##### 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, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER: 0-49762
 Triple-S Management Corporation
  Puerto Rico
    
    66-0555678(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)1441 F.D. Roosevelt AvenueSan Juan, Puerto Rico
    
    00920(Address of principal executive offices)
    
    (Zip code)
 (787) 749-4949
 Not applicable
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ
  Title of each class
    
    Outstanding at March 31, 2006Common Stock, $40.00 par value
    
    8,911




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Triple-S Management Corporation
 FORM 10-Q
   PAGEPART I  FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of March 31, 2006 and December 31, 2005
    
    3Consolidated Statements of Operations for the three months ended
March 31, 2006 and 2005
    
    4Consolidated Statements of Stockholders Equity and Comprehensive
Income for the three months ended March 31, 2006 and 2005
    
    5Consolidated Statements of Cash Flows for the three months ended
March 31, 2006 and 2005
    
    6Notes to Consolidated Financial Statements
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    26Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    38Item 4.
    
    Controls and Procedures
    
    38PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    38Item 1A
    
    Risk Factors
    
    42Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    42Item 3.
    
    Defaults Upon Senior Securities
    
    42Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    42Item 5.
    
    Other Information
    
    43Item 6.
    
    Exhibits
    
    43SIGNATURES
    
    
    
    44EX-10.1 PURCHASE AGREEMENT DATED 1-23-06EX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF CFO
 2




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##### Table of Contents



Part I  Financial Information
 
 Item 1. Financial Statements
 TRIPLE-S

MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Consolidated Balance Sheets
(Dollar amounts in thousands, except per share data)
 (Unaudited)March 31,
    
    December 31,2006
    
    2005ASSETSInvestments and cash:Securities held for trading, at fair value:Equity securities
    
    $
    81,550
    
    
    
    78,215Securities available for sale, at fair value:Fixed maturities
    
    
    715,337
    
    
    
    515,174Equity securities
    
    
    53,331
    
    
    
    51,810Securities held to maturity, at amortized cost:Fixed maturities
    
    
    21,083
    
    
    
    21,129Policy loans
    
    
    4,888
    
    
    
    Cash and cash equivalents
    
    
    48,909
    
    
    
    48,978Total investments and cash
    
    
    925,098
    
    
    
    715,306Premiums and other receivables, net
    
    
    154,711
    
    
    
    244,038Deferred policy acquisition costs and value of business acquired
    
    
    104,239
    
    
    
    81,568Property and equipment, net
    
    
    38,544
    
    
    
    34,709Net deferred tax asset
    
    
    498
    
    
    
    2,151Other assets
    
    
    57,073
    
    
    
    59,690Total assets
    
    $
    1,280,163
    
    
    
    1,137,462LIABILITIES AND STOCKHOLDERS EQUITYClaim liabilities:Claims processed and incomplete
    
    $
    147,069
    
    
    
    139,694Unreported losses
    
    
    163,868
    
    
    
    143,224Unpaid loss-adjustment expenses
    
    
    15,402
    
    
    
    14,645Total claim liabilities
    
    
    326,339
    
    
    
    297,563Future policy benefits
    
    
    168,457
    
    
    
    Future policy benefits reserve related to funds withheld reinsurance
    
    
    
    
    
    
    118,635Unearned premiums
    
    
    98,588
    
    
    
    95,703Policyholder deposits
    
    
    54,384
    
    
    
    41,738Liability to Federal Employees Health Benefits Program
    
    
    8,097
    
    
    
    4,356Accounts payable and accrued liabilities
    
    
    119,547
    
    
    
    106,468Short-term borrowings
    
    
    
    
    
    
    1,740Long-term borrowings
    
    
    185,317
    
    
    
    150,590Additional minimum pension liability
    
    
    14,133
    
    
    
    11,966Total liabilities
    
    
    974,862
    
    
    
    828,759Stockholders equity:Common stock, $40 par value. Authorized 12,500 shares;
issued and outstanding
8,911 at March 31, 2006
and
8,904 at December 31, 2005
    
    
    356
    
    
    
    356Additional paid-in capital
    
    
    150,408
    
    
    
    150,408Retained earnings
    
    
    166,114
    
    
    
    162,964Accumulated other comprehensive loss
    
    
    (11,577
    )
    
    
    (5,025
    )Total stockholders equity
    
    
    305,301
    
    
    
    308,703Total liabilities and stockholders equity
    
    $
    1,280,163
    
    
    
    1,137,462
  3




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Earnings (Unaudited)
  (Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2006
    
    2005REVENUE:Premiums earned, net
    
    $
    382,104
    
    
    
    333,389Amounts attributable to self-funded
arrangements
    
    
    50,806
    
    
    
    51,915Less amounts attributable to claims under
self-funded arrangements
    
    
    (47,377
    )
    
    
    (48,540
    )385,533
    
    
    
    336,764Net investment income
    
    
    10,050
    
    
    
    7,064Net realized investment gains
    
    
    528
    
    
    
    3,314Net
unrealized investment gain (loss) on trading securities
    
    
    2,556
    
    
    
    (5,793
    )Other income, net
    
    
    1,199
    
    
    
    632Total revenue
    
    
    399,866
    
    
    
    341,981BENEFITS AND EXPENSES:Claims incurred
    
    
    326,684
    
    
    
    302,923Operating expenses, net of reimbursement
for services
    
    
    57,730
    
    
    
    43,766Interest expense
    
    
    3,394
    
    
    
    1,788Total benefits and expenses
    
    
    387,808
    
    
    
    348,477Income (loss) before taxes
    
    
    12,058
    
    
    
    (6,496
    )INCOME TAX EXPENSE (BENEFIT):Current
    
    
    2,636
    
    
    
    1,221Deferred
    
    
    41
    
    
    
    (2,510
    )Total income taxes
    
    
    2,677
    
    
    
    (1,289
    )Net income (loss)
    
    $
    9,381
    
    
    
    (5,207
    )Basic net income (loss) per share
    
    $
    1,053
    
    
    
    (585
    )
  4




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Stockholders Equity and
 Comprehensive Income (Unaudited)
   (Dollar amounts in thousands, except per share data)
 2006
    
    2005BALANCE AT JANUARY 1
    
    $
    308,703
    
    
    
    301,433Dividends
    
    
    (6,231
    )
    
    
    Comprehensive income (loss):Net income (loss)
    
    
    9,381
    
    
    
    (5,207
    )Net unrealized change in investment securities
    
    
    (6,644
    )
    
    
    (12,488
    )Net change in fair value of cash flow hedges
    
    
    92
    
    
    
    337Total comprehensive income (loss)
    
    
    2,829
    
    
    
    (17,358
    )BALANCE AT MARCH 31
    
    $
    305,301
    
    
    
    284,075
  5




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows (Unaudited)
  (Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2006
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Premiums collected
    
    $
    366,287
    
    
    
    323,459Cash paid to suppliers and employees
    
    
    (65,552
    )
    
    
    (44,943
    )Claims, losses and benefits paid
    
    
    (305,380
    )
    
    
    (276,277
    )Interest received
    
    
    10,462
    
    
    
    6,359Proceeds from trading securities sold or matured:Fixed maturities sold
    
    
    
    
    
    
    31,946Equity securities
    
    
    5,866
    
    
    
    5,027Acquisitions of investments in trading portfolio:Fixed maturities
    
    
    
    
    
    
    (14,463
    )Equity securities
    
    
    (5,762
    )
    
    
    (5,116
    )Interest paid
    
    
    (3,161
    )
    
    
    (1,509
    )Expense reimbursement from Medicare
    
    
    1,155
    
    
    
    3,003Net cash provided by operating activities
    
    
    3,915
    
    
    
    27,486CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from investments sold or matured:Securities available for sale:Fixed maturities sold
    
    
    4,838
    
    
    
    5,038Fixed maturities matured
    
    
    14,569
    
    
    
    206Equity securities
    
    
    360
    
    
    
    2,677Securities held to maturity:Fixed maturities matured
    
    
    122
    
    
    
    290Acquisitions of investments:Securities available for sale:Fixed maturities
    
    
    (21,844
    )
    
    
    (17,919
    )Equity securities
    
    
    
    
    
    
    (2,821
    )Securities held to maturity:Fixed maturities
    
    
    
    
    
    
    (993
    )Acquisition of business, net of $10,403 of cash acquired
    
    
    (27,793
    )
    
    
    Net disbursements for policy loans
    
    
    (109
    )
    
    
    Capital expenditures
    
    
    (3,780
    )
    
    
    (1,338
    )Proceeds from sale of property and equipment
    
    
    3
    
    
    
    2Net cash used in investing activities
    
    
    (33,634
    )
    
    
    (14,858
    )CASH FLOWS FROM FINANCING ACTIVITIES:Change in outstanding checks in excess of bank balances
    
    
    2,569
    
    
    
    8,700Payments of short-term borrowings
    
    
    (8,652
    )
    
    
    (17,125
    )Proceeds from short-term borrowings
    
    
    6,912
    
    
    
    17,125Payments of long-term borrowings
    
    
    (273
    )
    
    
    (273
    )Proceeds from long-term borrowings
    
    
    35,000
    
    
    
    Dividends
    
    
    (6,231
    )
    
    
    Proceeds from policyholder deposits
    
    
    2,255
    
    
    
    3,164Surrenders of policyholder deposits
    
    
    (1,930
    )
    
    
    (1,166
    )Net cash provided by financing activities
    
    
    29,650
    
    
    
    10,425Net (decrease) increase in cash and cash equivalents
    
    
    (69
    )
    
    
    23,053Cash and cash equivalents at beginning of the period
    
    
    48,978
    
    
    
    35,115Cash and cash equivalents at end of the period
    
    $
    48,909
    
    
    
