##### 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, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 COMMISSION FILE NUMBER: 001-33865
 Triple-S Management Corporation
 Puerto Rico
(State or other jurisdiction of 
incorporation or organization)
    
    66-0555678
(I.R.S. Employer Identification No.)1441 F.D. Roosevelt AvenueSan Juan, Puerto Rico
    
    00920(Address of principal executive offices)
    
    (Zip code)
 (787) 749-4949
 Not applicable
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ
  Title of each class
    
    Outstanding at March 31, 2010Common Stock Class A, $1.00 par value
    
    9,042,809Common Stock Class B, $1.00 par value
    
    20,361,063




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##### 



Triple-S Management Corporation
 FORM 10-Q
  Table of Contents
 Part I  Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Cautionary Statement Regarding Forward-Looking Information
    
    
    28Overview
    
    
    28Recent Developments
    
    
    29Recent Accounting Standards
    
    
    31Managed Care Membership
    
    
    31Consolidated Operating Results
    
    
    31Managed Care Operating Results
    
    
    33Life Insurance Operating Results
    
    
    35Property and Casualty Insurance Operating Results
    
    
    36Liquidity and Capital Resources
    
    
    37Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    38Part II  Other Information
    
    
    39Item 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    39Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3. Defaults Upon Senior Securities
    
    
    39Item 4. (Removed and Reserved)
    
    
    39Item 5. Other Information
    
    
    39Item 6. Exhibits
    
    
    39SIGNATURES
    
    
    40EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Part I  Financial Information
 
 Item 1. Financial Statements
 Triple-S Management Corporation
 Consolidated Balance Sheets

(Unaudited)
 (Dollar amounts in thousands, except per share data)
 March 31,
    
    
    December 31,2010
    
    
    2009AssetsInvestments and cash:Equity securities held for trading, at fair value
    
    $
    47,607
    
    
    $
    43,909Securities available for sale, at fair value:Fixed maturities
    
    
    959,212
    
    
    
    918,977Equity securities
    
    
    68,281
    
    
    
    64,689Securities held to maturity, at amortized cost:Fixed maturities
    
    
    14,632
    
    
    
    15,794Policy loans
    
    
    5,990
    
    
    
    5,940Cash and cash equivalents
    
    
    41,345
    
    
    
    40,376Total investments and cash
    
    
    1,137,067
    
    
    
    1,089,685Premiums and other receivables, net
    
    
    290,596
    
    
    
    272,932Deferred policy acquisition costs and value of business acquired
    
    
    140,432
    
    
    
    139,917Property and equipment, net
    
    
    71,487
    
    
    
    68,803Deferred tax asset
    
    
    32,711
    
    
    
    37,551Other assets
    
    
    35,072
    
    
    
    39,816Total assets
    
    $
    1,707,365
    
    
    $
    1,648,704Liabilities and Stockholders EquityClaim liabilities
    
    
    397,634
    
    
    
    360,446Liability for future policy benefits
    
    
    226,559
    
    
    
    222,619Unearned premiums
    
    
    101,148
    
    
    
    108,342Policyholder deposits
    
    
    47,494
    
    
    
    47,563Liability to Federal Employees Health Benefits Program (FEHBP)
    
    
    13,350
    
    
    
    13,002Accounts payable and accrued liabilities
    
    
    140,117
    
    
    
    139,161Deferred tax liability
    
    
    11,528
    
    
    
    11,088Borrowings
    
    
    167,257
    
    
    
    167,667Liability for pension benefits
    
    
    38,980
    
    
    
    41,044Total liabilities
    
    
    1,144,067
    
    
    
    1,110,932Stockholders equity:Common stock Class A, $1 par value. Authorized 100,000,000 shares;
issued
and outstanding 9,042,809 at March 31, 2010 and December 31, 2009
    
    
    9,043
    
    
    
    9,043Common stock Class B, $1 par value. Authorized 100,000,000 shares;
issued
and outstanding 20,110,391 shares at March 31, 2010 and
December 31, 2009, respectively
    
    
    20,110
    
    
    
    20,110Additional paid-in capital
    
    
    159,808
    
    
    
    159,303Retained earnings
    
    
    372,084
    
    
    
    360,892Accumulated other comprehensive income (loss)
    
    
    2,253
    
    
    
    (11,576
    )Total stockholders equity
    
    
    563,298
    
    
    
    537,772Total liabilities and stockholders equity
    
    $
    1,707,365
    
    
    $
    1,648,704
  3




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##### Table of Contents



Triple-S Management Corporation
 Consolidated
Statements of Earnings (Unaudited)
 (Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2010
    
    
    2009Revenues:Premiums earned, net
    
    $
    494,177
    
    
    $
    451,438Administrative service fees
    
    
    12,498
    
    
    
    8,866Net investment income
    
    
    12,423
    
    
    
    12,541Total operating revenues
    
    
    519,098
    
    
    
    472,845Net realized investment losses:Total other-than-temporary impairment losses on securities
    
    
    (1,855
    )
    
    
    (2,661
    )Net realized gains, excluding other-than-temporary impairment
losses on securities
    
    
    476
    
    
    
    934Total net realized investment losses
    
    
    (1,379
    )
    
    
    (1,727
    )Net unrealized investment gain (loss) on trading securities
    
    
    2,030
    
    
    
    (2,476
    )Other income (expense), net
    
    
    152
    
    
    
    (379
    )Total revenues
    
    
    519,901
    
    
    
    468,263Benefits and expenses:Claims incurred
    
    
    425,828
    
    
    
    393,486Operating expenses
    
    
    76,871
    
    
    
    68,252Total operating costs
    
    
    502,699
    
    
    
    461,738Interest expense
    
    
    3,228
    
    
    
    3,264Total benefits and expenses
    
    
    505,927
    
    
    
    465,002Income before taxes
    
    
    13,974
    
    
    
    3,261Income tax expense (benefit):Current
    
    
    3,544
    
    
    
    451Deferred
    
    
    (762
    )
    
    
    (1,122
    )Total income taxes
    
    
    2,782
    
    
    
    (671
    )Net income
    
    $
    11,192
    
    
    $
    3,932Basic net income per share
    
    $
    0.38
    
    
    $
    0.13Diluted net income per share
    
    $
    0.38
    
    
    $
    0.13
  4




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##### Table of Contents



Triple-S Management Corporation
 Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) 
(Unaudited)
 (Dollar amounts in thousands, except per share data)
 2010
    
    
    2009Balance at January 1
    
    $
    537,772
    
    
    $
    485,099Share-based compensation
    
    
    505
    
    
    
    1,619Grant of restricted Class B common stock
    
    
    
    
    
    
    3Repurchase and retirement of common stock
    
    
    
    
    
    
    (18,032
    )Comprehensive income (loss):Net income
    
    
    11,192
    
    
    
    3,932Net unrealized change in fair value of available for sale securities, net of taxes
    
    
    13,527
    
    
    
    (10,599
    )Defined benefit pension plan:Actuarial loss, net
    
    
    371
    
    
    
    331Prior service credit, net
    
    
    (69
    )
    
    
    (65
    )Total comprehensive income (loss)
    
    
    25,021
    
    
    
    (6,401
    )Balance at March 31
    
    $
    563,298
    
    
    $
    462,288
  5




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Triple-S Management Corporation
 Consolidated Statements of Cash Flows

