##### 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, 2008
 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
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ
  Title of each
class
    
    
    
    Outstanding
at April 25, 2008Common Stock Class A, $1.00 par value
    
    
    
    16,042,809Common Stock Class B, $1.00 par value
    
    
    
    16,266,554




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##### 



Triple-S Management Corporation
 FORM 10-Q
   
  PAGEPART I  FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of March 31, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Earnings for the three months ended March 31, 2008 and 2007
    
    
    4Consolidated Statements of Stockholders' Equity and Comprehensive Income for the three months ended March 31, 2008 and 2007
    
    
    5Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    28Item 1A
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3.
    
    Defaults Upon Senior Securities
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    29Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits
    
    
    29SIGNATURES
    
    
    
    
    30EX-3.(I)(B) CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATIONEX-3.(I)(C) ARTICLES OF INCORPORATIONEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE 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 31,2008
    
    2007ASSETSInvestments and cash:Equity securities held for trading, at fair value
    
    $
    46,312
    
    
    
    67,158Securities available for sale, at fair value:Fixed maturities
    
    
    933,212
    
    
    
    823,629Equity securities
    
    
    82,825
    
    
    
    71,050Securities held to maturity, at amortized cost:Fixed maturities
    
    
    26,052
    
    
    
    43,691Policy loans
    
    
    5,105
    
    
    
    5,481Cash and cash equivalents
    
    
    62,184
    
    
    
    240,153Total investments and cash
    
    
    1,155,690
    
    
    
    1,251,162Premiums and other receivables, net
    
    
    211,314
    
    
    
    202,268Deferred policy acquisition costs and value of business acquired
    
    
    118,987
    
    
    
    117,239Property and equipment, net
    
    
    43,162
    
    
    
    43,415Net deferred tax asset
    
    
    5,578
    
    
    
    6,783Other assets
    
    
    32,017
    
    
    
    38,675Total assets
    
    $
    1,566,748
    
    
    
    1,659,542LIABILITIES AND STOCKHOLDERS EQUITYClaim liabilities:Claims processed and incomplete
    
    $
    170,024
    
    
    
    186,065Unreported losses
    
    
    173,754
    
    
    
    149,996Unpaid loss-adjustment expenses
    
    
    19,189
    
    
    
    17,769Total claim liabilities
    
    
    362,967
    
    
    
    353,830Liability for future policy benefits
    
    
    197,099
    
    
    
    194,131Unearned premiums
    
    
    103,416
    
    
    
    132,599Policyholder deposits
    
    
    47,354
    
    
    
    45,959Liability to Federal Employees Health Benefits Program (FEHBP)
    
    
    18,035
    
    
    
    21,338Accounts payable and accrued liabilities
    
    
    136,682
    
    
    
    228,980Short-term borrowings
    
    
    9,825
    
    
    
    Long-term borrowings
    
    
    170,537
    
    
    
    170,946Liability for pension benefits
    
    
    26,849
    
    
    
    29,221Total liabilities
    
    
    1,072,764
    
    
    
    1,177,004Stockholders equity:Common stock Class A
    
    
    16,043
    
    
    
    16,043Common stock Class B
    
    
    16,266
    
    
    
    16,266Additional paid-in capital
    
    
    189,673
    
    
    
    188,935Retained earnings
    
    
    268,524
    
    
    
    267,336Accumulated other comprehensive income (loss)
    
    
    3,478
    
    
    
    (6,042
    )Total stockholders equity
    
    
    493,984
    
    
    
    482,538Total liabilities and stockholders equity
    
    $
    1,566,748
    
    
    
    1,659,542
  3




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##### Table of Contents



TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Earnings (Unaudited)   (Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2008
    
    2007REVENUES:Premiums earned, net
    
    $
    404,399
    
    
    
    348,465Administrative service fees
    
    
    3,713
    
    
    
    3,509Net investment income
    
    
    13,432
    
    
    
    11,121Total operating revenues
    
    
    421,544
    
    
    
    363,095Net realized investment gains
    
    
    609
    
    
    
    1,196Net unrealized investment loss on trading securities
    
    
    (6,250
    )
    
    
    (1,925
    )Other income (expense), net
    
    
    (1,521
    )
    
    
    209Total revenues
    
    
    414,382
    
    
    