    58,168
  6




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
  (Dollar amounts in thousands, except per share data)
  (1) Basis of Presentation
    Future Policy Benefits
  Value of Business Acquired
  (2) Recent Accounting Standards
 Accounting for Certain Hybrid Financial Instruments Accounting for
Derivatives and Hedging Activities Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities
 7




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Accounting for Servicing of Financial Assets Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,
 (3) Segment Information
  8




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements
  (Dollar amounts in thousands, except per share data)
  Operating SegmentsHealth
    
    HealthInsurance
    
    Insurance
    
    Property
    
    Life andCommercial
    
    Reform
    
    and Casualty
    
    DisabilityProgram
    
    Program
    
    Insurance
    
    Insurance
    
    Other *
    
    TotalTHREE MONTHS ENDED MARCH 31, 2006Premiums earned, net
    
    $
    211,107
    
    
    
    127,496
    
    
    
    21,898
    
    
    
    21,603
    
    
    
    
    
    
    
    382,104Amounts attributable to self-funded arrangements
    
    
    50,806
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,806Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (47,377
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,377
    )Intersegment premiums earned/service revenues
    
    
    1,398
    
    
    
    
    
    
    
    129
    
    
    
    78
    
    
    
    13,268
    
    
    
    14,873215,934
    
    
    
    127,496
    
    
    
    22,027
    
    
    
    21,681
    
    
    
    13,268
    
    
    
    400,406Net investment income
    
    
    3,755
    
    
    
    801
    
    
    
    2,364
    
    
    
    3,010
    
    
    
    
    
    
    
    9,930Realized gain (loss) on sale of securities
    
    
    485
    
    
    
    33
    
    
    
    (32
    )
    
    
    42
    
    
    
    
    
    
    
    528Unrealized gain on trading securities
    
    
    1,914
    
    
    
    
    
    
    
    552
    
    
    
    90
    
    
    
    
    
    
    
    2,556Other
    
    
    1,063
    
    
    
    (4
    )
    
    
    54
    
    
    
    69
    
    
    
    
    
    
    
    1,182Total revenue
    
    $
    223,151
    
    
    
    128,326
    
    
    
    24,965
    
    
    
    24,892
    
    
    
    13,268
    
    
    
    414,602Net income
    
    $
    2,116
    
    
    
    3,667
    
    
    
    2,659
    
    
    
    507
    
    
    
    7
    
    
    
    8,956Claims incurred
    
    $
    190,857
    
    
    
    113,882
    
    
    
    10,313
    
    
    
    11,632
    
    
    
    
    
    
    
    326,684Operating expenses
    
    $
    28,401
    
    
    
    9,240
    
    
    
    11,642
    
    
    
    11,390
    
    
    
    12,984
    
    
    
    73,657Depreciation expense, included in operating expenses
    
    $
    760
    
    
    
    157
    
    
    
    107
    
    
    
    135
    
    
    
    
    
    
    
    1,159Interest expense
    
    $
    1,240
    
    
    
    324
    
    
    
    
    
    
    
    1,285
    
    
    
    
    
    
    
    2,849Income tax expense
    
    $
    537
    
    
    
    1,213
    
    
    
    351
    
    
    
    78
    
    
    
    277
    
    
    
    2,456
 *
    
    Includes segments which are not required to be reported separately. These segments include the data processing services organization as well
as the third-party administrator of health insurance services.
 9




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements
  (Dollar amounts in thousands, except per share data)
  Operating SegmentsHealth
    
    HealthInsurance
    
    Insurance
    
    Property
    
    Life andCommercial
    
    Reform
    
    and Casualty
    
    DisabilityProgram
    
    Program
    
    Insurance
    
    Insurance
    
    Other *
    
    TotalTHREE MONTHS ENDED MARCH 31, 2005Premiums earned, net
    
    $
    184,300
    
    
    
    123,140
    
    
    
    22,096
    
    
    
    3,853
    
    
    
    
    
    
    
    333,389Amounts attributable to self-funded arrangements
    
    
    51,915
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,915Less: Amounts attributable to claims under self-funded
arrangements
    
    
    (48,540
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,540
    )Intersegment premiums earned/service revenues
    
    
    1,076
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,638
    
    
    
    14,714188,751
    
    
    
    123,140
    
    
    
    22,096
    
    
    
    3,853
    
    
    
    13,638
    
    
    
    351,478Net investment income
    
    
    3,413
    
    
    
    741
    
    
    
    2,105
    
    
    
    711
    
    
    
    
    
    
    
    6,970Realized gain (loss) on sale of securities
    
    
    2,103
    
    
    
    (25
    )
    
    
    1,176
    
    
    
    60
    
    
    
    
    
    
    
    3,314Unrealized loss on trading securities
    
    
    (4,806
    )
    
    
    
    
    
    
    (793
    )
    
    
    (194
    )
    
    
    
    
    
    
    (5,793
    )Other
    
    
    188
    
    
    
    (5
    )
    
    
    338
    
    
    
    62
    
    
    
    
    
    
    
    583Total revenue
    
    $
    189,649
    
    
    
    123,851
    
    
    
    24,922
    
    
    
    4,492
    
    
    
    13,638
    
    
    
    356,552Net income (loss)
    
    $
    (6,803
    )
    
    
    (911
    )
    
    
    2,658
    
    
    
    (414
    )
    
    
    69
    
    
    
    (5,401
    )Claims incurred
    
    $
    172,829
    
    
    
    116,088
    
    
    
    11,373
    
    
    
    2,633
    
    
    
    
    
    
    
    302,923Operating expenses
    
    $
    24,240
    
    
    
    8,914
    
    
    
    10,341
    
    
    
    1,982
    
    
    
    13,405
    
    
    
    58,882Depreciation expense, included in operating expenses
    
    $
    644
    
    
    
    181
    
    
    
    107
    
    
    
    39
    
    
    
    
    
    
    
    971Interest expense
    
    $
    1,058
    
    
    
    204
    
    
    
    
    
    
    
    279
    
    
    
    
    
    
    
    1,541Income tax expense (benefit)
    
    $
    (1,675
    )
    
    
    (444
    )
    
    
    550
    
    
    
    12
    
    
    
    164
    
    
    
    (1,393
    )
 *
    
    Includes segments which are not required to be reported separately.
These segments include the data processing services organization as well
as the third-party administrator of health of health insurance services.
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements
  (Dollar amounts in thousands, except per share data)
  Operating SegmentsHealth
    
    HealthInsurance
    
    Insurance
    
    Property
    
    Life andCommercial
    
    Reform
    
    and Casualty
    
    DisabilityProgram
    
    Program
    
    Insurance
    
    Insurance
    
    Other *
    
    TotalAS OF MARCH 31, 2006Segment assets
    
    $
    481,275
    
    
    
    92,073
    
    
    
    305,514
    
    
    
    396,893
    
    
    
    4,201
    
    
    
    1,279,956Significant noncash item:Net change in unrealized gain on securities
available for sale
    
    $
    (1,832
    )
    
    
    (355
    )
    
    
    (877
    )
    
    
    (3,512
    )
    
    
    
    
    
    
    (6,576
    )AS OF DECEMBER 31, 2005Segment assets
    
    $
    459,288
    
    
    
    82,685
    
    
    
    307,228
    
    
    
    271,615
    
    
    
    4,310
    
    
    
    1,125,126Significant noncash item:Net change in unrealized gain on securities
available for sale
    
    $
    (12,432
    )
    
    
    (1,301
    )
    
    
    (3,090
    )
    
    
    (1,844
    )
    
    
    
    
    
    
    (18,667
    )Net change in minimum pension liability
    
    
    (2,048
    )
    
    
    
    
    
    
    (142
    )
    
    
    (76
    )
    
    
    (453
    )
    
    
    (2,719
    )
 *
    
    Includes segments which are not required to be reported separately. These segments include the data processing services organization as well
as the third-party administrator of health insurance services.
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements
  (Dollar amounts in thousands, except per share data)
  RECONCILIATION OF REPORTABLE SEGMENT TOTALS
WITH FINANCIAL STATEMENTS
 Three months endedMarch 31,2006
    
    2005TOTAL REVENUETotal revenues for reportable segments
    
    $
    401,334
    
    
    
    342,914Total revenues for other segments
    
    
    13,268
    
    
    
    13,638414,602
    
    
    
    356,552Elimination of intersegment premiums earned
    
    
    (1,605
    )
    
    
    (1,076
    )Elimination of intersegment service revenues
    
    
    (13,268
    )
    
    
    (13,638
    )Unallocated amount  revenues from external sources
    
    
    137
    
    
    
    143(14,736
    )
    
    
    (14,571
    )Consolidated total revenue
    
    $
    399,866
    
    
    
    341,981NET INCOMENet income (loss) for reportable segments
    
    $
    8,949
    
    
    
    (5,470
    )Net income for other segments
    
    
    7
    
    
    
    698,956
    
    
    
    (5,401
    )Elimination of TSM charges:Rent expense
    
    
    1,690
    
    
    
    1,624Interest expense
    
    
    1,343
    
    
    
    256Management fees
    
    
    680
    
    
    
    3,713
    
    
    
    1,880Unallocated amounts related to TSM:General and administrative expenses
    
    
    (1,316
    )
    
    
    (1,222
    )Income tax expense
    
    
    (221
    )
    
    
    (104
    )Interest expense
    
    
    (1,888
    )
    
    
    (503
    )Other revenues from external sources
    
    
    137
    
    
    
    143(3,288
    )
    
    
    (1,686
    )Consolidated net income (loss)
    
    $
    9,381
    
    
    
    (5,207
    )
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements
    RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS
 Three months ended March 31, 2006Segment
    
    
    
    
    
    ConsolidatedTotals
    
    Adjustments *
    
    TotalsClaims incurred
    
    $
    326,684
    
    
    