(Unaudited)
 (Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    11,192
    
    
    $
    3,932Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    3,012
    
    
    
    2,047Net amortization of investments
    
    
    755
    
    
    
    191Provision for doubtful receivables
    
    
    1,732
    
    
    
    504Deferred tax benefit
    
    
    (762
    )
    
    
    (1,122
    )Net realized investment loss on sale of securities
    
    
    1,379
    
    
    
    1,727Net unrealized (gain) loss on trading securities
    
    
    (2,030
    )
    
    
    2,476Share-based compensation
    
    
    505
    
    
    
    1,622Proceeds from trading securities sold:Equity securities
    
    
    1,156
    
    
    
    1,311Acquisition of securities in trading portfolio:Equity securities
    
    
    (2,419
    )
    
    
    (1,351
    )Loss on sale of property and equipment
    
    
    
    
    
    
    2(Increase) decrease in assets:Premium and other receivables, net
    
    
    (18,889
    )
    
    
    (11,369
    )Deferred policy acquisition costs and value of business acquired
    
    
    (515
    )
    
    
    (2,095
    )Other deferred taxes
    
    
    3,422
    
    
    
    (406
    )Other assets
    
    
    3,926
    
    
    
    6,418Increase (decrease) in liabilities:Claim liabilities
    
    
    37,188
    
    
    
    38,873Liability for future policy benefits
    
    
    3,940
    
    
    
    3,977Unearned premiums
    
    
    (7,194
    )
    
    
    (8,201
    )Policyholder deposits
    
    
    130
    
    
    
    412Liability to FEHBP
    
    
    348
    
    
    
    (1,282
    )Accounts payable and accrued liabilities
    
    
    (6,385
    )
    
    
    (7,705
    )Net cash provided by operating activities
    
    
    30,491
    
    
    
    29,961
  6




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Triple-S Management Corporation
 Consolidated Statements of Cash Flows (Unaudited)
 (Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2010
    
    
    2009Cash flows from investing activities:Proceeds from investments sold or matured:Securities available for sale:Fixed maturities sold
    
    $
    23,272
    
    
    $
    56,136Fixed maturities matured/called
    
    
    35,415
    
    
    
    112,042Equity securities
    
    
    401
    
    
    
    1,137Securities held to maturity:Fixed maturities matured/called
    
    
    1,250
    
    
    
    2,666Acquisition of investments:Securities available for sale:Fixed maturities
    
    
    (83,024
    )
    
    
    (105,263
    )Equity securities
    
    
    (1,295
    )
    
    
    (1,579
    )Net (outflows) proceeds for policy loans
    
    
    (50
    )
    
    
    21Net capital expenditures
    
    
    (4,878
    )
    
    
    (2,726
    )Net cash (used in) provided by investing activities
    
    
    (28,909
    )
    
    
    62,434Cash flows from financing activities:Change in outstanding checks in excess of bank balances
    
    
    (4
    )
    
    
    (11,306
    )Repayments of long-term borrowings
    
    
    (410
    )
    
    
    (410
    )Repurchase and retirement of common stock
    
    
    
    
    
    
    (17,256
    )Proceeds from policyholder deposits
    
    
    2,052
    
    
    
    1,169Surrenders of policyholder deposits
    
    
    (2,251
    )
    
    
    (2,005
    )Net cash used in financing activities
    
    
    (613
    )
    
    
    (29,808
    )Net increase in cash and cash equivalents
    
    
    969
    
    
    
    62,587Cash and cash equivalents:Beginning of period
    
    
    40,376
    
    
    
    46,095End of period
    
    $
    41,345
    
    
    $
    108,682
  7




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




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (3) Segment Information
   Three months endedMarch 31,2010
    
    
    2009Operating revenues:Managed Care:Premiums earned, net
    
    $
    443,059
    
    
    $
    402,625Administrative service fees
    
    
    12,498
    
    
    
    8,866Intersegment premiums /service fees
    
    
    1,552
    
    
    
    1,453Net investment income
    
    
    4,962
    
    
    
    5,142Total managed care
    
    
    462,071
    
    
    
    418,086Life Insurance:Premiums earned, net
    
    
    25,806
    
    
    
    24,405Intersegment premiums
    
    
    98
    
    
    
    91Net investment income
    
    
    4,206
    
    
    
    4,004Total life insurance
    
    
    30,110
    
    
    
    28,500Property and Casualty Insurance:Premiums earned, net
    
    
    25,312
    
    
    
    24,408Intersegment premiums
    
    
    153
    
    
    
    153Net investment income
    
    
    2,735
    
    
    
    2,801Total property and casualty insurance
    
    
    28,200
    
    
    
    27,362Other segments  intersegment service revenues *
    
    
    13,504
    
    
    
    11,904Total business segments
    
    
    533,885
    
    
    
    485,852TSM operating revenues from external sources
    
    
    520
    
    
    
    594Elimination of intersegment premiums
    
    
    (1,803
    )
    
    
    (1,697
    )Elimination of intersegment service fees
    
    
    (13,504
    )
    
    
    (11,904
    )Consolidated operating revenues
    
    $
    519,098
    
    
    $
    472,845
 
 *
    
    Includes segments that are not required to be reported separately. These segments include the
data processing services organization as well as the third-party administrator of managed care
services. 9




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2010
    
    
    2009Operating income (loss):Managed care
    
    $
    12,648
    
    
    $
    5,775Life insurance
    
    
    3,838
    
    
    
    3,034Property and casualty insurance
    
    
    (902
    )
    
    
    1,347Other segments *
    
    
    187
    
    
    
    127Total business segments
    
    
    15,771
    
    
    
    10,283TSM operating revenues from external sources
    
    
    520
    
    
    
    594TSM unallocated operating expenses
    
    
    (2,213
    )
    
    
    (2,304
    )Elimination of TSM intersegment charges
    
    
    2,321
    
    
    
    2,534Consolidated operating income
    
    
    16,399
    
    
    
    11,107Consolidated net realized investment losses
    
    
    (1,379
    )
    
    
    (1,727
    )Consolidated net unrealized gain (loss) on trading securities
    
    
    2,030
    
    
    
    (2,476
    )Consolidated interest expense
    
    
    (3,228
    )
    
    
    (3,264
    )Consolidated other income (expense), net
    
    
    152
    
    
    
    (379
    )Consolidated income before taxes
    
    $
    13,974
    
    
    $
    3,261Depreciation expense:Managed care
    
    
    2,228
    
    
    
    1,315Life insurance
    
    
    169
    
    
    
    145Property and casualty insurance
    
    
    399
    
    
    
    372Total business segments
    
    
    2,796
    
    
    
    1,832TSM depreciation expense
    
    
    216
    
    
    
    215Consolidated depreciation expense
    
    $
    3,012
    
    
    $
    2,047
 
 *
    
    Includes segments that are not required to be reported separately. These segments include the
data processing services organization as well as the third-party administrator of managed care
services. 10




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 March 31,
    
    
    December 31,2010
    
    
    2009Assets:Managed care
    
    $
    804,758
    
    
    $
    746,674Life insurance
    
    
    500,837
    
    
    
    487,290Property and casualty insurance
    
    
    347,498
    
    
    
    351,793Other segments *
    
    
    13,587
    
    
    
    14,193Total business segments
    
    
    1,666,680
    
    
    
