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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 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 OF INCORPORATION)
    
    66-0555678
(I.R.S. ID)
 1441 F.D. Roosevelt Avenue, San Juan, PR 00920
(787) 749-4949
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
Class B common stock, $1.00 par value
    
    Name of each exchange on which registered
New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
 o þ
 o þ
 þ o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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Triple-S Management Corporation
 FORM 10-K
  Table of Contents
 Part I
    
    
    3Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    29Item 1B. Unresolved Staff Comments
    
    
    47Item 2. Properties
    
    
    47Item 3. Legal Proceedings
    
    
    47Item 4. Removed and Reserved
    
    
    49Part II
    
    
    49Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
    
    
    49Item 6. Selected Financial Data
    
    
    52Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    53Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    80Item 8. Financial Statements and Supplementary Data
    
    
    83Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
    
    
    83Item 9A. Controls and Procedures
    
    
    83Item 9B. Other Information
    
    
    84Part III
    
    
    84Item 10. Directors, Executive Officers and Corporate Governance
    
    
    84Item 11. Executive Compensation
    
    
    85Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    85Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    85Item 14. Principal Accountant Fees and Services
    
    
    85Item 15. Exhibits and Financial Statements Schedules
    
    
    85SIGNATURES
    
    
    89EX-10.3EX-10.5EX-10.11EX-10.12EX-10.13EX-10.14EX-10.24EX-21EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2
  Page 2




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Part I
 
 Item 1. Business
 General Description of Business and Recent Developments
        Industry Overview
 Managed Care
  Page 3




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Life Insurance
  Property and Casualty Insurance Segment
   Puerto Ricos Economy
  Page 4




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Products and Services
 Managed Care
  Page 5




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Health Maintenance Organization (HMO).
 Preferred Provider Organization (PPO).
 BlueCard.
 Medicare Supplement.
 Prescription Drug Benefit Plans.
 Administrative Services Only.
 Page 6




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Life Insurance
  Percentage of TotalSegment Revenues forthe Year EndedLine of Business
    
    December 31, 2009Home service
    
    
    57
    %Ordinary life
    
    
    18Cancer
    
    
    15Other
    
    
    10
 Property and Casualty Insurance
  Percentage of TotalSegment Revenues forthe Year EndedLine of Business
    
    December 31, 2009Commercial multi-peril
    
    
    46
    %Auto
    
    
    21Dwelling and commercial property mono-line
    
    
    18Other
    
    
    15
   Marketing and Distribution
  Page 7




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Branding and Marketing
  Sales and Marketing
  Distribution
 Managed Care Segment.
  Life Insurance Segment.
 Property and Casualty Insurance Segment.
 Page 8




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Customers
 Managed Care
  Enrollment at
    
    
    Percentage ofMarket Sector
    
    December 31, 2009
    
    
    Total EnrollmentCommercial
    
    
    737,286
    
    
    
    54.7
    %Reform
    
    
    540,142
    
    
    
    40.1Medicare Advantage
    
    
    69,608
    
    
    
    5.2Total
    
    
    1,347,003
    
    
    
    100.0
    %
 Commercial Sector
  Corporate Accounts.
 Federal Government Employees.
 Individual Accounts.
 Local Government Employees.
 Medicare Supplement.
 Reform Sector
  Page 9




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Medicare Advantage Sector
 Medicare Optimo Medicare Selecto Medicare Platino
 FarmaMed
 Page 10




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Life Insurance
  Property and Casualty Insurance
  Underwriting and Pricing
 Managed Care
     Life Insurance
  Property and Casualty Insurance
   Page 11




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Quality Initiatives and Medical Management
    Information Systems
   Page 12




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Provider Arrangements
  Medicare Optimo
   Hospitals.
 Physicians.
  Subcontracting.
 Page 13




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Competition
  Managed Care
    Life Insurance
  Property & Casualty Insurance
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Blue Cross and Blue Shield License
    
    
    failure to maintain our total adjusted capital at 200% of Health Risk-Based Capital Authorized Control Level, as defined by
the National Association of Insurance Commissioners (NAIC) Risk Based Capital (RBC) Model Act;
    
    failure to maintain liquidity of greater than one month of underwritten claims and administrative expenses, as defined by
the BCBSA, for two consecutive quarters;
    
    failure to satisfy state-mandated statutory net worth requirements;
    
    impending financial insolvency; and
    
    a change of control not otherwise approved by the BCBSA or a violation of the BCBSA voting and ownership limitations on our
capital stock.
     BlueCard.
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Claim Liabilities
 Liabilities
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Investments
      Trademarks
  Regulation
  
    
    grant, suspend and revoke licenses to transact business;
    
    regulate many aspects of the products and services we offer;
    
    assess fines, penalties and/or sanctions;
    
    monitor our solvency and adequacy of our financial reserves; and
    
    regulate our investment activities on the basis of quality,
diversification and other quantitative criteria, within the parameters
of a list of permitted investments set forth in applicable insurance
laws and regulations.
  Page 17




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
    
    initiatives to provide greater access to coverage for uninsured and under-insured populations without adequate funding
to health plans or to be funded through taxes or other negative financial levy on health plans;
    
    payments to health plans that are tied to achievement of certain quality performance measures;
    
    other efforts or specific legislative changes to the Medicare or Reform programs, including changes in the bidding
process or other means of materially reducing premiums;
    
    local government regulatory changes;
    
    increased government enforcement of or changes in interpretation or application of fraud and abuse laws; and
    
    regulations that increase the operational burden on health plans or laws that increase a health plans exposure to
liabilities, including efforts to expand the tort liability of health plans care;
    
    
    licensure;
    
    policy forms, including plan design and
disclosures;
    
    premium rates and rating methodologies;
    
    underwriting rules and procedures;
    
    benefit mandates;
    
    eligibility requirements;
    
    security of electronically transmitted
individually identifiable health information;
    
    geographic service areas;
    
    market conduct;
    
    utilization review;
    
payment of claims, including timeliness and
accuracy of payment;
    
    special rules in contracts to administer
government programs;
    
    transactions with affiliated entities;
    
    limitations on the ability to pay dividends;
    
    rates of payment to providers of care;
    
    transactions resulting in a change of control;
    
    member rights and responsibilities;
    
    fraud and abuse;
    
    sales and marketing activities;
    
    quality assurance procedures;
    
    privacy of medical and other information and permitted disclosures;
    
    rates of payment to providers of care;
    
    surcharges on payments to providers;
    
    provider contract forms;
    
    delegation of financial risk and other financial arrangements in rates paid to providers of care;
    
    agent licensing;
    
    financial condition (including reserves);
    
    reinsurance;
    
    issuance of new shares of capital stock;
    
    corporate governance; and
    
    permissible investments.
 Page 18




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Puerto Rico Insurance Laws
      Page 19




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Privacy of Financial and Health Information
  Managed Care Provider Services
  Capital and Reserve Requirements
     Page 20




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Dividend Restrictions
  Guaranty Fund Assessments
  Federal Regulation
  Page 21




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The Medicare Advantage and Medicare Part D Programs
     The 2003 Medicare Modernization Act
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Page 23




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Dual-Eligible Beneficiaries. Platino Platino
 Sales and Marketing.
 Fraud and Abuse Laws.
 Anti-kickback Laws.
 Federal False Claims Act.
 HIPAA and Gramm-Leach-Bliley Act
   Page 24




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Initiatives
 Page 25




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Employee Retirement Income Security Act of 1974
  Other Government Programs
  Page 26




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Legislative and Regulatory Initiatives
 Puerto Rico Initiatives
   Federal Initiatives
  Financial Information About Segments
  Employees
  Available Information
  Page 27




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Special Note Regarding Forward-Looking Statements
    
    
    trends in health care costs and utilization rates;
    
    ability to secure sufficient premium rate increases;
    
    competitor pricing below market trends of increasing costs;
    
    re-estimates of our policy and contract liabilities;
    
    changes in government regulation of managed care, life insurance or property and casualty insurance;
    
    significant acquisitions or divestitures by major competitors;
    
    introduction and use of new prescription drugs and technologies;
    
    a downgrade in our financial strength ratings;
    
    litigation or legislation targeted at managed care, life insurance or property and casualty insurance companies;
    
    ability to contract with providers consistent with past practice;
    
    ability to successfully implement our disease management and utilization management programs;
    
    volatility in the securities markets and investment losses and defaults;
    
    general economic downturns, major disasters and epidemics.
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Item 1A. Risk Factors
  Risks Relating to our Capital Stock
 Certain of our current and former providers may bring materially dilutive claims against us.
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Heirs of certain of our former shareholders may bring materially dilutive claims against us.
   The dual class structure may not successfully protect against significant dilution of your
shares of Class B common stock.
    Future sales of our Class B common stock, or the perception that such future sales may occur,
may have an adverse impact on its market price.
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Risks Related to Our Business
 Our inability to contain managed care costs may adversely affect our business and profitability.
  Our inability to implement increases in premium rates on a timely basis may adversely affect
our business and profitability.
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Our profitability may be adversely affected if we are unable to maintain our current provider
agreements and to enter into other appropriate agreements.
  A reduction in the enrollment in our managed care programs could have an adverse effect on our
business and profitability.
  We are dependent on a small number of government contracts to generate a significant amount of
the revenues of our managed care business.
  
    
    Reform:We participate in the government of Puerto Rico Health Reform
Program to provide health coverage to medically indigent citizens in Puerto Rico. Our
results of operations have depended to a significant extent on our participation in the
Reform program. During each of the years ended December 31, 2009, 2008 and 2007, the
Reform program has accounted for 18.6%, 20.1% and 22.1%, respectively , of our consolidated
premiums earned, net. During the 2009 period, we were the sole Reform provider in two of
the eight Reform regions in Puerto Rico on a fully-insured basis. We are also the sole
Reform provider in another Reform region on an ASO basis. Since we obtained our first
Reform contract in 1995, we have been the sole provider for two to three regions each year.
The contract for each geographical area is subject to termination in the event of any
non-compliance by the insurance company which is not corrected or cured to the satisfaction
of the government entity overseeing the Reform, or on 90 days prior written notice in the
event that the government determines that there is an insufficiency of funds to finance the
Reform. These contracts typically have one-year terms that expire on June 30 of each year,
except for the Metro-North region contract which had an October 30 expiration date. Upon
the expiration of the contract for a geographical area, the government of the Commonwealth
of Puerto Rico usually commences an open bidding process for such area. We intend to
continue to participate in the Reform program, but we may not be able to retain the right
to service a particular geographical area in which we currently operate after the
expiration of our current or any future contracts. Our two fully-insured contracts with
the government of Puerto Rico that terminated in June 30, 2009, were first extended until
October 31, 2009 and then to December 31, 2009. In December 2009, all of our three
government contracts, the two that are fully-insured and the one ASO contract, were
extended until June 30, 2010. The premium rates of the Reform business were last increased
in July 2008.
    
    Medicare:We provide services through our Medicare Advantage products
pursuant to a limited number of contracts with CMS. These contracts generally have terms
of one year and must be renewed each year. Each of our contracts with CMS is terminable
for cause if we breach a material provision of the contract or violate relevant laws or
regulations. If we are unable to renew, or to successfully re-bid or compete for any of
these contracts, or if the process for bidding materially changes or if any of these
contracts are terminated, our business could be materially impaired. During each of the
years ended December 31, 2009,
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2008 and 2007, contracts with CMS represented 27.4%, 25.9% and 17.2% of our consolidated
premiums earned, net, respectively, and 33.9%, 12.4% and 34.6% of our consolidated operating
income, respectively.
 