    
    
    
    
    326,684Operating expenses
    
    
    73,657
    
    
    
    (15,927
    )
    
    
    57,730Depreciation expense
    
    
    1,159
    
    
    
    283
    
    
    
    1,442Interest expense
    
    
    2,849
    
    
    
    545
    
    
    
    3,394Income tax expense
    
    
    2,456
    
    
    
    221
    
    
    
    2,677
 Three months ended March 31, 2005Segment
    
    
    
    
    
    ConsolidatedTotals
    
    Adjustments *
    
    TotalsClaims incurred
    
    $
    302,923
    
    
    
    
    
    
    
    302,923Operating expenses
    
    
    58,882
    
    
    
    (15,116
    )
    
    
    43,766Depreciation expense
    
    
    971
    
    
    
    277
    
    
    
    1,248Interest expense
    
    
    1,541
    
    
    
    247
    
    
    
    1,788Income tax expense (benefit)
    
    
    (1,393
    )
    
    
    104
    
    
    
    (1,289
    )
 
 *
    
    Adjustments represent TSM operations and the elimination of
intersegment charges.
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements
  (Dollar amounts in thousands, except per share data)
  RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS
 March 31,
    
    December 31,2006
    
    2005ASSETSTotal assets for reportable segments
    
    $
    1,275,755
    
    
    
    1,120,816Total assets for other segments
    
    
    4,201
    
    
    
    4,3101,279,956
    
    
    
    1,125,126Elimination entries  intersegment receivables and others
    
    
    (38,456
    )
    
    
    (28,705
    )Unallocated amounts related to TSM:Parent cash, cash equivalents and investments
    
    
    11,376
    
    
    
    11,054Parent net property and equipment
    
    
    24,479
    
    
    
    24,760Parent other assets
    
    
    2,808
    
    
    
    5,22738,663
    
    
    
    41,041Consolidated assets
    
    $
    1,280,163
    
    
    
    1,137,462
 OTHER SIGNIFICANT ITEMS
 As of March 31, 2006Segment
    
    
    
    
    
    ConsolidatedTotals
    
    Adjustments *
    
    TotalsSignificant noncash item  net change in unrealized
gain on securities available for sale
    
    $
    (6,576
    )
    
    
    (68
    )
    
    
    (6,644
    )
 As of December 31, 2005Segment
    
    
    
    
    
    ConsolidatedTotals
    
    Adjustments *
    
    TotalsSignificant noncash items:Net change in unrealized gain on securities
available for sale
    
    $
    (18,667
    )
    
    
    (165
    )
    
    
    (18,832
    )Net change in minimum pension liability
    
    
    (2,719
    )
    
    
    (69
    )
    
    
    (2,788
    )
 
 *
    
    Adjustments represent principally TSM operations and the elimination
of intersegment charges.
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to
Consolidated Financial Statements  (Dollar amounts in thousands)
 (4) Investment in Securities
  March 31, 2006Gross
    
    GrossAmortized
    
    unrealized
    
    unrealized
    
    Estimated faircost
    
    gains
    
    losses
    
    valueTrading securities:Equity securities
    
    $
    70,176
    
    
    
    13,323
    
    
    
    (1,949
    )
    
    
    81,550
 March 31, 2006Gross
    
    GrossAmortized
    
    unrealized
    
    unrealized
    
    Estimated faircost
    
    gains
    
    losses
    
    valueSecurities available for sale:Fixed maturities
    
    $
    732,732
    
    
    
    536
    
    
    
    (17,931
    )
    
    
    715,337Equity securities
    
    
    40,658
    
    
    
    14,575
    
    
    
    (1,902
    )
    
    
    53,331$
    773,390
    
    
    
    15,111
    
    
    
    (19,833
    )
    
    
    768,668
 March 31, 2006Gross
    
    GrossAmortized
    
    unrealized
    
    unrealized
    
    Estimated faircost
    
    gains
    
    losses
    
    valueSecurities held to maturity:Fixed maturities
    
    $
    21,083
    
    
    
    297
    
    
    
    (971
    )
    
    
    20,409
 December 31, 2005Gross
    
    GrossAmortized
    
    unrealized
    
    unrealized
    
    Estimated faircost
    
    gains
    
    losses
    
    valueTrading securities:Equity securities
    
    $
    69,397
    
    
    
    11,378
    
    
    
    (2,560
    )
    
    
    78,215
 December 31, 2005Gross
    
    GrossAmortized
    
    unrealized
    
    unrealized
    
    Estimated faircost
    
    gains
    
    losses
    
    valueSecurities available for sale:Fixed maturities
    
    $
    524,287
    
    
    
    694
    
    
    
    (9,807
    )
    
    
    515,174Equity securities
    
    
    38,675
    
    
    
    14,550
    
    
    
    (1,415
    )
    
    
    51,810$
    562,962
    
    
    
    15,244
    
    
    
    (11,222
    )
    
    
    566,984
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 December 31, 2005Gross
    
    GrossAmortized
    
    unrealized
    
    unrealized
    
    Estimated faircost
    
    gains
    
    losses
    
    valueSecurities held to maturity:Fixed maturities
    
    $
    21,129
    
    
    
    254
    
    
    
    (623
    )
    
    
    20,760
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 (5) Premiums and Other Receivables
  March 31,
    
    December 31,2006
    
    2005Premiums
    
    $
    75,834
    
    
    
    53,391Self-funded group receivables
    
    
    22,108
    
    
    
    21,620FEHBP
    
    
    11,747
    
    
    
    9,491Accrued interest
    
    
    8,051
    
    
    
    5,074Agents balances
    
    
    3,049
    
    
    
    Funds withheld reinsurance receivable
    
    
    
    
    
    
    118,635Reinsurance recoverable
    
    
    35,086
    
    
    
    33,915Other
    
    
    12,392
    
    
    
    14,152168,267
    
    
    
    256,278Less allowance for doubtful receivables:Premiums
    
    
    8,365
    
    
    
    7,792Other
    
    
    5,191
    
    
    
    4,44813,556
    
    
    
    12,240Total premiums and other receivables
    
    $
    154,711
    
    
    
    244,038
 (6) Claim Liabilities
  Three months ended March 31,2006
    
    2005Claim liabilities at beginning of period
    
    $
    297,563
    
    
    
    279,325Reinsurance recoverable on claim liabilities
    
    
    (28,720
    )
    
    
    (26,555
    )Net claim
liabilities at
beginning of period
    
    
    268,843
    
    
    
    252,770Claim liabilities acquired from GA Life
    
    
    8,771
    
    
    
    Incurred claims and loss-adjustment expenses:Current period insured events
    
    
    316,804
    
    
    
    297,517Prior period insured events
    
    
    4,460
    
    
    
    5,406Total
    
    
    321,264
    
    
    
    302,923Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    167,711
    
    
    
    137,351Prior period insured events
    
    
    133,859
    
    
    
    138,995Total
    
    
    301,570
    
    
    
    276,346Net claim liabilities at end of period
    
    
    297,308
    
    
    
    279,347Reinsurance recoverable on claim liabilities
    
    
    29,031
    
    
    
    25,285Claim liabilities at end of period
    
    $
    326,339
    
    
    
    304,632
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
  (7) Long-term Borrowings
  March 31,
    
    December 31,2006
    
    2005Secured loan payable of $20,000, payable in various different
installments up to August 31, 2007, with interest payable on a
monthly basis at a rate reset periodically of 130 basis points
over LIBOR selected (which was 5.87% and 5.71% at
March 31, 2006 and December 31, 2005, respectively)
    
    $
    11,500
    
    
    
    11,500Senior unsecured notes payable of $50,000 due September 2019.
Interest is payable semiannually at a fixed rate of 6.30%.
    
    
    50,000
    
    
    
    50,000Senior unsecured notes payable of $60,000 due December 2020.
Interest is payable monthly at a fixed rate of 6.60%.
    
    
    60,000
    
    
    
    60,000Senior unsecured notes payable of $35,000 due January 2021.
Interest is payable monthly at a fixed rate of 6.70%.
    
    
    35,000
    
    
    
    Secured loan payable of $41,000, payable in monthly installments of
$137 up to July 1, 2024, plus interest at a rate reset periodically
of 100 basis points over LIBOR selected (which was 5.63% and
5.29% at March 31, 2006 and December 31, 2005, respectively)
    
    
    28,817
    
    
    
    29,090Total long-term borrowings
    
    $
    185,317
    
    
    
    150,590
  (8) Comprehensive Income
  AccumulatedUnrealized
    
    Minimum
    
    
    
    
    
    othergains on
    
    pension
    
    Cash flow
    
    comprehensivesecurities
    
    liability
    
    hedges
    
    incomeBALANCE AT JANUARY 1
    
    $
    3,217
    
    
    
    (8,613
    )
    
    
    371
    
    
    
    (5,025
    )Net current period change
    
    
    (6,644
    )
    
    
    
    
    
    
    92
    
    
    
    (6,552
    )BALANCE AT MARCH 31
    
    $
    (3,427
    )
    
    
    (8,613
    )
    
    
    463
    
    
    
    (11,577
    )
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands)
 (9) Income Taxes
   (10) Pension Plan
  Three months endedMarch 31,2006
    
    2005Components of net periodic benefit cost:Service cost
    
    $
    1,370
    
    
    
    1,143Interest cost
    
    
    1,175
    
    
    
    1,030Expected return on assets
    
    
    (991
    )
    
    
    (843
    )Amortization of prior service cost
    
    
    12
    
    
    
    12Amortization of actuarial loss
    
    
    602
    
    
    
    490Net periodic benefit cost
    
    $
    2,168
    
    
    
    1,832
 Employer contributions
  (11) Net Income (Loss) Available to Stockholders and Net Income (Loss) per Share
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2006
    
