##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 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(State or other jurisdiction of
    
    66-0555678incorporation or organization)
    
    (I.R.S. Employer Identification No.)1441 F.D. Roosevelt Avenue 
San 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 October 31, 2010Common Stock Class A, $1.00 par value
    
    
    9,042,809Common Stock Class B, $1.00 par value
    
    
    20,101,005




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##### 



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
    
    
    34Managed 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-10.4EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### 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)
 September 30,
    
    
    December 31,2010
    
    
    2009AssetsInvestments and cash:Equity securities held for
trading, at fair value
    
    $
    46,228
    
    
    $
    43,909Securities available for
sale, at fair value:Fixed maturities
    
    
    1,023,469
    
    
    
    918,977Equity securities
    
    
    73,241
    
    
    
    64,689Securities held to
maturity, at amortized
cost:Fixed maturities
    
    
    15,266
    
    
    
    15,794Policy loans
    
    
    6,064
    
    
    
    5,940Cash and cash equivalents
    
    
    50,679
    
    
    
    40,376Total investments and cash
    
    
    1,214,947
    
    
    
    1,089,685Premiums and other
receivables, net
    
    
    315,092
    
    
    
    272,932Deferred policy acquisition
costs and value of business
acquired
    
    
    142,444
    
    
    
    139,917Property and equipment, net
    
    
    74,170
    
    
    
    68,803Deferred tax asset
    
    
    28,869
    
    
    
    37,551Other assets
    
    
    30,084
    
    
    
    39,816Total assets
    
    $
    1,805,606
    
    
    $
    1,648,704Liabilities and Stockholders EquityClaim liabilities
    
    
    423,819
    
    
    
    360,446Liability for future policy
benefits
    
    
    232,727
    
    
    
    222,619Unearned premiums
    
    
    92,489
    
    
    
    108,342Policyholder deposits
    
    
    48,215
    
    
    
    47,563Liability to Federal
Employees Health Benefits
Program (FEHBP)
    
    
    16,029
    
    
    
    13,002Accounts payable and accrued
liabilities
    
    
    139,640
    
    
    
    139,161Deferred tax liability
    
    
    15,215
    
    
    
    11,088Borrowings
    
    
    166,124
    
    
    
    167,667Liability for pension benefits
    
    
    36,709
    
    
    
    41,044Total liabilities
    
    
    1,170,967
    
    
    
    1,110,932Stockholders equity:Common stock Class A, $1 par value.
Authorized 100,000,000 shares; issued
and outstanding 9,042,809 at September
30, 2010 and December 31, 2009
    
    
    9,043
    
    
    
    9,043Common stock Class B, $1 par value.
Authorized 100,000,000 shares; issued
and outstanding 20,101,005 and
20,110,391 shares at September 30,
2010 and December 31, 2009,
respectively
    
    
    20,101
    
    
    
    20,110Additional paid-in capital
    
    
    160,224
    
    
    
    159,303Retained earnings
    
    
    407,629
    
    
    
    360,892Accumulated other
comprehensive income
(loss)
    
    
    37,642
    
    
    
    (11,576
    )Total stockholders equity
    
    
    634,639
    
    
    
    537,772Total liabilities and
stockholders equity
    
    $
    1,805,606
    
    
    $
    1,648,704
  3




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Triple-S Management Corporation  Consolidated Statements of Earnings (Unaudited)
(Dollar amounts in thousands, except per share data)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Premiums earned, net
    
    $
    496,511
    
    
    $
    476,269
    
    
    $
    1,493,449
    
    
    $
    1,390,778Administrative service fees
    
    
    10,195
    
    
    
    9,797
    
    
    
    34,859
    
    
    
    29,982Net investment income
    
    
    12,794
    
    
    
    12,955
    
    
    
    37,888
    
    
    
    38,856Total operating revenues
    
    
    519,500
    
    
    
    499,021
    
    
    
    1,566,196
    
    
    
    1,459,616Net realized investment gains (losses):Total other-than-temporary impairment losses on securities
    
    
    (316
    )
    
    
    (240
    )
    
    
    (2,932
    )
    
    
    (5,953
    )Net realized gains, excluding other-than-temporary impairmentlosses on securities
    
    
    3
    
    
    
    2,390
    
    
    
    2,673
    
    
    
    4,751Total net realized investment gains (losses)
    
    
    (313
    )
    
    
    2,150
    
    
    
    (259
    )
    
    
    (1,202
    )Net unrealized investment gain on trading securities
    
    
    4,611
    
    
    
    4,860
    
    
    
    631
    
    
    
    8,036Other income, net
    
    
    576
    
    
    
    67
    
    
    
    404
    
    
    
    392Total revenues
    
    
    524,374
    
    
    
    506,098
    
    
    
    1,566,972
    
    
    
    1,466,842Benefits and expenses:Claims incurred
    
    
    421,514
    
    
    
    412,392
    
    
    
    1,272,180
    
    
    
    1,201,148Operating expenses
    
    
    74,111
    
    
    
    71,205
    
    
    
    227,702
    
    
    
    208,060Total operating costs
    
    
    495,625
    
    
    
    483,597
    
    
    
    1,499,882
    
    
    
    1,409,208Interest expense
    
    
    3,026
    
    
    
    3,338
    
    
    
    9,626
    
    
    
    9,959Total benefits and expenses
    
    
    498,651
    
    
    
    486,935
    
    
    
    1,509,508
    
    
    
    1,419,167Income before taxes
    
    
    25,723
    
    
    
    19,163
    
    
    
    57,464
    
    
    
    47,675Income tax expense (benefit):Current
    
    
    6,040
    
    
    
    2,096
    
    
    
    14,461
    
    
    
    11,637Deferred
    
    
    (805
    )
    
    
    (1,017
    )
    
    
    (3,734
    )
    
    
    (4,638
    )Total income taxes
    
    
    5,235
    
    
    
    1,079
    
    
    
    10,727
    
    
    
    6,999Net income
    
    $
    20,488
    
    
    $
    18,084
    
    
    $
    46,737
    
    
    $
    40,676Basic net income per share
    
    $
    0.70
    
    
    $
    0.62
    
    
    $
    1.61
    
    
    $
    1.37Diluted net income per share
    
    $
    0.70
    
    
    $
    0.62
    
    
    $
    1.60
    
    
    $
    1.37
  4




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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
    
    
    1,301
    
    
    
    3,231Grant of restricted Class B common stock
    
    
    15
    
    
    
    27Repurchase and retirement of common stock
    
    
    (404
    )
    
    
    (22,034
    )Comprehensive income (loss):Net income
    
    
    46,737
    
    
    
    40,676Net unrealized change in fair value of available for sale securities, net of taxes
    
    
    48,332
    
    
    
    20,299Defined benefit pension plan:Actuarial loss, net
    
    
    1,089
    
    
    
    1,103Prior service credit, net
    
    
    (203
    )
    
    
    (207
    )Total comprehensive income
    
    
    95,955
    
    
    
    61,871Balance at September 30
    
    $
    634,639
    
    
    $
    528,194
  5




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Triple-S Management Corporation  Consolidated Statements of Cash Flows (Unaudited)
(Dollar amounts in thousands, except per share data)
 Nine months endedSeptember 30,2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    46,737
    