    
    Commercial:Our managed care subsidiary is a qualified contractor to
provide managed care coverage to federal government employees within Puerto Rico. Such
coverage is provided pursuant to a contract with the OPM that is subject to termination in
the event of noncompliance not corrected to the satisfaction of the OPM. During each of
the years ended December 31, 2009, 2008 and 2007 premiums generated under this contract
represented 6.7%, 7.3% and 8.2% of our consolidated premiums earned, net, respectively.
The operating income generated under this contract represented 1.2% during the year ended
December 31, 2009 and 1.1% of our consolidated operating income, during each of the years
ended December 31, 2008 and 2007.
  A change in our managed care product mix may impact our profitability.
  Our failure to accurately estimate incurred but not reported claims would affect our reported
financial results.
  The termination or modification of our license agreements to use the BCBS name and mark could
have a material adverse effect on our business, financial condition and results of operations.
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Our ability to manage our exposure to underwriting risks in our life insurance and property
and casualty insurance businesses depends on the availability and cost of reinsurance coverage.
   If our reinsurers do not pay our claims or do not pay them in a timely manner, we may incur
losses.
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A downgrade in our A.M. Best rating or our inability to increase our A.M. Best rating could
affect our ability to write new business or renew our existing business in our property and
casualty segment.
  Significant competition could negatively affect our ability to maintain or increase our
profitability.
 Managed Care
   Complementary Products
   Page 35




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Our results may fluctuate as a result of many factors, including cyclical changes in the
insurance industry.
  
    
    rising levels of actual costs that are not known by companies at the time they price their products;
    
    volatile and unpredictable developments, including man-made and natural catastrophes;
    
    changes in reserves resulting from the general claims and legal environments as
different types of claims arise and judicial interpretations relating to the scope of
insurers liability develop; and
    
    fluctuations in interest rates, inflationary pressures and other changes in the
investment environment, which affect returns on invested capital.
  If we do not effectively manage the growth of our operations, we may not be able to achieve
our profitability targets.
  
    
    identify profitable new geographic markets to enter;
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
    
    operate in new geographic areas, as we have very limited experience operating outside Puerto Rico;
    
    obtain licenses in new geographic areas in which we wish to market and sell our products;
    
    successfully implement our underwriting, pricing, claims management and product
strategies over a larger operating region;
    
    properly design and price new and existing products and programs and reinsurance
facilities for markets in which we have no direct experience;
    
    identify, train and retain qualified employees;
    
    identify, recruit and integrate new independent agencies and brokers and expand the
range of Triple-S products carried by our existing agents and brokers;
    
    develop a network of physicians, hospitals and other managed care providers that meets
our requirements and those of applicable regulators; and
    
    augment our internal monitoring and control systems as we expand our business.
  We face intense competition to attract and retain employees and independent agents and
brokers.
   Our investment portfolios are subject to varying economic and market conditions.
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The securities and credit markets recently have been experiencing extreme volatility and
disruption.
   
    
    Significantly reducing the value of the debt securities we hold in our investment
portfolio, and creating net realized capital losses that reduces our operating results
and/or net unrealized capital losses that reduce our shareholders equity.
    
    Reducing interest rates on high quality short-term debt securities and thereby
materially reducing our net investment income and operating results.
    
    Making it more difficult to value certain of our investment securities, for example if
trading becomes less frequent, which could lead to significant period-to-period changes in
our estimates of the fair values of those securities and cause period-to-period volatility
in our operating results and shareholders equity.
    
    Reducing our ability to issue other securities.
   The geographic concentration of our business in Puerto Rico may subject us to economic
downturns in the region.
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We may not be able to retain our executive officers and significant employees, and the loss of
any one or more of these officers and their expertise could adversely affect our business.
  The success of our business depends on developing and maintaining effective information
systems.
    Page 39




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We face risks related to litigation.
  
    
    claims relating to the denial of managed care benefits;
    
    medical malpractice actions;
    
    allegations of anti-competitive and unfair business activities;
    
    provider disputes over compensation and termination of provider contracts;
    
    disputes related to self-funded business;
    
    disputes over co-payment calculations;
    
    claims related to the failure to disclose certain business practices;
    
    claims relating to customer audits and contract performance; and
    
    claims by regulatory agencies or whistleblowers for regulatory non-compliance,
including but not limited to fraud.
  Large-scale natural disasters may have a material adverse effect on our business, financial
condition and results of operations.
  Non-financial covenants in our secured term loan and note purchase agreements may restrict our
operations.
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We may incur additional indebtedness in the future. Covenants related to such indebtedness
could also adversely affect our ability to pursue desirable business opportunities.
   We may pursue acquisitions in the future.
  
    
    disruption of on-going business operations, distraction of management, diversion of
resources and difficulty in maintaining current business standards, controls and
procedures;
    
    difficulty in integrating information technology of acquired entity and unanticipated
expenses related to such integration;
    
    difficulty in the integration of the new companys accounting, financial reporting,
management, information, human resources and other administrative systems and the lack of
control if such integration is delayed or not implemented;
    
    difficulty in the implementation of controls, procedures and policies appropriate for
filers with the SEC at companies that prior to acquisition lacked such controls, policies
and procedures;
    
    potential unknown liabilities associated with the acquired company;
    
    failure of acquired businesses to achieve anticipated revenues, earnings or cash
flow;
    
    dilutive issuances of equity securities and incurrence of additional debt to finance
acquisitions;
    
    other acquisition-related expenses, including amortization of intangible assets and
write-offs; and
    
    competition with other firms, some of which may have greater financial and other
resources, to acquire attractive companies.
  Risks Relating to Taxation
 If the Company is considered to be a controlled foreign corporation under the related person
insurance income rules for U.S. federal income tax purposes, U.S. persons that own the Companys
shares of Class B common stock could be subject to adverse tax consequences.
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If the Company is considered to be a passive foreign investment company for U.S. federal
income tax purposes, U.S. persons that own the Companys shares of Class B common stock could be
subject to adverse tax consequences.
  Risks Relating to the Regulation of Our Industry
 Changes in governmental regulations, or the application thereof, may adversely affect our business,
financial condition and results of operations.
 Regulation
 
    
    initiatives to provide greater access to coverage for uninsured and under-insured
populations without adequate funding to health plan or to be funded through taxes or other
negative financial levy on health plans;
    
    payments to health plans that are tied to achievement of certain quality performance
measures;
    
    other efforts or specific legislative changes to the Medicare of Reform programs,
including changes in the bidding process or other means of materially reducing premiums;
    
    local government regulatory changes;
    
    increased government enforcement of or changes in intermpretation or application of
fraud and abuse laws; and
    
    regulations that increase the operational burden on health plans or laws that
increase a health plans exposure to liabilities, including efforts to expand the tort
liability of health plans.
   Page 42




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We may be subject to government audits or regulatory proceedings or investigative,actions,
which may find that our policies, procedures, practices or contracts are not compliant with or
found to be in violation of applicable healthcare regulations.
   
    
    recoupment of amounts we have been paid pursuant to our government contracts;
    
    mandated changes in our business practices;
    
    imposition of significant civil or criminal penalties, fines or other sanctions on us
and/or our key employees;
    
    loss of our right to participate in Medicare, the Reform or other federal or local
programs; damage to our reputation;
    
    increased difficulty in marketing our products and services;
    
    inability to obtain approval for future services or geographic expansions; and
    
    loss of one or more of our licenses to act as an insurance company, preferred
provider or managed care organization or other licensed entity or to otherwise provide a
service.
  As a Medicare Advantage program participant, we are subject to complex regulations. If we
fail to comply with these regulations, we may be exposed to criminal sanctions and significant
civil penalties, and our Medicare Advantage contracts may be terminated or our operations may be
required to change in a manner that has a material impact on our business.
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The revised rate calculation system for Medicare Advantage and the payment system for the
Medicare Part D established by the MMA could reduce our profitability.
 Medicare
Selecto Medicare Optimo
    CMSs risk adjustment payment system and budget neutrality factors make our revenue and
profitability difficult to predict and could result in material retroactive adjustments to our
results of operations.
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If during the open enrollment season our Medicare Advantage members enroll in another Medicare
Advantage plan, they will be automatically disenrolled from our plan, possibly without our
immediate knowledge.
  If we are deemed to have violated the insurance company change of control statutes in Puerto
Rico, we may suffer adverse consequences.
   Our insurance subsidiaries are subject to minimum capital requirements. Our failure to meet
these standards could subject us to regulatory actions.
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We are required to comply with laws governing the transmission, security and privacy of health
information.
   Puerto Rico insurance laws and regulations and provisions of our articles and bylaws could
delay, deter or prevent a takeover attempt that shareholders might consider to be in their best
interests and may make it more difficult to replace members of our board of directors and have the
effect of entrenching management.
    
    
    permit our board of directors to issue one or more series of preferred stock;
    
    divide our board of directors into three classes serving staggered three-year terms;
    
    limit the ability of shareholders to remove directors;
    
    impose restrictions on shareholders ability to fill vacancies on our board of
directors;
    
    impose advance notice requirements for shareholder proposals and nominations of
directors to be considered at meetings of shareholders; and
    
    impose restrictions on shareholders ability to amend our articles and bylaws.
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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
    
 Item 3. Legal Proceedings
    Hau et al Litigation (formerly known as Jordan et al)
  Page 47




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Dentists Association Litigation
     Colón Litigation
  Puerto Rico Center for Municipal Revenue Collection
  Page 48




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Claims by Heirs of Former Shareholders
  
 Item 4. Removed and Reserved
 
 Part II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 Market Information
   High
    
    Low2008First quarter
    
    $
    21.69
    
    
    $
    16.83Second quarter
    
    
    19.94
    
    
    
    16.34Third quarter
    
    
    18.05
    
    
    
    15.19Fourth quarter
    
    
    16.43
    
    
    
    6.552009First quarter
    
    $
    15.00
    
    
    $
    10.67Second quarter
    
    
    16.23
    
    
    
    12.06Third quarter
    
    
    17.84
    
    
    
    14.50Fourth quarter
    
    
    18.88
    
    
    
    15.52
  Holders
  Page 49




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Dividends
    Securities Authorized for Issuance Under Equity Compensation Plan
  Recent Sales of Unregistered Securities
  Purchases of Equity Securities by the Issuer
  Approximate DollarValue of SharesTotal Number of
    
    that May Yet BeShares Purchased as
    
    Purchased Under theTotal Number
    
    Average Price Paid
    
    Part of Publicly
    
    Programs(Dollar amounts in millions, except per share data)
    
    of Shares Purchased
    
    per Share
    
    Announced
Programs1
    
    (in millions)November 1, 2009 to
November 30,
2009
    
    
    235,000
    
    
    $
    16.30
    
    
    
    235,000
    
    
    $
    0.3December 1, 2009 to
December 31,
2009
    
    
    15,672
    
    
    
    16.27
    
    
    
    15,672
    
    
    
    0.0
 
 1
    
    In October 2008, the Board of Directors authorized a $40.0 million share repurchase
program, which commenced on December 8, 2008. This repurchase program was completed during
December 2009. Performance Graph
  Page 50




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Period EndingIndex
    
    12/07/07
    
    12/31/07
    
    06/30/08
    
    12/31/08
    
    06/30/09
    
    12/31/09Triple-S Management Corporation
    
    
    100.00
    
    
    
    133.40
    
    
    
    107.92
    
    
    
    75.91
    
    
    
    102.90
    
    
    
    116.17S&P 500
    
    
    100.00
    
    
    
    97.59
    
    
    
    85.07
    
    
    
    60.03
    
    
    
    61.10
    
    
    
    74.11Morgan Stanley Healthcare Payor Index
    
    
    100.00
    
    
    
    100.38
    
    
    
    58.66
    
    
    
    45.37
    
    
    
    52.42
    
    
    
    69.59
 Page 51




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##### Table of Contents



Item 6. Selected Financial Data
 Statement of Earnings Data
 (Dollar amounts in millions, except per share data)Years ended December 31,
    