    1,599,950Unallocated amounts related to TSM:Cash, cash equivalents, and investments
    
    
    44,428
    
    
    
    39,029Property and equipment, net
    
    
    21,361
    
    
    
    21,577Other assets
    
    
    3,665
    
    
    
    4,78069,454
    
    
    
    65,386Elimination entries-intersegment receivables and others
    
    
    (28,769
    )
    
    
    (16,632
    )Consolidated total assets
    
    $
    1,707,365
    
    
    $
    1,648,704
 
 *
    
    Includes segments that are not required to be reported separately. These segments include the
data processing services organization as well as the third-party administrator of managed care
services. 11




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (4) Investment in Securities
  March 31, 2010Gross
    
    Grossunrealized
    
    unrealized
    
    EstimatedCost
    
    gains
    
    losses
    
    fair valueTrading securities:Equity securities
    
    $
    43,743
    
    
    $
    7,969
    
    
    $
    (4,105
    )
    
    $
    47,607
 December 31, 2009Gross
    
    Grossunrealized
    
    unrealized
    
    EstimatedCost
    
    gains
    
    losses
    
    fair valueTrading securities:Equity securities
    
    $
    42,075
    
    
    $
    7,064
    
    
    $
    (5,230
    )
    
    $
    43,909
 March 31, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities available for sale:Fixed maturities:Obligations of government-sponsored enterprises
    
    $
    214,117
    
    
    $
    5,228
    
    
    $
    (334
    )
    
    $
    219,011U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    48,002
    
    
    
    3,442
    
    
    
    
    
    
    
    51,444Obligations of the
Commonwealth of Puerto Rico
and its instrumentalities
    
    
    153,148
    
    
    
    3,009
    
    
    
    (825
    )
    
    
    155,332Municipal securities
    
    
    168,570
    
    
    
    2,041
    
    
    
    (1,502
    )
    
    
    169,109Corporate bonds
    
    
    99,534
    
    
    
    3,470
    
    
    
    (229
    )
    
    
    102,775Residential mortgage-backed securities
    
    
    15,496
    
    
    
    763
    
    
    
    (2
    )
    
    
    16,257Collateralized mortgage obligations
    
    
    241,156
    
    
    
    5,701
    
    
    
    (1,573
    )
    
    
    245,284Total fixed maturities
    
    
    940,023
    
    
    
    23,654
    
    
    
    (4,465
    )
    
    
    959,212Equity securities:Common stocks
    
    
    3,909
    
    
    
    4,410
    
    
    
    
    
    
    
    8,319Preferred stocks
    
    
    4,296
    
    
    
    31
    
    
    
    (1,045
    )
    
    
    3,282Perpetual preferred stocks
    
    
    2,849
    
    
    
    335
    
    
    
    (150
    )
    
    
    3,034Mutual funds
    
    
    49,689
    
    
    
    5,161
    
    
    
    (1,204
    )
    
    
    53,646Total equity securities
    
    
    60,743
    
    
    
    9,937
    
    
    
    (2,399
    )
    
    
    68,281Total
    
    $
    1,000,766
    
    
    $
    33,591
    
    
    $
    (6,864
    )
    
    $
    1,027,493
 12




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities available for sale:Fixed maturities:Obligations of government-sponsored enterprises
    
    $
    252,513
    
    
    $
    2,240
    
    
    $
    (3,325
    )
    
    $
    251,428U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    48,190
    
    
    
    3,148
    
    
    
    
    
    
    
    51,338Obligations of the
Commonwealth of Puerto Rico
and its instrumentalities
    
    
    154,754
    
    
    
    3,113
    
    
    
    (1,919
    )
    
    
    155,948Municipal securities
    
    
    107,441
    
    
    
    1,117
    
    
    
    (1,851
    )
    
    
    106,707Corporate bonds
    
    
    102,547
    
    
    
    3,546
    
    
    
    (728
    )
    
    
    105,365Residential mortgage-backed securities
    
    
    16,605
    
    
    
    677
    
    
    
    (1
    )
    
    
    17,281Collateralized mortgage obligations
    
    
    229,312
    
    
    
    4,237
    
    
    
    (2,639
    )
    
    
    230,910Total fixed maturities
    
    
    911,362
    
    
    
    18,078
    
    
    
    (10,463
    )
    
    
    918,977Equity securities:Common stocks
    
    
    4,074
    
    
    
    3,435
    
    
    
    
    
    
    
    7,509Preferred stocks
    
    
    4,000
    
    
    
    
    
    
    
    (1,325
    )
    
    
    2,675Perpetual preferred stocks
    
    
    2,849
    
    
    
    
    
    
    
    (270
    )
    
    
    2,579Mutual funds
    
    
    50,608
    
    
    
    4,150
    
    
    
    (2,832
    )
    
    
    51,926Total equity securities
    
    
    61,531
    
    
    
    7,585
    
    
    
    (4,427
    )
    
    
    64,689Total
    
    $
    972,893
    
    
    $
    25,663
    
    
    $
    (14,890
    )
    
    $
    983,666
 March 31, 2010Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities held to maturity:Obligations of government-sponsored enterprises
    
    $
    2,303
    
    
    $
    78
    
    
    $
    
    
    
    $
    2,381U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    1,482
    
    
    
    121
    
    
    
    
    
    
    
    1,603Corporate bonds
    
    
    9,156
    
    
    
    574
    
    
    
    
    
    
    
    9,730Residential mortgage-backed securities
    
    
    926
    
    
    
    23
    
    
    
    (2
    )
    
    
    947Certificates of deposit
    
    
    765
    
    
    
    
    
    
    
    
    
    
    
    765Total
    
    $
    14,632
    
    
    $
    796
    
    
    $
    (2
    )
    
    $
    15,426
 13




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    Estimatedcost
    
    
    gains
    
    
    losses
    
    
    fair valueSecurities held to maturity:Obligations of government-sponsored enterprises
    
    $
    925
    
    
    $
    6
    
    
    $
    
    
    
    $
    931U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    3,786
    
    
    
    132
    
    
    
    
    
    
    
    3,918Corporate bonds
    
    
    9,063
    
    
    
    534
    
    
    
    
    
    
    
    9,597Residential mortgage-backed securities
    
    
    1,256
    
    
    
    25
    
    
    
    (1
    )
    
    
    1,280Certificates of deposit
    
    
    764
    
    
    
    
    
    
    
    
    
    
    
    764Total
    
    $
    15,794
    
    
    $
    697
    
    
    $
    (1
    )
    
    $
    16,490
  March 31, 2010Less than 12 months
    
    
    12 months or longer
    
    
    TotalGross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossEstimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number ofFair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    SecuritiesSecurities available for sale:Fixed maturities:Obligations of government-
sponsored enterprises
    
    $
    33,337
    
    
    $
    (86
    )
    
    
    6
    
    
    $
    25,780
    
    
    $
    (248
    )
    
    
    4
    
    
    $
    59,117
    
    
    $
    (334
    )
    
    
    10Obligations of the
Commonwealth of Puerto
Rico and its instrumentalities
    
    
    6,399
    
    
    
    (174
    )
    
    
    7
    
    
    
    37,745
    
    
    
    (651
    )
    
    
    16
    
    
    
    44,144
    
    
    
    (825
    )
    
    
    23Municipal securities
    
    
    94,068
    
    
    