    
    $
    40,676Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    10,605
    
    
    
    6,358Net amortization of investments
    
    
    2,399
    
    
    
    544Provision for doubtful receivables
    
    
    6,721
    
    
    
    10,070Deferred tax benefit
    
    
    (3,734
    )
    
    
    (4,638
    )Net realized investment loss on sale of securities
    
    
    259
    
    
    
    1,202Net unrealized gain on trading securities
    
    
    (631
    )
    
    
    (8,036
    )Share-based compensation
    
    
    1,316
    
    
    
    3,258Proceeds from trading securities sold:Equity securities
    
    
    3,441
    
    
    
    2,923Acquisition of securities in trading portfolio:Equity securities
    
    
    (4,931
    )
    
    
    (3,206
    )(Increase) decrease in assets:Premium and other receivables, net
    
    
    (42,574
    )
    
    
    (25,214
    )Deferred policy acquisition costs and value of business acquired
    
    
    (2,527
    )
    
    
    (7,952
    )Other deferred taxes
    
    
    7,347
    
    
    
    (11,150
    )Other assets
    
    
    3,673
    
    
    
    7,904Increase (decrease) in liabilities:Claim liabilities
    
    
    63,373
    
    
    
    54,087Liability for future policy benefits
    
    
    10,108
    
    
    
    11,747Unearned premiums
    
    
    (15,853
    )
    
    
    (14,148
    )Policyholder deposits
    
    
    487
    
    
    
    568Liability to FEHBP
    
    
    3,027
    
    
    
    2,858Accounts payable and accrued liabilities
    
    
    (2,223
    )
    
    
    (1,197
    )Net cash provided by operating activities
    
    
    87,020
    
    
    
    66,654
  6




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Triple-S Management Corporation  Consolidated Statements of Cash Flows (Unaudited)

(Dollar amounts in thousands, except per share data)
 Nine months endedSeptember 30,2010
    
    
    2009Cash flows from investing activities:Proceeds from investments sold or matured:Securities available for sale:Fixed maturities sold
    
    $
    48,193
    
    
    $
    125,951Fixed maturities matured/called
    
    
    97,067
    
    
    
    151,898Equity securities
    
    
    16,791
    
    
    
    6,849Securities held to maturity:Fixed maturities matured/called
    
    
    1,852
    
    
    
    6,893Acquisition of investments:Securities available for sale:Fixed maturities
    
    
    (199,809
    )
    
    
    (294,628
    )Equity securities
    
    
    (22,436
    )
    
    
    (3,209
    )Fixed maturity securities held to maturity
    
    
    (1,050
    )
    
    
    (577
    )Net outflows for policy loans
    
    
    (124
    )
    
    
    (285
    )Net capital expenditures
    
    
    (13,678
    )
    
    
    (14,555
    )Net cash used in investing activities
    
    
    (73,194
    )
    
    
    (21,663
    )Cash flows from financing activities:Change in outstanding checks in excess of bank balances
    
    
    (2,458
    )
    
    
    (11,903
    )Repayments of long-term borrowings
    
    
    (1,230
    )
    
    
    (1,230
    )Repurchase and retirement of common stock
    
    
    
    
    
    
    (22,034
    )Proceeds from policyholder deposits
    
    
    7,740
    
    
    
    3,708Surrenders of policyholder deposits
    
    
    (7,575
    )
    
    
    (4,929
    )Net cash used in financing activities
    
    
    (3,523
    )
    
    
    (36,388
    )Net increase in cash and cash equivalents
    
    
    10,303
    
    
    
    8,603Cash and cash equivalents:Beginning of period
    
    
    40,376
    
    
    
    46,095End of period
    
    $
    50,679
    
    
    $
    54,698
  7




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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
  Subtopic 340-20, Other Assets and Deferred Costs
Capitalized Advertising Costs
  (3) Segment Information
  8




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 st
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues:Managed Care:Premiums earned, net
    
    $
    445,514
    
    
    $
    427,332
    
    
    $
    1,340,261
    
    
    $
    1,244,033Administrative service fees
    
    
    10,195
    
    
    
    9,798
    
    
    
    34,859
    
    
    
    29,983Intersegment premiums /service fees
    
    
    1,649
    
    
    
    1,533
    
    
    
    4,717
    
    
    
    4,481Net investment income
    
    
    5,225
    
    
    
    5,435
    
    
    
    15,262
    
    
    
    15,953Total managed care
    
    
    462,583
    
    
    
    444,098
    
    
    
    1,395,099
    
    
    
    1,294,450Life Insurance:Premiums earned, net
    
    
    26,606
    
    
    
    24,645
    
    
    
    78,410
    
    
    
    74,198Intersegment premiums
    
    
    99
    
    
    
    108
    
    
    
    293
    
    
    
    293Net investment income
    
    
    4,467
    
    
    
    4,093
    
    
    
    12,913
    
    
    
    12,480Total life insurance
    
    
    31,172
    
    
    
    28,846
    
    
    
    91,616
    
    
    
    86,971Property and Casualty Insurance:Premiums earned, net
    
    
    24,391
    
    
    
    24,293
    
    
    
    74,778
    
    
    
    72,547Intersegment premiums
    
    
    153
    
    
    
    153
    
    
    
    460
    
    
    
    460Net investment income
    
    
    2,594
    
    
    
    2,998
    
    
    
    8,197
    
    
    
    8,783Total property and casualty insurance
    
    
    27,138
    
    
    
    27,444
    
    
    
    83,435
    
    
    
    81,790Other segments  intersegment service
revenues *
    
    
    12,452
    
    
    
    13,889
    
    
    
    40,127
    
    
    
    39,003Total business segments
    
    
    533,345
    
    
    
    514,277
    
    
    
    1,610,277
    
    
    
    1,502,214TSM operating revenues from external sources
    
    
    508
    
    
    
    427
    
    
    
    1,516
    
    
    
    1,639Elimination of intersegment premiums
    
    
    (1,901
    )
    
    
    (1,794
    )
    
    
    (5,470
    )
    
    
    (5,234
    )Elimination of intersegment service fees
    
    
    (12,452
    )
    
    
    (13,889
    )
    
    
    (40,127
    )
    
    
    (39,003
    )Consolidated operating revenues
    
    $
    519,500
    
    
    $
    499,021
    
    
    $
    1,566,196
    
    
    $
    1,459,616
 
 *
    
    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




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Operating income:Managed care
    
    $
    16,417
    
    
    
    10,098
    
    
    $
    47,532
    
    
    
    32,080Life insurance
    
    
    4,529
    
    
    
    3,992
    
    
    
    13,055
    
    
    
    10,938Property and casualty insurance
    
    
    2,242
    
    
    
    245
    
    
    
    3,311
    
    
    
    4,394Other segments *
    
    
    476
    
    
    
    451
    
    
    
    974
    
    
    
    813Total business segments
    
    
    23,664
    
    
    
    14,786
    
    
    
    64,872
    
    
    
