##### 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 March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER: 001-33865
 Triple-S Management Corporation
 Puerto Rico
    
    66-0555678(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)1441 F.D. Roosevelt AvenueSan Juan, Puerto Rico
    
    00920(Address of principal executive offices)
    
    (Zip code)
 (787) 749-4949
 Not applicable
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Title of each class
    
    Outstanding at March 31, 2011Common Stock Class A, $1.00 par value
    
    9,042,809Common Stock Class B, $1.00 par value
    
    19,810,271




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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
    
    
    31Cautionary Statement Regarding Forward-Looking Information
    
    
    31Overview
    
    
    31Recent Developments
    
    
    32Recent Accounting Standards
    
    
    33Managed Care Membership
    
    
    34Consolidated Operating Results
    
    
    34Managed Care Operating Results
    
    
    36Life Insurance Operating Results
    
    
    38Property and Casualty Insurance Operating Results
    
    
    39Liquidity and Capital Resources
    
    
    40Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 4. Controls and Procedures
    
    
    42Part II  Other Information
    
    
    42Item 1. Legal Proceedings
    
    
    42Item 1A. Risk Factors
    
    
    42Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 3. Defaults Upon Senior Securities
    
    
    43Item 4. (Removed and Reserved)
    
    
    43Item 5. Other Information
    
    
    43Item 6. Exhibits
    
    
    43SIGNATURES
    
    
    44EX-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)
 March
    
    
    December 31,2011
    
    
    2010AssetsInvestments and cash:Equity securities held for trading, at fair value
    
    $
    32,768
    
    
    $
    51,099Securities available for sale, at fair value:Fixed maturities
    
    
    995,703
    
    
    
    977,586Equity securities
    
    
    81,720
    
    
    
    56,739Securities held to maturity, at amortized cost:Fixed maturities
    
    
    14,531
    
    
    
    14,615Policy loans
    
    
    5,898
    
    
    
    5,887Cash and cash equivalents
    
    
    70,388
    
    
    
    45,021Total investments and cash
    
    
    1,201,008
    
    
    
    1,150,947Premiums and other receivables, net
    
    
    290,054
    
    
    
    325,780Deferred policy acquisition costs and value of business acquired
    
    
    145,385
    
    
    
    146,086Property and equipment, net
    
    
    79,061
    
    
    
    76,745Deferred tax asset
    
    
    27,232
    
    
    
    29,445Other assets
    
    
    87,381
    
    
    
    30,367Total assets
    
    $
    1,830,121
    
    
    $
    1,759,370Liabilities and Stockholders EquityClaim liabilities
    
    
    414,215
    
    
    
    360,210Liability for future policy benefits
    
    
    239,819
    
    
    
    236,523Unearned premiums
    
    
    91,045
    
    
    
    98,341Policyholder deposits
    
    
    50,254
    
    
    
    49,936Liability to Federal Employees Health Benefits Program (FEHBP)
    
    
    12,619
    
    
    
    15,018Accounts payable and accrued liabilities
    
    
    159,400
    
    
    
    136,567Deferred tax liability
    
    
    21,908
    
    
    
    12,655Short-term borrowings
    
    
    
    
    
    
    15,575Long-term borrowings
    
    
    165,617
    
    
    
    166,027Liability for pension benefits
    
    
    50,639
    
    
    
    51,246Total liabilities
    
    
    1,205,516
    
    
    
    1,142,098Stockholders equity:Common stock Class A, $1 par value. Authorized
100,000,000 shares; issued
and outstanding 9,042,809 at March 31, 2011
and December 31, 2010
    
    
    9,043
    
    
    
    9,043Common stock Class B, $1 par value. Authorized
100,000,000 shares; issued
and outstanding 19,810,271 and 19,772,614
shares at March 31, 2011
and December 31, 2010, respectively
    
    
    19,810
    
    
    
    19,773Additional paid-in capital
    
    
    153,333
    
    
    
    155,299Retained earnings
    
    
    438,063
    
    
    
    427,693Accumulated other comprehensive income
    
    
    4,356
    
    
    
    5,464Total stockholders equity
    
    
    624,605
    
    
    
    617,272Total liabilities and stockholders equity
    
    $
    1,830,121
    
    
    $
    1,759,370
  3




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##### Table of Contents



Triple-S Management Corporation  Consolidated Statements of Earnings

(Unaudited) (Dollar amounts in thousands, except
per share data)
 Three months endedMarch 31,2011
    
    
    2010Revenues:Premiums earned, net
    
    $
    485,271
    
    
    $
    494,177Administrative service fees
    
    
    6,595
    
    
    
    12,498Net investment income
    
    
    11,798
    
    
    
    12,423Total operating revenues
    
    
    503,664
    
    
    
    519,098Net realized investment losses:Total other-than-temporary impairment losses on securities
    
    
    
    
    
    
    (1,855
    )Net realized gains, excluding other-than-temporary impairment
losses on securities
    
    
    5,893
    
    
    
    476Total net realized investment gains (losses)
    
    
    5,893
    
    
    
    (1,379
    )Net unrealized investment (loss) gain on trading securities
    
    
    (1,141
    )
    
    
    2,030Other income, net
    
    
    14
    
    
    
    152Total revenues
    
    
    508,430
    
    
    
    519,901Benefits and expenses:Claims incurred
    
    
    402,573
    
    
    
    425,828Operating expenses
    
    
    82,711
    
    
    
    76,871Total operating costs
    
    
    485,284
    
    
    
    502,699Interest expense
    
    
    3,127
    
    
    
    3,228Total benefits and expenses
    
    
    488,411
    
    
    
    505,927Income before taxes
    
    
    20,019
    
    
    
    13,974Income tax expense (benefit):Current
    
    
    (153
    )
    
    
    3,544Deferred
    
    
    9,802
    
    
    
    (762
    )Total income taxes
    
    
    9,649
    
    
    
    2,782Net income
    
    $
    10,370
    
    
    $
    11,192Basic net income per share
    
    $
    0.36
    
    
    $
    0.38Diluted net income per share
    
    $
    0.36
    
    
    $
    0.38
  4




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##### Table of Contents



Triple-S Management Corporation  Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss)

(Unaudited) (Dollar amounts in thousands, except per share data)
 2011
    
    
    2010Balance at January 1
    
    $
    617,272
    
    
    $
    537,772Share-based compensation
    
    
    793
    
    
    
    505Cash settlement of options granted under share-based compensation plan
    
    
    (1,259
    )
    
    
    Stock issued
upon the exercise of stock options
    
    
    94
    
    
    
    Repurchase and retirement of common stock
    
    
    (1,557
    )
    
    
    Comprehensive income (loss):Net income
    
    
    10,370
    
    
    
    11,192Net unrealized change in fair value of available for sale securities, net of taxes
    
    
    (1,641
    )
    
    
    13,527Defined benefit pension plan:Actuarial
gain, net
    
    
    622
    
    
    
    371Prior service credit, net
    
    
    (89
    )
    
    
    (69
    )Total comprehensive income
    
    
    9,262
    
    
    