    362,575BENEFITS AND EXPENSES:Claims incurred
    
    
    350,207
    
    
    
    297,318Operating expenses
    
    
    60,031
    
    
    
    56,137Total operating costs
    
    
    410,238
    
    
    
    353,455Interest expense
    
    
    3,673
    
    
    
    3,952Total benefits and expenses
    
    
    413,911
    
    
    
    357,407Income before taxes
    
    
    471
    
    
    
    5,168INCOME TAX EXPENSE (BENEFIT):Current
    
    
    (184
    )
    
    
    1,060Deferred
    
    
    (547
    )
    
    
    (397
    )Total income taxes
    
    
    (731
    )
    
    
    663Net income
    
    $
    1,202
    
    
    
    4,505Basic net income per share
    
    $
    0.04
    
    
    
    0.17Diluted net income per share
    
    $
    0.04
    
    
    
    0.17
  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)
 2008
    
    2007BALANCE AT JANUARY 1
    
    $
    482,538
    
    
    
    342,599Dividends
    
    
    
    
    
    
    (2,448
    )Share-based compensation
    
    
    738
    
    
    
    Other
    
    
    (14
    )
    
    
    Comprehensive income (loss):Net income
    
    
    1,202
    
    
    
    4,505Net unrealized change in fair value of available for sale securities
    
    
    9,350
    
    
    
    1,582Defined benefit pension plan:Actuarial loss, net
    
    
    296
    
    
    
    Prior service credit, net
    
    
    (70
    )
    
    
    Net change in fair value of cash flow hedges
    
    
    (56
    )
    
    
    (65
    )Total comprehensive income
    
    
    10,722
    
    
    
    6,022BALANCE AT MARCH 31
    
    $
    493,984
    
    
    
    346,173
  5




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARES
 
 Consolidated Statements of Cash Flows (Unaudited)   (Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2008
    
    2007Net income
    
    $
    1,202
    
    
    
    4,505Adjustments to reconcile net income to net cash
(used in) provided by operating activities:Depreciation and amortization
    
    
    1,800
    
    
    
    1,716Net amortization of investments
    
    
    192
    
    
    
    190Provision for doubtful receivables
    
    
    205
    
    
    
    1,463Deferred tax benefit
    
    
    (547
    )
    
    
    (397
    )Net gain on sale of securities
    
    
    (609
    )
    
    
    (1,196
    )Net unrealized loss of trading securities
    
    
    6,250
    
    
    
    1,925Share-based compensation
    
    
    738
    
    
    
    Proceeds from trading securities sold:Equity securities
    
    
    20,476
    
    
    
    9,842Acquisition of securities in trading portfolio:Equity securities
    
    
    (5,687
    )
    
    
    (6,024
    )(Increase) decrease in assets:Premiums receivable
    
    
    (14,749
    )
    
    
    (19,161
    )Agents balances
    
    
    6,386
    
    
    
    4,809Accrued interest receivable
    
    
    (1,855
    )
    
    
    (1,124
    )Other receivables
    
    
    (3,589
    )
    
    
    (4,522
    )Reinsurance recoverable on paid losses
    
    
    4,599
    
    
    
    (589
    )Deferred policy acquisition costs and
value of business acquired
    
    
    (1,748
    )
    
    
    (1,395
    )Prepaid income tax
    
    
    191
    
    
    
    Other assets
    
    
    6,374
    
    
    
    2,821Increase (decrease) in liabilities:Claims processed and incomplete
    
    
    (16,041
    )
    
    
    4,031Unreported losses
    
    
    23,758
    
    
    
    9,077Unpaid loss-adjustment expenses
    
    
    1,420
    
    
    
    81Liability for future policy benefits
    
    
    2,968
    
    
    
    3,148Unearned premiums
    
    
    (29,183
    )
    
    
    (3,205
    )Policyholder deposits
    
    
    457
    
    
    
    428Liability to FEHBP
    
    
    (3,303
    )
    
    
    56Accounts payable and accrued liabilities
    
    
    (117,815
    )
    
    
    (4,320
    )Income tax payable
    
    
    
    
    
    
    1,430Net cash (used in) provided by operating activities
    
    $
    (118,110
    )
    
    
    3,589
  6




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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 31,2008
    
    2007CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from investments sold or matured:Securities available for sale:Fixed maturities sold
    