    48,225TSM operating revenues from external sources
    
    
    508
    
    
    
    427
    
    
    
    1,516
    
    
    
    1,638TSM unallocated operating expenses
    
    
    (2,678
    )
    
    
    (2,178
    )
    
    
    (7,102
    )
    
    
    (6,648
    )Elimination of TSM intersegment charges
    
    
    2,381
    
    
    
    2,389
    
    
    
    7,028
    
    
    
    7,193Consolidated operating income
    
    
    23,875
    
    
    
    15,424
    
    
    
    66,314
    
    
    
    50,408Consolidated net realized investment gains (losses)
    
    
    (313
    )
    
    
    2,150
    
    
    
    (259
    )
    
    
    (1,202
    )Consolidated net unrealized gain on trading
securities
    
    
    4,611
    
    
    
    4,860
    
    
    
    631
    
    
    
    8,036Consolidated interest expense
    
    
    (3,026
    )
    
    
    (3,338
    )
    
    
    (9,626
    )
    
    
    (9,959
    )Consolidated other income, net
    
    
    576
    
    
    
    67
    
    
    
    404
    
    
    
    392Consolidated income before taxes
    
    $
    25,723
    
    
    
    19,163
    
    
    $
    57,464
    
    
    
    47,675Depreciation expense:Managed care
    
    
    2,767
    
    
    
    1,364
    
    
    
    8,157
    
    
    
    4,092Life insurance
    
    
    173
    
    
    
    181
    
    
    
    510
    
    
    
    491Property and casualty insurance
    
    
    485
    
    
    
    378
    
    
    
    1,290
    
    
    
    1,128Total business segments
    
    
    3,425
    
    
    
    1,923
    
    
    
    9,957
    
    
    
    5,711TSM depreciation expense
    
    
    216
    
    
    
    216
    
    
    
    648
    
    
    
    647Consolidated depreciation expense
    
    $
    3,641
    
    
    
    2,139
    
    
    $
    10,605
    
    
    
    6,358
 
 *
    
    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




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 September 30,
    
    
    December 31,2010
    
    
    2009Assets:Managed care
    
    $
    850,114
    
    
    $
    746,674Life insurance
    
    
    538,427
    
    
    
    487,290Property and casualty insurance
    
    
    353,416
    
    
    
    351,793Other segments *
    
    
    12,594
    
    
    
    14,193Total business segments
    
    
    1,754,551
    
    
    
    1,599,950Unallocated amounts related to TSM:Cash, cash equivalents, and investments
    
    
    55,817
    
    
    
    39,029Property and equipment, net
    
    
    20,929
    
    
    
    21,577Other assets
    
    
    16,170
    
    
    
    4,78092,916
    
    
    
    65,386Elimination entries-intersegment
receivables and others
    
    
    (41,861
    )
    
    
    (16,632
    )Consolidated total assets
    
    $
    1,805,606
    
    
    $
    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




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (4) Investment in Securities
  September 30, 2010Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    EstimatedCost
    
    
    gains
    
    
    losses
    
    
    fair valueTrading securities:Equity securities
    
    $
    43,763
    
    
    $
    7,844
    
    
    $
    (5,379
    )
    
    $
    46,228
 December 31, 2009Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    EstimatedCost
    
    
    gains
    
    
    losses
    
    
    fair valueTrading securities:Equity securities
    
    $
    42,075
    
    
    $
    7,064
    
    
    $
    (5,230
    )
    
    $
    43,909
 September 30, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities available for sale:Fixed maturities:Obligations of government-
sponsored enterprises
    
    $
    188,641
    
    
    $
    13,087
    
    
    $
    
    
    
    $
    201,728U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    47,621
    
    
    
    8,345
    
    
    
    
    
    
    
    55,966Obligations of the
Commonwealth of Puerto Rico
and its instrumentalities
    
    
    160,529
    
    
    
    4,926
    
    
    
    (164
    )
    
    
    165,291Municipal securities
    
    
    200,290
    
    
    
    13,541
    
    
    
    (62
    )
    
    
    213,769Corporate bonds
    
    
    102,925
    
    
    
    13,701
    
    
    
    
    
    
    
    116,626Residential mortgage-backed securities
    
    
    13,912
    
    
    
    843
    
    
    
    (2
    )
    
    
    14,753Collateralized mortgage obligations
    
    
    248,036
    
    
    
    7,574
    
    
    
    (274
    )
    
    
    255,336Total fixed maturities
    
    
    961,954
    
    
    
    62,017
    
    
    
    (502
    )
    
    
    1,023,469Equity securities:Common stocks
    
    
    900
    
    
    
    2,786
    
    
    
    
    
    
    
    3,686Preferred stocks
    
    
    4,298
    
    
    
    73
    
    
    
    (526
    )
    
    
    3,845Perpetual preferred stocks
    
    
    1,000
    
    
    
    
    
    
    
    (79
    )
    
    
    921Mutual funds
    
    
    60,819
    
    
    
    5,114
    
    
    
    (1,144
    )
    
    
    64,789Total equity securities
    
    
    67,017
    
    
    
    7,973
    
    
    
    (1,749
    )
    
    
    73,241Total
    
    $
    1,028,971
    
    
    $
    69,990
    
    
    $
    (2,251
    )
    
    $
    1,096,710
 12




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 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
 September 30, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities held to maturity:Obligations of government-
sponsored enterprises
    
    $
    2,303
    
    
    $
    219
    
    
    $
    
    
    
    $
    2,522U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    1,479
    
    
    
    348
    
    
    
    
    
    
    
    1,827Corporate bonds
    
    
    9,347
    
    
    
    532
    
    
    
    
    
    
    
    9,879Residential mortgage-backed securities
    
    
    897
    
    
    
    39
    
    
    
    
    
    
    
    936Certificates of deposit
    
    
    1,240
    
    
    
    
    
    
    
    
    
    
    
    1,240Total
    
    $
    15,266
    
    
    $
    1,138
    
    
    $
    
    
    
    $
    16,404
 13




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 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
  September 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
    
    $
    8,811
    
    
    $
    (20
    )
    
    
    4
    
    
    $
    3,709
    
    
    $
    (144
    )
    
    
    3
    
    
    $
    12,520
    
    
    $
    (164
    )
    
    
    7Municipal securities
    
    
    776
    
    
    
    (62
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    776
    
    
    
    (62
    )
    
    
    1Residential mortgage-backed
securities
    
    
    12
    
    
    
    (1
    )
    
    
    1
    
    
    
    36
    
    
    
    (1
    )
    
    
    1
    
    
    
    48
    
    
    
    (2
    )
    
    
    2Collateralized mortgage
obligations
    
    
    24,159
    
    
    
    (249
    )
    
    
    5
    
    
    
    1,947
    
    
    
    (25
    )
    
    
    1
    
    
    
    26,106
    
    
    
    (274
    )
    
    
    6Total fixed maturities
    
    
    33,758
    
    
    
    (332
    )
    
    
    11
    
    
    
    5,692
    
    
    
    (170
    )
    
    
    5
    
    
    
    39,450
    
    
    
    (502
    )
    
    
    16Equity securities:Preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,474
    
    
    