    25,021Balance at March 31
    
    $
    624,605
    
    
    $
    563,298
  5




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##### Table of Contents



Triple-S Management Corporation  Consolidated Statements of Cash Flows

(Unaudited) (Dollar amounts in thousands, except
per share data)
 Three months endedMarch 31,2011
    
    
    2010Cash flows from operating activities:Net income
    
    $
    10,370
    
    
    $
    11,192Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    5,188
    
    
    
    3,012Net amortization of investments
    
    
    1,041
    
    
    
    755Provision for doubtful receivables
    
    
    410
    
    
    
    1,732Deferred tax expense (benefit)
    
    
    9,802
    
    
    
    (762
    )Net realized investment (gain) loss on sale of securities
    
    
    (5,893
    )
    
    
    1,379Net unrealized loss (gain) on trading securities
    
    
    1,141
    
    
    
    (2,030
    )Share-based compensation
    
    
    793
    
    
    
    505Proceeds from trading securities sold:Equity securities
    
    
    20,804
    
    
    
    1,156Acquisition of securities in trading portfolio:Equity securities
    
    
    (187
    )
    
    
    (2,419
    )(Increase) decrease in assets:Premium and other receivables, net
    
    
    56,690
    
    
    
    (18,889
    )Deferred policy acquisition costs and value of business acquired
    
    
    701
    
    
    
    (515
    )Other deferred taxes
    
    
    92
    
    
    
    3,422Other assets
    
    
    1,403
    
    
    
    3,926Increase (decrease) in liabilities:Claim liabilities
    
    
    12,339
    
    
    
    37,188Liability for future policy benefits
    
    
    3,296
    
    
    
    3,940Unearned premiums
    
    
    (8,015
    )
    
    
    (7,194
    )Policyholder deposits
    
    
    270
    
    
    
    130Liability to FEHBP
    
    
    (2,399
    )
    
    
    348Accounts payable and accrued liabilities
    
    
    (6,459
    )
    
    
    (6,385
    )Net cash provided by operating activities
    
    
    101,387
    
    
    
    30,491
  6




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##### Table of Contents



Triple-S Management Corporation  Consolidated Statements of Cash Flows
(Unaudited) (Dollar amounts in thousands, except
per share data)
 Three months endedMarch 31,2011
    
    
    2010Cash flows from investing activities:Proceeds from investments sold or matured:Securities available for sale:Fixed maturities sold
    
    $
    14,986
    
    
    $
    23,272Fixed maturities matured/called
    
    
    33,964
    
    
    
    35,415Equity securities
    
    
    9,458
    
    
    
    401Securities held to maturity:Fixed maturities matured/called
    
    
    181
    
    
    
    1,250Acquisition of investments:Securities available for sale:Fixed maturities
    
    
    (32,224
    )
    
    
    (83,024
    )Equity securities
    
    
    (29,134
    )
    
    
    (1,295
    )Net outflows for policy loans
    
    
    (11
    )
    
    
    (50
    )Acquisition of business, net of $29,370 of cash acquired
    
    
    (54,058
    )
    
    
    Net capital expenditures
    
    
    (3,977
    )
    
    
    (4,878
    )Net cash used in investing activities
    
    
    (60,815
    )
    
    
    (28,909
    )Cash flows from financing activities:Change in outstanding checks in excess of bank
balances
    
    
    3,454
    
    
    
    (4
    )Repayments of short-term borrowings
    
    
    (15,575
    )
    
    
    Repayments of long-term borrowings
    
    
    (410
    )
    
    
    (410
    )Repurchase and retirement of common stock
    
    
    (1,557
    )
    
    
    Cash settlements of stock options
    
    
    (1,259
    )
    
    
    Proceeds
from exercise of stock options
    
    
    94
    
    
    
    Proceeds from policyholder deposits
    
    
    1,824
    
    
    
    2,052Surrenders of policyholder deposits
    
    
    (1,776
    )
    
    
    (2,251
    )Net cash used in financing activities
    
    
    (15,205
    )
    
    
    (613
    )Net increase in cash and cash
equivalents
    
    
    25,367
    
    
    
    969Cash and cash equivalents:Beginning of period
    
    
    45,021
    
    
    
    40,376End of period
    
    $
    70,388
    
    
    $
    41,345
  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
  (3) Segment Information
  st
 8




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months endedMarch 31,2011
    
    
    2010Operating revenues:Managed Care:Premiums earned, net
    
    $
    432,803
    
    
    $
    443,059Administrative service fees
    
    
    6,595
    
    
    
    12,498Intersegment premiums /service fees
    
    
    1,500
    
    
    
    1,552Net investment income
    
    
    4,221
    
    
    
    4,962Total managed care
    
    
    445,119
    
    
    
    462,071Life Insurance:Premiums earned, net
    
    
    26,958
    
    
    
    25,806Intersegment premiums
    
    
    86
    
    
    
    98Net investment income
    
    
    4,407
    
    
    
    4,206Total life insurance
    
    
    31,451
    
    
    
    30,110Property and Casualty Insurance:Premiums earned, net
    
    
    25,510
    
    
    
    25,312Intersegment premiums
    
    
    153
    
    
    
    153Net investment income
    
    
    2,210
    
    
    
    2,735Total property and casualty insurance
    
    
    27,873
    
    
    
    28,200Other segments: *Intersegment service revenues
    
    
    3,848
    
    
    
    13,504Operating revenues from external sources
    
    
    2
    
    
    
    Total other segments
    
    
    3,850
    
    
    
    13,504Total business segments
    
    
    508,293
    
    
    
    533,885TSM operating revenues from external sources
    
    
    462
    
    
    
    520Elimination of intersegment premiums
    
    
    (1,739
    )
    
    
    (1,803
    )Elimination of intersegment service fees
    
    
    (3,848
    )
    
    
    (13,504
    )Other intersegment eliminations
    
    
    496
    
    
    
    Consolidated operating revenues
    
    $
    503,664
    
    
    $
    519,098
 
 *
    
    Includes segments that are not required to be reported separately, primarily 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 endedMarch 31,2011
    
    
    2010Operating income:Managed care
    
    $
    12,407
    
    
    $
    12,648Life insurance
    
    
    4,272
    
    
    
    3,838Property and casualty insurance
    
    
    960
    
    
    
    (902
    )Other segments *
    
    
    (6
    )
    
    
    187Total business segments
    
    
    17,633
    
    
    
    15,771TSM operating revenues from external sources
    
    
    462
    
    
    
    520TSM unallocated operating expenses
    
    
    (2,506
    )
    
    
    (2,213
    )Elimination of TSM intersegment charges
    
    
    2,791
    
    
    
    2,321Consolidated operating income
    
    
    18,380
    
    
    
    16,399Consolidated net realized investment gains (losses)
    
    
    5,893
    
    
    
    (1,379
    )Consolidated net unrealized (loss) gain on trading
securities
    
    
    (1,141
    )
    
    
    2,030Consolidated interest expense
    
    
    (3,127
    )
    
    
    (3,228
    )Consolidated other income, net
    
    
    14
    
    
    
    152Consolidated income before taxes
    
    $
    20,019
    
    
    
    13,974Depreciation expense:Managed care
    
    $
    4,434
    
    
    
    2,228Life insurance
    
    
    162
    
    
    