    $
    67,267
    
    
    
    59,497Fixed maturities matured
    
    
    48,133
    
    
    
    5,178Fixed maturity securities held to maturity
    
    
    22,863
    
    
    
    209Acquisition of investments:Securities available for sale:Fixed maturities
    
    
    (205,474
    )
    
    
    (66,243
    )Equity securities
    
    
    (12,143
    )
    
    
    (499
    )Fixed maturity securities held to maturity
    
    
    (5,120
    )
    
    
    Net disbursements for policy loans
    
    
    376
    
    
    
    (34
    )Net capital expenditures
    
    
    (1,547
    )
    
    
    (1,447
    )Net cash used in investing activities
    
    
    (85,645
    )
    
    
    (3,339
    )CASH FLOWS FROM FINANCING ACTIVITIES:Change in outstanding checks in excess of bank balances
    
    
    15,446
    
    
    
    2,140Repayments of short-term borrowings
    
    
    (45,661
    )
    
    
    Proceeds from short-term borrowings
    
    
    55,486
    
    
    
    Repayments of long-term borrowings
    
    
    (409
    )
    
    
    (410
    )Dividends paid
    
    
    
    
    
    
    (2,448
    )Proceeds from policyholder deposits
    
    
    2,611
    
    
    
    1,440Surrenders of policyholder deposits
    
    
    (1,673
    )
    
    
    (1,938
    )Other
    
    
    (14
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    25,786
    
    
    
    (1,216
    )Net decrease in cash and cash equivalents
    
    
    (177,969
    )
    
    
    (966
    )Cash and cash equivalents at beginning of the period
    
    
    240,153
    
    
    
    81,320Cash and cash equivalents at end of the period
    
    $
    62,184
    
    
    
    80,354
  7




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TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 (1) Basis of Presentation
   (2) Recent Accounting Standards
 Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial
Liabilities  Including an Amendment of FASB Statement No. 115
 Disclosures about Derivative Instruments and Hedging
Activities Accounting for Derivative Instruments and Hedging
Activities
  (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)
  Three months endedMarch 31,2008
    
    2007Operating revenues:Managed Care:Premiums earned, net
    
    $
    359,111
    
    
    
    304,831Administrative service fees
    
    
    3,713
    
    
    
    3,509Intersegment premiums /service fees
    
    
    1,650
    
    
    
    1,627Net investment income
    
    
    5,602
    
    
    
    4,829Total managed care
    
    
    370,076
    
    
    
    314,796Life Insurance:Premiums earned, net
    
    
    22,129
    
    
    
    22,380Intersegment premiums
    
    
    92
    
    
    
    82Net investment income
    
    
    3,934
    
    
    
    3,620Total life insurance
    
    
    26,155
    
    
    
    26,082Property and Casualty Insurance:Premiums earned, net
    
    
    23,159
    
    
    
    21,254Intersegment premiums
    
    
    154
    
    
    
    154Net investment income
    
    
    2,964
    
    
    
    2,552Total property and casualty insurance
    
    
    26,277
    
    
    
    23,960Other segments  intersegment service revenues *
    
    
    11,068
    
    
    
    11,040Total business segments
    
    
    433,576
    
    
    
    375,878TSM operating revenues from external sources
    
    
    932
    
    
    
    120Elimination of intersegment premiums
    
    
    (1,896
    )
    
    
    (1,863
    )Elimination of intersegment service fees
    
    
    (11,068
    )
    
    
    (11,040
    )Consolidated operating revenues
    
    $
    421,544
    
    
    
    363,095
 *
    
    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 AND SUBSIDIARIES  Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 Three months endedMarch 31,2008
    
    2007Operating income:Managed care
    
    $
    5,332
    
    
    
    4,100Life insurance
    
    
    2,505
    
    
    
    2,975Property and casualty insurance
    
    
    2,097
    
    
    
    1,393Other segments *
    
    
    109
    
    
    
    138Total business segments
    
    
    10,043
    
    
    
    8,606TSM operating revenues from external sources
    
    
    932
    
    
    
    120TSM unallocated operating expenses
    
    
    (2,140
    )
    
    
    (1,826
    )Elimination of TSM intersegment charges
    
    
    2,471
    
    
    
    2,740Consolidated operating income
    
    
    11,306
    
    
    