    (526
    )
    
    
    1
    
    
    
    3,474
    
    
    
    (526
    )
    
    
    1Perpetual preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    920
    
    
    
    (79
    )
    
    
    1
    
    
    
    920
    
    
    
    (79
    )
    
    
    1Mutual funds
    
    
    8,521
    
    
    
    (491
    )
    
    
    5
    
    
    
    9,825
    
    
    
    (653
    )
    
    
    7
    
    
    
    18,346
    
    
    
    (1,144
    )
    
    
    12Total equity securities
    
    
    8,521
    
    
    
    (491
    )
    
    
    5
    
    
    
    14,219
    
    
    
    (1,258
    )
    
    
    9
    
    
    
    22,740
    
    
    
    (1,749
    )
    
    
    14Total for securities available for sale
    
    $
    42,279
    
    
    $
    (823
    )
    
    
    16
    
    
    $
    19,911
    
    
    $
    (1,428
    )
    
    
    14
    
    
    $
    62,190
    
    
    $
    (2,251
    )
    
    
    30
 14




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 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
   
    
    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.
 15




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 
    
    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:
 Residential Mortgage-Backed Securities and Collateralized Mortgage Obligations:
 Preferred Stocks:
 Perpetual Preferred Stocks:
 16




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 Mutual Funds:
 
    
    Mutual funds invested in fixed income securities: The unrealized loss
of each position in this category represents 10% 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 3% 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 six months. Because there has been an improvement in the market
price of these positions in the period subsequent to September 30,
2010, these positions have been with an unrealized loss for a 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.
  Amortized
    
    
    Estimatedcost
    
    
    fair valueSecurities available for sale:Due in one year or less
    
    $
    10,749
    
    
    $
    10,892Due after one year through five years
    
    
    113,498
    
    
    
    118,928Due after five years through ten years
    
    
    229,039
    
    
    
    247,098Due after ten years
    
    
    346,720
    
    
    
    376,462Residential mortgage-backed securities
    
    
    13,912
    
    
    
    14,753Collateralized mortgage obligations
    
    
    248,036
    
    
    
    255,336$
    961,954
    
    
    $
    1,023,469Securities held to maturity:Due in one year or less
    
    $
    1,240
    
    
    $
    1,240Due after one year through five years
    
    
    9,347
    
    
    
    9,879Due after five years through ten years
    
    
    510
    
    
    
    513Due after ten years
    
    
    3,272
    
    
    
    3,836Residential mortgage-backed securities
    
    
    897
    
    
    
    936$
    15,266
    
    
    $
    16,404
  17




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Realized gains (losses):Fixed maturity securities:Securities available for sale:Gross gains from sales
    
    $
    
    
    
    $
    65
    
    
    $
    69
    
    
    $
    3,122Gross losses from sales
    
    
    (148
    )
    
    
    
    
    
    
    (272
    )
    
    
    (3
    )Gross losses from other-than-temporary impairments
    
    
    
    
    
    
    (240
    )
    
    
    (95
    )
    
    
    (1,393
    )Total debt securities
    
    
    (148
    )
    
    
    (175
    )
    
    
    (298
    )
    
    
    1,726Equity securities:Trading securities:Gross gains from sales
    
    
    110
    
    
    
    107
    
    
    
    935
    
    
    
    416Gross losses from sales
    
    
    (212
    )
    
    
    (104
    )
    
    
    (741
    )
    
    
    (823
    )(102
    )
    
    
    3
    
    
    
    194
    
    
    
    (407
    )Securities available for sale:Gross gains from sales
    
    
    273
    
    
    
    2,322
    
    
    
    3,259
    
    
    
    2,322Gross losses from sales
    
    
    (19
    )
    
    
    
    
    
    
    (576
    )
    
    
    (283
    )Gross losses from other-than-temporary impairments
    
    
    (317
    )
    
    
    
    
    
    
    (2,838
    )
    
    
    (4,560
    )(63
    )
    
    
    2,322
    
    
    
    (155
    )
    
    
    (2,521
    )Total equity securities
    
    
    (165
    )
    
    
    2,325
    
    
    
    39
    
    
    
    (2,928
    )Net realized (losses) gains on securities
    
    $
    (313
    )
    
    $
    2,150
    
    
    $
    (259
    )
    
    $
    (1,202
    )
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Changes in net unrealized gains (losses):Recognized in income:Equity securities  trading
    
    $
    4,611
    
    
    $
    4,860
    
    
    $
    631
    
    
    $
    8,036Recognized in accumulated other comprehensive income:Fixed maturities  available for sale
    
    
    14,376
    
    
    
    21,393
    
    
    
    53,900
    
    
    
    21,044Equity securities  available for sale
    
    
    5,011
    
    
    
    3,346
    
    
    
    3,066
    
    
    
    2,837$
    19,387
    
    
    $
    24,739
    
    
    $
    56,966
    
    
    $
    23,881Not recognized in the consolidated financial statements:Fixed maturities  held to maturity
    
    $
    93
    
    
    $
    90
    
    
    $
    442
    
    
    $
    (441
    )
   18




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Fixed maturities
    
    $
    11,707
    
    
    $
    11,629
    
    
    $
    34,303
    
    
    $
    34,498Equity securities
    
    
    756
    
    
    
    891
    
    
    
    2,595
    
    
    
    2,984Policy loans
    
    
    113
    
    
    
    105
    
    
    
    330
    
    
    
    302Cash equivalents and interest-bearing deposits
    
    
    58
    
    
    
    127
    
    
    
    160
    
    
    
    485Other
    
    
    160
    
    
    
    203
    
    
    
    500
    
    
    
    587Total
    
    $
    12,794
    
    
    $
    12,955
    
    
    $
    37,888
    
    
    $
    38,856
 (5) Premiums and Other Receivables, Net
  September 30,
    
    
    December 31,2010
    
    
    2009Premium
    
    $
    142,397
    
    
    $
    98,429Self-funded group receivables
    
    
    81,634
    
    
    
    70,315FEHBP
    
    
    11,198
    
    
    
    10,297Agents balances
    
    
    28,187
    
    
    
    37,888Accrued interest
    
    
    10,278
    
    
    
    9,287Reinsurance recoverable
    
    
    47,303
    
    
    
    43,951Other
    
    
    26,050
    
    
    
    27,999347,047
    
    
    
    298,166Less allowance for doubtful receivables:Premiums
    
    
    24,884
    
    
    
    20,280Other
    
    
    7,071
    
    
    
    4,95431,955
    
    
    
    25,234Total premiums and other receivables
    
    $
    315,092
    
    
    $
    272,932
 19




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##### 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
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Claim liabilities at beginning of period
    
    $
    411,410
    
    
    $
    363,914
    
    
    $
    360,446
    
    
    $
    323,710Reinsurance recoverable on claim liabilities
    
    
    (33,069
    )
    
    
    (30,154
    )
    
    
    (30,712
    )
    
    
    (30,432
    )Net claim liabilities at beginning of period
    
    
    378,341
    
    
    
    333,760
    
    
    
    329,734
    
    
    