    2009
    
    2008
    
    2007
    
    2006 (1)
    
    2005Premiums earned, net
    
    $
    1,876.1
    
    
    $
    1,695.5
    
    
    $
    1,483.6
    
    
    $
    1,511.6
    
    
    $
    1,380.2Administrative service fees
    
    
    48.6
    
    
    
    19.2
    
    
    
    14.0
    
    
    
    14.1
    
    
    
    14.4Net investment income
    
    
    52.1
    
    
    
    56.2
    
    
    
    47.2
    
    
    
    42.7
    
    
    
    29.1Total operating revenues
    
    
    1,976.8
    
    
    
    1,770.9
    
    
    
    1,544.8
    
    
    
    1,568.4
    
    
    
    1,423.7Net realized investments gains (losses)
    
    
    0.6
    
    
    
    (13.9
    )
    
    
    5.9
    
    
    
    0.8
    
    
    
    7.2Net unrealized investment gain (loss) on
trading securities
    
    
    10.5
    
    
    
    (21.1
    )
    
    
    (4.1
    )
    
    
    7.7
    
    
    
    (4.7
    )Other income (expense), net
    
    
    1.3
    
    
    
    (2.5
    )
    
    
    3.2
    
    
    
    2.3
    
    
    
    3.7Total revenues
    
    
    1,989.2
    
    
    
    1,733.4
    
    
    
    1,549.8
    
    
    
    1,579.2
    
    
    
    1,429.9Benefits and expenses:Claims incurred
    
    
    1,612.8
    
    
    
    1,434.9
    
    
    
    1,223.8
    
    
    
    1,259.0
    
    
    
    1,208.3Operating expenses
    
    
    279.4
    
    
    
    251.9
    
    
    
    237.5
    
    
    
    236.1
    
    
    
    181.7Total operating costs
    
    
    1,892.2
    
    
    
    1,686.8
    
    
    
    1,461.3
    
    
    
    1,495.1
    
    
    
    1,390.0Interest expense
    
    
    13.3
    
    
    
    14.7
    
    
    
    15.9
    
    
    
    16.6
    
    
    
    7.6Total benefits and expenses
    
    
    1,905.5
    
    
    
    1,701.5
    
    
    
    1,477.2
    
    
    
    1,511.7
    
    
    
    1,397.6Income before taxes
    
    
    83.7
    
    
    
    31.9
    
    
    
    72.6
    
    
    
    67.5
    
    
    
    32.3Income tax expense
    
    
    14.9
    
    
    
    7.1
    
    
    
    14.1
    
    
    
    13.0
    
    
    
    3.9Net income
    
    $
    68.8
    
    
    $
    24.8
    
    
    $
    58.5
    
    
    $
    54.5
    
    
    $
    28.4Basic net income per share (2):
    
    $
    2.33
    
    
    $
    0.77
    
    
    $
    2.15
    
    
    $
    2.04
    
    
    $
    1.06Diluted net income per share:
    
    $
    2.33
    
    
    $
    0.77
    
    
    $
    2.15
    
    
    $
    2.04
    
    
    $
    1.06Dividend declared per common
share (3):
    
    $
    
    
    
    $
    
    
    
    $
    0.82
    
    
    $
    0.23
    
    
    $
    
 Balance Sheet Data
 December 31,
    
    2009
    
    2008
    
    2007
    
    2006 (1)
    
    2005Cash and cash equivalents
    
    $
    40.4
    
    
    $
    46.1
    
    
    $
    240.2
    
    
    $
    81.6
    
    
    $
    49.0Total assets
    
    $
    1,648.7
    
    
    $
    1,559.2
    
    
    $
    1,659.5
    
    
    $
    1,345.5
    
    
    $
    1,137.5Long-term borrowings
    
    $
    167.7
    
    
    $
    169.3
    
    
    $
    170.9
    
    
    $
    183.1
    
    
    $
    150.6Total stockholders equity
    
    $
    537.8
    
    
    $
    485.9
    
    
    $
    482.5
    
    
    $
    342.6
    
    
    $
    308.7
 Page 52




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##### Table of Contents



Additional Managed Care Data (4)
 Years ended December 31,
    
    2009
    
    2008
    
    2007
    
    2006 (1)
    
    2005Medical loss ratio
    
    
    90.0
    %
    
    
    88.9
    %
    
    
    87.0
    %
    
    
    87.6
    %
    
    
    90.3
    %Operating expense ratio
    
    
    10.6
    %
    
    
    10.5
    %
    
    
    11.2
    %
    
    
    11.5
    %
    
    
    10.8
    %Medical membership (period end)
    
    
    1,347,033
    
    
    
    1,195,450
    
    
    
    977,190
    
    
    
    979,506
    
    
    
    1,252,649
 
 (1)
    
    On January 31, 2006 we completed the acquisition of GA Life (now TSV). The results of
operations and financial condition of GA Life are included in this table for the period
following the effective date of the acquisition.(2)
    
    Further details of the calculation of basic earnings per share are set forth in notes 2 and
22 of the audited financial consolidated financial statements for the years ended December 31,
2009, 2008 and 2007.(3)
    
    Shareowners holding qualifying shares were excluded from dividend payment. See note 19 of
the audited financial consolidated financial statements for the years ended December 31, 2009,
2008 and 2007.(4)
    
    Does not reflect inter-segment eliminations. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Overview
     Page 53




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##### Table of Contents



Years ended December 31,(Dollar amounts in millions)
    
    2009
    
    2008
    
    
    2007Premiums earned, net:Managed care
    
    $
    1,684.1
    
    
    $
    1,513.0
    
    
    $
    1,301.8Life insurance
    
    
    100.1
    
    
    
    92.8
    
    
    
    88.9Property and casualty insurance
    
    
    96.2
    
    
    
    93.8
    
    
    
    96.9Intersegment premiums earned
    
    
    (4.3
    )
    
    
    (4.1
    )
    
    
    (4.0
    )Consolidated premiums earned, net
    
    $
    1,876.1
    
    
    $
    1,695.5
    
    
    $
    1,483.6Administrative service fees:Managed care
    
    $
    51.3
    
    
    $
    22.5
    
    
    $
    17.2Intersegment administrative service fees
    
    
    (2.7
    )
    
    
    (3.3
    )
    
    
    (3.2
    )Consolidated administrative service fees
    
    $
    48.6
    
    
    $
    19.2
    
    
    $
    14.0Operating income:Managed care
    
    $
    57.2
    
    
    $
    52.6
    
    
    $
    57.4Life insurance
    
    
    14.6
    
    
    
    12.5
    
    
    
    10.7Property and casualty insurance
    
    
    8.8
    
    
    
    13.1
    
    
    
    10.7Intersegment and other
    
    
    4.0
    
    
    
    5.9
    
    
    
    4.7Consolidated operating income
    
    $
    84.6
    
    
    $
    84.1
    
    
    $
    83.5
 Results of Operations
 Revenue
 General.
 Managed Care Premium Revenue.
  Page 54




---



##### Table of Contents



Administrative Service Fees.
 Other Premium Revenue.
 Investment Income and Other Income.
 Expenses
 Claims Incurred.
  Operating Expenses.
 Page 55




---



##### Table of Contents



Membership
    As of December 31,2009
    
    2008
    
    2007Commercial (1)
    
    
    737,286
    
    
    
    592,723
    
    
    
    574,251Reform(2)
    
    
    540,142
    
    
    
    527,447
    
    
    
    353,694Medicare (3)
    
    
    69,605
    
    
    
    75,280
    
    
    
    49,245Total
    
    
    1,347,033
    
    
    
    1,195,450
    
    
    
    977,190
 
 (1)
    
    Commercial membership includes corporate accounts, self-funded employers, individual
accounts, Medicare Supplement, 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. Page 56




---



##### Table of Contents



Consolidated Operating Results
  (Dollar amounts in millions)
    
    2009
    
    
    2008
    
    
    2007Years ended December 31,Revenues:Premiums earned, net
    
    $
    1,876.1
    
    
    $
    1,695.5
    
    
    $
    1,483.6Administrative service fees
    
    
    48.6
    
    
    
    19.2
    
    
    
    14.0Net investment income
    
    
    52.1
    
    
    
    56.2
    
    
    
    47.2Total operating revenues
    
    
    1,976.8
    
    
    
    1,770.9
    
    
    
    1,544.8Net realized investment gains (losses)
    
    
    0.6
    
    
    
    (13.9
    )
    
    
    5.9Net unrealized investment gain (loss) on trading securities
    
    
    10.5
    
    
    
    (21.1
    )
    
    
    (4.1
    )Other income (expense), net
    
    
    1.3
    
    
    
    (2.5
    )
    
    
    3.2Total revenues
    
    
    1,989.2
    
    
    
    1,733.4
    
    
    
    1,549.8Benefits and expenses:Claims incurred
    
    
    1,612.8
    
    
    
    1,434.9
    
    
    
    1,223.8Operating expenses
    
    
    279.4
    
    
    
    251.9
    
    
    
    237.5Total operating costs
    
    
    1,892.2
    
    
    
    1,686.8
    
    
    
    1,461.3Interest expense
    
    
    13.3
    
    
    
    14.7
    
    
    
    15.9Total benefits and expenses
    
    
    1,905.5
    
    
    
    1,701.5
    
    
    
    1,477.2Income before taxes
    
    
    83.7
    
    
    
    31.9
    
    
    
    72.6Income tax expense
    
    
    14.9
    
    
    
    7.1
    
    
    
    14.1Net income
    
    $
    68.8
    
    
    $
    24.8
    
    
    $
    58.5
 Year ended December 31, 2009 compared with the year ended December 31, 2008
 Operating Revenues
    Net Realized Investment Gains
  Net Unrealized Gains on Trading Securities and Other Income, Net
  Page 57




---



##### Table of Contents



Claims Incurred
  Operating Expenses
  Income tax expense
  Year ended December 31, 2008 compared with the year ended December 31, 2007
 Operating Revenues
    Net Realized Investment Losses
  Page 58




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Net Unrealized Loss on Trading Securities and Other Income (Expense), Net
  Claims Incurred
  Operating Expenses
  Income tax expense
  Page 59




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##### Table of Contents



Managed Care Operating Results
  (Dollar amounts in millions)
    
    2009
    
    
    2008
    
    
    2007Operating revenues:Medical premiums earned, net:Commercial
    
    $
    822.1
    
    
    $
    734.2
    
    
    $
    718.7Reform
    
    
    348.1
    
    
    
    340.1
    
    
    
    327.5Medicare
    
    
    513.9
    
    
    
    438.7
    
    
    
    255.6Medical premiums earned, net
    
    
    1,684.1
    
    
    
    1,513.0
    
    
    
    1,301.8Administrative service fees
    
    
    51.3
    
    
    
    22.5
    
    
    
    17.2Net investment income
    
    
    21.6
    
    
    
    23.1
    
    
    
    19.7Total operating revenues
    
    
    1,757.0
    
    
    
    1,558.6
    
    
    
    1,338.7Medical operating costs:Medical claims incurred
    
    
    1,515.2
    
    
    
    1,345.4
    
    
    
    1,133.2Medical operating expenses
    
    
    184.6
    
    
    
    160.6
    
    
    
    148.1Total medical operating costs
    
    
    1,699.8
    
    
    
    1,506.0
    
    
    
    1,281.3Medical operating income
    
    $
    57.2
    
    
    $
    52.6
    
    
    $
    57.4Additional data:Member months enrollment:Commercial:Fully-insured
    
    
    5,421,586
    
    
    
    4,947,854
    
    
    
    4,983,980Self-funded
    
    
    2,726,036
    
    
    
    2,049,140
    
    
    
    1,930,850Total Commercial member months
    
    
    8,147,622
    
    
    
    6,996,994
    
    
    
    6,914,830Reform:Fully-insured
    
    
    4,016,332
    
    
    
    4,101,905
    
    
    
    4,262,248Self-funded
    
    
    2,321,144
    
    
    
    376,975
    
    
    
    Total Reform member months
    
    
    6,337,476
    
    
    
    4,478,880
    
    
    
    4,262,248Medicare:Medicare Advantange
    
    
    742,666
    
    
    
    727,274
    
    
    
    416,512Stand-alone PDP
    
    
    117,700
    
    
    
    127,658
    
    
    
    137,528Total Medicare member months
    
    
    860,366
    
    
    
    854,932
    
    
    
    554,040Total member months
    
    
    15,345,464
    
    
    
    12,330,806
    
    
    
    11,731,118Medical loss ratio
    
    
    90.0
    %
    
    
    88.9
    %
    
    
    87.0
    %Operating expense ratio
    
    
    10.6
    %
    
    
    10.5
    %
    
    
    11.2
    %
 Year ended December 31, 2009 compared with the year ended December 31, 2008
 Medical Operating Revenues
  
    
    Medical premiums generated by the Commercial business increased by $87.9 million, or
12.0%, to $822.1 million during the year ended December 31, 2009. This fluctuation is
primarily the result of an increase in member months enrollment of 473,732, or 9.6%, and
higher average premium rates per member of
 Page 60




---



##### Table of Contents



approximately 2.9%. Increase in member months
was mainly attributed to new members acquired from LCA effective July 1, 2009, which
represented 49.1% of the increase in member months enrollment during this period, and to
new groups acquired during the period.
    