    2005Numerator for basic earnings per share:Net income (loss) available to stockholders
    
    $
    9,381
    
    
    
    (5,207
    )Denominator for basic earnings per share:Weighted average of outstanding common
shares
    
    
    8,906
    
    
    
    8,904Basic net income (loss) per share
    
    $
    1,053
    
    
    
    (585
    )
 (12) Contingencies
 (a)
    
    As of March 31, 2006, the Corporation is a defendant in various lawsuits arising in the
ordinary course of business. Management believes, based on the opinion of its legal
counsel, that the aggregate liabilities, if any, arising from such actions would not have a
material adverse effect on the consolidated financial position and results of operations of
the Corporation.(b)
    
    Drs. Carlyle Benavent and Ibrahim Pérez (the plaintiffs) caused the initiation of an
administrative proceeding before the Puerto Rico Insurance Commissioner against TSI and TSM
alleging the illegality of the repurchase and subsequent sale of 1,582 shares of TSIs
common stock due to the fact that the ultimate purchasers of said shares were selected on
an improper and selective basis by the Corporation in violation of the Puerto Rico
Insurance Code. The plaintiffs alleged that they were illegally excluded from
participation in the sale of shares by TSI due to the illegally selective nature of the
sale of shares and that, consequently, the sale of shares should be eliminated.In December 1996, the Commissioner of Insurance issued an order to annul the sale of the
1,582 shares that TSI had repurchased from the estate of deceased stockholders. TSI contested
such order through an administrative and judicial review process. Consequently, the sale of
1,582 shares was cancelled and the purchase price was returned to each former stockholder. In
the year 2000, the Commissioner of Insurance issued a pronouncement providing further
clarification of the content and effect of the order. This order also required that all
corporate decisions undertaken by TSI through the vote of its stockholders of record, be
ratified in a stockholders meeting or in a subsequent referendum. In November 2000, TSM, as
the sole stockholder of TSI, ratified all such decisions. Furthermore, on November 19, 2000,
TSM held a special stockholders meeting, where a ratification of these decisions was
undertaken except for the resolution related to the approval of the reorganization of TSI and
its subsidiaries. This resolution did not reach the two thirds majority required by the
order because the number of shares that were present and represented at the meeting was below
such amount (total shares present and represented in the stockholders meeting was 64%). As
stipulated in the order, TSM began the process to conduct a referendum among its stockholders
in order to ratify such resolution. The process was later suspended because upon further
review of the scope of the order, the Commissioner of Insurance issued an opinion in a letter
dated January 8, 2002 which indicated that the ratification of the corporate reorganization
was not required.In another letter dated March 14, 2002, the Commissioner of Insurance stated that the
ratification of the corporate reorganization was not required and that TSI had complied with
the Commissioners order of December 6, 1996 related to the corporate reorganization.
Thereafter, the plaintiffs filed a petition for review of the Commissioners determination
before the Puerto Rico Circuit Court of Appeals. Such petition was opposed by TSI and by the
Commissioner of Insurance.
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 Pursuant to that review, on September 24, 2002, the Puerto Rico Circuit Court of Appeals
issued an order requiring the Commissioner of Insurance to order that a meeting of
shareholders be held to ratify TSIs corporate reorganization and the change of name of TSI
from Seguros de Servicios de Salud de Puerto Rico, Inc. to Triple-S, Inc. The Puerto Rico
Circuit Court of Appeals based its decision on administrative and procedural issues directed
at the Commissioner of Insurance. The Commissioner of Insurance filed a motion of
reconsideration with the Puerto Rico Circuit Court of Appeals on October 11, 2002. TSM and
TSI also filed a motion of reconsideration.On October 25, 2002, the Puerto Rico Circuit Court of Appeals dismissed the Commissioner of
Insurances Motion for Reconsideration and ordered the plaintiffs to reply to TSIs Motion of
Reconsideration.On May 18, 2003, the Puerto Rico Circuit Court of Appeals granted TSIs and TSMs Motion of
Reconsideration. The Puerto Rico Circuit Court of Appeals held that the Commissioner of
Insurance had the authority to waive the celebration of a referendum to ratify TSIs
reorganization and that therefore the reorganization of TSI, inasmuch as the 1,582 shares
annulled were not decisive, was approved by the stockholders.On June 26, 2003, the plaintiffs presented a writ of certiorari before the Supreme Court of
Puerto Rico. TSI and TSM filed a motion opposing the issuance of the writ. The writ was
issued by the Supreme Court on August 22, 2003 when it ordered the Puerto Rico Circuit Court
of Appeals to transmit the record of the case. On December 1, 2003, the plaintiffs filed a
motion submitting their case on the basis of their original petition. TSI and TSM filed its
brief on December 30, 2003, while the Commissioner of Insurance, in turn, filed a separate
brief on December 31, 2003. On June 24, 2004 the Supreme Court of Puerto Rico ordered the
plaintiffs to file a brief in support of their allegations. The case is still pending before
the Supreme Court of Puerto Rico. It is the opinion of the management and its legal counsels
that the corporate reorganization as approved is in full force and effect.(c)
    
    On September 4, 2003, José Sánchez and others filed a putative class action complaint
against the Corporation, present and former directors of TSM and TSI, and others, in the
United States District Court for the District of Puerto Rico, alleging violations under the
Racketeer Influenced and Corrupt Organizations Act, better known as the RICO Act. The
suit, among other allegations, alleges a scheme to defraud the plaintiffs by acquiring
control of TSI through illegally capitalizing TSI and later converting it to a for-profit
corporation and depriving the stockholders of their ownership rights. The plaintiffs base
their later allegations on the supposed decisions of TSIs board of directors and
stockholders, allegedly made in 1979, to operate with certain restrictions in order to turn
TSI into a charitable corporation, basically forever. On March 4, 2005 the Court issued an
Opinion and Order. In this Opinion and Order, of the twelve counts included in the
complaint, eight counts were dismissed for failing to assert an actionable injury; six of
them for lack of standing and two for failing to plead with sufficient particularity in
compliance with the Rules. All shareholder allegations, including those described above,
were dismissed in the Opinion and Order. The remaining four counts were found standing, in
a limited way, in the Opinion and Order. The parties finished class certification
discovery and fully briefed the issue of class certification. In addition, the defendants
are evaluating the dismissal of the surviving claims. While waiting for the Courts
decision on the issue of class certification, the Court sua sponte, issued an Order to Show
Cause (OTC) to plaintiffs as to why the complaint should not be dismissed with prejudice.
The Courts OTC is predicated on the parties submissions about class certification. The
Court then granted plaintiffs leave to file a sur-reply, which they did on April
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 21, 2006.
In its OTC the Court indicated that it will decide first the sustainability of the
complaint before deciding plaintiffs request for class certification. The parties are in
anticipation of the Courts ruling on the OTC. On May 4, 2006, the Court issued an Opinion
and Order which entered a summary judgment in favor of the Corporation and the case was
dismissed by the Court. The plaintiffs have ten (10) business days to file for
reconsideration with the Court, they may also request additional findings from the Court,
and/or they have thirty (30) days to appeal the judgment to the United States Court of
Appeals for the First Circuit.
 (d)
    
    On April 24, 2002, Octavio Jordán, Agripino Lugo, Ramón Vidal, and others filed a suit
against TSM, TSI and others in the Court of First Instance for San Juan, Superior Section,
alleging, among other things, violations by the defendants of provisions of the Puerto Rico
Insurance Code, anti-monopolistic practices, unfair business practices and damages in the
amount of $12.0 million. They also requested that TSM sell shares to them. After a
preliminary review of the complaint, it appears that many of the allegations brought by the
plaintiffs have been resolved in favor of TSM and TSI in previous cases brought by the same
plaintiffs in the United States District Court for the District of Puerto Rico and by most
of the plaintiffs in the local courts. The defendants, including TSM and TSI answered the
complaint, filed a counterclaim and filed several motions to dismiss this claim. On
February 18, 2005 the plaintiffs informed their intention to amend the complaint and the
Court granted them 45 days to do so and 90 days to the defendants to file the corresponding
motion to dismiss. On May 9, 2005 the plaintiffs amended the complaint and the defendants
are preparing the corresponding motions to dismiss this amended complaint. The plaintiffs
amended the complaint to allege causes of action similar to those dismissed by the United
States District Court for the District of Puerto Rico in the Sánchez case. Defendants
moved to dismiss the amended complaint. Plaintiffs have notified their opposition to some
of the defendants motion to dismiss, and the defendants filed the corresponding replies.
On January 25, 2006, the court held a hearing to argue the dispositive motions. On March
16, 2006 the Court held another hearing to hear additional argument on the same motions.
The Court set a final hearing for July 6, 2006.(e)
    