    293,278Incurred claims and loss-adjustment expenses:Current period insured events
    
    
    417,642
    
    
    
    407,651
    
    
    
    1,259,518
    
    
    
    1,194,365Prior period insured events
    
    
    671
    
    
    
    1,731
    
    
    
    4,006
    
    
    
    (2,872
    )Total
    
    
    418,313
    
    
    
    409,382
    
    
    
    1,263,524
    
    
    
    1,191,493Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    383,961
    
    
    
    353,243
    
    
    
    951,570
    
    
    
    903,574Prior period insured events
    
    
    22,016
    
    
    
    44,728
    
    
    
    251,011
    
    
    
    236,026Total
    
    
    405,977
    
    
    
    397,971
    
    
    
    1,202,581
    
    
    
    1,139,600Net claim liabilities at end of period
    
    
    390,677
    
    
    
    345,171
    
    
    
    390,677
    
    
    
    345,171Reinsurance recoverable on claim liabilities
    
    
    33,142
    
    
    
    32,626
    
    
    
    33,142
    
    
    
    32,626Claim liabilities at end of period
    
    $
    423,819
    
    
    $
    377,797
    
    
    $
    423,819
    
    
    $
    377,797
    (7) Borrowings
  20




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (8) 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
  September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fairamount
    
    
    value
    
    
    amount
    
    
    valueLoans payable to bank
    
    $
    21,437
    
    
    $
    21,437
    
    
    $
    22,667
    
    
    $
    22,6676.3% senior unsecured notes payable
    
    
    50,000
    
    
    
    49,725
    
    
    
    50,000
    
    
    
    48,0006.6% senior unsecured notes payable
    
    
    59,687
    
    
    
    59,025
    
    
    
    60,000
    
    
    
    57,4206.7% senior unsecured notes payable
    
    
    35,000
    
    
    
    34,458
    
    
    
    35,000
    
    
    
    33,320Totals
    
    $
    166,124
    
    
    $
    164,645
    
    
    $
    167,667
    
    
    $
    161,407
 21




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  (vii) Derivative Instruments
   September 30, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity securities held for trading
    
    $
    46,228
    
    
    $
    
    
    
    $
    
    
    
    $
    46,228Securities available for sale:Fixed maturity securitiesObligations of government-sponsored
    
    
    
    
    
    
    201,728
    
    
    
    
    
    
    
    201,728U.S. Treasury securities and obligations of U.S
government instrumentalities
    
    
    55,966
    
    
    
    
    
    
    
    
    
    
    
    55,966Obligations of the Commonwealth of Puerto
and its instrumentalities
    
    
    
    
    
    
    165,291
    
    
    
    
    
    
    
    165,291Municipal securities
    
    
    
    
    
    
    213,769
    
    
    
    
    
    
    
    213,769Corporate bonds
    
    
    
    
    
    
    116,626
    
    
    
    
    
    
    
    116,626Residential agency mortgage-backed securities
    
    
    
    
    
    
    14,753
    
    
    
    
    
    
    
    14,753Collateralized mortgage obligations
    
    
    
    
    
    
    255,336
    
    
    
    
    
    
    
    255,336Total fixed maturities
    
    
    55,966
    
    
    
    967,503
    
    
    
    
    
    
    
    1,023,469Equity securitiesCommon stocks
    
    
    3,686
    
    
    
    
    
    
    
    
    
    
    
    3,686Preferred stocks
    
    
    3,845
    
    
    
    
    
    
    
    
    
    
    
    3,845Perpetual preferred stocks
    
    
    921
    
    
    
    
    
    
    
    
    
    
    
    921Mutual funds
    
    
    24,211
    
    
    
    39,732
    
    
    
    846
    
    
    
    64,789Total equity securities
    
    
    32,663
    
    
    
    39,732
    
    
    
    846
    
    
    
    73,241Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    659
    
    
    
    
    
    
    
    659Total
    
    $
    134,857
    
    
    $
    1,007,894
    
    
    $
    846
    
    
    $
    1,143,597
 22




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##### 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
  23




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months endedSeptember 30, 2010
    
    
    September 30, 2009Fixed
    
    
    
    
    
    
    
    
    
    
    FixedMaturity
    
    
    Equity
    
    
    
    
    
    
    Maturity
    
    
    EquitySecurities
    
    
    Securities
    
    
    Total
    
    
    Securities
    
    
    Securities
    
    
    TotalBeginning balance
    
    $
    
    
    
    $
    699
    
    
    $
    699
    
    
    $
    560
    
    
    $
    1,747
    
    
    $
    2,307Total gains or losses:Realized in earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (240
    )
    
    
    
    
    
    
    (240
    )Unrealized in other accumulated
comprehensive income
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    Purchases and sales
    
    
    
    
    
    
    153
    
    
    
    153
    
    
    
    
    
    
    
    
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ending balance
    
    $
    
    
    
    $
    846
    
    
    $
    846
    
    
    $
    320
    
    
    $
    1,747
    
    
    $
    2,067
 Nine months endedSeptember 30, 2010
    
    

    September 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,264
    )
    
    
    
    
    
    
    (1,264
    )Unrealized in other accumulated
comprehensive income
    
    
    
    
    
    
    (253
    )
    
    
    (253
    )
    
    
    303
    
    
    
    661
    
    
    
    964Purchases and sales
    
    
    
    
    
    
    324
    
    
    
    324
    
    
    
    
    
    
    
    
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ending balance
    
    $
    
    
    
    $
    846
    
    
    $
    846
    
    
    $
    320
    
    
    $
    1,747
    
    
    $
    2,067
    (9) Share-Based Compensation
  24




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
   (10) 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
    
    
    48,332
    
    
    
    886
    
    
    
    49,218Balance at September 30
    
    $
    57,473
    
    
    $
    (19,831
    )
    
    $
    37,642
 (11) Income Taxes
    25




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (12) Pension Plan
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Components of net periodic benefit cost:Service cost
    
    $
    1,218
    
    
    $
    1,372
    
    
    $
    3,772
    
    
    $
    3,791Interest cost
    
    
    1,478
    
    
    
    1,614
    
    
    
    4,497
    
    
    
    4,290Expected return on assets
    
    
    (1,044
    )
    
    
    (1,135
    )
    
    
    (3,148
    )
    
    
    (3,047
    )Amortization of prior service benefit
    
    
    (110
    )
    
    
    (127
    )
    
    
    (333
    )
    
    
    (340
    )Amortization of actuarial loss
    
    
    588
    
    
    
    718
    
    
    
    1,782
    
    
    
    1,809Net periodic benefit cost
    
    $
    2,130
    
    
    $
    2,442
    
    
    $
    6,570
    
    
    $
    6,503
 Employer contributions:
 (13) Net Income Available to Stockholders and Net Income per Share
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator for earnings per share:Net income available to stockholders
    
    $
    20,488
    
    
    $
    18,084
    
    
    $
    46,737
    
    
    $
    40,676Denominator for basic earnings per share:Weighted average of common shares
    
    
    29,095,272
    
    
    
    29,265,472
    
    
    
    29,085,188
    
    
    