    169Property and casualty insurance
    
    
    390
    
    
    
    399Total business segments
    
    
    4,986
    
    
    
    2,796TSM depreciation expense
    
    
    202
    
    
    
    216Consolidated depreciation expense
    
    $
    5,188
    
    
    
    3,012
 
 *
    
    Includes segments that are not required to be reported separately, primarily the data
processing services organization as well as the third-party administrator of managed
care services. 10




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 March 31,
    
    
    December 31,2011
    
    
    2010Assets:Managed care
    
    $
    891,968
    
    
    $
    790,485Life insurance
    
    
    531,588
    
    
    
    523,246Property and casualty insurance
    
    
    325,892
    
    
    
    339,955Other segments *
    
    
    18,586
    
    
    
    16,842Total business segments
    
    
    1,768,034
    
    
    
    1,670,528Unallocated amounts related to TSM:Cash, cash equivalents, and investments
    
    
    61,758
    
    
    
    62,841Property and equipment, net
    
    
    20,510
    
    
    
    20,712Other assets
    
    
    17,680
    
    
    
    20,60099,948
    
    
    
    104,153Elimination entries-intersegment
receivables and others
    
    
    (37,861
    )
    
    
    (15,311
    )Consolidated total assets
    
    $
    1,830,121
    
    
    $
    1,759,370
 
 *
    
    Includes segments that are not required to be reported separately, primarily the data
processing services organization as well as the third-party administrator of managed
care services. 11




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (4) Investment in Securities
  March 31, 2011Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    EstimatedCost
    
    
    gains
    
    
    losses
    
    
    fair valueTrading securities:Equity securities
    
    $
    26,642
    
    
    $
    8,946
    
    
    $
    (2,820
    )
    
    $
    32,768
 December 31, 2010Gross
    
    
    Grossunrealized
    
    
    unrealized
    
    
    EstimatedCost
    
    
    gains
    
    
    losses
    
    
    fair valueTrading securities:Equity securities
    
    $
    43,832
    
    
    $
    10,738
    
    
    $
    (3,471
    )
    
    $
    51,099
 March 31, 2011Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities available for sale:Fixed maturities:Obligations of government-
sponsored enterprises
    
    $
    114,514
    
    
    $
    5,527
    
    
    $
    (36
    )
    
    $
    120,005U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    47,231
    
    
    
    4,890
    
    
    
    
    
    
    
    52,121Obligations of the
Commonwealth of Puerto Rico
and its instrumentalities
    
    
    143,814
    
    
    
    2,362
    
    
    
    (279
    )
    
    
    145,897Municipal securities
    
    
    298,348
    
    
    
    6,129
    
    
    
    (2,178
    )
    
    
    302,299Corporate bonds
    
    
    105,778
    
    
    
    6,460
    
    
    
    (378
    )
    
    
    111,860Residential mortgage-backed securities
    
    
    10,313
    
    
    
    695
    
    
    
    
    
    
    
    11,008Collateralized mortgage obligations
    
    
    248,053
    
    
    
    5,565
    
    
    
    (1,105
    )
    
    
    252,513Total fixed maturities
    
    
    968,051
    
    
    
    31,628
    
    
    
    (3,976
    )
    
    
    995,703Equity securities:Common stocks
    
    
    66
    
    
    
    2,646
    
    
    
    
    
    
    
    2,712Preferred stocks
    
    
    4,311
    
    
    
    66
    
    
    
    (750
    )
    
    
    3,627Perpetual preferred stocks
    
    
    1,000
    
    
    
    
    
    
    
    (83
    )
    
    
    917Mutual funds
    
    
    67,346
    
    
    
    7,345
    
    
    
    (227
    )
    
    
    74,464Total equity securities
    
    
    72,723
    
    
    
    10,057
    
    
    
    (1,060
    )
    
    
    81,720Total
    
    $
    1,040,774
    
    
    $
    41,685
    
    
    $
    (5,036
    )
    
    $
    1,077,423
 12




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 December 31, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities available for sale:Fixed maturities:Obligations of government-
sponsored enterprises
    
    $
    124,735
    
    
    $
    6,650
    
    
    $
    
    
    
    $
    131,385U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    47,427
    
    
    
    5,451
    
    
    
    
    
    
    
    52,878Obligations of the
Commonwealth of Puerto Rico
and its instrumentalities
    
    
    117,519
    
    
    
    3,115
    
    
    
    (10
    )
    
    
    120,624Municipal securities
    
    
    272,383
    
    
    
    3,979
    
    
    
    (2,798
    )
    
    
    273,564Corporate bonds
    
    
    102,184
    
    
    
    7,698
    
    
    
    (250
    )
    
    
    109,632Residential mortgage-backed securities
    
    
    12,560
    
    
    
    801
    
    
    
    (1
    )
    
    
    13,360Collateralized mortgage obligations
    
    
    271,149
    
    
    
    6,158
    
    
    
    (1,164
    )
    
    
    276,143Total fixed maturities
    
    
    947,957
    
    
    
    33,852
    
    
    
    (4,223
    )
    
    
    977,586Equity securities:Common stocks
    
    
    901
    
    
    
    3,430
    
    
    
    
    
    
    
    4,331Preferred stocks
    
    
    4,298
    
    
    
    68
    
    
    
    (737
    )
    
    
    3,629Perpetual preferred stocks
    
    
    1,000
    
    
    
    
    
    
    
    (94
    )
    
    
    906Mutual funds
    
    
    41,551
    
    
    
    6,632
    
    
    
    (310
    )
    
    
    47,873Total equity securities
    
    
    47,750
    
    
    
    10,130
    
    
    
    (1,141
    )
    
    
    56,739Total
    
    $
    995,707
    
    
    $
    43,982
    
    
    $
    (5,364
    )
    
    $
    1,034,325
 March 31, 2011Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities held to maturity:Obligations of government-
sponsored enterprises
    
    $
    1,793
    
    
    $
    130
    
    
    $
    
    
    
    $
    1,923U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    1,477
    
    
    
    180
    
    
    
    
    
    
    
    1,657Corporate bonds
    
    
    9,540
    
    
    
    350
    
    
    
    
    
    
    
    9,890Residential mortgage-backed securities
    
    
    480
    
    
    
    27
    
    
    
    
    
    
    
    507Certificates of deposit
    
    
    1,241
    
    
    
    
    
    
    
    
    
    
    
    1,241Total
    
    $
    14,531
    
    
    $
    687
    
    
    $
    
    
    
    $
    15,218
 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, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities held to maturity:Obligations of government-
sponsored enterprises
    
    $
    1,793
    
    
    $
    151
    
    
    $
    
    
    
    $
    1,944U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    1,478
    
    
    
    203
    
    
    
    
    
    
    
    1,681Corporate bonds
    
    
    9,443
    
    
    
    414
    
    
    
    
    
    
    
    9,857Residential mortgage-backed securities
    
    
    660
    
    
    
    41
    
    
    
    
    
    
    
    701Certificates of deposit
    
    
    1,241
    
    
    
    
    
    
    
    
    
    
    
    1,241Total
    
    $
    14,615
    
    
    $
    809
    
    
    $
    
    
    