    (1,478
    )
    
    
    79
    
    
    
    655
    
    
    
    (24
    )
    
    
    2
    
    
    
    94,723
    
    
    
    (1,502
    )
    
    
    81Corporate bonds
    
    
    13,946
    
    
    
    (148
    )
    
    
    5
    
    
    
    3,898
    
    
    
    (81
    )
    
    
    3
    
    
    
    17,844
    
    
    
    (229
    )
    
    
    8Residential mortgage-backed
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    (2
    )
    
    
    1
    
    
    
    36
    
    
    
    (2
    )
    
    
    1Collateralized mortgage
obligations
    
    
    77,998
    
    
    
    (1,075
    )
    
    
    16
    
    
    
    7,116
    
    
    
    (498
    )
    
    
    9
    
    
    
    85,114
    
    
    
    (1,573
    )
    
    
    25Total fixed maturities
    
    
    225,748
    
    
    
    (2,961
    )
    
    
    113
    
    
    
    75,230
    
    
    
    (1,504
    )
    
    
    35
    
    
    
    300,978
    
    
    
    (4,465
    )
    
    
    148Equity securities:Preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,955
    
    
    
    (1,045
    )
    
    
    1
    
    
    
    2,955
    
    
    
    (1,045
    )
    
    
    1Perpetual preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    850
    
    
    
    (150
    )
    
    
    1
    
    
    
    850
    
    
    
    (150
    )
    
    
    1Mutual funds
    
    
    1,275
    
    
    
    (87
    )
    
    
    1
    
    
    
    16,837
    
    
    
    (1,117
    )
    
    
    9
    
    
    
    18,112
    
    
    
    (1,204
    )
    
    
    10Total equity securities
    
    
    1,275
    
    
    
    (87
    )
    
    
    1
    
    
    
    20,642
    
    
    
    (2,312
    )
    
    
    11
    
    
    
    21,917
    
    
    
    (2,399
    )
    
    
    12Total for securities available for sale
    
    $
    227,023
    
    
    $
    (3,048
    )
    
    
    114
    
    
    $
    95,872
    
    
    $
    (3,816
    )
    
    
    46
    
    
    $
    322,895
    
    
    $
    (6,864
    )
    
    
    160Securities held to maturity:Residential mortgage-backed
securities
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    56
    
    
    $
    (2
    )
    
    
    1
    
    
    $
    56
    
    
    $
    (2
    )
    
    
    1
 14




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 December 31, 2009Less than 12 months
    
    
    12 months or longer
    
    
    TotalGross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossEstimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number of
    
    
    Estimated
    
    
    Unrealized
    
    
    Number ofFair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    Securities
    
    
    Fair Value
    
    
    Loss
    
    
    SecuritiesSecurites available for sale:Fixed maturities:Obligations of government-
sponsored enterprises
    
    $
    110,602
    
    
    $
    (2,264
    )
    
    
    21
    
    
    $
    25,468
    
    
    $
    (1,061
    )
    
    
    5
    
    
    $
    136,070
    
    
    $
    (3,325
    )
    
    
    26Obligations of the
Commonwealth of Puerto
Rico and its instrumentalities
    
    
    12,944
    
    
    
    (201
    )
    
    
    10
    
    
    
    58,866
    
    
    
    (1,718
    )
    
    
    22
    
    
    
    71,810
    
    
    
    (1,919
    )
    
    
    32Municipal securities
    
    
    62,292
    
    
    
    (1,841
    )
    
    
    39
    
    
    
    173
    
    
    
    (10
    )
    
    
    1
    
    
    
    62,465
    
    
    
    (1,851
    )
    
    
    40Corporate bonds
    
    
    10,997
    
    
    
    (215
    )
    
    
    4
    
    
    
    7,975
    
    
    
    (513
    )
    
    
    6
    
    
    
    18,972
    
    
    
    (728
    )
    
    
    10Residential mortgage-backed
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    (1
    )
    
    
    1
    
    
    
    36
    
    
    
    (1
    )
    
    
    1Collateralized mortgage
obligations
    
    
    101,265
    
    
    
    (1,732
    )
    
    
    21
    
    
    
    7,171
    
    
    
    (907
    )
    
    
    10
    
    
    
    108,436
    
    
    
    (2,639
    )
    
    
    31Total fixed maturities
    
    
    298,100
    
    
    
    (6,253
    )
    
    
    95
    
    
    
    99,689
    
    
    
    (4,210
    )
    
    
    45
    
    
    
    397,789
    
    
    
    (10,463
    )
    
    
    140Equity securities:Preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,675
    
    
    
    (1,325
    )
    
    
    1
    
    
    
    2,675
    
    
    
    (1,325
    )
    
    
    1Perpetual preferred stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    730
    
    
    
    (270
    )
    
    
    1
    
    
    
    730
    
    
    
    (270
    )
    
    
    1Mutual funds
    
    
    9,994
    
    
    
    (907
    )
    
    
    4
    
    
    
    21,667
    
    
    
    (1,925
    )
    
    
    15
    
    
    
    31,661
    
    
    
    (2,832
    )
    
    
    19Total equity securities
    
    
    9,994
    
    
    
    (907
    )
    
    
    4
    
    
    
    25,072
    
    
    
    (3,520
    )
    
    
    17
    
    
    
    35,066
    
    
    
    (4,427
    )
    
    
    21Total for securities available for sale
    
    $
    308,094
    
    
    $
    (7,160
    )
    
    
    99
    
    
    $
    124,761
    
    
    $
    (7,730
    )
    
    
    62
    
    
    $
    432,855
    
    
    $
    (14,890
    )
    
    
    161Securities held to maturity:Residential mortgage-backed
securities
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    55
    
    
    $
    (1
    )
    
    
    1
    
    
    $
    55
    
    
    $
    (1
    )
    
    
    1
   
    
    Identification and evaluation of securities that have possible
indications of other-than-temporary impairment, which includes an
analysis of all investments with gross unrealized investment losses
that represent 20% or more of their cost and all investments with an
unrealized loss greater than $50.
 15




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 
    
    Review and evaluation of any other security based on the investees
current financial condition, liquidity, near-term recovery prospects,
implications of rating agency actions, the outlook for the business
sectors in which the
investee operates and other factors. This evaluation is in addition to the
evaluation of those securities with a gross unrealized investment loss
representing 20% or more of their cost.
    