    On May 22, 2003 a putative class action suit was filed by Kenneth A. Thomas, M.D. and
Michael Kutell, M.D., on behalf of themselves and all others similarly situated and the
Connecticut State Medical Society against the Blue Cross and Blue Shield Association
(BCBSA) and multiple other insurance companies including TSI. The case is pending before
the U.S. District Court for the Southern District of Florida, Miami District.The individual plaintiffs bring this action on behalf of themselves and a class of similarly
situated physicians seeking redress for alleged illegal acts of the defendants, which they
allege have resulted in a loss of their property and a detriment to their business, and for
declaratory and injunctive relief to end those practices and prevent further losses.
Plaintiffs alleged that the defendants, on their own and as part of a common scheme,
systematically deny, delay and diminish the payments due to doctors so that they are not paid
in a timely manner for the covered, medically necessary services they render.The class action complaint alleges that the health care plans are the agents of BCBSA
licensed entities, and as such have committed the acts alleged above and acted within the
scope of their agency, with the consent, permission, authorization and knowledge of the
others, and in furtherance of both their interest and the interests of other defendants.Management believes that TSI was brought to this litigation for the sole reason of being
associated with the BCBSA. However, on June 18, 2004 the plaintiffs moved to amend the
complaint to
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 include the Colegio de Médicos y Cirujanos de Puerto Rico (a compulsory
association grouping all physicians in Puerto Rico), Marissel Velázquez, MD, President of the
Colegio de Médicos y Cirujanos de Puerto Rico, and Andrés Meléndez, MD, as plaintiffs against
TSI. Later Marissel Velázquez, MD voluntarily dismissed her complaint against TSI.TSI, along with the other defendants, moved to dismiss the complaint on multiple grounds,
including but not limited to arbitration and applicability of the McCarran Ferguson Act.The Court issued a 90-day stay to allow the parties to discuss their differences and come to
amicable agreement. The stay expired on March 7, 2006. Upon the expiration of the stay,
both plaintiffs and defendants agreed to request the Court to extend the stay until April 21,
2006. The stay expired and the parties informed the Court that they need additional time to
iron out the details of an amicable solution. The Court has not reacted to the parties
joint request. If the Court denies another stay, the parties will have to continue the
proceedings where they were left before the issuance of the first stay. In the meantime, the
Court issued an Agreed Order on the Preservation of Records. This order supersedes the
parties existing record-keeping policies in regards to the documents and materials specified
in the order. The purpose of the order is to avoid the disposition of documents that might
be relevant for the case.(f)
    
    On December 8, 2003 a putative class action was filed by Jeffrey Solomon, MD and
Orlando Armstrong, MD, on behalf of themselves and all other similarly situated and the
American Podiatric Medical Association, Florida Chiropractic Association, California
Podiatric Medical Association, Florida Podiatric Medical Association, Texas Podiatric
Medical Association, and Independent Chiropractic Physicians, against the BCBSA and
multiple other insurance companies, including TSI and all members of the BCBSA. The case
is still pending before the United States District Court for the Southern District of
Florida, Miami District.The lawsuit challenges many of the same practices as the litigation described in the
immediately preceding item.Management believes that TSI was made a party to this litigation for the sole reason that TSI
is associated with the BCBSA.On June 25, 2004, plaintiffs amended the complaint but the allegations against TSI did not
vary. TSI along with the other defendants, moved to dismiss the complaint on multiple
grounds, including but not limited to arbitration and applicability of the McCarran Ferguson
Act.The Court issued a 90-day stay to allow the parties to discuss their differences and come to
an amicable agreement. The stay expired on March 7, 2006. Upon the expiration of the stay,
both plaintiffs and defendants agreed to request the Court to extend the stay until April 21,
2006. The stay expired and the parties informed the Court that they need additional time to
iron out the details of an amicable solution. The Court has not reacted to the parties
joint request. If the Court denies another stay, the parties will have to continue the
proceedings where they were left before the issuance of the first stay. In the meantime, the
Court issued an Agreed Order on the Preservation of Records. This order supersedes the
parties existing record-keeping policies in regards to the documents and materials specified
in the order. The purpose of the order is to avoid the disposition of documents that might
be relevant for the case.
 (12) Acquisition
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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 Business
Combinations
  Current assets
    
    $
    219,747Property and equipment
    
    
    1,500Value of business acquired
    
    
    21,973Total assets acquired
    
    
    243,220Total liabilities assumed
    
    
    205,024Net assets acquired
    
    $
    38,196
   Three months endedMarch 31,2006
    
    2005Total revenue
    
    $
    407,149
    
    
    
    363,240Net income
    
    $
    9,698
    
    
    
    (3,667
    )Basic net income (loss) per share
    
    $
    1,089
    
    
    
    (412
    )
 24




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 (13) Reconciliation of Net Income to Net Cash Provided by Operating Activities
  Three months endedMarch 31,2006
    
    2005Net income (loss)
    
    $
    9,381
    
    
    
    (5,207
    )Adjustments to reconcile net income to net cash
provided by operating expenses:Depreciation and amortization
    
    
    1,442
    
    
    
    1,248Amortization of investment discounts
    
    
    245
    
    
    
    194Accretion in value of securities
    
    
    (182
    )
    
    
    (106
    )Increase (decrease) in provision for doubtful
receivables
    
    
    451
    
    
    
    (100
    )Increase (decrease) in net deferred taxes
    
    
    41
    
    
    
    (2,506
    )Gain on sale of securities
    
    
    (528
    )
    
    
    (3,314
    )Unrealized gain (loss) of trading securities
    
    
    (2,556
    )
    
    
    5,793Proceeds from trading securities sold:Fixed maturities
    
    
    
    
    
    
    31,946Equity securities
    
    
    5,866
    
    
    
    5,027Acquisition of securities in trading portfolio:Fixed maturities
    
    
    
    
    
    
    (14,463
    )Equity securities
    
    
    (5,762
    )
    
    
    (5,116
    )Loss on sale of property and equipment
    
    
    
    
    
    
    (2
    )(Increase) decrease in assets:Premiums receivable
    
    
    (23,969
    )
    
    
    (11,081
    )Accrued interest receivable
    
    
    349
    
    
    
    (793
    )Agents balances
    
    
    (94
    )
    
    
    Reinsurance receivable
    
    
    (348
    )
    
    
    1,339Other receivables
    
    
    1,782
    
    
    
    2,717Deferred policy acquisition costs
    
    
    (698
    )
    
    
    460Prepaid income tax
    
    
    2,555
    
    
    
    Other assets
    
    
    762
    
    
    
    (769
    )Increase (decrease) in liabilities:Claims processed and incomplete
    
    
    2,661
    
    
    
    3,705Unreported losses
    
    
    16,475
    
    
    
    21,271Unpaid loss-adjustment expenses
    
    
    457
    
    
    
    331Future policy benefits
    
    
    2,059
    
    
    
    Unearned premiums
    
    
    585
    
    
    
    (3,393
    )Policyholder deposits
    
    
    416
    
    
    
    279Liability to FEHBP
    
    
    3,741
    
    
    
    988Accounts payable and accrued liabilities
    
    
    (11,216
    )
    
    
    (2,179
    )Income tax payable
    
    
    
    
    
    
    1,217Net cash provided
by operating
activities
    
    $
    3,915
    
    
    
    27,486
 25




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##### Table of Contents



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




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##### Table of Contents



Recent Developments
 Puerto Ricos Economy
    Recent Accounting Standards
  Significant Transactions
   27




---



##### Table of Contents



Consolidated
 Three months ended March 31, 2005Comparable(Dollar amounts in thousands)
    
    TSM
    
    GA Life
    
    BasisREVENUE:Premiums earned, net
    
    $
    333,389
    
    
    
    12,294
    
    
    
    345,683Amounts attributable to self-funded arrangements
    
    
    51,915
    
    
    
    
    
    
    
    51,915Less amounts attributable to claims under
self-funded arrangements
    
    
    (48,540
    )
    
    
    
    
    
    
    (48,540
    )336,764
    
    
    
    12,294
    
    
    
    349,058Net investment income
    
    
    7,064
    
    
    
    1,958
    
    
    
    9,022Net realized investment gains (losses)
    
    
    3,314
    
    
    
    (375
    )
    
    
    2,939Net unrealized investment loss on trading securities
    
    
    (5,793
    )
    
    
    
    
    
    
    (5,793
    )Other income, net
    
    
    632
    
    
    
    
    
    
    
    632Total revenue
    
    
    341,981
    
    
    
    13,877
    
    
    
    355,858BENEFITS AND EXPENSES:Claims incurred
    
    
    302,923
    
    
    
    6,718
    
    
    
    309,641Operating expenses, net of reimbursement for services
    
    
    43,766
    
    
    
    5,455
    
    
    
    49,221Interest expense
    
    
    1,788
    
    
    
    
    
    
    
    1,788Total benefits and expenses
    
    
    348,477
    
    
    
    12,173
    
    
    
    360,650Income (loss) before taxes
    
    
    (6,496
    )
    
    
    1,704
    
    
    
    (4,792
    )INCOME TAX EXPENSE (BENEFIT):Current
    
    
    1,221
    
    
    
    123
    
    
    
    1,344Deferred
    
    
    (2,510
    )
    
    
    (396
    )
    
    
    (2,906
    )Total income taxes
    
    
    (1,289
    )
    
    
    (273
    )
    
    
    (1,562
    )Net income (loss)
    
    $
    (5,207
    )
    
    
    1,977
    
    
    
    (3,230
    )Basic net loss per share
    
    $
    (585
    )
    
    
    
    
    
    
    (363
    )
 Life and Disability Insurance Segment
 Three months ended March 31, 2005Comparable(Dollar amounts in thousands)
    
    SVTS
    
    GA Life
    
    BasisNet earned premiums and commission income:Earned premiumsLife
    
    $
    2,202
    
    
    
    9,806
    
    
    
    12,008Disability
    
    
    3,354
    
    
    
    26
    
    
    
    3,380Cancer and other dreaded diseases
    
    
    213
    
    
    
    2,781
    
    
    
    2,994Total earned premiums
    
    
    5,769
    
    
    
    12,613
    
    
    
    18,382Earned premiums ceded
    
    
    (2,023
    )
    
    
    (319
    )
    
    
    (2,342
    )Net earned premiums
    
    
    3,746
    
    
    
    12,294
    
    
    
    16,040Commission income on reinsurance
    
    
    107
    
    
    
    
    
    
    
    107Net premiums earned
    
    $
    3,853
    
    
    
    12,294
    
    
    
    16,147Claims incurred
    
    $
    2,633
    
    
    
    6,718
    
    
    
    9,351Operating expenses
    
    
    1,982
    
    
    
    5,455
    
    
    
    7,437Total underwriting costs
    
    $
    4,615
    
    
    
    12,173
    
    
    