    $
    15,424
  March 31, 2011Less 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
    
    $
    3,408
    
    
    $
    (36
    )
    
    
    1
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    3,408
    
    
    $
    (36
    )
    
    
    1Obligations of the
Commonwealth of Puerto
Rico and its instrumentalities
    
    
    45,441
    
    
    
    (279
    )
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,441
    
    
    
    (279
    )
    
    
    9Municipal securities
    
    
    82,182
    
    
    
    (2,178
    )
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,182
    
    
    
    (2,178
    )
    
    
    40Corporate bonds
    
    
    11,161
    
    
    
    (378
    )
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,161
    
    
    
    (378
    )
    
    
    7Collateralized mortgage
obligations
    
    
    63,684
    
    
    
    (963
    )
    
    
    10
    
    
    
    2,085
    
    
    
    (142
    )
    
    
    1
    
    
    
    65,769
    
    
    
    (1,105
    )
    
    
    11Total fixed maturities
    
    
    205,876
    
    
    
    (3,834
    )
    
    
    67
    
    
    
    2,085
    
    
    
    (142
    )
    
    
    1
    
    
    
    207,961
    
    
    
    (3,976
    )
    
    
    68Equity securities:Preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,251
    
    
    
    (750
    )
    
    
    1
    
    
    
    3,251
    
    
    
    (750
    )
    
    
    1Perpetual preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    917
    
    
    
    (83
    )
    
    
    1
    
    
    
    917
    
    
    
    (83
    )
    
    
    1Mutual funds
    
    
    1,116
    
    
    
    (227
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,116
    
    
    
    (227
    )
    
    
    1Total equity securities
    
    
    1,116
    
    
    
    (227
    )
    
    
    1
    
    
    
    4,168
    
    
    
    (833
    )
    
    
    2
    
    
    
    5,284
    
    
    
    (1,060
    )
    
    
    3Total for securities available for sale
    
    $
    206,992
    
    
    $
    (4,061
    )
    
    
    68
    
    
    $
    6,253
    
    
    $
    (975
    )
    
    
    3
    
    
    $
    213,245
    
    
    $
    (5,036
    )
    
    
    71
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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 December 31, 2010Less than 12 months
    
    
    12 months or longer
    
    
    TotalGross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossEstimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number ofFair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    SecuritiesSecurites available for sale:Fixed maturities:Obligations of the
Commonwealth of Puerto
Rico and its instrumentalities
    
    $
    2,483
    
    
    $
    (10
    )
    
    
    5
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    2,483
    
    
    $
    (10
    )
    
    
    5Municipal securities
    
    
    105,280
    
    
    
    (2,652
    )
    
    
    53
    
    
    
    692
    
    
    
    (146
    )
    
    
    1
    
    
    
    105,972
    
    
    
    (2,798
    )
    
    
    54Corporate bonds
    
    
    5,828
    
    
    
    (250
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,828
    
    
    
    (250
    )
    
    
    3Residential mortgage-backed
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    (1
    )
    
    
    1
    
    
    
    36
    
    
    
    (1
    )
    
    
    1Collateralized mortgage
obligations
    
    
    77,417
    
    
    
    (1,144
    )
    
    
    12
    
    
    
    1,953
    
    
    
    (20
    )
    
    
    1
    
    
    
    79,370
    
    
    
    (1,164
    )
    
    
    13Total fixed maturities
    
    
    191,008
    
    
    
    (4,056
    )
    
    
    73
    
    
    
    2,681
    
    
    
    (167
    )
    
    
    3
    
    
    
    193,689
    
    
    
    (4,223
    )
    
    
    76Equity securities:Preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,263
    
    
    
    (737
    )
    
    
    1
    
    
    
    3,263
    
    
    
    (737
    )
    
    
    1Perpetual preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    906
    
    
    
    (94
    )
    
    
    1
    
    
    
    906
    
    
    
    (94
    )
    
    
    1Mutual funds
    
    
    2,337
    
    
    
    (310
    )
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,337
    
    
    
    (310
    )
    
    
    2Total equity securities
    
    
    2,337
    
    
    
    (310
    )
    
    
    2
    
    
    
    4,169
    
    
    
    (831
    )
    
    
    2
    
    
    
    6,506
    
    
    
    (1,141
    )
    
    
    4Total for securities available for sale
    
    $
    193,345
    
    
    $
    (4,366
    )
    
    
    75
    
    
    $
    6,850
    
    
    $
    (998
    )
    
    
    5
    
    
    $
    200,195
    
    
    $
    (5,364
    )
    
    
    80
   
    
    Identification and evaluation of securities that have possible
indications of other-than-temporary impairment, which includes an
analysis of all investments with gross unrealized investment losses
that represent 20% or more of their cost and all investments with an
unrealized loss greater than $50.
    
    Review and evaluation of any other security based on the investees
current financial condition, liquidity, near-term recovery prospects,
implications of rating agency actions, the outlook for the business
sectors in which the
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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 investee operates and other factors. This evaluation is in addition to the evaluation of those
securities with a gross unrealized investment loss representing 20% or more of their cost.
    
    Consideration of evidential matter, including an evaluation of factors
or triggers that may or may not cause individual investments to
qualify as having other-than-temporary impairments; and
    
    Determination of the status of each analyzed security as
other-than-temporary or not, with documentation of the rationale for
the decision.
  Obligations of States of the United States and Political Subdivisions of the States, and
Obligations of the Commonwealth of Puerto Rico and its Instrumentalities:
 Corporate Bonds:
 Collateralized Mortgage Obligations:
 Preferred Stocks:
 Perpetual Preferred Stocks:
 16




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Mutual
Funds:
  March 31, 2011Amortized
    
    
    Estimatedcost
    
    
    fair valueSecurities available for sale:Due in one year or less
    
    $
    12,923
    
    
    $
    13,096Due after one year through five years
    
    
    116,068
    
    
    
    119,831Due after five years through ten years
    
    
    222,842
    
    
    
    232,296Due after ten years
    
    
    357,852
    
    
    
    366,959Residential mortgage-backed securities
    
    
    10,313
    
    
    
    11,008Collateralized mortgage obligations
    
    
    248,053
    
    
    
    252,513$
    968,051
    
    
    $
    995,703Securities held to maturity:Due in one year or less
    
    $
    1,241
    
    
    $
    1,241Due after one year through five years
    
    
    9,540
    
    
    
    9,890Due after ten years
    
    
    3,270
    
    
    
    3,580Residential mortgage-backed securities
    
    
    480
    
    
    
    507$
    14,531
    
    
    $
    15,218
  17




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months endedMarch 31,2011
    
    
    2010Realized gains (losses):Fixed maturity securities:Securities available for sale:Gross gains from sales
    
    $
    221
    
    
    $
    32Gross losses from sales
    
    
    (151
    )
    
    
    (40
    )Gross losses from other-than-temporary impairments
    
    
    
    
    
    
    (95
    )Total debt securities
    
    
    70
    
    
    
    (103
    )Equity securities:Trading securities:Gross gains from sales
    
    
    3,790
    
    
    
    613Gross losses from sales
    
    
    (364
    )
    