    29,607,691Effect of dilutive securities
    
    
    220,301
    
    
    
    107,462
    
    
    
    197,690
    
    
    
    64,876Denominator for diluted earnings per share
    
    
    29,315,573
    
    
    
    29,372,934
    
    
    
    29,282,878
    
    
    
    29,672,567Basic net income per share
    
    $
    0.70
    
    
    $
    0.62
    
    
    $
    1.61
    
    
    $
    1.37Diluted net income per share
    
    $
    0.70
    
    
    $
    0.62
    
    
    $
    1.60
    
    
    $
    1.37
  (14) Contingencies
  26




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##### Table of Contents



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




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##### 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
  ACODESE Investigation
   28




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Intrusions into Triple-C, Inc. Internet IPA Database
    (15) Subsequent Event
  29




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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
  
 Overview
      30




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(Dollar amounts in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Premiums earned, net:Managed care
    
    $
    446.4
    
    
    $
    428.2
    
    
    $
    1,342.7
    
    
    $
    1,246.6Life insurance
    
    
    26.7
    
    
    
    24.7
    
    
    
    78.7
    
    
    
    74.5Property and casualty insurance
    
    
    24.5
    
    
    
    24.4
    
    
    
    75.2
    
    
    
    73.0Intersegment premiums earned
    
    
    (1.1
    )
    
    
    (1.0
    )
    
    
    (3.2
    )
    
    
    (3.4
    )Consolidated premiums earned, net
    
    $
    496.5
    
    
    $
    476.3
    
    
    $
    1,493.4
    
    
    $
    1,390.7Administrative service fees:Managed care
    
    $
    10.9
    
    
    $
    10.5
    
    
    $
    37.1
    
    
    $
    32.0Intersegment administrative service fees
    
    
    (0.7
    )
    
    
    (0.7
    )
    
    
    (2.2
    )
    
    
    (2.0
    )Consolidated administrative service fees
    
    $
    10.2
    
    
    $
    9.8
    
    
    $
    34.9
    
    
    $
    30.0Operating income:Managed care
    
    $
    16.4
    
    
    $
    10.1
    
    
    $
    47.5
    
    
    $
    32.1Life insurance
    
    
    4.6
    
    
    
    4.0
    
    
    
    13.1
    
    
    
    10.9Property and casualty insurance
    
    
    2.2
    
    
    
    0.2
    
    
    
    3.3
    
    
    
    4.4Intersegment and other
    
    
    0.7
    
    
    
    1.1
    
    
    
    2.4
    
    
    
    3.0Consolidated operating income
    
    $
    23.9
    
    
    $
    15.4
    
    
    $
    66.3
    
    
    $
    50.4
    
 Recent Developments
 Federal Health Reform Legislation
  31




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##### 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 a 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.
   32




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Commonwealth of Puerto Rico Healthcare Reform Contracts (Medicaid)
  
 Recent Accounting Standards
  
 Managed Care Membership
 As of September 30,2010
    
    
    2009Managed care enrollment:Commercial 1
    
    
    737,697
    
    
    
    745,933Medicaid 2
    
    
    544,448
    
    
    
    537,414Medicare 3
    
    
    64,190
    
    
    
    69,290Total
    
    
    1,346,335
    
    
    
    1,352,637Managed care enrollment by funding arrangement:Fully-insured
    
    
    900,498
    
    
    
    890,987Self-insured
    
    
    445,837
    
    
    
    461,650Total
    
    
    1,346,335
    
    
    
    1,352,637
 
 (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. 33




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##### Table of Contents



Consolidated Operating Results
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(Dollar amounts in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Premiums earned, net
    
    $
    496.5
    
    
    
    476.3
    
    
    $
    1,493.4
    
    
    
    1,390.7Administrative service fees
    
    
    10.2
    
    
    
    9.8
    
    
    
    34.9
    
    
    
    30.0Net investment income
    
    
    12.8
    
    
    
    12.9
    
    
    
    37.9
    
    
    
    38.9Total operating revenues
    
    
    519.5
    
    
    
    499.0
    
    
    
    1,566.2
    
    
    
    1,459.6Net realized investment gains (losses)
    
    
    (0.3
    )
    
    
    2.1
    
    
    
    (0.3
    )
    
    
    (1.2
    )Net unrealized investment gain on trading securities
    
    
    4.6
    
    
    
    4.9
    
    
    
    0.6
    
    
    
    8.1Other income, net
    
    
    0.6
    
    
    
    0.1
    
    
    
    0.4
    
    
    
    0.4Total revenues
    
    
    524.4
    
    
    
    506.1
    
    
    
    1,566.9
    
    
    
    1,466.9Benefits and expenses:Claims incurred
    
    
    421.5
    
    
    
    412.4
    
    
    
    1,272.2
    
    
    
    1,201.1Operating expenses
    
    
    74.1
    
    
    
    71.2
    
    
    
    227.7
    
    
    
    208.1Total operating expenses
    
    
    495.6
    
    
    
    483.6
    
    
    
    1,499.9
    
    
    
    1,409.2Interest expense
    
    
    3.0
    
    
    
    3.4
    
    
    
    9.6
    
    
    
    10.0Total benefits and expenses
    
    
    498.6
    
    
    
    487.0
    
    
    
    1,509.5
    
    
    
    1,419.2Income before taxes
    
    
    25.8
    
    
    
    19.1
    
    
    
    57.4
    
    
    
    47.7Income tax expense
    
    
    5.3
    
    
    
    1.0
    
    
    
    10.7
    
    
    
    7.0Net income
    
    $
    20.5
    
    
    
    18.1
    
    
    $
    46.7
    
    
    
    40.7
 Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
 Operating Revenues
  Claims Incurred
  Operating Expenses
  34




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##### Table of Contents



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




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##### Table of Contents



Managed Care Operating Results
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(Dollar amounts in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues:Medical premiums earned, net:Commercial
    
    $
    237.1
    
    
    $
    217.3
    
    
    $
    715.0
    
    
    $
    600.3Medicaid
    
    
    92.9
    
    
    
    89.4
    
    
    
    273.1
    
    
    
    257.7Medicare
    
    
    116.4
    
    
    
    121.5
    
    
    
    354.6
    
    
    
    388.6Medical premiums earned, net
    
    
    446.4
    
    
    
    428.2
    
    
    
    1,342.7
    
    
    
    1,246.6Administrative service fees
    
    
    10.9
    
    
    
    10.5
    
    
    
    37.1
    
    
    
    32.0Net investment income
    
    
    5.2
    
    
    
    5.4
    
    
    
    15.2
    
    
    
    15.9Total operating revenues
    
    
    462.5
    
    
    
    444.1
    
    
    
    1,395.0
    
    
    
    1,294.5Medical operating costs:Medical claims incurred
    
    
    397.5
    
    
    
    386.5
    
    
    
    1,197.6
    
    
    
    1,126.4Medical operating expenses
    
    
    48.6
    
    
    
    47.5
    
    
    
    149.9
    
    
    
    136.0Total medical operating costs
    
    
    446.1
    
    
    
    434.0
    
    
    
    1,347.5
    
    
    
