dollar amounts in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Premiums written:Commercial multiperil
    
    $
    15,691
    
    
    
    12,641
    
    
    
    28,676
    
    
    
    25,521Dwelling
    
    
    6,571
    
    
    
    7,837
    
    
    
    12,792
    
    
    
    13,536Auto physical damage
    
    
    4,595
    
    
    
    4,479
    
    
    
    9,589
    
    
    
    8,891Commercial auto liability
    
    
    3,280
    
    
    
    3,125
    
    
    
    6,959
    
    
    
    6,683Other liability
    
    
    2,029
    
    
    
    2,473
    
    
    
    4,355
    
    
    
    4,482Medical malpractice
    
    
    1,525
    
    
    
    1,529
    
    
    
    2,625
    
    
    
    2,517All other
    
    
    2,354
    
    
    
    2,540
    
    
    
    4,816
    
    
    
    4,246Total premiums written
    
    
    36,045
    
    
    
    34,624
    
    
    
    69,812
    
    
    
    65,876Premiums ceded
    
    
    (14,590
    )
    
    
    (12,977
    )
    
    
    (29,065
    )
    
    
    (25,730
    )Change in unearned premiums
    
    
    (353
    )
    
    
    (1,438
    )
    
    
    2,451
    
    
    
    846Net premiums earned
    
    $
    21,102
    
    
    
    20,209
    
    
    
    43,198
    
    
    
    40,992Claims incurred
    
    $
    10,247
    
    
    
    10,501
    
    
    
    21,620
    
    
    
    21,128Operating expenses
    
    
    9,108
    
    
    
    10,719
    
    
    
    19,449
    
    
    
    19,428Total underwriting
costs
    
    $
    19,355
    
    
    
    21,220
    
    
    
    41,069
    
    
    
    40,556Underwriting income (loss)
    
    $
    1,747
    
    
    
    (1,011
    )
    
    
    2,129
    
    
    
    436Loss ratio
    
    
    48.6
    %
    
    
    52.0
    %
    
    
    50.0
    %
    
    
    51.5
    %Expense ratio
    
    
    43.2
    %
    
    
    53.0
    %
    
    
    45.0
    %
    
    
    47.4
    %Combined ratio
    
    
    91.7
    %
    
    
    105.0
    %
    
    
    95.1
    %
    
    
    98.9
    %
 Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
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Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
     Liquidity and Capital Resources
 Cash Flows
  35




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Cash Flows from Operations
   
    
    The net proceeds of investments in the trading portfolio increased by $41.5 million for
the six months ended June 30, 2005, when compared to the six months ended June 30, 2004.
    
    The amount of income taxes paid decreased by $34.2 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.
    
    Premiums collected increased by $32.7 million when comparing collections during the six
months ended June 30, 2005 with collections for the six months ended June 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 claims, losses and benefits paid for the six months ended June 30, 2005
reflect an increase of $49.4 million when compared with the six months ended June 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 $12.4 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.
  Cash Flows from Investing Activities
  36




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##### Table of Contents



Cash Flows from Financing Activities
  
    
    The change in outstanding checks in excess of bank balances reflects a decrease of $7.1
million during the six months ended June 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.
    
    Net proceeds from annuity contracts decreased by $3.1 million during the six month
period ended June 30, 2005. This fluctuation is basically due to a decrease in the
proceeds received from the fixed deferred annuity product.
    
    In the 2005 period the payments of short-term borrowings exceeded proceeds from
short-term borrowings by $1.7 million. Short-term borrowings are used to address timing
differences between cash receipts and disbursements.
    
    The repayments of long-term debt increased by $1.5 million for the six months period
ended June 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 $2.5 million in 2005 and $1.0 million in 2004.
 Financing and Financing Capacity
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##### Table of Contents



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 June 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)
    
    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. 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. Further descriptions of this case and
the Sánchez case are incorporated hereby by reference to Sections (c) and (d) of Item 1 of
Part II of the Corporations Quarterly Report on Form 10-Q for the Quarter ended March 31,
2005 filed on May 13, 2005.
 