    
    (209
    )3,426
    
    
    
    404Securities available for sale:Gross gains from sales
    
    
    2,492
    
    
    
    80Gross losses from sales
    
    
    (95
    )
    
    
    Gross losses from other-than-temporary impairments
    
    
    
    
    
    
    (1,760
    )2,397
    
    
    
    (1,680
    )Total equity securities
    
    
    5,823
    
    
    
    (1,276
    )Net realized gains (losses) on securities
    
    $
    5,893
    
    
    $
    (1,379
    )
  Three months endedMarch 31,2011
    
    
    2010Changes in net unrealized gains (losses):Recognized in income:Equity securities  trading
    
    $
    (1,141
    )
    
    $
    2,030Recognized in accumulated other comprehensive income:Fixed maturities  available for sale
    
    
    (1,977
    )
    
    
    11,574Equity securities  available for sale
    
    
    8
    
    
    
    4,380$
    (1,969
    )
    
    $
    15,954Not recognized in the consolidated financial statements:Fixed maturities  held to maturity
    
    $
    (122
    )
    
    $
    98
    18




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2011
    
    
    2010Fixed maturities
    
    $
    11,070
    
    
    $
    11,190Equity securities
    
    
    310
    
    
    
    896Policy loans
    
    
    108
    
    
    
    106Cash equivalents and interest-bearing deposits
    
    
    83
    
    
    
    69Other
    
    
    227
    
    
    
    162Total
    
    $
    11,798
    
    
    $
    12,423
 (5) Premiums and Other Receivables, Net
  March 31,
    
    
    December 31,2011
    
    
    2010Premium
    
    $
    101,364
    
    
    $
    144,501Self-funded group receivables
    
    
    82,992
    
    
    
    73,750FEHBP
    
    
    12,320
    
    
    
    11,001Agents balances
    
    
    27,809
    
    
    
    37,262Accrued interest
    
    
    10,270
    
    
    
    9,781Reinsurance recoverable
    
    
    48,402
    
    
    
    47,342Other
    
    
    27,341
    
    
    
    22,177310,498
    
    
    
    345,814Less allowance for doubtful receivables:Premiums
    
    
    13,501
    
    
    
    13,106Other
    
    
    6,943
    
    
    
    6,92820,444
    
    
    
    20,034Total premiums and other receivables
    
    $
    290,054
    
    
    $
    325,780
 19




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (6) Claim Liabilities
  Three months endedMarch 31,2011
    
    
    2010Claim liabilities at beginning of period
    
    $
    360,210
    
    
    $
    360,446Reinsurance recoverable on claim liabilities
    
    
    (31,449
    )
    
    
    (30,712
    )Net claim liabilities at beginning of period
    
    
    328,761
    
    
    
    329,734Claim liabilities acquired from American Health
    
    
    41,666
    
    
    
    Incurred claims and loss-adjustment expenses:Current period insured events
    
    
    412,173
    
    
    
    433,309Prior period insured events
    
    
    (12,520
    )
    
    
    (10,584
    )Total
    
    
    399,653
    
    
    
    422,725Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    201,886
    
    
    
    178,430Prior period insured events
    
    
    185,237
    
    
    
    208,350Total
    
    
    387,123
    
    
    
    386,780Net claim liabilities at end of period
    
    
    382,957
    
    
    
    365,679Reinsurance recoverable on claim liabilities
    
    
    31,258
    
    
    
    31,955Claim liabilities at end of period
    
    $
    414,215
    
    
    $
    397,634
    (7) Fair Value Measurements
  Level Input:
    
    Input Definition:Level 1
    
    Inputs are unadjusted, quoted prices for identical assets or
liabilities in active markets at the measurement date.Level 2
    
    Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability through corroboration
with market data at the measurement date.Level 3
    
    Unobservable inputs that reflect managements best estimate
of what market participants would use in pricing the asset or
liability at the measurement date.
 20




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
   (i) Cash and Cash Equivalents
  (ii) Investment in Securities
  (iii) Policy Loans
  (iv) Receivables, Accounts Payable and Accrued Liabilities
  (v) Policyholder Deposits
  (vi) Borrowings
  March 31, 2011
    
    
    December 31, 2010Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fairamount
    
    
    value
    
    
    amount
    
    
    valueLoans payable to bank
    
    $
    20,617
    
    
    $
    20,617
    
    
    $
    21,027
    
    
    $
    21,0276.3% senior unsecured notes payable
    
    
    50,000
    
    
    
    49,700
    
    
    
    50,000
    
    
    
    49,6256.6% senior unsecured notes payable
    
    
    35,000
    
    
    
    34,615
    
    
    
    35,000
    
    
    
    34,3886.7% senior unsecured notes payable
    
    
    35,000
    
    
    
    34,930
    
    
    
    35,000
    
    
    
    35,000Repurchase agreeement
    
    
    25,000
    
    
    
    24,423
    
    
    
    25,000
    
    
    
    24,575Totals
    
    $
    165,617
    
    
    $
    164,285
    
    
    $
    166,027
    
    
    $
    164,615
  21




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (vii) Derivative Instruments
   March 31, 2011Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity securities held for trading
    
    $
    32,768
    
    
    $
    
    
    
    $
    
    
    
    $
    32,768Securities available for sale:Fixed maturity securitiesObligations of government-sponsored
    
    
    
    
    
    
    120,005
    
    
    
    
    
    
    
    120,005U.S. Treasury securities and obligations of U.S
government instrumentalities
    
    
    52,121
    
    
    
    
    
    
    
    
    
    
    
    52,121Obligations of the Commonwealth of Puerto
and its instrumentalities
    
    
    
    
    
    
    145,897
    
    
    
    
    
    
    
    145,897Municipal securities
    
    
    
    
    
    
    302,299
    
    
    
    
    
    
    
    302,299Corporate bonds
    
    
    
    
    
    
    111,860
    
    
    
    
    
    
    
    111,860Residential agency mortgage-backed securities
    
    
    
    
    
    
    11,008
    
    
    
    
    
    
    
    11,008Collateralized mortgage obligations
    
    
    
    
    
    
    252,513
    
    
    
    
    
    
    
    252,513Total fixed maturities
    
    
    52,121
    
    
    
    943,582
    
    
    
    
    
    
    
    995,703Equity securitiesCommon stocks
    
    
    2,712
    
    
    
    
    
    
    
    
    
    
    
    2,712Preferred stocks
    
    
    3,627
    
    
    
    
    
    
    
    
    
    
    
    3,627Perpetual preferred stocks
    
    
    917
    
    
    
    
    
    
    
    
    
    
    
    917Mutual funds
    
    
    56,350
    
    
    
    16,898
    
    
    
    1,216
    
    
    
    74,464Total equity securities
    
    
    63,606
    
    
    
    16,898
    
    
    
    1,216
    
    
    
    81,720Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    566
    
    
    
    
    
    
    
    566Total
    
    $
    148,495
    
    
    $
    961,046
    
    
    $
    1,216
    
    
    $
    1,110,757
 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, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity securities held for trading
    
    $
    51,099
    
    
    $
    
    
    
    $
    
    
    