    1,262.4Medical operating income
    
    $
    16.4
    
    
    $
    10.1
    
    
    $
    47.5
    
    
    $
    32.1Additional data:Member months enrollment:Commercial:Fully-insured
    
    
    1,484,056
    
    
    
    1,441,028
    
    
    
    4,521,088
    
    
    
    3,977,778Self-funded
    
    
    735,154
    
    
    
    812,780
    
    
    
    2,239,544
    
    
    
    1,954,997Total Commercial member months
    
    
    2,219,210
    
    
    
    2,253,808
    
    
    
    6,760,632
    
    
    
    5,932,775Medicaid:Fully-insured
    
    
    1,034,749
    
    
    
    1,011,294
    
    
    
    3,078,288
    
    
    
    2,997,800Self-funded
    
    
    599,648
    
    
    
    590,117
    
    
    
    1,782,426
    
    
    
    1,723,568Total Medicaid member months
    
    
    1,634,397
    
    
    
    1,601,411
    
    
    
    4,860,714
    
    
    
    4,721,368Medicare:Medicare Advantage
    
    
    165,327
    
    
    
    179,878
    
    
    
    506,622
    
    
    
    565,439Stand-alone PDP
    
    
    28,014
    
    
    
    29,330
    
    
    
    84,395
    
    
    
    88,301Total Medicare member months
    
    
    193,341
    
    
    
    209,208
    
    
    
    591,017
    
    
    
    653,740Total member months
    
    
    4,046,948
    
    
    
    4,064,427
    
    
    
    12,212,363
    
    
    
    11,307,883Medical loss ratio
    
    
    89.0
    %
    
    
    90.3
    %
    
    
    89.2
    %
    
    
    90.4
    %Operating expense ratio
    
    
    10.6
    %
    
    
    10.8
    %
    
    
    10.9
    %
    
    
    10.6
    %
 Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
 Medical Operating Revenues
  
    
    Medical premiums generated by the Commercial business increased by $19.8 million, or 9.1%, to
$237.1 million during the three months ended September 30, 2010. This fluctuation is
primarily the result of an increase in member months enrollment by 43,028, or 3.0%, and an
increase in average
premium rates in rated group policies of approximately 7.6%. Increase in
member months was primarily attributed to new groups acquired during the
period.
 36




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##### Table of Contents




    
    Medical premiums earned in the Medicaid business
increased by $3.5 million, or 3.9%, to $92.9 million
during the three months ended September 30, 2010.
This fluctuation is due to an increase in member
months enrollment in the fully-insured membership by
23,455, or 2.3%, as well as to an average increase in
premiums rates of 4.8% that was effective September
1st, 2010.
    
    Medical premiums generated by the Medicare business
decreased during the three months ended September 30,
2010 by $5.1 million, or 4.2%, to $116.4 million.
This fluctuation is the result of an overall decrease
in the member months enrollment of this business by
15,867, or 7.6%, when compared with the same period
in 2009, mostly reflected in our dual-eligible
product. This decrease in member month enrollment is
offset in part by higher average premium rates,
particularly in our dual eligible product, and to
higher CMS risk score adjustment for the 2010 period
as compared to 2009. The three months ended
September 30, 2010 and 2009 include the net effect of
approximately $1.8 million and $0.9 million,
respectively of risk score adjustments corresponding
to prior periods.
 Medical Claims Incurred
  
    
    The medical claims incurred of the Commercial business increased by
$12.0 million, or 6.2%, during the 2010 period and its MLR decreased
by 2.3 percentage points. The increase in claims relates primarily to
the increase in member months enrollment experienced during the 2010
period. 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 decreased by 1.1
percentage points, mostly resulting from a higher overall trend in
premium rate increases as compared to cost trends as well as to lower
utilization trends in 2010.
    
    The medical claims incurred of the Medicaid business increased by $4.7
million, or 5.8%, and its MLR increased by 1.7 percentage points
during the three months ended September 30, 2010. The increase in MLR
is primarily due to the effect of prior period reserve developments in
the 2010 and 2009 periods and an increase in loss adjustment expenses.
This increase was offset in part by 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 5.0 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 until September 2010.
    
    The medical claims incurred of the Medicare business decreased by $5.7
million, or 5.3% during the 2010 period primarily due to a lower
membership and its MLR was 89.3%, 1.1 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 increased by 1.0 percentage points
primarily the result of higher utilization trends in our non-dual
product.
 Medical Operating Expenses
  37




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##### Table of Contents



Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009
 Medical Operating Revenues
  
    
    Medical premiums generated by the Commercial business increased by
$114.7 million, or 19.1%, to $715.0 million during the nine months
ended September 30, 2010. This fluctuation is primarily the result of
an increase in member months enrollment by 543,310, or 13.7%, and an
increase in average premium rates in rated group policies of
approximately 6.1%. Increase in member months was attributed to new
members acquired from LCA effective July 1, 2009, which represent
approximately 35.1% of the increase in member months enrollment
experienced during 2010, and to new groups acquired during the period.
    
    Medical premiums earned in the Medicaid business increased by $15.4
million, or 6.0%, to $273.1 million during the nine months ended
September 30, 2010. This fluctuation is due to an increase in the
member months enrollment in the fully-insured membership by 80,488, or
2.7%. In addition, the 2009 period includes a premium reduction
adjustment of approximately $8.0 million to provide for unresolved
reconciling items with the Government of Puerto Rico. The average
premiums rates of this business were increased by 4.8% effective
September 1st, 2010.
    
    Medical premiums generated by the Medicare business decreased by $34.0
million, or 8.7%, to $354.6 million, primarily due to a decrease in
member month enrollment of 62,723, or 9.6%, 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 nine months ended September 30, 2010 and 2009
include the net effect of approximately $3.0 million and $9.2 million,
respectively, related to CMS 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
$98.8 million, or 18.1%, during the 2010 period and its MLR decreased
by 0.7 percentage points. The increase in claims relates primarily to
the increase in member months enrollment of 543,310, or 13.7%. The
lower MLR primarily results from a higher overall trend in premium
rate increases as compared to cost trends as well as to lower
utilization trends in 2010.
    
    The medical claims incurred of the Medicaid business increased by
$25.4 million, or 11.0%, during the 2010 period and its MLR increased
by 4.2 percentage points during the nine months ended September 30,
2010, to 94.1%. 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 2.8 percentage points during the 2010 period,
mostly resulting from a lower premium yield due to the extension of
the prior years contract with the government without premium rate
increases until September 2010.
    