    Medical premiums generated by the Medicare business increased during the year ended
December 31, 2009 by $75.2 million, or 17.1%, to $513.9 million, primarily due to higher
average premium rates by approximately 11% and an increase in member months enrollment of
5,434 or 0.6%. The fluctuation in member months is the net result of an increase of
15,392, or 2.1%, in the membership of our Medicare Advantage products and a decrease of
9,958, or 7.8%, in the membership of our PDP product. In addition, the premiums for the
year ended December 31, 2009 include the net effect of approximately $8.7 million in
adjustments related to CMS final risk score adjustment for 2008. The premiums for the year
ended December 31, 2008 include the net effect of approximately $1.4 million related to CMS
final risk score adjustments for 2007.
    
    Medical premiums earned in the Reform business increased by $8.0 million, or 2.4%, to
$348.1 million during the year ended December 31, 2009. This fluctuation is due to an
increase in premium rates, effective July 1, 2008, of approximately 10%, offset in part by
a lower member months enrollment in the Reforms fully-insured membership by 85,573, or
2.1% and premium adjustments of approximately $8.3 million to provide for unresolved
reconciling items with the government of Puerto Rico.
  Medical Claims Incurred
  
    
    The medical claims incurred of the Commercial business increased by $99.3 million
during the 2009 period and its MLR increased by 2.8 percentage points during the year ended
December 31, 2009. The increase in claims was partially attributed to the increase in
members. The increase in the MLR is primarily due to the effect of prior period reserve
developments in the 2009 and 2008 periods and higher utilization trends. Excluding the
effect of prior period reserve developments, the MLR increased by 1.6 percentage points.
This variance in the MLR is due to a higher than expected claims experience in the local
government employees policy, mainly in the utilization of pharmacy and in-patient
benefits, and the effect of the AH1N1 flu of approximately $4.4 million, or 0.5 percentage
points.
    
    The medical claims incurred of the Medicare business increased by $59.2 million during
the 2009 period primarily due to the higher member months enrollment of this business. The
MLR for the year ended December 31, 2009 was 88.1%, 1.6 percentage points lower than 2008.
The reduction in MLR is attributed to the effect of risk score premium adjustments recorded
during this period, as well as premium rate increases and lower utilization trends.
Excluding the effect of prior period reserve developments in the 2009 and 2008 periods, as
well as premium adjustments, the MLR decreased by 4.7 percentage points, mostly due to the
effect of lower medical costs resulting from an improvement in utilization trends and
premium rate increases effective January 1, 2009.
    
    The medical claims incurred of the Reform business increased by $11.3 million and its
MLR increased by 1.2 percentage points during the year ended December 31, 2009. The
increase in MLR is primarily due to reserve development in the 2009 and 2008 periods and
the effect of the premium adjustments to provide for unresolved reconciling items with the
government of Puerto Rico. Such increase is also a result of the extension during 2009 of
the current Reform contracts to all the participating insurance companies without the
re-negotiation of premium rates. In addition, during 2008 we recognized a retroactive
adjustment due to a reduction in capitation rates. Excluding the effect of these items in
the 2009 and 2008 periods the MLR increased by 1.9 percentage points.
 Page 61




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##### Table of Contents



Medical Operating Expenses
  Year ended December 31, 2008 compared with the year ended December 31, 2007
 Medical Operating Revenues
  
    
    Medical premiums generated by the Medicare business increased by $183.1 million, or
71.6%, to $438.7 million, primarily due to an increase in member months enrollment of
300,892, or 54.3%, and a change in the mix of products. The increase in member months is
the net result of an increase of 310,762, or 74.6%, in the membership of our Medicare
Advantage products, mainly in dual eligible members, and a decrease of 9,870, or 7.2%, in
the membership of our PDP product.
    
    Medical premiums generated by the Commercial business increased by $15.5 million, or
2.2%, to $734.2 million during 2008. This fluctuation is primarily the net result of an
increase in the average premium rates of approximately 4.4%, offset in part by a decrease
in fully-insured member months enrollment of 36,126 or 0.7%.
    
    Medical premiums earned of the Reform business increased by $12.6 million, or 3.8%, to
$340.1 million during 2008. This fluctuation is primarily due to the increases in premium
rates of approximately 10% effective on July 1, 2008 and of 8.6% during 2007, partially
offset by a decrease in member months enrollment of 160,343, or 3.8%.
  Medical Claims Incurred
  
    
    The medical claims incurred of the Medicare business increased by $190.0 million during
the 2008 period mainly as the result of the increase in member months and a higher MLR by
10.0 percentage points. The higher MLR is in part due to the effect of prior period
reserve developments and to higher utilization trends. Excluding the effect of prior
period reserve developments in the 2007 and 2008 periods, the MLR increased by 7.1
percentage points. The increase in utilization trends is primarily the result of higher
utilization in outpatient visits and drug benefits for the dual eligible product. The
higher MLR is also the result of a change in enrollment mix between dual and non-dual
eligible members within the business. Member months during the year ended December 31, 2008
have a higher concentration of dual eligible members than the prior year. Dual eligible
members have higher utilization and MLR than non-dual eligible members.
    
    The medical claims incurred of the Reform business increased by $16.9 million during
the 2008 period and its MLR increased by 1.6 percentage points during the year ended
December 31, 2008. The higher MLR is primarily the effect of prior period reserve
developments and the retroactive premium rate increase
 Page 62




---



##### Table of Contents



received by this business during
June 2007 amounting to $2.8 million corresponding to 2006. Excluding the effect of prior
period reserve developments in the 2007 and 2008 periods and considering the effect of this
retroactive premium rate increase, the MLR actually decreased by 1.5 percentage points
during the 2008 period.
    
    The medical claims incurred of the Commercial business increased by $5.3 million during
the 2008 period and its MLR decreased by 1.2 percentage points during the year ended
December 31, 2008. The lower MLR is primarily the result of the re-pricing or termination
of less profitable groups, cost containment initiatives and lower utilization trends in
drug and medical services.
 Medical Operating Expenses
  Life Insurance Operating Results
 (Dollar amounts in millions)
    
    2009
    
    
    2008
    
    
    2007Years ended December 31,Operating revenues:Premiums earned, netPremiums earned, net
    
    $
    106.2
    
    
    $
    100.1
    
    
    $
    97.4Premiums earned ceded
    
    
    (6.1
    )
    
    
    (7.6
    )
    
    
    (8.8
    )Net premiums earned
    
    
    100.1
    
    
    
    92.5
    
    
    
    88.6Commission income on reinsurance
    
    
    
    
    
    
    0.3
    
    
    
    0.3Premiums earned, net
    
    
    100.1
    
    
    
    92.8
    
    
    
    88.9Net investment income
    
    
    16.8
    
    
    
    16.5
    
    
    
    15.0Total operating revenues
    
    
    116.9
    
    
    
    109.3
    
    
    
    103.9Operating costs:Policy benefits and claims incurred
    
    
    50.3
    
    
    
    47.4
    
    
    
    45.7Underwriting and other expenses
    
    
    52.0
    
    
    
    49.4
    
    
    
    47.5Total operating costs
    
    
    102.3
    
    
    
    96.8
    
    
    
    93.2Operating income
    
    $
    14.6
    
    
    $
    12.5
    
    
    $
    10.7Additional data:Loss ratio
    
    
    50.2
    %
    
    
    51.1
    %
    
    
    51.4
    %Expense ratio
    
    
    51.9
    %
    
    
    53.2
    %
    
    
    53.4
    %
 Year ended December 31, 2009 compared with the year ended December 31, 2008
 Operating Revenues
  Policy Benefits and Claims Incurred
  Page 63




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##### Table of Contents



Underwriting and Other Expenses
  Year ended December 31, 2008 compared with the year ended December 31, 2007
 Operating Revenues
  Policy Benefits and Claims Incurred
  Underwriting and Other Expenses
  Property and Casualty Insurance Operating Results
 (Dollar amounts in millions)
    
    2009
    
    
    2008
    
    
    2007Years ended December 31,Operating revenues:Premiums earned, net:Premiums written
    
    $
    163.3
    
    
    $
    168.0
    
    
    $
    170.9Premiums ceded
    
    
    (67.5
    )
    
    
    (72.1
    )
    
    
    (69.1
    )Change in unearned premiums
    
    
    0.4
    
    
    
    (2.1
    )
    
    
    (4.9
    )Premiums earned, net
    
    
    96.2
    
    
    
    93.8
    
    
    
    96.9Net investment income
    
    
    11.7
    
    
    
    12.5
    
    
    
    11.8Total operating revenues
    
    
    107.9
    
    
    
    106.3
    
    
    
    108.7Operating costs:Claims incurred
    
    
    47.3
    
    
    
    42.1
    
    
    
    44.9Underwriting and other operating expenses
    
    
    51.8
    
    
    
    51.1
    
    
    
    53.1Total operating costs
    
    
    99.1
    
    
    
    93.2
    
    
    
    98.0Operating income
    
    $
    8.8
    
    
    $
    13.1
    
    
    $
    10.7Additional data:Loss ratio
    
    
    49.2
    %
    
    
    44.9
    %
    
    
    46.3
    %Expense ratio
    
    
    53.8
    %
    
    
    54.5
    %
    
    
    54.8
    %Combined ratio
    
    
    103.0
    %
    
    
    99.4
    %
    
    
    101.1
    %
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Year ended December 31, 2009 compared with the year ended December 31, 2008
 Operating Revenues
    Claims Incurred
  Underwriting and Other Expenses
  Year ended December 31, 2008 compared with the year ended December 31, 2007
 Operating Revenues
    Claims Incurred
  Page 65




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##### Table of Contents



Underwriting and Other Operating Expenses
  Liquidity and Capital Resources
 Cash Flows
  (dollar amounts in millions)
    
    2009
    
    
    2008
    
    
    2007Years ended December 31,Sources of cash:Net cash provided by operating activities
    
    $
    72.6
    
    
    $
    
    
    
    $
    115.9Net proceeds from investments sold
    
    
    
    
    
    
    
    
    
    
    1.0Proceeds from annuity contracts
    
    
    4.3
    
    
    
    8.0
    
    
    
    6.1Net proceeds from initial public offering
    
    
    