    Consideration of evidential matter, including an
evaluation of factors or triggers that may or may not
cause individual investments to qualify as having
other-than-temporary impairments; and
    
    Determination of the status of each analyzed security
as other-than-temporary or not, with documentation of
the rationale for the decision.
  Obligations of Government-sponsored Enterprises, U.S. Treasury Securities and Obligations of
U.S. Government Instrumentalities, Obligations of States of the United States and Political
Subdivisions of the States, and Obligations of the Commonwealth of Puerto Rico and its
Instrumentalities:
 Corporate Bonds:
 Residential Mortgage-Backed Securities and Collateralized Mortgage Obligations:
 Preferred Stocks:
 16




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Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Perpetual Preferred Stocks:
 Mutual Funds:
  Amortized
    
    
    Estimatedcost
    
    
    fair valueSecurities available for sale:Due in one year or less
    
    $
    10,329
    
    
    $
    10,446Due after one year through five years
    
    
    99,294
    
    
    
    102,815Due after five years through ten years
    
    
    229,678
    
    
    
    236,762Due after ten years
    
    
    344,070
    
    
    
    347,648Collateralized mortgage obligations
    
    
    241,156
    
    
    
    245,284Residential mortgage-backed securities
    
    
    15,496
    
    
    
    16,257$
    940,023
    
    
    $
    959,212Securities held to maturity:Due in one year or less
    
    $
    9,921
    
    
    $
    10,495Due after one year through five years
    
    
    
    
    
    
    Due after five years through ten years
    
    
    510
    
    
    
    524Due after ten years
    
    
    3,275
    
    
    
    3,460Residential mortgage-backed securities
    
    
    926
    
    
    
    947$
    14,632
    
    
    $
    15,426
  17




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months endedMarch 31,2010
    
    
    2009Realized gains (losses):Fixed maturity securities:Securities available for sale:Gross gains from sales
    
    $
    32
    
    
    $
    1,236Gross losses from sales
    
    
    (40
    )
    
    
    Gross losses from other-than-temporary impairments
    
    
    (95
    )
    
    
    (2,606
    )Total debt securities
    
    
    (103
    )
    
    
    (1,370
    )Equity securities:Trading securities:Gross gains from sales
    
    
    613
    
    
    
    218Gross losses from sales
    
    
    (209
    )
    
    
    (279
    )404
    
    
    
    (61
    )Securities available for sale:Gross gains from sales
    
    
    80
    
    
    
    Gross losses from sales
    
    
    
    
    
    
    (241
    )Gross losses from other-than-temporary impairments
    
    
    (1,760
    )
    
    
    (55
    )(1,680
    )
    
    
    (296
    )Total equity securities
    
    
    (1,276
    )
    
    
    (357
    )Net realized losses on securities
    
    $
    (1,379
    )
    
    $
    (1,727
    )
  Three months endedMarch 31,2010
    
    
    2009Changes in net unrealized gains (losses):Recognized in income:Equity securities  trading
    
    $
    2,030
    
    
    $
    (2,476
    )Recognized in accumulated other comprehensive income (loss):Fixed maturities  available for sale
    
    
    11,574
    
    
    
    (4,754
    )Equity securities  available for sale
    
    
    4,380
    
    
    
    (7,715
    )$
    15,954
    
    
    $
    (12,469
    )Not recognized in the consolidated financial statements:Fixed maturities  held to maturity
    
    $
    98
    
    
    $
    (162
    )
   18




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months endedMarch 31,2010
    
    
    2009Fixed maturities
    
    $
    11,190
    
    
    $
    11,124Equity securities
    
    
    896
    
    
    
    928Policy loans
    
    
    106
    
    
    
    98Cash equivalents and interest-bearing deposits
    
    
    69
    
    
    
    206Other
    
    
    162
    
    
    
    185Total
    
    $
    12,423
    
    
    $
    12,541
 (5) Premiums and Other Receivables
  March 31,
    
    
    December 31,2010
    
    
    2009Premium
    
    $
    116,989
    
    
    $
    98,429Self-funded group receivables
    
    
    84,115
    
    
    
    70,315FEHBP
    
    
    11,258
    
    
    
    10,297Agents balances
    
    
    28,426
    
    
    
    37,888Accrued interest
    
    
    9,532
    
    
    
    9,287Reinsurance recoverable
    
    
    47,641
    
    
    
    43,951Other
    
    
    19,601
    
    
    
    27,999317,562
    
    
    
    298,166Less allowance for doubtful receivables:Premiums
    
    
    21,551
    
    
    
    20,280Other
    
    
    5,415
    
    
    
    4,95426,966
    
    
    
    25,234Total premiums and other receivables
    
    $
    290,596
    
    
    $
    272,932
 19




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (6) Claim Liabilities
  Three months endedMarch 31,2010
    
    
    2009Claim liabilities at beginning of period
    
    $
    360,446
    
    
    $
    323,710Reinsurance recoverable on claim liabilities
    
    
    (30,712
    )
    
    
    (30,432
    )Net claim liabilities at beginning of period
    
    
    329,734
    
    
    
    293,278Incurred claims and loss-adjustment expenses:Current period insured events
    
    
    433,309
    
    
    
    395,329Prior period insured events
    
    
    (10,584
    )
    
    
    (3,948
    )Total
    
    
    422,725
    
    
    
    391,381Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    178,430
    
    
    
    172,155Prior period insured events
    
    
    208,350
    
    
    
    179,308Total
    
    
    386,780
    
    
    
    351,463Net claim liabilities at end of period
    
    
    365,679
    
    
    
    333,196Reinsurance recoverable on claim liabilities
    
    
    31,955
    
    
    
    29,387Claim liabilities at end of period
    
    $
    397,634
    
    
    $
    362,583
    (7) Fair Value Measurements
  Level Input:
    
    Input Definition:Level 1
    
    Inputs are unadjusted, quoted prices for identical assets or
liabilities in active markets at the measurement date.Level 2
    
    Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability through corroboration
with market data at the measurement date.Level 3
    
    Unobservable inputs that reflect managements best estimate
of what market participants would use in pricing the asset or
liability at the measurement date.
 20




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  (i) Cash and Cash Equivalents
  (ii) Investment in Securities
  (iii) Policy Loans
  (iv) Receivables, Accounts Payable, and Accrued Liabilities
  (v) Policyholder Deposits
  (vi) Borrowings
  March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fairamount
    
    
    value
    
    
    amount
    
    
    valueLoans payable to bank
    
    $
    22,257
    
    
    $
    22,667
    
    
    $
    22,667
    
    
    $
    22,6676.3% senior unsecured notes payable
    
    
    50,000
    
    
    
    48,000
    
    
    
    50,000
    
    
    
    48,0006.6% senior unsecured notes payable
    
    
    60,000
    
    
    
    57,420
    
    
    
    60,000
    
    
    
    57,4206.7% senior unsecured notes payable
    
    
    35,000
    
    
    
    33,320
    
    
    
    35,000
    
    
    
    33,320Totals
    
    $
    167,257
    
    
    $
    161,407
    
    
    $
    167,667
    
    
    $
    161,407
  (vii) Derivative Instruments
  21




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  March 31, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity securities held for trading
    
    $
    47,607
    
    
    $
    
    
    
    $
    
    
    
    $
    47,607Securities available for sale:Fixed maturity securitiesObligations of government-sponsored enterprises
    
    
    
    
    
    
    219,011
    
    
    
    
    
    
    
    219,011U.S. Treasury securities and obligations of U.S
government instrumentalities
    
    
    51,444
    
    
    
    
    
    
    
    
    
    
    
    51,444Obligations of the Commonwealth of Puerto Rico
and its instrumentalities
    
    
    
    
    
    
    155,332
    
    
    
    
    
    
    
    155,332Municipal securities
    
    
    
    
    
    
    169,109
    
    
    
    
    
    
    
    169,109Corporate bonds
    
    
    
    
    
    
    102,775
    
    
    
    
    
    
    
    102,775Residential agency mortgage-backed securities
    
    
    
    
    
    
    16,257
    
    
    
    
    
    
    
    16,257Collateralized mortgage obligations
    
    
    
    
    
    
    245,284
    
    
    
    
    
    
    
    245,284Total fixed maturities
    
    
    51,444
    
    
    