 Item 2. Unregistered Sales of Equity Securities and Use Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
 Annual Meeting
  38




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##### Table of Contents



Election of Directors:
    Proposals of the Board of Directors:
 Resolution Number 1
  Resolution Number 2
  Proposal Presented at the Annual Meeting of Shareholders:
  39




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##### Table of Contents



Resolution Number 7
  
 Item 5. Other Information.
 (a).
    
    On April 25, 2005, the Board of Directors of TSM held a special meeting where it elected
the officers of the Board of Directors, which elections were effective immediately. The
officers of the Board of Directors are as follows:
 Wilmer Rodríguez-Silva, MD, Chairman of the Board of Directors
Mario S Belaval-Ferrer, Vice-Chairman of the Board of Directors
Jesús R. Sánchez-Colón, DMD, Secretary of the Board of Directors
Miguel Nazario-Franco, Assistant Secretary of the Board of Directors
Vicente J. León-Irizarry, CPA, Treasurer of the Board of Directors
Adamina Soto-Martínez, CPA, Assistant Treasurer of the Board of Directors
Ramón M. Ruiz-Comas, CPA, President and Chief Executive Officer
Valeriano Alicea-Cruz, MD
José Arturo Álvarez-Gallardo
Arturo R. Córdova-López, MD
Carmen Ana Culpeper-Ramírez
Porfirio E. Díaz-Torres, MD
Manuel Figueroa-Collazo, PhD
José Hawayek-Alemañy, MD
Fernando L. Longo-Rodríguez, MD
Wilfredo López-Hernández, MD
Juan E. Rodríguez Díaz, Esq.
Manuel Suárez-Méndez, PE
Fernando J. Ysern-Borrás, MD
 (b).
    
    Shareholders proposals intended to be presented at the 2006 Annual Meeting of Shareholders
must be received by the Corporations Secretary, at its executive offices, located at the
Sixth Floor of 1441 FD Roosevelt Avenue, San Juan, Puerto Rico 00920, or by mail at PO Box
363628, San Juan, Puerto Rico, 00936-3628, no later than December 1, 2005, for inclusion in
the Corporations Proxy Statement and Form of Proxy relating to the 2006 Annual Meeting of
Shareholders.
 
 Item 6. Exhibits
 (a)
    
    Exhibits:
 Exhibit 3.1 By-laws of Triple-S Management Corporation, as amended (English translation).Exhibit 10.1 Employment contract with Francisco Joglar-Pesquera, MD (English translation).
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##### Table of Contents



Exhibit 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, 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 six months ended June 30, 2005
and 2004 has been omitted as the detail necessary to
determine the computation of 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.(b)
    
    Reports on Form 8-K:The Corporation filed with the Securities and Exchange Commission the following Current report
on Form 8-K.
 
 
    
    Form 8-K dated May 2, 2005, to report that Dr. Manuel A. Marcial-Seoane, an ex-member of
the Board of Directors of TSM, notified on September 29, 2004 his intention not to stand for
re-election as a member of TSMs Board of Directors upon the expiration of his term. On April
24, 2005, the Annual Meeting of Shareholders of TSM was held and Dr. Jose Hawayek-Alemañy was
elected to serve in the Board of Directors of TSM in the post left vacant by Dr. Marcial-Seoane
on that date. 41




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##### Table of Contents



SIGNATURES
  Triple-S Management Corporation
RegistrantDate: August 12, 2005
    By:
    /s/ Ramón M. Ruiz-ComasRamón M. Ruiz-Comas, CPAPresident and Chief Executive Officer Date: August 12, 2005
    By:
    /s/ Juan J. RománJuan J. Román, CPAVice President of Finance
and Chief Financial Officer 42