    
    
    
    
    
    
    
    70.3Other
    
    
    
    
    
    
    18.3
    
    
    
    Total sources of cash
    
    
    76.9
    
    
    
    26.3
    
    
    
    193.3Uses of cash:Net cash used in operating activities
    
    
    
    
    
    
    (3.0
    )
    
    
    Net purchases of investment securities
    
    
    (17.3
    )
    
    
    (178.6
    )
    
    
    Capital expenditures
    
    
    (18.7
    )
    
    
    (22.4
    )
    
    
    (9.4
    )Dividends
    
    
    
    
    
    
    
    
    
    
    (2.4
    )Payments of long-term borrowings
    
    
    (1.6
    )
    
    
    (1.6
    )
    
    
    (12.1
    )Surrenders of annuity contracts
    
    
    (7.1
    )
    
    
    (7.1
    )
    
    
    (7.4
    )Repurchase and retirement of common stock
    
    
    (32.3
    )
    
    
    (7.6
    )
    
    
    Other
    
    
    (5.6
    )
    
    
    
    
    
    
    (3.4
    )Total uses of cash
    
    
    (82.6
    )
    
    
    (220.3
    )
    
    
    (34.7
    )Net (decrease) increase in cash and cash equivalents
    
    $
    (5.7
    )
    
    $
    (194.0
    )
    
    $
    158.6
 Year ended December 31, 2009 compared to year ended December 31, 2008
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Year ended December 31, 2008 compared to year ended December 31, 2007
        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). The 6.7% notes were privately placed to
various institutional accredited investors. The notes pay interest each month until the
principal becomes due and payable. These notes can
be redeemed after five years at par, in whole or in part, as determined by us. The proceeds
obtained from this issuance were used to finance the acquisition of 100% of the common stock
of GA Life effective January 31, 2006.
    
    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). The 6.6% notes were privately placed to various
institutional accredited investors. The notes pay interest each month until the principal
becomes due and payable. These notes can
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be redeemed after five years at par, in whole or
in part, as determined by us. The proceeds obtained from this issuance were used to pay
the ceding commission to GA Life on the effective date of the coinsurance funds withheld
reinsurance agreement.
    
    On September 30, 2004, TSS issued and sold $50.0 million of its 6.3% senior unsecured
notes due September 2019 (the 6.3% notes). The 6.3% notes are unconditionally guaranteed
as to payment of principal and interest by us. The notes were privately placed to various
institutional accredited investors. The notes pay interest semiannually until the
principal becomes due and payable. These notes can be prepaid after five years at par, in
whole or in part, as determined by TSS. Most of the proceeds obtained from this issuance
were used to repay $37.0 million of short-term borrowings. The remaining proceeds were
used for general business purposes.
      Planned Capital Expenditures
  Contractual Obligations
   
    
    Unearned premiums  This amount accounts for the premiums collected prior to the end of
coverage period and does not represent a future cash outflow. As of December 31, 2009, we
had $108.3 million in unearned premiums.
    
    Policyholder deposits  The cash outflows related to these instruments are not included
because they do not have defined maturities, such that the timing of payments and
withdrawals is uncertain. There are currently
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no significant policyholder deposits in
paying status. As of December 31, 2009, our policyholder deposits had a carrying amount of
$47.6 million.
    
    Other long-term liabilities  Due to the indeterminate nature of their cash outflows,
$57.3 million of other long-term liabilities are not reflected in the following table,
including $41.0 million of liability for pension benefits and $13.0 million in liabilities
to the Federal Employees Health Benefits Plan Program.
 Contractual obligations by year(Dollar amounts in millions)
    
    Total
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    ThereafterLong-term borrowings (1)
    
    $
    270.0
    
    
    $
    11.4
    
    
    $
    11.4
    
    
    $
    11.3
    
    
    $
    11.3
    
    
    $
    11.3
    
    
    $
    213.3Operating leases
    
    
    20.1
    
    
    
    4.6
    
    
    
    3.3
    
    
    
    2.2
    
    
    
    1.7
    
    
    
    1.6
    
    
    
    6.7Purchase obligations (2)
    
    
    148.8
    
    
    
    146.6
    
    
    
    1.6
    
    
    
    0.4
    
    
    
    0.2
    
    
    
    
    
    
    
    Claim liabilities (3)
    
    
    360.4
    
    
    
    241.4
    
    
    
    68.6
    
    
    
    14.5
    
    
    
    13.2
    
    
    
    6.7
    
    
    
    16.0Estimated obligation for future policy benefits (4)
    
    
    1,038.3
    
    
    
    77.3
    
    
    
    67.0
    
    
    
    62.3
    
    
    
    58.9
    
    
    
    55.9
    
    
    
    716.9$
    1,837.6
    
    
    $
    481.3
    
    
    $
    151.9
    
    
    $
    90.7
    
    
    $
    85.3
    
    
    $
    75.5
    
    
    $
    952.9
 (1)
    
    As of December 31, 2009, our long-term borrowings consist of our managed care subsidiarys
6.3% senior unsecured notes payable (which are unconditionally guaranteed as to payment of
principal, premium, if any, and interest by us), our 6.6% senior unsecured notes payable, our
6.7% senior unsecured notes payable, and a loan payable to a commercial bank. Total
contractual obligations for long-term borrowings include the current maturities of long term
debt. For the 6.3%, 6.6% and 6.7% senior unsecured notes, scheduled interest payments were
included in the total contractual obligations for long-term borrowings until the maturity
dates of the notes in 2019, 2020, and 2021, respectively. We may redeem the notes starting
five years after issuance; however no redemption is considered in this schedule. The interest
payments related to our loan payable were estimated using the interest rate applicable as of
December 31, 2009. The actual amount of interest payments of the loans payable will differ
from the amount included in this schedule due to the loans variable interest rate structure.
See the Financing and Financing Capacity section for additional information regarding our
long-term borrowings.(2)
    
    Purchase obligations represent payments required by us under material agreements to purchase
goods or services that are enforceable and legally binding and where all significant terms are
specified, including: quantities to be purchased, price provisions and the timing of the
transaction. Other purchase orders made in the ordinary course of business for which we are
not liable are excluded from the table above. Estimated pension plan contributions amounting
to $7.0 million were included within the total purchase obligations. However, this amount is
an estimate which may be subject to change in view of the fact that contribution decisions are
affected by various factors such as market performance, regulatory and legal requirements and
plan funding policy.(3)
    
    Claim liabilities represent the amount of our claims processed and incomplete as well as an
estimate of the amount of incurred but not reported claims and loss-adjustment expenses. This
amount does not include an estimate of claims to be incurred subsequent to December 31, 2009.
The expected claims payments are an estimate and may differ materially from the actual claims
payments made by us in the future. Also, claim liabilities are presented gross, and thus do
not reflect the effects of reinsurance under which $30.7 million of reserves had been ceded at
December 31, 2009.(4)
    
    Our life insurance segment establishes, and carries as liabilities, actuarially determined
amounts that are calculated to meet its policy obligations when a policy matures or
surrenders, an insured dies or becomes disabled or upon the occurrence of other covered
events. A significant portion of the estimated obligation for future policy benefits to be
paid included in this table considers contracts under which we are currently not making
payments and will not make payments until the occurrence of an insurable event not under our
control, such as death, illness, or the surrender of a policy. We have estimated the timing
of the cash flows related to these contracts based on historical experience as well as
expectations of future payment patterns. The amounts presented in the table above represent
the estimated cash payments for benefits under such contracts based on assumptions related to
the receipt of future premiums and assumptions related to mortality, morbidity, policy lapses,
renewals, retirements, disability incidence and other contingent events as appropriate for the
respective product type. All estimated cash payments included in this table are not
discounted to present value nor do they Page 69




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take into account estimated future premiums on
policies in-force as of December 31, 2009 and are gross of any reinsurance recoverable. The
$1,038.3 million total estimated cash flows for all years in the table is different from the
liability of future policy benefits of $222.6 million included in our audited consolidated
financial statements principally due to the time value of money. Actual cash payments to
policyholders could differ significantly from the estimated cash payments as presented in this
table due to differences between actual experience and the assumptions used in the estimation
of these payments. Off-Balance Sheet Arrangements
  Restriction on Certain Payments by the Corporations Subsidiaries
      Solvency Regulation
  Other Contingencies
 Legal Proceedings
   Page 70




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Guarantee Associations
    Critical Accounting Estimates
   Page 71




---



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Claim Liabilities
  Property andManaged
    
    
    Life
    
    
    Casualty(Dollar amounts in millions)
    
    Care
    
    
    Insurance
    
    
    Insurance
    
    
    ConsolidatedClaims processed and incomplete (1)
    
    $
    106.0
    
    
    $
    31.6
    
    
    $
    48.5
    
    
    $
    186.1Unreported losses (2)
    
    
    125.6
    
    
    
    8.2
    
    
    
    21.2
    
    
    
    155.0Unpaid loss-adjustment expenses (3)
    
    
    4.8
    
    
    
    0.3
    
    
    
    14.2
    
    
    
    19.3$
    236.4
    
    
    $
    40.1
    
    
    $
    83.9
    
    
    $
    360.4
 (1)
    
    The liability for claims processed and incomplete represents those claims that have been
incurred and reported to us that remain unpaid as of the balance sheet date. This amount
includes claims that have been investigated and adjusted but have not been paid as well as
those reported claims that have not gone through the investigation and adjustment process.(2)
    
    The liability for estimated unreported losses is the amount needed to provide for the
estimated ultimate cost of settling those claims related to insured events that have occurred
but have not been reported to us.(3)
    
    The liability for unpaid loss-adjustment expenses is the amount needed to provide for the
estimated ultimate cost required to investigate and adjust claims related to insured events
that have occurred as of the balance sheet date, whether or not the claims have been reported
to us at that date.   Managed Care Segment
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##### Table of Contents



(Dollar amounts in millions)
 Completion Factor1
    
    Claims Trend Factor2(Decrease) Increase
    
    (Decrease) IncreaseIn unpaid claim
    
    In claims trend
    
    In unpaid claimIn completion factor
    
    liabilities
    
    factor
    
    liabilities(0.6)%
    
    $10.5
    
    (0.75)%
    
    $10.5(0.4)%
    
    7.0
    
    (0.50)%
    
    7.0(0.2)%
    
    3.5
    
    (0.25)%
    
    3.50.2%
    
    (3.5)
    
    0.25%
    
    (3.5)0.4%
    
    (6.9)
    
    0.50%
    
    (7.0)0.6%
    
    (10.4)
    
    0.75%
    
    (10.5)
 
 (1)
    
    Assumes (decrease) increase in the completion factors for the most recent twelve months.(2)
    
    Assumes (decrease) increase in the claims trend factors for the most recent twelve months. Page 73




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(Dollar amounts in millions
    
    2008
    
    
    2007
    
    
    2006Years ended December 31,Total incurred claims:As reported (1)
    
    $
    1,348.9
    
    
    $
    1,156.8
    
    
    $
    1,184.3On a retrospective basis
    
    
    1,352.0
    
    
    
    1,149.2
    
    
    
    1,160.7Variance
    
    $
    (3.1
    )
    
    $
    7.6
    
    
    $
    23.6Variance to total incurred claims as reported
    
    
    -0.2
    %
    
    
    0.7
    %
    
    
    2.0
    %
 (1)
    
    Includes total claims incurred less adjustments for prior year reserve development.   
    
    Through the management of our cash flows and investment portfolio.
    
    We have the ability to increase the premium rates throughout the year in the monthly
renewal process, when renegotiating the premiums for the following contract year of each
group as they become due. We consider the actual claims trend of each group when
determining the premium rates for the following contract year.
    