    907,768
    
    
    
    
    
    
    
    959,212Equity securitiesCommon stocks
    
    
    8,319
    
    
    
    
    
    
    
    
    
    
    
    8,319Preferred stocks
    
    
    3,282
    
    
    
    
    
    
    
    
    
    
    
    3,282Perpetual preferred stocks
    
    
    3,034
    
    
    
    
    
    
    
    
    
    
    
    3,034Mutual funds
    
    
    7,049
    
    
    
    45,822
    
    
    
    775
    
    
    
    53,646Total equity securities
    
    
    21,684
    
    
    
    45,823
    
    
    
    775
    
    
    
    68,281Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    1,425
    
    
    
    
    
    
    
    1,425Total
    
    $
    120,735
    
    
    $
    954,655
    
    
    $
    775
    
    
    $
    1,076,165
 December 31, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity securities held for trading
    
    $
    43,909
    
    
    $
    
    
    
    $
    
    
    
    $
    43,909Securities available for sale:Fixed maturity securitiesObligations of government-sponsored enterprises
    
    
    
    
    
    
    251,428
    
    
    
    
    
    
    
    251,428U.S. Treasury securities and obligations of U.S
government instrumentalities
    
    
    51,338
    
    
    
    
    
    
    
    
    
    
    
    51,338Obligations of the Commonwealth of Puerto Rico
and its instrumentalities
    
    
    
    
    
    
    155,948
    
    
    
    
    
    
    
    155,948Municipal securities
    
    
    
    
    
    
    106,707
    
    
    
    
    
    
    
    106,707Corporate bonds
    
    
    
    
    
    
    105,365
    
    
    
    
    
    
    
    105,365Residential agency mortgage-backed securities
    
    
    
    
    
    
    17,281
    
    
    
    
    
    
    
    17,281Collateralized mortgage obligations
    
    
    
    
    
    
    230,910
    
    
    
    
    
    
    
    230,910Total fixed maturities
    
    
    51,338
    
    
    
    867,639
    
    
    
    
    
    
    
    918,977Equity securitiesCommon stocks
    
    
    7,509
    
    
    
    
    
    
    
    
    
    
    
    7,509Preferred stocks
    
    
    2,675
    
    
    
    
    
    
    
    
    
    
    
    2,675Perpetual preferred stocks
    
    
    2,579
    
    
    
    
    
    
    
    
    
    
    
    2,579Mutual funds
    
    
    6,961
    
    
    
    44,190
    
    
    
    775
    
    
    
    51,926Total equity securities
    
    
    19,724
    
    
    
    44,190
    
    
    
    775
    
    
    
    64,689Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    1,608
    
    
    
    
    
    
    
    1,608Total
    
    $
    114,971
    
    
    $
    913,437
    
    
    $
    775
    
    
    $
    1,029,183
 22




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Three months endedMarch 31, 2010
    
    
    March 31, 2009Fixed
    
    
    
    
    
    
    
    
    
    
    FixedMaturity
    
    
    Equity
    
    
    
    
    
    
    Maturity
    
    
    EquitySecurities
    
    
    Securities
    
    
    Total
    
    
    Securities
    
    
    Securities
    
    
    TotalBeginning balance
    
    $
    
    
    
    $
    775
    
    
    $
    775
    
    
    $
    1,281
    
    
    $
    1,086
    
    
    $
    2,367Total gains or losses:Realized in earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,024
    )
    
    
    
    
    
    
    (1,024
    )Unrealized in other accumulated
comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    303
    
    
    
    
    
    
    
    303Purchases and sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ending balance
    
    $
    
    
    
    $
    775
    
    
    $
    775
    
    
    $
    560
    
    
    $
    1,086
    
    
    $
    1,646
     (8) Share-Based Compensation
  23




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (9) Comprehensive Gain (Loss)
  AccumulatedNet unrealized
    
    
    Liability for
    
    
    othergain (loss) on
    
    
    pension
    
    
    comprehensivesecurities
    
    
    benefits
    
    
    (loss) incomeBalance at January 1
    
    $
    9,141
    
    
    $
    (20,717
    )
    
    $
    (11,576
    )Net current period change
    
    
    13,527
    
    
    
    302
    
    
    
    13,829Balance at March 31,
    
    $
    22,668
    
    
    $
    (20,415
    )
    
    $
    2,253
 (10) Income Taxes
    (11) Pension Plan
  2010
    
    
    2009Components of net periodic benefit cost:Service cost
    
    $
    1,340
    
    
    $
    1,222Interest cost
    
    
    1,547
    
    
    
    1,330Expected return on assets
    
    
    (1,064
    )
    
    
    (965
    )Amortization of prior service benefit
    
    
    (113
    )
    
    
    (107
    )Amortization of actuarial loss
    
    
    608
    
    
    
    544Net periodic benefit cost
    
    $
    2,318
    
    
    $
    2,024
 Employer contributions:
 24




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
 (12) Net Income Available to Stockholders and Basic Net Income per Share
  Three months endedMarch 31,2010
    
    
    2009Numerator for earnings per share:Net income available to stockholders
    
    $
    11,192
    
    
    $
    3,932Denominator for basic earnings per share:Weighted average of common shares
    
    
    29,071,308
    
    
    
    30,224,103Effect of dilutive securities
    
    
    155,032
    
    
    
    50,504Denominator for diluted earnings per share
    
    
    29,226,340
    
    
    
    30,274,607Basic net income per share
    
    $
    0.38
    
    
    $
    0.13Diluted net income per share
    
    $
    0.38
    
    
    $
    0.13
  (13) Contingencies
    Hau et al Litigation (formerly known as Jordan et al)
  25




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
  Dentists Association Litigation
     Colón Litigation
  Puerto Rico Center for Municipal Revenue Collection
  26




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##### Table of Contents



Triple-S Management Corporation  Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
   Claims by Heirs of Former Shareholders
  ACODESE Investigation
   (14) Subsequent Event
  27




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  
 Cautionary Statement Regarding Forward-Looking Information
  
 Overview
     28




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##### Table of Contents



Three months endedMarch 31,(Dollar amounts in millions)
    
    2010
    
    
    2009Premiums earned, net:Managed care
    
    $
    443.8
    
    
    $
    403.5Life insurance
    
    
    25.9
    
    
    
    24.5Property and casualty insurance
    
    
    25.5
    
    
    
    24.6Intersegment premiums earned
    
    
    (1.0
    )
    
    
    (1.2
    )Consolidated premiums earned, net
    
    $
    494.2
    
    
    $
    451.4Administrative service fees:Managed care
    
    $
    13.3
    
    
    $
    9.5Intersegment administrative service fees
    
    
    (0.8
    )
    
    
    (0.6
    )Consolidated administrative service fees
    
    $
    12.5
    
    
    $
    8.9Operating income:Managed care
    
    $
    12.7
    
    
    $
    5.8Life insurance
    
    
    3.8
    
    
    
    3.0Property and casualty insurance
    
    
    (0.9
    )
    
    
    1.4Intersegment and other
    
    
    0.8
    
    
    