    16,788Underwriting income (loss)
    
    $
    (762
    )
    
    
    121
    
    
    
    (641
    )
 28




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##### Table of Contents



General Information
   Consolidated Operating Results
  Three months ended March 31,Comparable(dollar amounts in thousands)
    
    2006
    
    2005
    
    Basis 2005Consolidated earned premiums, net
and fee revenue
    
    $
    385,533
    
    
    
    336,764
    
    
    
    349,058Consolidated claims incurred
    
    $
    326,684
    
    
    
    302,923
    
    
    
    309,641Consolidated operating expenses
    
    
    57,730
    
    
    
    43,766
    
    
    
    49,221Consolidated operating costs
    
    $
    384,414
    
    
    
    346,689
    
    
    
    358,862Consolidated loss ratio
    
    
    84.7
    %
    
    
    90.0
    %
    
    
    88.7
    %Consolidated expense ratio
    
    
    15.0
    %
    
    
    13.0
    %
    
    
    14.1
    %Consolidated combined ratio
    
    
    99.7
    %
    
    
    103.0
    %
    
    
    102.8
    %Consolidated net investment income
    
    $
    10,050
    
    
    
    7,064
    
    
    
    9,022Consolidated realized gain on sale of securities
    
    
    528
    
    
    
    3,314
    
    
    
    2,939Consolidated unrealized gain (loss) on
trading securities
    
    
    2,556
    
    
    
    (5,793
    )
    
    
    (5,793
    )Total consolidated net investment income
    
    $
    13,134
    
    
    
    4,585
    
    
    
    6,168Consolidated interest expense
    
    $
    3,394
    
    
    
    1,788
    
    
    
    1,788Consolidated income tax expense (benefit)
    
    $
    2,677
    
    
    
    (1,289
    )
    
    
    (1,562
    )Consolidated net income (loss)
    
    $
    9,381
    
    
    
    (5,207
    )
    
    
    (3,230
    )
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
  29




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##### Table of Contents




    
    The earned premiums, net and fee revenue corresponding to the Health Insurance 
Commercial segment increased by $27.2 million, or 14.4%, during the period. The increase
in premiums earned, net of this segment is primarily due to an increase in the average
enrollment of the Medicare Advantage business in the 2006 period. The average enrollment
of the segments rated contracts decreased during the same period, the effect of which was
mitigated by an average increase in premium rates of 4.0%.
    
    The earned premiums, net of the Health Insurance  Healthcare Reform segment presented
an increase of $4.4 million, or 3.5% during this period. This increase is the result of a
5.8% increase in premium rates effective August 1, 2005, net of decrease in average
enrollment.
    
    On a comparable basis, in the 2006 period the earned premiums, net of the Life and
Disability Insurance segment increased by $5.5 million, or 34.3%. The increase in the
earned premiums net of this segment is due to the following:
 °
    
    The assumed earned premiums of the segment on both the actual and comparable
basis increased by $4.4 million in the 2006 period. This increase is due to the
business assumed by SVTS during January 2006 as a result of the coinsurance funds
withheld agreement with GA Life, in which SVTS assumes 69% of GA Lifes business
effective December 22, 2005. However, since TSM acquired GA Life, now both entities
form the Corporations Life and Disability Insurance segment. Thus, this reinsurance
agreement is eliminated upon the combination of both entities for segment
presentation. The effects of the reinsurance transactions corresponding to this
agreement were eliminated for consolidated financial statement purposes for the period
following January 31, 2006.°
    
    On a comparable basis, the earned premiums of the segments individual life
and cancer and other dreaded diseases lines of business increased by $714 thousand, or
7.3%, and $639 thousand, or 21.3%, respectively.
   Medicare Platino FarmaMed
   30




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##### Table of Contents



Health Insurance  Commercial Program Operating Results
 Three months endedMarch 31,(dollar amounts in thousands)
    
    2006
    
    2005Average enrollment:Corporate accounts
    
    
    298,626
    
    
    
    306,308Self-funded employers
    
    
    151,970
    
    
    
    151,315Individual accounts
    
    
    77,478
    
    
    
    83,290Federal employees
    
    
    47,966
    
    
    
    50,154Local government employees
    
    
    31,630
    
    
    
    36,562Medicare Advantage
    
    
    18,876
    
    
    
    986Total enrollment
    
    
    626,546
    
    
    
    628,615Earned premiums
    
    $
    211,845
    
    
    
    185,057Amounts attributable to self-funded arrangements
    
    
    51,466
    
    
    
    52,234Less: Amounts attributable to claims under
self-funded arrangements
    
    
    (47,377
    )
    
    
    (48,540
    )Earned premiums and fee revenue
    
    $
    215,934
    
    
    
    188,751Claims incurred
    
    $
    190,857
    
    
    
    172,829Operating expenses
    
    
    28,401
    
    
    
    24,240Total underwriting costs
    
    $
    219,258
    
    
    
    197,069Underwriting loss
    
    $
    (3,324
    )
    
    
    (8,318
    )Loss ratio
    
    
    88.4
    %
    
    
    91.6
    %Expense ratio
    
    
    13.2
    %
    
    
    12.8
    %Combined ratio
    
    
    101.5
    %
    
    
    104.4
    %
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
  
    
    Premiums generated by the segments Medicare Advantage program presented an increase of
$28.3 million, from $3.1 million in the 2005 period to $31.4 million in the 2006 period.
This increase is primarily due to the increase in enrollment experienced in this business.
The average enrollment of the Medicare Advantage program presented an increase of 17,890
members upon
 31




---



##### Table of Contents



comparison of the 2006 and 2005 periods. In January 2006, the segment
expanded its Medicare Advantage program with the introduction of Medicare Platino(for
medically indigent Medicare-qualified beneficiaries in Puerto Rico) and FarmaMed
(prescription drugs program for beneficiaries of Medicare Parts A and B). The enrollment
for these programs contributed to the increase in average membership of the Medicare
Advantage business.
    
    The segment experienced a decrease in the earned premiums corresponding to its other
rated contracts lines of business of approximately $900 thousand. This decrease is the
combined effect of a decrease in the average enrollment of 20,614 members, or 4.3% and an
average increase in premium rates of 4.0%. The segment maintained its contract renewal
ratio of over 90% during the first quarter of 2006. The decrease in average enrollment is
primarily noted in the individual and local government employees as a result of qualifying
enrollees selecting Medicare Advantage policies. The average enrollment of the individual
and local government employees business decreased by 5,812, or 7.0%, and 4,932, or 13.5%,
respectively, during the 2006 period.
  Medicare Platino FarmaMed
 Health Insurance  Healthcare Reform Program Operating Results
 Three months endedMarch 31,(dollar amounts in thousands)
    
    2006
    
    2005Average enrollment:North area
    
    
    227,386
    
    
    
    232,977Metro-north area
    
    
    210,887
    
    
    
    215,707Southwest area
    
    
    158,281
    
    
    
    162,573596,554
    
    
    
    611,257Earned premiums
    
    $
    127,496
    
    
    
    123,140Claims incurred
    
    $
    113,882
    
    
    
    116,088Operating expenses
    
    
    9,240
    
    
    
    8,914Total underwriting costs
    
    $
    123,122
    
    
    
    125,002Underwriting income (loss)
    
    $
    4,374
    
    
    
    (1,862
    )Loss ratio
    
    
    89.3
    %
    
    
    94.3
    %Expense ratio
    
    
    7.2
    %
    
    
    7.2
    %Combined ratio
    
    
    96.6
    %
    
    
    101.5
    %
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
 32




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##### Table of Contents




    
    Premium rates for this segment were increased, effective August 1st, 2005,
by approximately 5.8% during the Healthcare Reform contract renegotiation process for the
eleven-month period ending June 30, 2006.
    
    The segments average enrollment during the 2006 quarter decreased by 14,703 members,
or 2.4%, when compared to the average enrollment during the 2005 quarter. This decrease
is mainly due to the shift of membership into a government-sponsored Medicare Advantage
policy (Medicare Platino).
   Property and Casualty Insurance Operating Results
 Three months endedMarch 31,(dollar amounts in thousands)
    
    2006
    
    2005Premiums written:Commercial multiperil
    
    $
    13,170
    
    
    
    12,984Dwelling
    
    
    6,190
    
    
    
    6,221Auto physical damage
    
    
    6,010
    
    
    
    4,995Commercial auto liability
    
    
    4,050
    
    
    
    3,679Other liability
    
    
    1,893
    
    
    
    2,325Medical malpractice
    
    
    951
    
    
    
    1,101All other
    
    
    2,469
    
    
    
    2,462Total premiums written
    
    
    34,733
    
    
    
    33,767Premiums ceded
    
    
    (13,729
    )
    
    
    (14,475
    )Change in unearned premiums
    
    
    1,023
    
    
    
    2,804Net premiums earned
    
    $
    22,027
    
    
    
    22,096Claims incurred
    
    $
    10,313
    
    
    
    11,373Operating expenses
    
    
    11,642
    
    
    
    10,341Total underwriting costs
    
    $
    21,955
    
    
    
    21,714Underwriting income
    
    $
    72
    
    
    
    382Loss ratio
    
    
    46.8
    %
    
    
    51.5
    %Expense ratio
    
    
    52.9
    %
    
    
    46.8
    %Combined ratio
    
    
    99.7
    %
    
    
    98.3
    %
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
  33




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##### Table of Contents



Life and Disability Insurance Operating Results
 Three months ended March 31,Comparable(dollar amounts in thousands)
    
    2006
    
    2005
    
    Basis 2005Net earned premiums and commission income:Earned premiums:Life
    
    $
    12,543
    
    
    
    2,202
    
    
    
    12,008Disability
    
    
    3,182
    
    
    
    3,354
    
    
    