    We have available short-term borrowing facilities that from time to time address
differences between cash receipts and disbursements.
  Life Insurance Segment
   Page 74




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Property and Casualty Insurance Segment
       Page 75




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Liability for Future Policy Benefits
    Deferred Policy Acquisition Costs and Value of Business Acquired
    Page 76




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Impairment of Investments
   
    
    Identification and evaluation of securities that have possible indications of
other-than-temporary impairment, which includes an analysis of all investments with gross
unrealized investments losses that represent 20% or more of cost.
    
    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 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.
   Page 77




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##### Table of Contents



Allowance for Doubtful Receivables
    Other Significant Accounting Policies
  Recently Issued Accounting Standards
   Page 78




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Page 79




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  Market Risk Exposure
        
    
    the market risk information is limited by the assumptions and parameters established in
creating the related sensitivity analysis, including the impact of prepayment rates on
mortgages; and
    
    the model assumes that the composition of assets and liabilities remains unchanged
throughout the year.
  Page 80




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##### Table of Contents



Interest Rate Risk
  Equity Price Risk
  Risk Measurement
 Trading Portfolio
  Other than Trading Portfolio
  Interest Rate Risk
  Page 81




---



##### Table of Contents



(Dollar amounts in millions)
 Expected
    
    Amount of
    
    %Change in Interest Rates
    
    Fair Value
    
    Decrease
    
    ChangeDecember 31, 2009:Base Scenario
    
    $
    935.5+100 bp
    
    
    885.4
    
    
    
    (50.1
    )
    
    
    (5.4
    )%+200 bp
    
    
    836.2
    
    
    
    (99.3
    )
    
    
    (10.6
    )%+300 bp
    
    
    786.7
    
    
    
    (148.8
    )
    
    
    (15.9
    )%December 31, 2008:Base Scenario
    
    $
    910.7+100 bp
    
    
    891.0
    
    
    
    (19.7
    )
    
    
    (2.2
    )%+200 bp
    
    
    844.9
    
    
    
    (65.8
    )
    
    
    (7.2
    )%+300 bp
    
    
    787.7
    
    
    
    (123.0
    )
    
    
    (13.5
    )%
  Equity Price Risk
  Other Risk Measurement
    Page 82




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 Financial Statements
  Selected Quarterly Financial Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Managements Report on Internal Control Over Financial Reporting
  Page 83




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##### Table of Contents




    
    pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the consolidated financial statements.
    Changes in Internal Control Over Financial Reporting
  Report of Independent Registered Public Accounting Firm
  
 Item 9B. Other Information
  
 Part III
 
 Item 10. Directors, Executive Officers and Corporate Governance
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Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
  
 Item 15. Exhibits and Financial Statements Schedules
 Financial Statements and Schedules
 Financial Statements
    
    DescriptionF-1
    
    Reports of Independent Registered Public Accounting FirmsF-2
    
    Consolidated Balance Sheets as of December 31, 2009 and 2008F-3
    
    Consolidated Statements of Earnings for the years ended
December 31, 2009, 2008 and 2007F-4
    
    Consolidated Statements of Stockholders Equity and
Comprehensive Income for the years ended December 31, 2009,
2008 and 2007F-5
    
    Consolidated Statements of Cash Flows for the years ended
December 31, 2009, 2008 and 2007F-7
    
    Notes to Consolidated Financial Statements 
December 31, 2009, 2008 and 2007
 Financial Statements
    
    DescriptionSchedulesS-1
    
    Schedule II  Condensed Financial Information of the RegistrantS-2
    
    Schedule III  Supplementary Insurance Information
 Page 85




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##### Table of Contents



Financial Statements
    
    DescriptionSchedulesS-3
    
    Schedule IV  ReinsuranceS-4
    
    Schedule V  Valuation and Qualifying Accounts
  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. 001-33865).3(i)(b)
    
    Amendment to Article Tenth of the Amended and Restated Articles of Incorporation of Triple-S Management Corporation, incorporated by reference to Exhibit 3(i)(b) to TSMs Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 001-33865).3(i)(c)
    
    Articles of Incorporation of Triple-S Management Corporation, as currently in effect, incorporated by reference to Exhibit 3(i)(c) to TSMs Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 001-33865).3(ii)
    
    Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 to TSMs Current Report on Form 8-K filed on October 23, 2007 (File No. 001-33865)).10.1
    
    Agreement between the Puerto Rico Health Insurance Administration and TSS for the provision of health insurance coverage to eligible population in the North and South-West Regions (incorporated herein by reference to Exhibit 10.1 to TSM's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2008 (File No. 001-33865)).10.2
    
    Extension to the agreement between the Puerto Rico Health Insurance Administration and TSS for the provision of health insurance coverage to eligible population in the North and South-West regions (incorporated herein by reference to Exhibit 10.3 of TSM's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2009 (File No. 001-33865)).10.3*
    
    Extension to the agreement between the Puerto Rico Health Insurance Administration and TSS for the provision of health insurance coverage to eligible population in the North and South-West.10.4
    
    Agreement between the Puerto Rico Health Insurance Administration and TSS to act as Third Party Administrator  in the Metro-North Region (incorporated herein by reference to Exhibit 10.17 to TSM's Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 001-33865)).10.5*
    
    Extension to the agreement between the Puerto Rico Health Insurance Administration and TSS. to act as Third Party Administrator  in the Metro-North Region.10.6
    
    Extension to the agreement between the Puerto Rico Health Insurance Administration and TSS for the provision of the wraparound coverage for the Government health insurance dual eligible population (incorporated herein by reference to Exhibit 10.4 of TSM's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2009 (File No. 001-33865)).
 Page 86




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Exhibits
    
    Description10.7
    
    Federal Employees Health Benefits Contract (incorporated herein by reference to Exhibit 10.5 to TSMs General Form of Registration of Securities on Form 10 (File No. 001-33865)).10.8
    
    Credit Agreement with FirstBank Puerto Rico in the amount of $41,000,000 (incorporated herein by reference to Exhibit 10.6 to TSMs General Form of Registration of Securities on Form 10 (File No. 001-33865)).10.9
    
    Credit Agreement with FirstBank Puerto Rico in the amount of $20,000,000 (incorporated herein by reference to Exhibit 10.7 to TSMs General Form of Registration of Securities on Form 10 (File No. 001-33865)).10.10
    
    Non-Contributory Retirement Program (incorporated herein by reference to Exhibit 10.8 to TSMs General Form of Registration of Securities on Form 10 (File No. 001-33865)).10.11*
    
    Blue Shield License Agreement by and between BCBSA and TSM, including revisions, if any, adopted by Member Plans through the November 19, 2009 meeting.10.12*
    
    Blue Shield Controlled Affiliate License Agreement by and among BCBSA, TSS and TSM, including revisions, if any, adopted by Member Plans through the November 19, 2009 meeting.10.13*
    
    Blue Cross License Agreements by and between BCBSA and TSM, including revisions, if any, adopted by Member Plans through the November 19, 2009 meeting.10.14*
    
    Blue Cross Controlled Affiliate License Agreement by and among BCBSA, TSS and TSM, including revisions, if any, adopted by Member Plans through the November 19, 2009 meeting.10.15
    
    6.30% Senior Unsecured Notes Due September 2019 Note Purchase Agreement, dated September 30, 2004, between Triple-S Management Corporation, Triple-S, Inc. and various institutional accredited investors (incorporated herein by reference to Exhibit 10.15 to TSMs Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 001-33865)).10.16
    
    6.60% Senior Unsecured Notes Due December 2020 Note Purchase Agreement, dated December 15, 2005, between Triple-S Management Corporation and various institutional accredited investors (incorporated herein by reference to Exhibit 10.16 to TSMs Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 001-33865)).10.17
    
    6.70% Senior Unsecured Notes Due December 2021 Note Purchase Agreement, dated January 23, 2006, between Triple-S Management Corporation and various institutional accredited investors (incorporated herein by reference to Exhibit 10.1 to TSMs Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2006 (File No. 001-33865)).10.18
    
    TSM 2007 Incentive Plan, dated October 16, 2007 (incorporated herein by reference to Exhibit C to TSMs 2007 Proxy Statement (File No. 001-33865)).10.19
    
    Software License and Maintenance Agreement between Quality Care Solutions, Inc, and TSS dated August 16, 2007 (incorporated herein by reference to Exhibit 10.15 to TSMs Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 001-33865)).10.20
    
    Addendum Number One to the Software License and Maintenance Agreement between Quality Care Solutions, Inc, and TSS (incorporated herein by reference to Exhibit 10.15(a) to TSMs Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 001-33865)).
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##### Table of Contents



Exhibits
    
    Description10.21
    
    Addendum Number Two to the Software License and MaintenanceAgreement between Quality Care Solutions, Inc, and TSS(incorporated herein by reference to Exhibit 10.15(b) to TSMsAnnual Report on Form 10-K for the year ended December 31, 2007(File No. 001-33865)).10.22
    
    Addendum Number Three to the Software License and MaintenanceAgreement between Quality Care Solutions, Inc, and TSS(incorporated herein by reference to Exhibit 10.15(c) to TSMsAnnual Report on Form 10-K for the year ended December 31, 2007(File No. 001-33865)).10.23
    
    Work Order Agreement between Quality Care Solutions, Inc. and TSS(incorporated herein by reference to Exhibit 10.16 to TSMs AnnualReport on Form 10-K for the year ended December 31, 2007 (File No.001-33865)).10.24*
    
    Employment Contract between Ramón M. Ruiz Comas and TSM.11.1
    
    Statement re computation of per share earnings; an exhibitdescribing the computation of the earnings per share has beenomitted as the detail necessary to determine the computation ofearnings per share can be clearly determined from the materialcontained in Part II of this Annual Report on Form 10-K.12.1
    
    Statement re computation of ratios; an exhibit describing thecomputation of the loss ratio, expense ratio and combined ratio hasbeen omitted as the detail necessary to determine the computationof the loss ratio, operating expense ratio and combined ratio canbe clearly determined from the material contained in Part II ofthis Annual Report on Form 10-K.21*
    
    List of Subsidiaries of TSM.23.1*
    
    Consent of Independent Registered Public Accounting Firm(PricewaterhouseCoopers LLP).23.2*
    
    Consent of Independent Registered Public Accounting Firm (KPMG LLP).31.1*
    
    Certification of the President and Chief Executive Officer requiredby Rule 13a-14(a)/15d-14(a).31.2*
    
    Certification of the Vice President of Finance and Chief FinancialOfficer required by Rule 13a-14(a)/15d-14(a).32.1*
    
    Certification of the President and Chief Executive Officer requiredpursuant to 18 U.S. Section 1350.32.2*
    
    Certification of the Vice President of Finance and Chief FinancialOfficer required pursuant to 18 U.S. Section 1350.
  
 *
    
    Filed herein. Page 88




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##### Table of Contents



SIGNATURES
  Triple-S Management Corporation
 By:
    
    /s/ Ramón M. Ruiz-Comas
    
    
    
    Date:
    
    March 5, 2010Ramón M. Ruiz-Comas 
President and Chief Executive OfficerBy:
    
    /s/ Juan J. Román

Juan J. Román 
Vice President of Finance and Chief Financial Officer,
Principal Accounting Officer
    
    
    
    Date:
    
    March 5, 2010
  By:
    
    /s/ Luis A. Clavell-Rodríguez, MD
    
    
    
    Date:
    
    March 5, 2010Luis A. Clavell-Rodríguez, MD 
Director and Chairman of the BoardBy:
    
    /s/ Vicente J. León-Irizarry, CPA
    
    
    
    Date:
    
    March 5, 2010Vicente J. León-Irizarry, CPA 
Director and Vice-Chairman of the BoardBy:
    
    /s/ Jesús R. Sánchez-Colón, DMD
    
    
    
    Date:
    
    March 5, 2010Jesús R. Sánchez-Colón, DMD 
Director and Secretary of the BoardBy:
    
    /s/ Adamina Soto-Martínez, CPA
    
    
    
    Date:
    
    March 5, 2010Adamina Soto-Martínez, CPA 
DirectorBy:
    
    /s/ Ms. Carmen Ana Culpeper-Ramírez
    
    
    
    Date:
    
    March 5, 2010Ms. Carmen Ana Culpeper-Ramírez
Director
 Page 89




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##### Table of Contents



By:
    
    /s/ Jorge L. Fuentes-Benejam, PE
    
    
    
    Date:
    
    March 5, 2010Jorge L. Fuentes-Benejam, PE
DirectorBy:
    
    /s/ Mr. Antonio F. Faría-Soto
    
    
    
    Date:
    
    March 5, 2010Mr. Antonio F. Faría-Soto
DirectorBy:
    
    /s/ Manuel Figueroa-Collazo, PE, Ph.D.
    