    9,640Consolidated net realized investment gains
    
    
    609
    
    
    
    1,196Consolidated net unrealized loss on
trading securities
    
    
    (6,250
    )
    
    
    (1,925
    )Consolidated interest expense
    
    
    (3,673
    )
    
    
    (3,952
    )Consolidated other income (expense), net
    
    
    (1,521
    )
    
    
    209Consolidated income before taxes
    
    $
    471
    
    
    
    5,168Depreciation expense:Managed care
    
    $
    984
    
    
    
    896Life insurance
    
    
    182
    
    
    
    179Property and casualty insurance
    
    
    372
    
    
    
    360Total business segments
    
    
    1,538
    
    
    
    1,435TSM depreciation expense
    
    
    262
    
    
    
    281Consolidated depreciation expense
    
    $
    1,800
    
    
    
    1,716
 *
    
    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 AND SUBSIDIARIES  Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 March 31,
    
    December 31,2008
    
    2007Assets:Managed care
    
    $
    666,216
    
    
    
    762,422Life insurance
    
    
    445,493
    
    
    
    430,807Property and casualty insurance
    
    
    367,947
    
    
    
    375,415Other segments *
    
    
    11,012
    
    
    
    11,255Total business segments
    
    
    1,490,668
    
    
    
    1,579,899Unallocated amounts related to TSM:Cash, cash equivalents, and investments
    
    
    83,812
    
    
    
    82,980Property and equipment,net
    
    
    22,260
    
    
    
    22,523Other assets
    
    
    3,387
    
    
    
    2,280109,459
    
    
    
    107,783Elimination entries-intersegment receivables and others
    
    
    (33,379
    )
    
    
    (28,140
    )Consolidated total assets
    
    $
    1,566,748
    
    
    
    1,659,542Significant noncash items:Net change in unrealized gain on securities available for sale:Managed care
    
    $
    4,167
    
    
    
    2,928Life insurance
    
    
    3,104
    
    
    
    3,253Property and casualty insurance
    
    
    1,598
    
    
    
    3,085Total business segments
    
    
    8,869
    
    
    
    9,266Amount related to TSM
    
    
    481
    
    
    
    283Consolidated net change in unrealized gain on
securities available for sale
    
    $
    9,350
    
    
    
    9,549Net change in liability for pension benefits:Managed care
    
    $
    151
    
    
    
    2,838Life
    
    
    2
    
    
    
    35Property and casualty
    
    
    19
    
    
    
    275Other segments*
    
    
    48
    
    
    
    844Total business segments
    
    
    220
    
    
    
    3,992Amount related to TSM
    
    
    6
    
    
    
    98Consolidated net change in liability for
pension benefits
    
    $
    226
    
    
    
    4,090
 
 *
    
    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 AND SUBSIDIARIES  Notes to Consolidated Financial Statements   (Dollar amounts in thousands, except per share data)
 (4) Investment in Securities
  March 31, 2008Gross
    
    GrossAmortized
    
    unrealized
    
    unrealized
    
    Estimated faircost
    
    gains
    
    losses value
    
    valueTrading securities:Equity securities
    
    $
    40,161
    
    
    
    8,862
    
    
    
    (2,711
    )
    
    
    46,312Securities available for sale:Fixed maturities
    
    
    914,746
    
    
    
    24,680
    
    
    
    (6,214
    )
    
    
    933,212Equity securities
    
    
    78,890
    
    
    
    7,506
    
    
    
    (3,571
    )
    
    
    82,825993,636
    
    
    
    32,186
    
    
    
    (9,785
    )
    
    
    1,016,037Securities held to maturity:Fixed maturities
    
    
    26,052
    
    
    
    772
    
    
    
    (12
    )
    
    
    26,812$
    1,059,849
    
    
    
    41,820
    
    
    
    (12,508
    )
    
    
    1,089,161
 December
31, 2007Gross
    
    GrossAmortized
    
    unrealized
    
    unrealized
    
    Estimated faircost
    
    gains
    
    losses
    
    valueTrading securities:Equity securities
    
    $
    54,757
    
    
    
    15,170
    
    
    
    (2,769
    )
    
    
    67,158Securities available for sale:Fixed maturities
    
    
    816,536
    
    
    
    11,583
    
    
    
    (4,490
    )
    