    $
    51,099Securities available for sale:Fixed maturity securitiesObligations of government-sponsored
    
    
    
    
    
    
    131,385
    
    
    
    
    
    
    
    131,385U.S. Treasury securities and obligations of U.S
government instrumentalities
    
    
    52,878
    
    
    
    
    
    
    
    
    
    
    
    52,878Obligations of the Commonwealth of Puerto
and its instrumentalities
    
    
    
    
    
    
    120,624
    
    
    
    
    
    
    
    120,624Municipal securities
    
    
    
    
    
    
    273,564
    
    
    
    
    
    
    
    273,564Corporate bonds
    
    
    
    
    
    
    109,632
    
    
    
    
    
    
    
    109,632Residential agency mortgage-backed securities
    
    
    
    
    
    
    13,360
    
    
    
    
    
    
    
    13,360Collateralized mortgage obligations
    
    
    
    
    
    
    276,143
    
    
    
    
    
    
    
    276,143Total fixed maturities
    
    
    52,878
    
    
    
    924,708
    
    
    
    
    
    
    
    977,586Equity securitiesCommon stocks
    
    
    4,331
    
    
    
    
    
    
    
    
    
    
    
    4,331Preferred stocks
    
    
    3,629
    
    
    
    
    
    
    
    
    
    
    
    3,629Perpetual preferred stocks
    
    
    906
    
    
    
    
    
    
    
    
    
    
    
    906Mutual funds
    
    
    27,858
    
    
    
    18,971
    
    
    
    1,044
    
    
    
    47,873Total equity securities
    
    
    36,724
    
    
    
    18,971
    
    
    
    1,044
    
    
    
    56,739Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    748
    
    
    
    
    
    
    
    748Total
    
    $
    140,701
    
    
    $
    944,427
    
    
    $
    1,044
    
    
    $
    1,086,172
   Three months endedMarch 31, 2011
    
    
    March 31, 2010Fixed
    
    
    
    
    
    
    
    
    
    
    FixedMaturity
    
    
    Equity
    
    
    
    
    
    
    Maturity
    
    
    EquitySecurities
    
    
    Securities
    
    
    Total
    
    
    Securities
    
    
    Securities
    
    
    TotalBeginning balance
    
    $
    
    
    
    $
    1,044
    
    
    $
    1,044
    
    
    $
    
    
    
    $
    775
    
    
    $
    775Total gains or losses:Realized in earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized in other accumulated
comprehensive income
    
    
    
    
    
    
    72
    
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    Purchases
    
    
    
    
    
    
    100
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ending balance
    
    $
    
    
    
    $
    1,216
    
    
    $
    1,216
    
    
    $
    
    
    
    $
    775
    
    
    $
    775
 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)
 (8) Share-Based Compensation
  (9) Comprehensive Income
  AccumulatedNet unrealized
    
    
    Liability for
    
    
    othergain on
    
    
    pension
    
    
    comprehensivesecurities
    
    
    benefits
    
    
    incomeBalance at January 1
    
    $
    32,743
    
    
    $
    (27,279
    )
    
    $
    5,464Net current period change
    
    
    (1,641
    )
    
    
    533
    
    
    
    (1,108
    )Balance at March 31,
    
    $
    31,102
    
    
    $
    (26,746
    )
    
    $
    4,356
 (10) Income Taxes
    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)
 (11) Pension Plan
  Three months endedMarch 31, 20112011
    
    
    2010Components of net periodic benefit cost:Service cost
    
    $
    829
    
    
    $
    1,340Interest cost
    
    
    1,904
    
    
    
    1,547Expected return on assets
    
    
    (1,479
    )
    
    
    (1,064
    )Amortization of prior service benefit
    
    
    (127
    )
    
    
    (113
    )Amortization of actuarial loss
    
    
    888
    
    
    
    608Net periodic benefit cost
    
    $
    2,015
    
    
    $
    2,318
 Employer contributions:
 (12) Net Income Available to Stockholders and Net Income per Share
  Three months endedMarch 31,2011
    
    
    2010Numerator for earnings per share:Net income available to stockholders
    
    $
    10,370
    
    
    $
    11,192Denominator for basic earnings per share:Weighted average of common shares
    
    
    28,744,423
    
    
    
    29,071,308Effect of dilutive securities
    
    
    227,224
    
    
    
    155,032Denominator for diluted earnings per share
    
    
    28,971,647
    
    
    
    29,226,340Basic net income per share
    
    $
    0.36
    
    
    $
    0.38Diluted net income per share
    
    $
    0.36
    
    
    $
    0.38
  (13) Contingencies
  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)
   Hau et al Litigation (formerly known as Jordan et al)
  Dentists Association Litigation
    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)
   Colón Litigation
  Claims by Heirs of Former Shareholders
  ACODESE Investigation
   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)
  Intrusions into Triple-C, Inc. Internet IPA Database
     (14) Business Combination
 Business Combinations
 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)
   Cash
    
    $
    71,525Due to seller
    
    
    11,903Total purchase price
    
    $
    83,428Investments and cash and cash equivalents
    
    $
    70,359Premiums and other receivables
    
    
    21,175Property and equipment
    
    
    1,665Intangible assets
    
    
    35,060Other assets
    
    
    9,911Claim liabilities
    
    
    (41,666
    )Accounts payable and accrued liabilities
    
    
    (26,710
    )Deferred tax liability
    
    
    (10,518
    )Total net assets
    
    $
    59,276Goodwill
    
    $
    24,152
   29




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  UnauditedMarch 31,
    
    
    March 31,2011
    
    
    2010Operating revenues
    
    $
    541,861
    
    
    $
    601,830Net Income
    
    $
    11,858
    
    
    $
    11,058Basic net income per share
    
    $
    0.41
    
    
    $
    0.38Diluted net income per share
    
    $
    0.41
    
    
    $
    0.38
  
    
    Amortization of intangible assets  based on the estimated fair value of the
tangible net assets acquired from AH, we estimate that we will recognize in our
consolidated balance sheet intangible assets of approximately $59.2 million, including
goodwill. We anticipate an amortization expense for the quarter ended March 2010 and
2011 of $2.1 million and $1.6 million, respectively.
    
    Interest expense  represents the interest expense related to the short-term
reverse repurchase agreements amounting to $55.0 million to finance the first payment
of the acquisition. This agreement was paid during the quarter of the acquisition.
Total interest expense related to these reverse repurchase agreements was approximately
$42.
    
    Net investment income  this pro forma adjustment represents the anticipated bond
discount amortization of approximately $31 for the quarter ended March 31, 2010 due to
the fair value accounting of investment in securities. For the quarter ended March 31,
2011 an additional bond discount amortization of approximately $9 was recorded.
    
    Acquisition costs  we recognized in the quarter ended March 31, 2010 $440 of
expenses related to the acquisition.
    