    0.9Consolidated operating income
    
    $
    16.4
    
    
    $
    11.1
    
 Recent Developments
 Federal Health Reform Legislation
  29




---



##### Table of Contents




    
    Provisions requiring greater access to coverage for certain uninsured and under-insured
populations and the elimination of certain underwriting practices without adequate funding to
health plans or other negative financial levy on health plans such as restrictions in ability
to charge additional premium for additional risk, including but not limited to provisions: (i)
extending dependent coverage for unmarried individuals until age 26 under their parents
health coverage, (ii) limiting a health plans ability to rescind coverage and restrict the
plans ability to establish annual and lifetime financial caps, and (iii) limiting a health
plans ability to deny or limit coverage on grounds of an persons pre-existing medical
condition;
    
    Provisions restricting medical loss ratios and imposing significant penalties for
non-compliance;
    
    Provisions requiring health plans to report to their members and HHS certain quality
performance measures and their wellness promotion activities;
    
    Provisions that freeze premium payments to Medicare Advantage health plans beginning in 2011
and that tie such premium to the local Medicare fee for service costs. The adjustment will be
phased in over between 3 and 7 years depending on the amount of the eventual adjustment;
    
    Provisions that tie Medicare Advantage premiums to achievement of certain quality performance
measures;
    
    Other efforts or specific legislative changes to the Medicare and Reform programs, including
changes in the bidding process, authority of CMS to deny bids, or other means of materially
reducing premiums such as through further adjustments to the risk adjustment methodology;
    
    Increased federal funding to the Reform program available for years 2014  2019;
    
    Funding provided to the Commonwealth to either establish health insurance exchanges or fund
Reform at the discretion of the Governor;
    
    Increased government funding to enforcement agencies and/or changes in interpretation or
application of fraud and abuse laws; and
    
    The increase in persons eligible for coverage under the Reform program in Puerto Rico may
result in some persons currently insured by us in our commercial programs becoming eligible
for, and thus moving to, the Reform program.
   Healthcare Reform Contracts
  30




---



##### Table of Contents



Recent Accounting Standards
  
 Managed Care Membership
 As of March 31,2010
    
    
    2009Managed care enrollment:Commercial 1
    
    
    763,885
    
    
    
    613,546Reform 2
    
    
    534,225
    
    
    
    521,731Medicare 3
    
    
    66,771
    
    
    
    74,186Total
    
    
    1,364,881
    
    
    
    1,209,463Managed care enrollment by funding arrangement:Fully-insured
    
    
    915,111
    
    
    
    829,042Self-insured
    
    
    449,770
    
    
    
    380,421Total
    
    
    1,364,881
    
    
    
    1,209,463
 
 (1)
    
    Commercial membership includes corporate accounts, self-funded employers, individual
accounts, Medicare Supplement, U.S. Federal government employees and local government
employees.(2)
    
    Includes rated and self-funded members.(3)
    
    Includes Medicare Advantage as well as stand-alone PDP plan membership. 
 Consolidated Operating Results
  Three months endedMarch 31,(Dollar amounts in millions)
    
    2010
    
    
    2009Revenues:Premiums earned, net
    
    $
    494.2
    
    
    $
    451.4Administrative service fees
    
    
    12.5
    
    
    
    8.9Net investment income
    
    
    12.4
    
    
    
    12.5Total operating revenues
    
    
    519.1
    
    
    
    472.8Net realized investment losses
    
    
    (1.4
    )
    
    
    (1.7
    )Net unrealized investment (loss) gain on trading securities
    
    
    2.0
    
    
    
    (2.4
    )Other income (expense), net
    
    
    0.2
    
    
    
    (0.4
    )Total revenues
    
    
    519.9
    
    
    
    468.3Benefits and expenses:Claims incurred
    
    
    425.8
    
    
    
    393.5Operating expenses
    
    
    76.9
    
    
    
    68.2Total operating expenses
    
    
    502.7
    
    
    
    461.7Interest expense
    
    
    3.2
    
    
    
    3.3Total benefits and expenses
    
    
    505.9
    
    
    
    465.0Income before taxes
    
    
    14.0
    
    
    
    3.3Income tax
expense (benefit)
    
    
    2.8
    
    
    
    (0.6
    )Net income
    
    $
    11.2
    
    
    $
    3.9
 31




---



##### Table of Contents



Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
 Operating Revenues
   Net Realized Investment Loss
  Net Unrealized Gains on Trading Securities and Other Income, Net
  Claims Incurred
  Operating Expenses
  32




---



##### Table of Contents



Managed Care Operating Results
 Three months endedMarch 31,(Dollar amounts in millions)
    
    2010
    
    
    2009Operating revenues:Medical premiums earned, net:Commercial
    
    $
    234.0
    
    
    $
    189.9Reform
    
    
    89.3
    
    
    
    84.9Medicare
    
    
    120.5
    
    
    
    128.7Medical premiums earned, net
    
    
    443.8
    
    
    
    403.5Administrative service fees
    
    
    13.3
    
    
    
    9.5Net investment income
    
    
    5.0
    
    
    
    5.1Total operating revenues
    
    
    462.1
    
    
    
    418.1Medical operating costs:Medical claims incurred
    
    
    399.6
    
    
    
    369.2Medical operating expenses
    
    
    49.8
    
    
    
    43.1Total medical operating costs
    
    
    449.4
    
    
    
    412.3Medical operating income
    
    $
    12.7
    
    
    $
    5.8Additional data:Member months enrollment:Commercial:Fully-insured
    
    
    1,507,114
    
    
    
    1,260,901Self-funded
    
    
    766,283
    
    
    
    579,092Total Commercial member months
    
    
    2,273,397
    
    
    
    1,839,993Reform:Fully-insured
    
    
    1,012,836
    
    
    
    978,591Self-funded
    
    
    589,184
    
    
    
    560,578Total Reform member months
    
    
    1,602,020
    
    
    
    1,539,169MedicareMedicare Advantage
    
    
    173,655
    
    
    
    198,616Stand-alone PDP
    
    
    28,125
    
    
    
    29,657Total Medicare member months
    
    
    201,780
    
    
    
    228,273Total member months
    
    
    4,077,197
    
    
    
    3,607,435Medical loss ratio
    
    
    90.0
    %
    
    
    91.5
    %Operating expense ratio
    
    
    10.9
    %
    
    
    10.4
    %
 Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
 Medical Operating Revenues
  
    
    Medical premiums generated by the Commercial business increased by $44.1 million, or 23.2%,
to $234.0 million during the three months ended March 31, 2010. This fluctuation is primarily
the result of an increase in member months enrollment by 246,213, or 19.5%, and an increase in
average premium rates in rated group policies of approximately 4.9%. Increase in member
months was attributed to new members acquired from
LCA effective July 1, 2009, which amount to 101,818 member
months, or 41.3% of the increase in
member months enrollment experienced during this quarter and to new groups acquired during the
period.
    
    Medical premiums earned in the Reform business increased by $4.4 million, or 5.2%, to $89.3
million during the three months ended March 31, 2010. This fluctuation is due an increase in
member months enrollment in the Reforms fully-insured membership by 34,245, or 3.5%. In addition in 2009 a premium reduction
 33




---



##### Table of Contents



adjustment of approximately $1.3 million was recorded to
provide for unresolved reconciling items with the Government of Puerto Rico.
 