    
    823,629Equity securities
    
    
    66,747
    
    
    
    7,354
    
    
    
    (3,051
    )
    
    
    71,050883,283
    
    
    
    18,937
    
    
    
    (7,541
    )
    
    
    894,679Securities held to maturity:Fixed maturities
    
    
    43,691
    
    
    
    227
    
    
    
    (69
    )
    
    
    43,849$
    981,731
    
    
    
    34,334
    
    
    
    (10,379
    )
    
    
    1,005,686
   12




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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 31,2008
    
    2007Premium
    
    $
    71,003
    
    
    
    54,330Self-funded group receivables
    
    
    30,111
    
    
    
    31,344FEHBP
    
    
    9,511
    
    
    
    10,202Agents balances
    
    
    26,488
    
    
    
    32,874Accrued interest
    
    
    10,218
    
    
    
    8,363Reinsurance recoverable
    
    
    54,158
    
    
    
    58,757Other
    
    
    25,955
    
    
    
    22,323227,444
    
    
    
    218,193Less allowance for doubtful receivables:Premiums
    
    
    11,771
    
    
    
    11,753Other
    
    
    4,359
    
    
    
    4,17216,130
    
    
    
    15,925Total premiums and other receivables
    
    $
    211,314
    
    
    
    202,268
 (6) Claim Liabilities
  Three months endedMarch 31,2008
    
    2007Claim liabilities at beginning of period
    
    $
    353,830
    
    
    
    314,682Reinsurance recoverable on claim liabilities
    
    
    (54,834
    )
    
    
    (32,066
    )Net claim liabilities at beginning of period
    
    
    298,996
    
    
    
    282,616Incurred claims and loss-adjustment expenses:Current period insured events
    
    
    358,324
    
    
    
    309,565Prior period insured events
    
    
    (11,241
    )
    
    
    (16,191
    )Total
    
    
    347,083
    
    
    
    293,374Payments of losses and loss-adjustment expenses:Current period insured events
    
    
    171,599
    
    
    
    144,814Prior period insured events
    
    
    160,982
    
    
    
    135,636Total
    
    
    332,581
    
    
    
    280,450Net claim liabilities at end of period
    
    
    313,498
    
    
    
    295,540Reinsurance recoverable on claim liabilities
    
    
    49,469
    
    
    
    32,331Claim liabilities at end of period
    
    $
    362,967
    
    
    
    327,871
  13




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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)
   (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 I 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.
  Level 1
    
    Level 2
    
    Level 3
    
    TotalEquity securities held for trading:
    
    $
    46,312
    
    
    
    
    
    
    
    
    
    
    
    46,312Securities available for sale:Fixed maturity securities
    
    
    
    
    
    
    933,212
    
    
    
    
    
    
    
    933,212Equity securities
    
    
    47,522
    
    
    
    35,303
    
    
    
    
    
    
    
    82,825Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    2,493
    
    
    
    
    
    
    
    2,493Total
    
    $
    93,834
    
    
    
    971,008
    
    
    
    
    
    
    
    1,064,842
 (8) Share-Based Compensation
  14




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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)
 (9) Comprehensive Income
  AccumulatedUnrealized
    
    
    Liability for
    
    
    
    
    
    
    othergain (loss) on
    
    
    pension
    
    
    Cash flow
    
    
    comprehensivesecurities
    
    
    benefits
    
    
    hedges
    
    
    incomeBALANCE AT JANUARY 1
    
    $
    9,554
    
    
    
    (15,652
    )
    
    
    56
    
    
    
    (6,042
    )Net current period change
    
    
    9,350
    
    
    
    226
    
    
    
    (56
    )
    
    
    9,520BALANCE AT MARCH 31
    
    $
    18,904
    
    
    
    (15,426
    )
    
    
    
    
    
    
    3,478
 (10) Income Taxes
   (11) Pension Plan
  Three months endedMarch 31,2008
    
    2007Components of net periodic benefit cost:Service cost
    
    $
    1,316
    
    
    
    1,356Interest cost
    
    
    1,422
    
    
    
    1,294Expected return on assets
    
    
    (1,225
    )
    
    
    (1,128
    )Prior service cost
    
    
    (113
    )
    
    
    14Actuarial loss
    
    
    479
    
    
    
    514Net periodic benefit cost
    
    $
    1,879
    
    
    