    3,380Cancer and other dreaded diseases
    
    
    3,633
    
    
    
    213
    
    
    
    2,994Total earned premiums
    
    
    19,358
    
    
    
    5,769
    
    
    
    18,382Earned premiums ceded
    
    
    (2,243
    )
    
    
    (2,023
    )
    
    
    (2,342
    )Assumed earned premiums
    
    
    4,413
    
    
    
    
    
    
    
    Net earned premiums
    
    
    21,528
    
    
    
    3,746
    
    
    
    16,040Commission income on reinsuarance
    
    
    153
    
    
    
    107
    
    
    
    107Net premiums earned
    
    $
    21,681
    
    
    
    3,853
    
    
    
    16,147Claims incurred
    
    $
    11,632
    
    
    
    2,633
    
    
    
    9,351Operating expenses
    
    
    11,390
    
    
    
    1,982
    
    
    
    7,437Total underwriting costs
    
    $
    23,022
    
    
    
    4,615
    
    
    
    16,788Underwriting loss
    
    $
    (1,341
    )
    
    
    (762
    )
    
    
    (641
    )Loss ratio
    
    
    53.7
    %
    
    
    68.3
    %
    
    
    57.9
    %Expense ratio
    
    
    52.5
    %
    
    
    51.4
    %
    
    
    46.1
    %Combined ratio
    
    
    106.2
    %
    
    
    119.8
    %
    
    
    104.0
    %
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
 34




---



##### Table of Contents




    
    The premiums earned of the individual life line of business on a comparable basis
increased by $714 thousand, or 7.3%, in the 2006 period. This fluctuation is mainly the
result of increases in the ordinary life and the monthly debit ordinary (MDO) premiums of
12.0% and 5.0%, respectively. The increase in premiums earned of the ordinary life and
MDO business is principally due to new sales made during the 2006 period.
    
    The premiums earned of the cancer and other dreaded diseases on a comparable basis
increased by $639 thousand, or 21.3%, in the 2006 period. This increase is primarily
attributed to the growth in the sales of the new cancer products that the segment began
selling during the last quarter of the year 2004.
    
    The premiums earned on a comparable basis for the group life and group disability lines
of business had a combined decrease of $377 thousand, or 6.7%, when compared to the three
months ended March 31, 2005. This fluctuation is primarily due to a disciplined
underwriting of groups where premiums have been significantly adjusted to reflect expected
losses and those groups have decided not to renew.
    Liquidity and Capital Resources
 Cash Flows
  35




---



##### Table of Contents



Cash Flows from Operations
   
    
    The amount of claims, losses and benefits paid for the three months ended March 31,
2006 reflect an increase of $29.1 million when compared with the three months ended March
31, 2005. The increase in the amount of claims, losses and benefits paid is mostly the
result of the segments increased volume of business.
    
    The payments to suppliers and employees increased by $20.6 million when comparing the
amount paid during the 2006 and 2005 periods. This increase is basically attributed to
additional commission expense generated from the acquisition of new business and general
operating expenses.
    
    The net proceeds of investments in the trading portfolio decreased by $17.3 million for
the three months ended March 31, 2006, when compared to the three months ended March 31,
2005. The fluctuation when compared to the 2005 period is due to the sale of the
corporate bonds portfolio in mid year 2005. The corporate bonds portfolio was considered
as a trading portfolio.
    
    Premiums collected increased by $42.8 million when comparing collections during the
three months ended March 31, 2006 with collections for the three months ended March 31,
2004. This increase is mostly related to the increased volume of business and increases
in premium rates of the operating segments.
    
    Interest received increased by $4.1 million during the 2006 period. This increase is
mostly the related to the increase experienced in the Corporations investments in fixed
income securities during the 2006 period.
  Cash Flows from Investing Activities
   36




---



##### Table of Contents




    
    During the 2006 period the Corporation completed the acquisition of 100% of the common
stock of GA Life. This transaction had an acquisition cost of $38.2 million, net of $10.4
million of acquired cash.
    
    The amount of capital expenditures increased by $2.4 million when comparing the 2006
and 2005 periods. This increase is principally due to incurred cost related to the
renovation of one of Corporations facilities in one building adjacent to its main offices
and to expenses related to STSs acquisition of a new computer system to manage its
insurance operations.
    
    The Corporation had net decrease of $11.6 million in the net acquisition of investments
during the 2006 period. During the three months ended March 31, 2006 and 2005 total
acquisition of investments exceeded the proceeds from investments sold or matured by $1.9
million and $13.5 million, respectively.
 Cash Flows from Financing Activities
  
    
    During the three months ended March 31, 2006 the Corporation received the proceeds from
the issuance of its 6.7% Senior Unsecured Notes amounting to $35.0 million. No long-term
debt was issued in the 2005 period.
    
    On January 13, 2006 the Corporation declared and paid dividends amounting to $6.2
million. There was no dividend payment during the 2005 period.
    
    The change in outstanding checks in excess of bank balances reflects a decrease of $6.1
million during the three months ended March 31, 2006 compared to the 2005 period. The
amount of checks in excess of bank balances represents a timing difference between the
issuance of checks and the cash balance in the bank account at one point in time.
    
    In the 2006 period the payments of short-term borrowings exceeded proceeds from
short-term borrowings by $1.7 million. In the 2005 period the short-term borrowings
activity did not result in net borrowings or payments. Short-term borrowings are used to
address timing differences between cash receipts and disbursements.
 Financing and Financing Capacity
   
    
    On September 30, 2004 TSI issued and sold $50.0 million of its 6.3% senior unsecured
notes due September 2019 (the 6.3% notes). The 6.3% notes are unconditionally guaranteed
as to payment of principal, premium, if any and interest by the Corporation. The notes
were privately placed to various institutional accredited investors. The notes pay
interest semiannually beginning on March 2005, until such principal becomes due and
payable. These notes can be prepaid after five years at par, in total or partially, as
determined by the Corporation. Most of the proceeds obtained from this issuance were used
to repay $37.0 million of short-term borrowings made by TSI. The remaining proceeds were
used for general business purposes.
    
    On December 21, 2005 TSM issued and sold $60.0 million of its 6.6% senior unsecured
notes due December 2020 (the 6.6% notes). The 6.6% notes were privately placed to various
institutional accredited investors. The notes pay interest each month beginning on
January 2006, until such principal becomes due and payable. These notes can be prepaid
after five years at par, in full or in
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part, as determined by the Corporation. The
proceeds obtained from this issuance were used to pay the initial ceding commission to GA
Life on the effective date of the coinsurance funds withheld reinsurance agreement.
     
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
  
 Part II  Other Information
 
 Item 1. Legal Proceedings
 (a)
    
    As of March 31, 2006, the Corporation is a defendant in various lawsuits arising out of
the ordinary course of business. Management believes, based on the opinion of legal counsel,
that the aggregate liabilities, if any, arising from such actions would not have a material
adverse effect on the Corporations consolidated financial position or results of operations.
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(b)
    
    Drs. Carlyle Benavent and Ibrahim Pérez (the plaintiffs) caused the initiation of an
administrative proceeding before the Puerto Rico Insurance Commissioner against TSI and TSM
alleging the illegality of the repurchase and subsequent sale of 1,582 shares of TSIs common
stock due to the fact that the ultimate purchasers of said shares were selected on an improper
and selective basis by the Corporation in violation of the Puerto Rico Insurance Code. The
plaintiffs alleged that they were illegally excluded from participation in the sale of shares
by TSI due to the illegally selective nature of the sale of shares and that, consequently, the
sale of shares should be eliminated.In December 1996, the Commissioner of Insurance issued an order to annul the sale of the 1,582
shares that TSI had repurchased from the estate of deceased stockholders. TSI contested such
order through an administrative and judicial review process. Consequently, the sale of 1,582
shares was cancelled and the purchase price was returned to each former stockholder. In the
year 2000, the Commissioner of Insurance issued a pronouncement providing further clarification
of the content and effect of the order. This order also required that all corporate decisions
undertaken by TSI through the vote of its stockholders of record, be ratified in a
stockholders meeting or in a subsequent referendum. In November 2000, TSM, as the sole
stockholder of TSI, ratified all such decisions. Furthermore, on November 19, 2000, TSM held a
special stockholders meeting, where a ratification of these decisions was undertaken except
for the resolution related to the approval of the reorganization of TSI and its subsidiaries.
This resolution did not reach the two thirds majority required by the order because the number
of shares that were present and represented at the meeting was below such amount (total shares
present and represented in the stockholders meeting was 64%). As stipulated in the order, TSM
began the process to conduct a referendum among its stockholders in order to ratify such
resolution. The process was later suspended because upon further review of the scope of the
order, the Commissioner of Insurance issued an opinion in a letter dated January 8, 2002 which
indicated that the ratification of the corporate reorganization was not required.In another letter dated March 14, 2002, the Commissioner of Insurance stated that the
ratification of the corporate reorganization was not required and that TSI had complied with
the Commissioners order of December 6, 1996 related to the corporate reorganization.
Thereafter, the plaintiffs filed a petition for review of the Commissioners determination
before the Puerto Rico Circuit Court of Appeals. Such petition was opposed by TSI and by the
Commissioner of Insurance.Pursuant to that review, on September 24, 2002, the Puerto Rico Circuit Court of Appeals issued
an order requiring the Commissioner of Insurance to order that a meeting of shareholders be
held to ratify TSIs corporate reorganization and the change of name of TSI from Seguros de
Servicios de Salud de Puerto Rico, Inc. to Triple-S, Inc. The Puerto Rico Circuit Court of
Appeals based its decision on administrative and procedural issues directed at the Commissioner
of Insurance. The Commissioner of
Insurance filed a motion of reconsideration with the Puerto Rico Circuit Court of Appeals on
October 11, 2002. TSM and TSI also filed a motion of reconsideration.On October 25, 2002, the Puerto Rico Circuit Court of Appeals dismissed the Commissioner of
Insurances Motion for Reconsideration and ordered the plaintiffs to reply to TSIs Motion of
Reconsideration.On May 18, 2003, the Puerto Rico Circuit Court of Appeals granted TSIs and TSMs Motion of
Reconsideration. The Puerto Rico Circuit Court of Appeals held that the Commissioner of
Insurance had the authority to waive the celebration of a referendum to ratify TSIs
reorganization and that therefore the reorganization of TSI, inasmuch as the 1,582 shares
annulled were not decisive, was approved by the stockholders.On June 26, 2003, the plaintiffs presented a writ of certiorari before the Supreme Court of
Puerto Rico. TSI and TSM filed a motion opposing the issuance of the writ. The writ was
issued by the Supreme Court on August 22, 2003 when it ordered the Puerto Rico Circuit Court of
Appeals to transmit the record of the case. On December 1, 2003, the plaintiffs filed a motion
submitting their case on the basis of their original petition. TSI and TSM filed its brief on
December 30, 2003, while the Commissioner of Insurance, in turn, filed a separate brief on
December 31, 2003. On June 24, 2004
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the Supreme Court of Puerto Rico ordered the plaintiffs to
file a brief in support of their allegations. The case is still pending before the Supreme
Court of Puerto Rico. It is the opinion of the management and its legal counsels that the
corporate reorganization as approved is in full force and effect.
 (c)
    