    Current income tax expense  we recognized the tax effect of the other pro forma
adjustments done to the statement of earnings. During the quarter ended March 31, 2010
the Corporation and AH were subject to Puerto Rico income taxes as a regular
corporation at the then enacted tax rate of 41%. The enacted tax rate for the quarter
ended March 31, 2011 was 30%.
 (15) Subsequent Event
  30




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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
      31




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##### Table of Contents



Three months endedMarch 31,(Dollar amounts in millions)
    
    2011
    
    
    2010Premiums earned, net:Managed care
    
    $
    433.3
    
    
    $
    443.8Life insurance
    
    
    27.0
    
    
    
    25.9Property and casualty insurance
    
    
    25.7
    
    
    
    25.5Intersegment premiums earned
    
    
    (0.7
    )
    
    
    (1.0
    )Consolidated premiums earned, net
    
    $
    485.3
    
    
    $
    494.2Administrative service fees:Managed care
    
    $
    7.6
    
    
    $
    13.3Intersegment administrative service fees
    
    
    (1.0
    )
    
    
    (0.8
    )Consolidated administrative service fees
    
    $
    6.6
    
    
    $
    12.5Operating income:Managed care
    
    $
    12.4
    
    
    $
    12.7Life insurance
    
    
    4.2
    
    
    
    3.8Property and casualty insurance
    
    
    1.0
    
    
    
    (0.9
    )Intersegment and other
    
    
    0.8
    
    
    
    0.8Consolidated operating income
    
    $
    18.4
    
    
    $
    16.4
    
 Recent Developments
 Business Acquisition
  32




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##### Table of Contents



Federal Regulation
      
 Recent Accounting Standards
  33




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##### Table of Contents



Managed Care Membership
 As of March 31,2011
    
    
    2010Managed care enrollment:Commercial 1
    
    
    719,982
    
    
    
    763,885Medicare2
    
    
    103,794
    
    
    
    66,771Medicaid 3
    
    
    
    
    
    
    534,225Total
    
    
    823,776
    
    
    
    1,364,881Managed care enrollment by funding arrangement:Fully-insured
    
    
    602,703
    
    
    
    915,111Self-insured
    
    
    221,073
    
    
    
    449,770Total
    
    
    823,776
    
    
    
    1,364,881
 
 (1)
    
    Commercial membership includes corporate accounts, self-funded employers, individual
accounts, Medicare Supplement, U.S. Federal government employees and local government
employees.(2)
    
    Includes Medicare Advantage as well as stand-alone PDP plan membership. As of March 31, 2011
total membership attributable to the AH acquisition was 40,835(3)
    
    Includes rated and self-funded members. We participated in this sector up to September 30,
2010. 
 Consolidated Operating Results
  Three months endedMarch 31,(Dollar amounts in millions)
    
    2011
    
    
    2010Revenues:Premiums earned, net
    
    $
    485.3
    
    
    $
    494.2Administrative service fees
    
    
    6.6
    
    
    
    12.5Net investment income
    
    
    11.8
    
    
    
    12.4Total operating revenues
    
    
    503.7
    
    
    
    519.1Net realized investment gains (losses)
    
    
    5.9
    
    
    
    (1.4
    )Net unrealized investment gain on trading securities
    
    
    (1.2
    )
    
    
    2.0Other income, net
    
    
    
    
    
    
    0.2Total revenues
    
    
    508.4
    
    
    
    519.9Benefits and expenses:Claims incurred
    
    
    402.6
    
    
    
    425.8Operating expenses
    
    
    82.7
    
    
    
    76.9Total operating expenses
    
    
    485.3
    
    
    
    502.7Interest expense
    
    
    3.1
    
    
    
    3.2Total benefits and expenses
    
    
    488.4
    
    
    
    505.9Income before taxes
    
    
    20.0
    
    
    
    14.0Income tax expense
    
    
    9.6
    
    
    
    2.8Net income
    
    $
    10.4
    
    
    $
    11.2
 34




---



##### Table of Contents



Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Operating Revenues
   Net Realized Investment Losses
  Net Unrealized Losses on Trading Securities
  Claims Incurred
  Operating Expenses
  Income Tax Expense
  35




---



##### Table of Contents



Managed Care Operating Results
 Three months endedMarch 31,(Dollar amounts in millions)
    
    2011
    
    
    2010Operating revenues:Medical premiums earned, net:Commercial
    
    $
    236.4
    
    
    $
    234.0Medicare
    
    
    194.1
    
    
    
    120.5Medicaid
    
    
    2.8
    
    
    
    89.3Medical premiums earned, net
    
    
    433.3
    
    
    
    443.8Administrative service fees
    
    
    7.6
    
    
    
    13.3Net investment income
    
    
    4.2
    
    
    
    5.0Total operating revenues
    
    
    445.1
    
    
    
    462.1Medical operating costs:Medical claims incurred
    
    
    378.4
    
    
    
    399.6Medical operating expenses
    
    
    54.3
    
    
    
    49.8Total medical operating costs
    
    
    432.7
    
    
    
    449.4Medical operating income
    
    $
    12.4
    
    
    $
    12.7Additional data:Member months enrollment:Commercial:Fully-insured
    
    
    1,463,381
    
    
    
    1,507,114Self-funded
    
    
    724,159
    
    
    
    766,283Total Commercial member months
    
    
    2,187,540
    
    
    
    2,273,397Medicare:Medicare Advantage
    
    
    246,468
    
    
    
    173,655Stand-alone PDP
    
    
    26,567
    
    
    
    28,125Total Medicare member months
    
    
    273,035
    
    
    
    201,780Medicaid:Fully-insured
    
    
    
    
    
    
    1,012,836Self-funded
    
    
    
    
    
    
    589,184Total Medicaid member months
    
    
    
    
    
    
    1,602,020Total member months
    
    
    2,460,575
    
    
    
    4,077,197Medical loss ratio
    
    
    87.3
    %
    
    
    90.0
    %Operating expense ratio
    
    
    12.3
    %
    
    
    10.9
    %
 Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Medical Operating Revenues
  
    
    Medical premiums earned in the Medicaid business decreased by $86.5 million, to $2.8 million
during the three months ended March 31, 2011. This fluctuation results from the termination
of the Medicaid contracts effective September 30, 2010. The premiums earned reflected in the
2011 period are the result of adjustments that increase the amount
receivable corresponding to the risk sharing agreement with the
government of Puerto Rico included in the Metro-North region contract.
    
    Medical premiums generated by the Medicare business increased during the three months ended
March 31, 2011 by $73.6 million, or 61.1%, to $194.1 million. This fluctuation is the result
of an overall increase in the member months enrollment of this business by 71,255, or 35.3%,
when compared with the same period in 2010. Increase in member month enrollment was
attributed to new members acquired from AH effective February 1,
 36




---



##### Table of Contents



2011, offset in part by a decrease in member months in our dual eligible product. Total
member months from AH amounted to 81,957 during the three months ended March 31, 2011.
 
    
    Medical premiums generated by the Commercial business increased by $2.4 million, or 1.0%, to
$236.4 million during the three months ended March 31, 2011. This fluctuation is primarily
the result of an increase in average premium rates in rated group policies of approximately
5.0% partially offset by a decrease in member months enrollment by 43,733, or 2.9%.
  Medical Claims Incurred
  
    
    The medical claims incurred of the Medicaid business were $93.4 million, or 5.8%, lower than
the prior year mostly due to the termination of the Medicaid contracts effective September 30,
2010.
    