    2,050
 Employer contributions
  15




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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)
  (12) Net Income Available to Stockholders and Basic Net Income per Share
  Three months endedMarch 31,2008
    
    2007Numerator for earnings per share:Net income available to stockholders
    
    $
    1,202
    
    
    
    4,505Denominator for basic earnings per share:Weighted average of common shares
    
    
    32,142,809
    
    
    
    26,735,000Effect of dilutive securities
    
    
    52,490
    
    
    
    Denominator for diluted earnings per share
    
    
    32,195,299
    
    
    
    26,735,000Basic net income per share
    
    $
    0.04
    
    
    
    0.17Diluted net income per share
    
    $
    0.04
    
    
    
    0.17
 (13) Contingencies
   Jordán et al Litigation
  16




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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)
      Thomas Litigation
     Lens Litigation
  17




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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)
  Colón Litigation
 inter alia
 Acevedo Litigation
  Puerto Rico Center for Municipal Revenue Collection
  18




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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)
      Regulatory Actions
  19




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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
     20




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##### Table of Contents



Recent Accounting Standards
  Managed Care Membership
 As of March 31,2008
    
    2007Managed care enrollment:Commercial 1
    
    
    576,209
    
    
    
    579,887Reform
    
    
    343,534
    
    
    
    353,460Medicare Advantage
    
    
    65,538
    
    
    
    42,357Total
    
    
    985,281
    
    
    
    975,704Managed care enrollment by funding arrangement:Fully-insured
    
    
    821,764
    
    
    
    814,092Self-insured
    
    
    163,517
    
    
    
    161,612Total
    
    
    985,281
    
    
    
    975,704
 
 (1)
    
    Commercial membership includes corporate accounts, self-funded employers, individual
accounts, Medicare Supplement, U.S. Federal government employees and local government
employees. 21




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##### Table of Contents



Consolidated Operating Results
  Three months endedMarch 31,(Dollar amounts in millions)
    
    2008
    
    2007Revenues:Premiums earned, net
    
    $
    404.4
    
    
    
    348.5Administrative service fees
    
    
    3.7
    
    
    
    3.5Net investment income
    
    
    13.4
    
    
    
    11.1Total operating revenues
    
    
    421.5
    
    
    
    363.1Net realized investment gains
    
    
    0.6
    
    
    
    1.2Net unrealized investment loss on trading securities
    
    
    (6.2
    )
    
    
    (1.9
    )Other income (expense), net
    
    
    (1.5
    )
    
    
    0.2Total revenues
    
    
    414.4
    
    
    
    362.6Benefits and expenses:Claims incurred
    
    
    350.2
    
    
    
    297.3Operating expenses
    
    
    60.0
    
    
    
    56.1Total operating expenses
    
    
    410.2
    
    
    
    353.4Interest expense
    
    
    3.7
    
    
    
    4.0Total benefits and expenses
    
    
    413.9
    
    
    
    357.4Income before taxes
    
    
    0.5
    
    
    
    5.2Income tax expense (benefit)
    
    
    (0.7
    )
    
    
    0.7Net income
    
    $
    1.2
    
    
    
    4.5
 Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
 Operating Revenues
   Net Unrealized Loss on Trading Securities and Other Income (Expense), Net
  Claims Incurred
  22




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##### Table of Contents



Operating Expenses
  Income Tax Expense (Benefit)
  Managed Care Operating Results
 Three months endedMarch 31,(Dollar amounts in millions)
    
    2008
    
    2007Medical operating revenues:Medical premiums earned, net:Commercial
    
    $
    182.0
    
    
    
    180.3Reform
    
    
    81.0
    
    
    
    71.8Medicare
    
    
    96.9
    
    
    
    53.5Medical premiums earned, net
    
    
    359.9
    
    
    
    305.6Administrative service fees
    
    
    4.6
    
    
    
    4.4Net investment income
    
    
    5.6
    
    
    
    4.8Total medical operating revenues
    
    
    370.1
    
    
    
    314.8Medical operating costs:Medical claims incurred
    
    
    327.9
    
    
    
    275.5Medical operating expenses
    
    
    36.9
    
    
    
    35.2Total medical operating costs
    
    
    364.8
    
    
    
    310.7Medical operating income
    
    $
    5.3
    
    
    