    
    
    Date:
    
    March 5, 2010Manuel Figueroa-Collazo, PE, Ph.D.
DirectorBy:
    
    /s/ José Hawayek-Alemañy, MD
    
    
    
    Date:
    
    March 5, 2010José Hawayek-Alemañy, MD
DirectorBy:
    
    /s/ Jaime Morgan-Stubbe, Esq.
    
    
    
    Date:
    
    March 5, 2010Jaime Morgan-Stubbe, Esq.
DirectorBy:
    
    /s/ Roberto Muñoz-Zayas, MD
    
    
    
    Date:
    
    March 5, 2010Roberto Muñoz-Zayas, MD
DirectorBy:
    
    /s/ Juan E. Rodríguez-Díaz, Esq.
    
    
    
    Date:
    
    March 5, 2010Juan E. Rodríguez-Díaz, Esq.
Director
 Page 90




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##### Table of Contents



Triple-S Management Corporation
 Consolidated Financial Statements
 December 31, 2009, 2008, and 2007




---



##### Table of Contents



Page(s)Reports of Independent Registered Public Accounting Firms
    
    
    1Consolidated Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Earnings
    
    
    4Consolidated Statements of Stockholders Equity and Comprehensive IncomeConsolidated Statements of Cash FlowsNotes to Consolidated Financial Statements
    

565




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
  Internal Control
 Integrated Framework
   /s/ PricewaterhouseCoopers LLPSan Juan, Puerto Rico
March 5, 2010 
 1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    /s/ KPMG
LLP
  
 2




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##### Table of Contents



Triple-S Management Corporation
 
 Consolidated Balance Sheets
December 31, 2009 and 2008
 (dollar amounts in thousands, except per share data)
    
    2009
    
    
    2008AssetsInvestments and cashEquity securities held for trading, at fair value (cost of $42,075
in 2009 and $40,847 in 2008)
    
    $
    43,909
    
    
    $
    32,184Securities available for sale, at fair value:Fixed maturities (amortized cost of $911,362 in 2009 and
$879,663 in 2008)
    
    
    918,977
    
    
    
    887,684Equity securities (cost of $61,531 in 2009 and
$70,054 in 2008)
    
    
    64,689
    
    
    
    68,629Securities held to maturity, at amortized cost:Fixed maturities (fair value of $16,490 in 2009 and
$23,063 in 2008)
    
    
    15,794
    
    
    
    21,753Policy loans
    
    
    5,940
    
    
    
    5,451Cash and cash equivalents
    
    
    40,376
    
    
    
    46,095Total investments and cash
    
    
    1,089,685
    
    
    
    1,061,796Premium and other receivables, net
    
    
    272,932
    
    
    
    237,158Deferred policy acquisition costs and value of business acquired
    
    
    139,917
    
    
    
    126,347Property and equipment, net
    
    
    68,803
    
    
    
    58,448Deferred tax asset
    
    
    37,551
    
    
    
    35,926Other assets
    
    
    39,816
    
    
    
    39,515Total assets
    
    $
    1,648,704
    
    
    $
    1,559,190Liabilities and Stockholders EquityClaim liabilities
    
    
    360,446
    
    
    
    323,710Liability for future policy benefits
    
    
    222,619
    
    
    
    207,545Unearned premiums
    
    
    108,342
    
    
    
    110,141Policyholder deposits
    
    
    47,563
    
    
    
    48,684Liability to Federal Employees Health Benefits Program
    
    
    13,002
    
    
    
    11,157Accounts payable and accrued liabilities
    
    
    139,161
    
    
    
    148,713Deferred tax liability
    
    
    11,088
    
    
    
    10,731Borrowings
    
    
    167,667
    
    
    
    169,307Liability for pension benefits
    
    
    41,044
    
    
    
    44,103Total liabilities
    
    
    1,110,932
    
    
    
    1,074,091Commitments and contingenciesStockholders equityCommon stock Class A, $1 par value. Authorized
100,000,000 shares; issued and outstanding 9,042,809 at December 31, 2009 and 2008
    
    
    9,043
    
    
    
    9,043Common stock Class B, $1 par value. Authorized 100,000,000
shares; issued and outstanding 20,110,391 and 22,104,989
shares at December 31, 2009 and 2008, respectively
    
    
    20,110
    
    
    
    22,105Additional paid-in capital
    
    
    159,303
    
    
    
    179,504Retained earnings
    
    
    360,892
    
    
    
    292,112Accumulated other comprehensive loss, net
    
    
    (11,576
    )
    
    
    (17,665
    )Total stockholders equity
    
    
    537,772
    
    
    
    485,099Total liabilities and stockholders equity
    
    $
    1,648,704
    
    
    $
    1,559,190
  3




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##### Table of Contents



Triple-S Management Corporation
 
 Consolidated Statements of Earnings
Years Ended December 31, 2009, 2008 and 2007
 (dollar amounts in thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2007RevenuesPremiums earned, net
    
    $
    1,876,072
    
    
    $
    1,695,457
    
    
    $
    1,483,548Administrative service fees
    
    
    48,643
    
    
    
    19,187
    
    
    
    14,018Net investment income
    
    
    52,136
    
    
    
    56,253
    
    
    
    47,194Total operating revenues
    
    
    1,976,851
    
    
    
    1,770,897
    
    
    
    1,544,760Net realized investment gains (losses):Total other-than-temporary impairment
losses on securities
    
    
    (7,118
    )
    
    
    (16,494
    )
    
    
    (1,087
    )Net realized gains, excluding
other-than-temporary impairment
losses on securities
    
    
    7,732
    
    
    
    2,554
    
    
    
    7,018Total net realized investment gains (losses)
    
    
    614
    
    
    
    (13,940
    )
    
    
    5,931Net unrealized investment gain (loss) on
trading securities
    
    
    10,497
    
    
    
    (21,064
    )
    
    
    (4,116
    )Other income (loss), net
    
    
    1,237
    
    
    
    (2,467
    )
    
    
    3,217Total revenues
    
    
    1,989,199
    
    
    
    1,733,426
    
    
    
    1,549,792Benefits and expensesClaims incurred
    
    
    1,612,860
    
    
    
    1,434,914
    
    
    
    1,223,775Operating expenses
    
    
    279,418
    
    
    
    251,887
    
    
    
    237,533Total operating costs
    
    
    1,892,278
    
    
    
    1,686,801
    
    
    
    1,461,308Interest expense
    
    
    13,270
    
    
    
    14,681
    
    
    
    15,839Total benefits and expenses
    
    
    1,905,548
    
    
    
    1,701,482
    
    
    
    1,477,147Income before taxes
    
    
    83,651
    
    
    
    31,944
    
    
    
    72,645Income tax expense (benefit)Current
    
    
    19,197
    
    
    
    11,542
    
    
    
    15,906Deferred
    
    
    (4,326
    )
    
    
    (4,388
    )
    
    
    (1,779
    )Total income taxes
    
    
    14,871
    
    
    
    7,154
    
    
    
    14,127Net income
    
    $
    68,780
    
    
    $
    24,790
    
    
    $
    58,518Basic net income per share
    
    $
    2.33
    
    
    $
    0.77
    
    
    $
    2.15Diluted net income per share
    
    $
    2.33
    
    
    $
    0.77
    
    
    $
    2.15
  4




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##### Table of Contents



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

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 AccumulatedClass A
    
    
    Class B
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance, December 31, 2006
    
    $
    26,733
    
    
    $
    
    
    
    $
    124,031
    
    
    $
    211,266
    
    
    $
    (19,431
    )
    
    $
    342,599Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,448
    )
    
    
    
    
    
    
    (2,448
    )Sale of stock in public offering
    
    
    (10,813
    )
    
    
    16,100
    
    
    
    64,992
    
    
    
    
    
    
    
    
    
    
    
    70,279Grant of
restricted Class B common stock
    
    
    
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166Share-based compensation
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34Other
    
    
    123
    
    
    
    
    
    
    
    (122
    )
    
    
    
    
    
    
    
    
    
    
    1Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,518
    
    
    
    
    
    
    
    58,518Net unrealized change in fair valueof available for sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,549
    
    
    
    9,549Defined benefit pension planPrior service cost, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,935
    
    
    
    3,935Actuarial loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    155Net change in fair value of cashflow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (250
    )
    
    
    (250
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,907Balance, December 31, 2007
    
    
    16,043
    
    
    
    16,266
    
    
    
    188,935
    
    
    
    267,336
    
    
    
    (6,042
    )
    
    
    482,538Conversion of Class A common stock to Class B common stock
    
    
    (7,000
    )
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    3,268
    
    
    
    
    
    
    
    
    
    
    
    3,268Grant of restricted Class B common stock
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Repurchase and retirement of common stock
    
    
    
    
    
    
    (1,181
    )
    
    
    (12,699
    )
    
    
    
    
    
    
    
    
    
    
    (13,880
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    
    
    
    
    (14
    )Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,790
    
    
    
    
    
    
    
    24,790Net unrealized change in fair valueof available for sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,952
    )
    
    
    (3,952
    )Defined benefit pension planPrior service credit, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (266
    )
    
    
    (266
    )Actuarial
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,349
    )
    
    
    (7,349
    )Net change in fair value of cashflow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    (56
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,167Balance, December 31, 2008
    
    
    9,043
    
    
    
    22,105
    
    
    
    179,504
    
    
    
    292,112
    
    
    
    (17,665
    )
    
    
    485,099Share-based compensation
    
    
    
    
    
    
    
    
    
    
    3,897
    
    
    
    
    
    
    
    
    
    
    
    3,897Grant of restricted Class B common stock
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Repurchase and retirement of common stock
    
    
    
    
    
    
    (2,022
    )
    
    
    (24,098
    )
    
    
    
    
    
    
    
    
    
    
    (26,120
    )Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,780
    
    
    
    
    
    
    
    68,780Net unrealized change in fair valueof available for sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,539
    
    
    
    3,539Defined benefit pension planPrior service credit, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (273
    )
    
    
    (273
    )Actuarial gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,823
    
    
    
    2,823Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,869Balance, December 31, 2009
    
    $
    9,043
    
    
    $
    20,110
    
    
    $
    159,303
    
    
    $
    360,892
    
    
    $
    (11,576
    )
    
    $
    537,772
  5




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##### Table of Contents



Triple-S Management Corporation

Statements of Cash Flows

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 2009
    
    
    2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    68,780
    
    
    $
    24,790
    
    
    $
    58,518Adjustments to reconcile net income to net cashprovided by (used in) operating activitiesDepreciation and amortization
    
    
    9,643
    
    
    
    7,367
    
    
    
    7,562Net amortization of investments
    
    
    744
    
    
    
    952
    
    
    
    354Provision (reversal of provision) for doubtful receivables
    
    
    10,489
    
    
    
    (1,180
    )
    
    
    (2,305
    )Deferred tax benefit
    
    
    (4,326
    )
    