    The medical claims incurred of the Medicare business decreased by
$53.0 million, or 15.2%, during the 2010 period primarily due to lower
membership and MLR. The MLR was 83.6%, 6.4 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 3.4 percentage points mostly as
the result of higher premium rates and lower utilization in our Medicare products and a new
risk-sharing arrangement with our providers in the dual-eligible product.
 38




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Medical Operating Expenses
  
 Life Insurance Operating Results
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(Dollar amounts in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues:Premiums earned, net:Premiums earned
    
    $
    28.1
    
    
    $
    26.2
    
    
    $
    82.9
    
    
    $
    79.1Premiums earned ceded
    
    
    (1.4
    )
    
    
    (1.5
    )
    
    
    (4.2
    )
    
    
    (4.6
    )Premiums earned, net
    
    
    26.7
    
    
    
    24.7
    
    
    
    78.7
    
    
    
    74.5Net investment income
    
    
    4.5
    
    
    
    4.1
    
    
    
    12.9
    
    
    
    12.5Total operating revenues
    
    
    31.2
    
    
    
    28.8
    
    
    
    91.6
    
    
    
    87.0Operating costs:Policy benefits and claims incurred
    
    
    12.8
    
    
    
    12.2
    
    
    
    37.1
    
    
    
    37.9Underwriting and other expenses
    
    
    13.8
    
    
    
    12.6
    
    
    
    41.4
    
    
    
    38.2Total operating costs
    
    
    26.6
    
    
    
    24.8
    
    
    
    78.5
    
    
    
    76.1Operating income
    
    $
    4.6
    
    
    $
    4.0
    
    
    $
    13.1
    
    
    $
    10.9Additional data:Loss ratio
    
    
    47.9
    %
    
    
    49.4
    %
    
    
    47.1
    %
    
    
    50.9
    %Operating expense ratio
    
    
    51.7
    %
    
    
    51.0
    %
    
    
    52.6
    %
    
    
    51.3
    %
 Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
 Operating Revenues
  Policy Benefits and Claims Incurred
  39




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Underwriting and Other Expenses
  Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009
 Operating Revenues
  Policy Benefits and Claims Incurred
  Underwriting and Other Expenses
  
 Property and Casualty Insurance Operating Results
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(Dollar amounts in millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Operating revenues:Premiums earned, net:Premiums written
    
    $
    40.7
    
    
    $
    40.1
    
    
    $
    111.5
    
    
    $
    110.8Premiums ceded
    
    
    (17.4
    )
    
    
    (15.5
    )
    
    
    (46.7
    )
    
    
    (45.0
    )Change in unearned premiums
    
    
    1.2
    
    
    
    (0.2
    )
    
    
    10.4
    
    
    
    7.2Premiums earned, net
    
    
    24.5
    
    
    
    24.4
    
    
    
    75.2
    
    
    
    73.0Net investment income
    
    
    2.6
    
    
    
    3.0
    
    
    
    8.2
    
    
    
    8.8Total operating revenues
    
    
    27.1
    
    
    
    27.4
    
    
    
    83.4
    
    
    
    81.8Operating costs:Claims incurred
    
    
    11.2
    
    
    
    13.7
    
    
    
    37.5
    
    
    
    36.9Underwriting and other expenses
    
    
    13.7
    
    
    
    13.5
    
    
    
    42.6
    
    
    
    40.5Total operating costs
    
    
    24.9
    
    
    
    27.2
    
    
    
    80.1
    
    
    
    77.4Operating income
    
    $
    2.2
    
    
    $
    0.2
    
    
    $
    3.3
    
    
    $
    4.4Additional data:Loss ratio
    
    
    45.7
    %
    
    
    56.1
    %
    
    
    49.9
    %
    
    
    50.5
    %Operating expense ratio
    
    
    55.9
    %
    
    
    55.3
    %
    
    
    56.6
    %
    
    
    55.5
    %
 Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
 Operating Revenues
  40




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##### Table of Contents



Claims Incurred
  Underwriting and Other Expenses
  Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009
 Operating Revenues
    Claims incurred
  Underwriting and other expenses
  41




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows
  Nine months endedSeptember 30,(Dollar amounts in millions)
    
    2010
    
    
    2009Sources of cash:Cash provided by operating activities
    
    $
    87.0
    
    
    $
    66.7Proceeds from policyholder deposits
    
    
    7.7
    
    
    
    3.7Total sources of cash
    
    
    94.7
    
    
    
    70.4Uses of cash:Net purchases of investment securities
    
    
    (59.4
    )
    
    
    (6.8
    )Capital expenditures
    
    
    (13.7
    )
    
    
    (14.7
    )Repurchase and retirement of common stock
    
    
    
    
    
    
    (22.0
    )Payments of long-term borrowings
    
    
    (1.2
    )
    
    
    (1.2
    )Surrenders of policyholder deposits
    
    
    (7.6
    )
    
    
    (4.9
    )Other
    
    
    (2.5
    )
    
    
    (12.2
    )Total uses of cash
    
    
    (84.4
    )
    
    
    (61.8
    )Net increase in cash and cash equivalents
    
    $
    10.3
    
    
    $
    8.6
     Share Repurchase Program
  Financing and Financing Capacity
   
    
    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).
 42




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##### Table of Contents




    
    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). During September 2010, we entered into an agreement to purchase $25.0 million of this note on October 1, 2010.
For additional information refer to note 7 of the unaudited consolidated financial statements.
    
    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




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##### 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
 Purchases of Equity Securities by the Issuer
  Total Number
    
    
    Approximateof Shares
    
    
    Dollar ValuePurchased as
    
    
    of Shares thatTotal
    
    
    
    
    
    
    Part of
    
    
    May Yet BeNumber of
    
    
    Average
    
    
    Publicly
    
    
    Purchased(Dollar amounts in millions, except
    
    Shares
    
    
    Price Paid
    
    
    Announced
    
    
    Under theper share data)
    
    Purchased
    
    
    per Share
    
    
    Programs1
    
    
    ProgramsSeptember 1, 2010 to September 30,
2010
    
    
    24,400
    
    
    $
    16.61
    
    
    
    24,400
    
    
    $
    29.6
 
 1
    
    On September 29, 2010, the Board of Directors authorized the immediate
commencement of a $30.0 million share repurchase program of Class B shares only. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. (Removed and Reserved)
 
 Item 5. Other Information
  44




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##### Table of Contents



Item 6. Exhibits
 Exhibits
    
    DescriptionExhibit 3(ii)
    
    Amended and 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 (incorporated herein
by reference to Exhibit 10.1 to TSMs Quarterly Report on
Form 10-Q for the quarter ended June 30, 2010 (File No.
001-33865)).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 (incorporated herein by reference to Exhibit 10.1 to
TSMs Quarterly Report on Form 10-Q for the quarter ended
June 30, 2010 (File No. 001-33865)).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 (incorporated
herein by reference to Exhibit 10.1 to TSMs Quarterly
Report on Form 10-Q for the quarter ended June 30, 2010
(File No. 001-33865)).Exhibit 10.4*
    
    Amendment to the Medicare Platino Contract (Medicare
Wraparound) between the Puerto Rico Health Insurance
Administration and TSS for the provision of wraparound
coverage to health insurance dual-eligible population until
December 31, 2011.11
    
    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 September 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




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##### Table of Contents



SIGNATURES
  Triple-S Management Corporation
RegistrantDate:      November 9, 2010
    By:
    /s/ Ramón M. Ruiz-ComasRamón M. Ruiz-Comas, CPAPresident and

Chief Executive OfficerDate:      November 9, 2010
    By:
    /s/ Juan J. RománJuan J. Román, CPAVice President of Finance

and Chief Financial Officer
Principal Accounting Officer 46