    The medical claims incurred of the Commercial business increased by $2.2 million, or 1.0%,
during the 2011 period and its MLR increased by 0.1 percentage points. The higher MLR is
primarily due to the effect of prior period reserve developments in the 2011 and 2010 periods.
Excluding the effect of prior period reserve developments, the MLR decreased by 0.5
percentage points, mostly resulting from a lower utilization trends in 2011.
    
    The medical claims incurred of the Medicare business increased by $70.0 million, or 71.0%
during the 2011 period primarily due to the acquisition of AH effective February 1, 2011.
Total claims incurred during the 2011 period related to the AH business amounted to $68.7
million. The MLR of this business was 86.8%, which is 5.1 percentage points higher than the
MLR for the prior year. The higher MLR is due to the addition of AH which has a higher MLR
than our other Medicare products as well as higher utilization trends in our non-dual product
as compared to last year.
 Medical Operating Expenses
  37




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##### Table of Contents



Life Insurance Operating Results
 Three months endedMarch 31,(Dollar amounts in millions)
    
    2011
    
    
    2010Operating revenues:Premiums earned, net:Premiums earned
    
    $
    28.5
    
    
    $
    27.3Premiums earned ceded
    
    
    (1.5
    )
    
    
    (1.4
    )Premiums earned, net
    
    
    27.0
    
    
    
    25.9Net investment income
    
    
    4.4
    
    
    
    4.2Total operating revenues
    
    
    31.4
    
    
    
    30.1Operating costs:Policy benefits and claims incurred
    
    
    12.6
    
    
    
    12.4Underwriting and other expenses
    
    
    14.6
    
    
    
    13.9Total operating costs
    
    
    27.2
    
    
    
    26.3Operating income
    
    $
    4.2
    
    
    $
    3.8Additional data:Loss ratio
    
    
    46.7
    %
    
    
    47.9
    %Operating expense ratio
    
    
    54.1
    %
    
    
    53.7
    %
 Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Operating Revenues
  Policy Benefits and Claims Incurred
  Underwriting and Other Expenses
  38




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##### Table of Contents



Property and Casualty Insurance Operating Results
 Three months endedMarch 31,(Dollar amounts in millions)
    
    2011
    
    
    2010Operating revenues:Premiums earned, net:Premiums written
    
    $
    32.0
    
    
    $
    36.2Premiums ceded
    
    
    (14.5
    )
    
    
    (14.5
    )Change in unearned premiums
    
    
    8.2
    
    
    
    3.8Premiums earned, net
    
    
    25.7
    
    
    
    25.5Net investment income
    
    
    2.2
    
    
    
    2.7Total operating revenues
    
    
    27.9
    
    
    
    28.2Operating costs:Claims incurred
    
    
    11.6
    
    
    
    13.8Underwriting and other expenses
    
    
    15.3
    
    
    
    15.3Total operating costs
    
    
    26.9
    
    
    
    29.1Operating income / (loss)
    
    $
    1.0
    
    
    $
    (0.9
    )Additional data:Loss ratio
    
    
    45.1
    %
    
    
    54.1
    %Operating expense ratio
    
    
    59.5
    %
    
    
    60.0
    %
 Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Operating Revenues
    Claims Incurred
  Underwriting and Other Expenses
  39




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows
  Three months endedMarch 31,(Dollar amounts in millions)
    
    2011
    
    
    2010Sources of cash:Cash provided by operating activities
    
    $
    101.5
    
    
    $
    30.5Proceeds from policyholder deposits
    
    
    1.8
    
    
    
    2.1Other
    
    
    3.5
    
    
    
    Total sources of cash
    
    
    106.8
    
    
    
    32.6Uses of cash:Net purchases of investment securities
    
    
    (2.8
    )
    
    
    (24.0
    )Capital expenditures
    
    
    (3.9
    )
    
    
    (4.9
    )Repurchase and retirement of common stock
    
    
    (1.6
    )
    
    
    Cash settlements of stock options
    
    
    (1.3
    )
    
    
    Payments of long-term borrowings
    
    
    (0.4
    )
    
    
    (0.4
    )Payments of short-term borrowings
    
    
    (15.6
    )
    
    
    Surrenders of policyholder deposits
    
    
    (1.8
    )
    
    
    (2.3
    )Acquisition of business, net of cash of $29.4
million
    
    
    (54.0
    )
    
    
    Total uses of cash
    
    
    (81.4
    )
    
    
    (31.6
    )Net increase in cash and cash equivalents
    
    $
    25.4
    
    
    $
    1.0
        Share Repurchase Program
  40




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##### Table of Contents



Financing and Financing Capacity
  As of March 31, 2011, we had the following long-term borrowings:
    
    On January 31, 2006, we issued and sold $35.0 million of our 6.7% senior unsecured notes
payable due January 2021 (the 6.7% notes).
    
    On December 21, 2005, we issued and sold $60.0 million of our 6.6% senior unsecured notes due
December 2020 (the 6.6% notes). On October 1, 2010 we repaid $25.0 million of the principal of
these senior unsecured notes.
    
    On March 30, 2004, we issued and sold $50.0 million of our 6.3% senior unsecured notes due
March 2019 (the 6.3% notes).
    
    On November 1, 2010, we entered in a $25.0 million arrangement to sell securities under
repurchase agreements that matures on November 2015. This repurchase agreement pays interests on a
quarterly basis at 1.96%. The investment securities underlying such agreements were delivered to
the financial institution with whom the agreement was transacted. The dealers may have loaned, or
used as collateral such securities in the normal course of business operations. We maintain
effective control over the investment securities pledged as collateral and accordingly, such
securities continue to be carried on our consolidated balance sheet. At March 31, 2011 investment
securities available for sale with fair value of $28.4 million (face value of $20.7 million) were
pledged as collateral under this agreement. The proceeds obtained from this agreement were used to
repay $25.0 million of the 6.6% notes
      
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  41




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
    Changes in Internal Controls Over Financial Reporting
  
 Part II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  42




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Purchases of Equity Securities by the Issuer
 The following table presents information related to our repurchases of common stock for the
period indicated:
 Total Number
    
    
    Approximateof Shares
    
    
    Dollar Value ofPurchased as
    
    
    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
    
    
    ProgramsJanuary 1, 2011 to January 31, 2011
    
    
    47,794
    
    
    $
    18.51
    
    
    
    47,794
    
    
    $
    23.0February 1, 2011 to February 28, 2011
    
    
    35,800
    
    
    $
    18.77
    
    
    
    35,800
    
    
    
    22.2March 1, 2011 to March 31, 2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22.2
 
 1
    
    In September 2010 the Board of Directors authorized the 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
  
 Item 6. Exhibits
 Exhibits
    
    Description11
    
    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 March 31, 2011 and 2010 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. 43




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##### Table of Contents



SIGNATURES
  Triple-S Management Corporation
RegistrantDate: May 9, 2011
    By:
    /s/ Ramón M. Ruiz-ComasRamón M. Ruiz-Comas, CPAPresident and Chief
Executive OfficerDate: May 9, 2011
    By:
    /s/ Juan J. RománJuan J. Román, CPAVice President of
Finance and Chief
Financial Officer
Principal Accounting Officer 44