    4.1Additional data:Member months enrollment:Commercial:Fully-insured
    
    
    1,235,489
    
    
    
    1,253,743Self-funded
    
    
    496,062
    
    
    
    479,323Total commercial member months
    
    
    1,731,551
    
    
    
    1,733,066Reform
    
    
    1,033,660
    
    
    
    1,064,846Medicare Advantage
    
    
    190,529
    
    
    
    128,630Total member months
    
    
    2,955,740
    
    
    
    2,926,542Medical loss ratio
    
    
    91.1
    %
    
    
    90.2
    %Operating expense ratio
    
    
    10.1
    %
    
    
    11.4
    %
 23




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##### Table of Contents



Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
 Medical Operating Revenues
  
    
    Medical premiums generated by the Medicare business increased during the three months
ended March 31, 2008 by $43.4 million, or 81.1%, to $96.9 million, primarily due to an
increase in member months enrollment of 61,899, or 48.1% and premium rate increases. The
increase in member months is the net result of an increase of 64,542, or 69.2%, in the
membership of our Medicare Advantage products and a decrease of 2,643, or 7.5%, in the
membership of our PDP product.
    
    Medical premiums earned in the Reform business increased by $9.2 million, or 12.8%, to
$81.0 million during the 2008 period. This fluctuation is primarily due to the increases
in premium rates during 2007, one effective July 1, 2007, of approximately 8.7% and a
retroactive increase in rates of approximately 6.7% effective November 1, 2006 negotiated
in June 2007; mitigated by a decrease in member months enrollment in the Reform business by
31,186 or 2.9%.
    
    Medical premiums generated by the Commercial business increased by $1.7 million, or
0.9%, to $182.0 million during the three months ended March 31, 2008. This fluctuation is
primarily the result of an increase in average premium rates in corporate accounts of 4.5%;
partially offset by a decrease in member months enrollment of 18,254, or 1.5%.
 Medical Claims Incurred
  
    
    The Medicare business has experienced an expected overall increase in utilization
trends, but the increase is most noticeable in outpatient visits and ambulatory procedures.
We expect the utilization trends of the Medicare business to increase and then to
stabilize as the business matures. Also, the higher MLR in the Medicare business is also
impacted by the change in mix between dual and non-dual eligible members within the
business. The Medicare Advantage member months enrollment during the three months ended
March 31, 2008 has a higher concentration of dual eligible members than during the same
period of the prior year. In our experience dual eligible members have a higher utilization than non-dual
eligible members.
    
    The higher MLR experienced by the Reform business in 2008 is primarily due to the effect
of prior period reserve developments and the retroactive premium rate increase received by
this business during June 2007. If we exclude the effect of prior period reserve
developments in the 2007 and 2008 periods and considering the retroactive premium rate
increase in the 2007 period, the MLR actually decreased by 2.2 percentage points during the
2008 period.
    
    During the 2008 period the MLR of the Commercial business decreased by 2.1 percentage
points primarily as the result of our termination and re-pricing strategy of less
profitable groups and cost containment initiatives.
 Medical Operating Expenses
  24




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Life Insurance Operating Results
 Three months endedMarch 31,(Dollar amounts in millions)
    
    2008
    
    2007Operating revenues:Premiums earned, net:Premiums earned
    
    $
    24.1
    
    
    
    24.5Premiums earned ceded
    
    
    (2.0)
    
    
    
    (2.1
    )Net premiums earned
    
    
    22.1
    
    
    
    22.4Commission income on reinsuarance
    
    
    0.1
    
    
    
    0.1Premiums earned, net
    
    
    22.2
    
    
    
    22.5Net investment income
    
    
    3.9
    
    
    
    3.6Total operating revenues
    
    
    26.1
    
    
    
    26.1Operating costs:Policy benefits and claims incurred
    
    
    12.0
    
    
    
    11.6Underwriting and other expenses
    
    
    11.6
    
    
    
    11.5Total operating costs
    
    
    23.6
    
    
    
    23.1Operating income
    
    $
    2.5
    
    
    
    3.0Additional data:Loss ratio
    
    
    54.1
    %
    
    
    51.6
    %Operating expense ratio
    
    
    52.3
    %
    
    
    51.1
    %
 Three
Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
 Operating Revenues
  Policy
Benefits and Claims Incurred
  Underwriting and Other Expenses
  25