    On September 4, 2003, José Sánchez and others filed a putative class action complaint against
the Corporation, present and former directors of TSM and TSI, and others, in the United States
District Court for the District of Puerto Rico, alleging violations under the Racketeer
Influenced and Corrupt Organizations Act, better known as the RICO Act. The suit, among other
allegations, alleges a scheme to defraud the plaintiffs by acquiring control of TSI through
illegally capitalizing TSI and later converting it to a for-profit corporation and depriving
the stockholders of their ownership rights. The plaintiffs base their later allegations on the
supposed decisions of TSIs board of directors and stockholders, allegedly made in 1979, to
operate with certain restrictions in order to turn TSI into a charitable corporation,
basically forever. On March 4, 2005 the Court issued an Opinion and Order. In this Opinion
and Order, of the twelve counts included in the complaint, eight counts were dismissed for
failing to assert an actionable injury; six of them for lack of standing and two for failing
to plead with sufficient particularity in compliance with the Rules. All shareholder
allegations, including those described above, were dismissed in the Opinion and Order. The
remaining four counts were found standing, in a limited way, in the Opinion and Order. The
parties finished class certification discovery and fully briefed the issue of class
certification. While waiting for the Courts decision on the issue of class certification,
the Court, sua sponte, issued an Order to Show Cause (OTC) to plaintiffs as to why the
complaint should not be dismissed with prejudice. The Courts OTC is predicated on the
parties submissions about class certification. The Court then granted plaintiffs leave to
file a sur-reply, which they did on April 21, 2006. In its OTC the Court indicated that it
will decide first the sustainability of the complaint before deciding plaintiffs request for
class certification. The parties are in anticipation of the Courts ruling on the OTC. On
May 4, 2006, the Court issued an Opinion and Order which entered a summary judgment in favor
of the Corporation and the case was dismissed by the Court. The plaintiffs have ten (10)
business days to file for reconsideration with the Court, they may also request additional
findings from the Court, and/or they have thirty (30) days to appeal the judgment to the
United States Court of Appeals for the First Circuit.
 (d)
    
    On April 24, 2002, Octavio Jordán, Agripino Lugo, Ramón Vidal, and others filed a suit
against TSM, TSI and others in the Court of First Instance for San Juan, Superior Section,
alleging, among other things, violations by the defendants of provisions of the Puerto Rico
Insurance Code, anti-monopolistic practices, unfair business practices and damages in the
amount of $12.0 million. They also requested that TSM sell shares to them. After a
preliminary review of the complaint, it appears that many of the allegations brought by the
plaintiffs have been resolved in favor of TSM and TSI in previous cases brought by the same
plaintiffs in the United States District Court for the District of Puerto Rico and by
most of the plaintiffs in the local courts. The defendants, including TSM and TSI answered the
complaint, filed a counterclaim and filed several motions to dismiss this claim. On February
18, 2005 the plaintiffs informed their intention to amend the complaint and the Court granted
them 45 days to do so and 90 days to the defendants to file the corresponding motion to
dismiss. On May 9, 2005 the plaintiffs amended the complaint and the defendants are preparing
the corresponding motions to dismiss this amended complaint. The plaintiffs amended the
complaint to allege causes of action similar to those dismissed by the United States District
Court for the District of Puerto Rico in the Sánchez case. Defendants moved to dismiss the
amended complaint. Plaintiffs have notified their opposition to some of the defendants motion
to dismiss, and the defendants filed the corresponding replies. On January 25, 2006, the court
held a hearing to argue the dispositive motions. On March 16, 2006 the Court held another
hearing to hear additional argument on the same motions. The Court set a final hearing for
July 6, 2006.
 (e)
    
    On May 22, 2003 a putative class action suit was filed by Kenneth A. Thomas, M.D. and Michael
Kutell, M.D., on behalf of themselves and all others similarly situated and the Connecticut
State Medical Society against the Blue Cross and Blue Shield Association (BCBSA) and multiple
other insurance companies including TSI. The case is pending before the U.S. District Court
for the Southern District of Florida, Miami District.
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The individual plaintiffs bring this action on behalf of themselves and a class of similarly
situated physicians seeking redress for alleged illegal acts of the defendants, which they
allege have resulted in a loss of their property and a detriment to their business, and for
declaratory and injunctive relief to end those practices and prevent further losses. Plaintiffs
alleged that the defendants, on their own and as part of a common scheme, systematically deny,
delay and diminish the payments due to doctors so that they are not paid in a timely manner for
the covered, medically necessary services they render.The class action complaint alleges that the health care plans are the agents of BCBSA licensed
entities, and as such have committed the acts alleged above and acted within the scope of their
agency, with the consent, permission, authorization and knowledge of the others, and in
furtherance of both their interest and the interests of other defendants.Management believes that TSI was brought to this litigation for the sole reason of being
associated with the BCBSA. However, on June 18, 2004 the plaintiffs moved to amend the
complaint to include the Colegio de Médicos y Cirujanos de Puerto Rico (a compulsory
association grouping all physicians in Puerto Rico), Marissel Velázquez, MD, President of the
Colegio de Médicos y Cirujanos de Puerto Rico, and Andrés Meléndez, MD, as plaintiffs against
TSI. Later Marissel Velázquez, MD voluntarily dismissed her complaint against TSI.TSI, along with the other defendants, moved to dismiss the complaint on multiple grounds,
including but not limited to arbitration and applicability of the McCarran Ferguson Act.The Court issued a 90-day stay to allow the parties to discuss their differences and come to
amicable agreement. The stay expired on March 7, 2006. Upon the expiration of the stay, both
plaintiffs and defendants agreed to request the Court to extend the stay until April 21, 2006.
The stay expired and the parties informed the Court that they need additional time to iron out
the details of an amicable solution. The Court has not reacted to the parties joint request.
If the Court denies another stay, the parties will have to continue the proceedings where they
were left before the issuance of the first stay. In the meantime, the Court issued an Agreed
Order on the Preservation of Records. This order supersedes the parties existing
record-keeping policies in regards to the documents and materials specified in the order. The
purpose of the order is to avoid the disposition of documents that might be relevant for the
case.
 (f)
    
    On December 8, 2003 a putative class action was filed by Jeffrey Solomon, MD and Orlando
Armstrong, MD, on behalf of themselves and all other similarly situated and the American
Podiatric Medical Association, Florida Chiropractic Association, California Podiatric Medical
Association, Florida Podiatric Medical Association, Texas Podiatric Medical Association, and
Independent
Chiropractic Physicians, against the BCBSA and multiple other insurance companies, including
TSI and all members of the BCBSA. The case is still pending before the United States District
Court for the Southern District of Florida, Miami District.The lawsuit challenges many of the same practices as the litigation described in the
immediately preceding item.Management believes that TSI was made a party to this litigation for the sole reason that TSI
is associated with the BCBSA.On June 25, 2004, plaintiffs amended the complaint but the allegations against TSI did not
vary. TSI along with the other defendants, moved to dismiss the complaint on multiple grounds,
including but not limited to arbitration and applicability of the McCarran Ferguson Act.The Court issued a 90-day stay to allow the parties to discuss their differences and come to an
amicable agreement. The stay expired on March 7, 2006. Upon the expiration of the stay, both
plaintiffs and defendants agreed to request the Court to extend the stay until April 21, 2006.
The stay expired and the parties informed the Court that they need additional time to iron out
the details of an amicable solution. The Court has not reacted to the parties joint request.
If the Court denies another
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stay, the parties will have to continue the proceedings where they
were left before the issuance of the first stay. In the meantime, the Court issued an Agreed
Order on the Preservation of Records. This order supersedes the parties existing
record-keeping policies in regards to the documents and materials specified in the order. The
purpose of the order is to avoid the disposition of documents that might be relevant for the
case.
 
 Item IA. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submissions of Matters to a Vote of Security Holders
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Item 5. Other Information
  
 Item 6. Exhibits
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SIGNATURES
  Triple-S Management CorporationRegistrantDate: May 12, 2006
    
    
    
    By:
    
    /s/ Ramón M. Ruiz-ComasRamón M. Ruiz-Comas, CPAPresident andChief Executive OfficerDate: May 12, 2006
    
    
    
    By:
    
    /s/ Juan J. RománJuan J. Román, CPAVice President of Financeand Chief Financial Office
 44