    
    Medical premiums generated by the Medicare business decreased during the three months ended
March 31, 2010 by $8.2 million, or 6.4%, to $120.5 million, primarily due to a decrease in the
overall member months enrollment by 26,493 or 11.6% when compared with the same period during
prior year. This fluctuation was offset in part by higher average premium rates, particularly
in our dual eligible product.
  Medical Claims Incurred
  
    
    The medical claims incurred of the Commercial business increased by $40.6 million during the
2010 period and its MLR increased by 0.4 percentage points. This fluctuation relates
primarily to the increase in member months enrollment of 246,213, or 19.5%. The higher MLR is
primarily due to the effect of prior period reserve developments in the 2010 and 2009 periods.
Excluding the effect of prior period reserve developments, the MLR decreased by 1.5
percentage points, mostly resulting from a higher trend in premium increases as compared to
cost trends.
    
    The medical claims incurred of the Reform business increased by $15.5 million and its MLR
increased by 13.1 percentage points during the three months ended March 31, 2010. The higher
MLR is primarily due to the effect of prior period reserve developments in the 2010 and 2009
periods and the 2009 premium adjustment to provide for unresolved reconciling
items with the Government of Puerto Rico. Excluding the effect of
these items in the 2010 and 2009 periods, the MLR
increased 5.5 percentage points mostly resulting from a lower premium yield during the 2010
period due to the extension of the prior years contract with the government.
    
    The medical claims incurred of the Medicare business decreased by $25.7 million, or 20.7%
during the 2010 period primarily due to a lower membership by 26,493 member months, or 11.6%,
and its MLR was 81.7%, 14.9 percentage points lower than the MLR for same period of the prior
year. The lower MLR mostly results from the effect of prior period reserve developments in
2010 and 2009 and risk score premium adjustments. Excluding the effect of prior period
reserve developments in the 2010 and 2009 period and risk-score premium adjustments, the MRL
decreased by 6.3 percentage points. This decrease is mostly resulting from higher premium
rates in our Medicare products and a new risk sharing agreement with our Independent Practice
Associations.
 Medical Operating Expenses
  34




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##### Table of Contents



Life Insurance Operating Results
 Three months endedMarch 31,(Dollar amounts in millions)
    
    2010
    
    
    2009Operating revenues:Premiums earned, net:Premiums earned
    
    $
    27.3
    
    
    $
    26.0Premiums earned ceded
    
    
    (1.4
    )
    
    
    (1.6
    )Net premiums earned
    
    
    25.9
    
    
    
    24.4Commission income on reinsuarance
    
    
    
    
    
    
    0.1Premiums earned, net
    
    
    25.9
    
    
    
    24.5Net investment income
    
    
    4.2
    
    
    
    4.0Total operating revenues
    
    
    30.1
    
    
    
    28.5Operating costs:Policy benefits and claims incurred
    
    
    12.4
    
    
    
    12.7Underwriting and other expenses
    
    
    13.9
    
    
    
    12.8Total operating costs
    
    
    26.3
    
    
    
    25.5Operating income
    
    $
    3.8
    
    
    $
    3.0Additional data:Loss ratio
    
    
    47.9
    %
    
    
    51.8
    %Operating expense ratio
    
    
    53.7
    %
    
    
    52.2
    %
 Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
 Operating Revenues
  Policy Benefits and Claims Incurred
  Underwriting and Other Expenses
  35




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##### Table of Contents



Property and Casualty Insurance Operating Results
 Three months endedMarch 31,(Dollar amounts in millions)
    
    2010
    
    
    2009Operating revenues:Premiums earned, net:Premiums written
    
    $
    36.2
    
    
    $
    33.1Premiums ceded
    
    
    (14.5
    )
    
    
    (12.8
    )Change in unearned premiums
    
    
    3.8
    
    
    
    4.3Premiums earned, net
    
    
    25.5
    
    
    
    24.6Net investment income
    
    
    2.7
    
    
    
    2.8Total operating revenues
    
    
    28.2
    
    
    
    27.4Operating costs:Claims incurred
    
    
    13.8
    
    
    
    11.6Underwriting and other expenses
    
    
    15.3
    
    
    
    14.4Total operating costs
    
    
    29.1
    
    
    
    26.0Operating income
    
    $
    (0.9
    )
    
    $
    1.4Additional data:Loss ratio
    
    
    54.1
    %
    
    
    47.2
    %Operating expense ratio
    
    
    60.0
    %
    
    
    58.5
    %
 Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
 Operating Revenues
   Claims Incurred
  Underwriting and Other Expenses
  36




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows
  Three months endedMarch 31,(Dollar amounts in millions)
    
    2010
    
    
    2009Sources of cash:Proceeds from policyholder deposits
    
    $
    2.1
    
    
    $
    1.2Net proceeds from investment securities
    
    
    
    
    
    
    65.1Cash provided by operating activities
    
    
    30.5
    
    
    
    30.0Total sources of cash
    
    
    32.6
    
    
    
    96.3Uses of cash:Net purchases of investment securities
    
    
    (24.0
    )
    
    
    Capital expenditures
    
    
    (4.9
    )
    
    
    (2.7
    )Repurchase and retirement of common stock
    
    
    
    
    
    
    (17.3
    )Payments of long-term borrowings
    
    
    (0.4
    )
    
    
    (0.4
    )Surrenders of policyholder deposits
    
    
    (2.3
    )
    
    
    (2.0
    )Other
    
    
    
    
    
    
    (11.3
    )Total uses of cash
    
    
    (31.6
    )
    
    
    (33.7
    )Net increase in cash and cash equivalents
    
    $
    1.0
    
    
    $
    62.6
      Financing and Financing Capacity
   
    
    On January 31, 2006, we issued and sold $35.0 million of our 6.7% senior unsecured notes
payable due January 2021 (the 6.7% notes).
    
    On December 21, 2005, we issued and sold $60.0 million of our 6.6% senior unsecured notes due
December 2020 (the 6.6% notes).
 37




---



##### Table of Contents




    
    On September 30, 2004, we issued and sold $50.0 million of our 6.3% senior unsecured notes
due September 2019 (the 6.3% notes).
      
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
    38




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##### Table of Contents



Changes in Internal Controls Over Financial Reporting
  
 Part II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. (Removed and Reserved)
 
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
    
    Description11
    
    Statement re computation of per share earnings; an exhibit
describing the computation of the earnings per share for the
three months ended March 31, 2010 and 2009 has been omitted
as the detail necessary to determine the computation of
earnings per share can be clearly determined from the
material contained in Part I of this Quarterly Report on
Form 10-Q.31.1*
    
    Certification of the President and Chief Executive Officer
required by Rule 13a-14(a)/15d-14(a).31.2*
    
    Certification of the Vice President of Finance and Chief
Financial Officer required by Rule 13a-14(a)/15d-14(a).32.1*
    
    Certification of the President and Chief Executive Officer
required pursuant to 18 U.S.C Section 1350.32.2*
    
    Certification of the Vice President of Finance and Chief
Financial Officer required pursuant to 18 U.S.C Section
1350.
  
 *
    
    Filed herein. 39




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##### Table of Contents



SIGNATURES
  Triple-S Management Corporation
RegistrantDate:      May 5, 2010
    By:
    /s/ Ramón M. Ruiz-ComasRamón M. Ruiz-Comas, CPAPresident and
Chief Executive OfficerDate:      May 5, 2010
    By:
    /s/ Juan J. RománJuan J. Román, CPAVice President of Finance

and Chief Financial Officer

Principal Accounting Officer 40