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##### Table of Contents



Property and Casualty Insurance Operating Results
 Three months endedMarch 31,(Dollar amounts in millions)
    
    2008
    
    2007Operating revenues:Premiums earned, net:Premiums written
    
    $
    35.5
    
    
    
    35.2Premiums ceded
    
    
    (15.6)
    
    
    
    (15.4
    )Change in unearned premiums
    
    
    3.4
    
    
    
    1.6Premiums earned, net
    
    
    23.3
    
    
    
    21.4Net investment income
    
    
    3.0
    
    
    
    2.6Total operating revenues
    
    
    26.3
    
    
    
    24.0Operating costs:Claims incurred
    
    
    10.3
    
    
    
    10.2Underwriting and other expenses
    
    
    13.9
    
    
    
    12.4Total operating costs
    
    
    24.2
    
    
    
    22.6Operating income
    
    $
    2.1
    
    
    
    1.4Additional data:Loss ratio
    
    
    44.2
    %
    
    
    47.7
    %Operating expense ratio
    
    
    59.7
    %
    
    
    57.9
    %Combined ratio
    
    
    103.9
    %
    
    
    105.6
    %
 Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
 Operating Revenues
    Claims Incurred
  Underwriting and Other Expenses
  26




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows
  Three months endedMarch 31,(Dollar amounts in millions)
    
    2008
    
    2007Sources of cash:Proceeds from short-term borrowings
    
    $
    55.5
    
    
    
    Proceeds from policyholder deposits
    
    
    2.6
    
    
    
    1.4Cash provided by operating activities
    
    
    
    
    
    
    3.6Other
    
    
    15.8
    
    
    
    2.1Total sources of cash
    
    
    73.9
    
    
    
    7.1Uses of cash:Cash used in operating activities
    
    
    (118.1
    )
    
    
    Net purchases of investment securities
    
    
    (84.5
    )
    
    
    (1.9
    )Capital expenditures
    
    
    (1.5
    )
    
    
    (1.4
    )Dividends
    
    
    
    
    
    
    (2.4
    )Payments of long-term borrowings
    
    
    (0.4
    )
    
    
    (0.4
    )Payments of short-term borrowings
    
    
    (45.7
    )
    
    
    Surrenders of policyholder deposits
    
    
    (1.7
    )
    
    
    (1.9
    )Total uses of cash
    
    
    (251.9
    )
    
    
    (8.0
    )Net decrease in cash and cash equivalents
    
    $
    (178.0
    )
    
    
    (0.9
    )
      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).
 27




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##### Table of Contents




    
    On December 21, 2005, we issued and sold $60.0 million of our 6.6% senior unsecured notes
due December 2020 (the 6.6% notes).
 
    
    On September 30, 2004, we issued and sold $50.0 million of its 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
  
 Part II  Other Information
 
 Item 1. Legal Proceedings
  28




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##### Table of Contents



Item IA. Risk Factors
  Heirs of certain of our former shareholders may bring materially dilutive claims against us.
   
 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
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
    
    Description3(i)(a)
    
    Amended and Restated Articles of Incorporation (incorporated
herein by reference to Exhibit 3(i)(d) to TSMs Annual Report on
Form 10-K for the year ended December 31, 2007 (File No.
0-49762).3(i)(b)*
    
    Amendment to Article Tenth of the Amended and Restated Articles of
Incorporation of Triple-S Management Corporation.3(i)(c)*
    
    Articles of Incorporation of Triple-S Management Corporation, as
currently in effect.
 29




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##### Table of Contents



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, 2008 and 2007 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.12
    
    Statements re computation of ratios; an exhibit describing the
computation of the loss ratio, expense ratio and combined ratio for
the three months ended March 31, 2008 and 2007 has been omitted as
the detail necessary to determine the computation of the loss ratio,
operating expense ratio and combined ratio 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.
  
  
 SIGNATURES
  Triple-S Management CorporationRegistrantDate:
May 9, 2008
    
    By:
    
    /s/ Ramón M. Ruiz-Comas

Ramón M. Ruiz-Comas, CPAPresident andChief Executive OfficerDate:
May 9, 2008
    
    By:
    
    /s/ Juan J. Román

Juan J. Román, CPAVice President of Financeand Chief Financial Officer
 30