    
    (4,388
    )
    
    
    (1,779
    )Net realized investment gains (losses)
    
    
    (614
    )
    
    
    13,940
    
    
    
    (5,931
    )Net unrealized (gain) loss on trading securities
    
    
    (10,497
    )
    
    
    21,064
    
    
    
    4,116Share-based compensation
    
    
    3,924
    
    
    
    3,268
    
    
    
    200Proceeds from trading securities soldEquity securities
    
    
    4,240
    
    
    
    24,640
    
    
    
    43,614Acquisition of securities in trading portfolioEquity securities
    
    
    (6,132
    )
    
    
    (10,737
    )
    
    
    (23,921
    )Gain on sale of property and equipment
    
    
    
    
    
    
    11
    
    
    
    28(Increase) decrease in assetsPremium and other receivables, net
    
    
    (46,263
    )
    
    
    (32,210
    )
    
    
    (34,337
    )Deferred
policy acquisition costs and value of business acquired
    
    
    (13,570
    )
    
    
    (9,108
    )
    
    
    (5,822
    )Other deferred taxes
    
    
    900
    
    
    
    (8,337
    )
    
    
    Other assets
    
    
    (1,593
    )
    
    
    (933
    )
    
    
    (13,213
    )Increase (decrease) in liabilitiesClaim liabilities
    
    
    36,736
    
    
    
    (30,120
    )
    
    
    39,148Liability for future policy benefits
    
    
    15,074
    
    
    
    13,414
    
    
    
    13,711Unearned premiums
    
    
    (1,799
    )
    
    
    (22,458
    )
    
    
    19,017Policyholder deposits
    
    
    1,665
    
    
    
    1,902
    
    
    
    1,800Liability to FEHBP
    
    
    1,845
    
    
    
    (10,181
    )
    
    
    7,775Accounts payable and accrued liabilities
    
    
    3,339
    
    
    
    15,322
    
    
    
    7,359Net cash provided by (used in)
operating activities
    
    
    72,585
    
    
    
    (2,982
    )
    
    
    115,894
  6




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##### Table of Contents



Triple-S Management Corporation

Consolidated Statements of Cash Flows

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 2009
    
    
    2008
    
    
    2007Cash flows from investing activitiesProceeds from investments sold or maturedSecurities available for saleFixed maturities sold
    
    $
    241,368
    
    
    $
    228,436
    
    
    $
    299,561Fixed maturities matured
    
    
    189,144
    
    
    
    91,732
    
    
    
    41,248Equity securities sold
    
    
    9,877
    
    
    
    4,450
    
    
    
    1,000Securities held to maturityFixed maturities matured
    
    
    7,819
    
    
    
    22,875
    
    
    
    13,246Acquisition of investmentsSecurities available for saleFixed maturities
    
    
    (459,705
    )
    
    
    (505,896
    )
    
    
    (327,409
    )Equity securities
    
    
    (3,684
    )
    
    
    (19,636
    )
    
    
    (18,379
    )Securities held to maturityFixed maturities
    
    
    (1,502
    )
    
    
    (554
    )
    
    
    (8,244
    )Net (disbursements) repayment for policy loans
    
    
    (489
    )
    
    
    30
    
    
    
    (287
    )Capital expenditures
    
    
    (18,706
    )
    
    
    (22,411
    )
    
    
    (9,390
    )Net cash used in investing activities
    
    
    (35,878
    )
    
    
    (200,974
    )
    
    
    (8,654
    )Cash flows from financing activitiesRepurchase and retirement of common stock
    
    
    (32,355
    )
    
    
    (7,645
    )
    
    
    Change in outstanding checks in excess of bank balances
    
    
    (5,645
    )
    
    
    18,353
    
    
    
    (3,076
    )Repayments of borrowings
    
    
    (1,640
    )
    
    
    (1,639
    )
    
    
    (12,141
    )Proceeds from annuity contracts
    
    
    4,307
    
    
    
    8,018
    
    
    
    6,150Surrenders of annuity contracts
    
    
    (7,093
    )
    
    
    (7,195
    )
    
    
    (7,416
    )Net proceeds from initial public offering
    
    
    
    
    
    
    
    
    
    
    70,279Dividends
    
    
    
    
    
    
    
    
    
    
    (2,448
    )Other
    
    
    
    
    
    
    6
    
    
    
    1Net cash (used in) provided by financing activities
    
    
    (42,426
    )
    
    
    9,898
    
    
    
    51,349Net (decrease) increase in cash and cash
equivalents
    
    
    (5,719
    )
    
    
    (194,058
    )
    
    
    158,589Cash and cash equivalentsBeginning of year
    
    
    46,095
    
    
    
    240,153
    
    
    
    81,564End of year
    
    $
    40,376
    
    
    $
    46,095
    
    
    $
    240,153
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 1.
    
    Nature of Business
 Triple-S Management Corporation (the Company or TSM) was incorporated under the laws of the
Commonwealth of Puerto Rico on January 17, 1997 to engage, among other things, as the holding
company of entities primarily involved in the insurance industry.The Company has the following wholly owned subsidiaries that are subject to the regulations
of the Commissioner of Insurance of the Commonwealth of Puerto Rico (the Commissioner of
Insurance): (1) Triple-S Salud, Inc. (TSS) a managed care organization that provides health
benefits services to subscribers through contracts with hospitals, physicians, dentists,
laboratories, and other organizations; (2) Triple-S Vida, Inc. (TSV), which is engaged in the
underwriting of life and accident and health insurance policies and the administration of
annuity contracts; and (3) Triple-S Propiedad, Inc. (TSP), which is engaged in the
underwriting of property and casualty insurance policies. The Company and TSS are members of
the Blue Cross and Blue Shield Association (BCBSA).The Company also has two other wholly owned subsidiaries, Interactive Systems, Inc. (ISI) and
Triple-C, Inc. (TC). ISI is mainly engaged in providing data processing services to the
Company and its subsidiaries. TC is mainly engaged as a third-party administrator for TSS in
the administration of the Commonwealth of Puerto Rico Health Care Reforms (the Reform)
business. Also, TC provides healthcare advisory services to TSS and other health
insurance-related services to the health insurance industry.A substantial majority of the Companys business activity is with insurers located throughout
Puerto Rico, and as such, the Company is subject to the risks associated with the Puerto Rico
economy.
 2.
    
    Significant Accounting Policies
 The following are the significant accounting policies followed by the Company and its
subsidiaries:Basis of PresentationThe accompanying consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America (GAAP).The consolidated financial statements include the financial statements of the Company and its
subsidiaries. All significant intercompany balances and transactions have been eliminated in
consolidation.Use of EstimatesThe preparation of the consolidated financial statements in conformity with GAAP requires the
Company to make a number of estimates and assumptions relating to the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements, and the reported amounts of revenue and expenses
during the period. Actual results could differ from those estimates. The most significant
items on the consolidated balance sheets that involve a greater degree of accounting
estimates and actuarial determinations subject to changes in the near future are the
assessment of other-than-temporary impairments, allowance for doubtful receivables, deferred
policy acquisition costs and value of business acquired, claim liabilities, the liability for
future policy benefits, and liability for pension benefits. As additional information
becomes available (or actual amounts are determinable), the recorded estimates are revised
and reflected in operating results of the period they are determined.
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 
 Although some variability is inherent in these estimates, the Company believes the amounts
provided are adequate.ReclassificationsCertain amounts in the 2008 and 2007 consolidated financial statements were reclassified to
conform to the 2009 presentation.Cash EquivalentsThe Company considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents. Cash equivalents of $920 and $2,564 at December 31,
2009 and 2008, respectively, consist principally of obligations of government-sponsored
enterprises and certificates of deposit with an initial term of less than three months.InvestmentsInvestment in securities at December 31, 2009 and 2008 consists mainly of obligations of
government-sponsored enterprises, U.S. Treasury securities and obligations of U.S. government
instrumentalities, obligations of the Commonwealth of Puerto Rico and its instrumentalities,
municipal securities, obligations of states of the United States and political subdivisions
of the states, corporate bonds, mortgage-backed securities, collateralized mortgage
obligations, and equity securities. The Company classifies its debt and equity securities in
one of three categories: trading, available for sale, or held to maturity. Trading
securities are bought and held principally for the purpose of selling them in the near term.
Securities classified as held to maturity are those securities in which the Company has the
ability and intent to hold the security until maturity. All other securities not included in
trading or held to maturity are classified as available for sale.Trading and available-for-sale securities are recorded at fair value. The fair values of
debt securities (both available for sale and held to maturity investments) and equity
securities are based on quoted market prices for those or similar investments at the
reporting date. Held-to-maturity debt securities are recorded at amortized cost, adjusted
for the amortization or accretion of premiums and discounts, respectively. Unrealized
holding gains and losses on trading securities are included in earnings. Unrealized holding
gains and losses, net of the related tax effect, on available-for-sale securities are
excluded from earnings and are reported as a separate component of other comprehensive income
until realized. Realized gains and losses from the sale of available-for-sale securities are
included in earnings and are determined on a specific-identification basis.Transfers of securities between categories are recorded at fair value at the date of
transfer. Unrealized holding gains and losses are recognized in earnings for transfers into
trading securities. Unrealized holding gains or losses associated with transfers of
securities from held to maturity to available for sale are recorded as a separate component
of other comprehensive income. The unrealized holding gains or losses included in the
separate component of other comprehensive income for securities transferred from available
for sale to held to maturity, are maintained and amortized into earnings over the remaining
life of the security as an adjustment to yield in a manner consistent with the amortization
or accretion of premium or discount on the associated security.If a fixed maturity security is in an unrealized loss position and the Company has the intent
to sell the fixed maturity security, or it is more likely than not that the Company will have
to sell the fixed maturity security before recovery of its amortized cost basis, the decline
in value is deemed to be other-than-temporary and is recorded to other-than-temporary
impairment losses recognized in earnings in the Companys consolidated statements of
earnings. For impaired fixed maturity
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 
 securities that the Company does not intend to sell or it is more likely than not that such securities
will not have to be sold, but the Company expects not to fully recover the amortized cost
basis, the credit component of the other-than temporary impairment is recognized in
other-than-temporary impairment losses recognized in earnings in the Companys consolidated
income statements and the non-credit component of the other-than-temporary impairment is
recognized in other comprehensive income. Furthermore, unrealized losses entirely caused by
non-credit related factors related to fixed maturity securities for which the Company expects
to fully recover the amortized cost basis continue to be recognized in accumulated other
comprehensive income.The credit component of an other-than-temporary impairment is determined by comparing the net
present value of projected future cash flows with the amortized cost basis of the fixed
maturity security. The net present value is calculated by discounting the Companys best
estimate of projected future cash flows at the effective interest rate implicit in the fixed
maturity security at the date of acquisition.The unrealized gains or losses on the Companys equity securities classified as
available-for-sale are included in accumulated other comprehensive income as a separate
component of stockholders equity, unless the decline in value is deemed to be
other-than-temporary and the Company does not have the intent and ability to hold such equity
securities until their full cost can be recovered, in which case such equity securities are
written down to fair value and the loss is charged to other-than-temporary impairment losses
recognized in earningsA decline in the fair value of any available-for-sale or held-to-maturity security below cost
that is deemed to be other-than-temporary results in an impairment to reduce the carrying
amount to fair value. The impairment is charged to earnings and a new cost basis for the
security is established. To determine whether an impairment is other-than-temporary, the
Company considers whether it has the ability and intent to hold the investment until a market
price recovery and considers whether evidence indicating the cost of the investment is
recoverable outweighs evidence to the contrary. Evidence considered in this assessment
includes the reasons for the impairment, the severity and duration of the impairment, market
conditions, changes in value subsequent to year-end, forecasted performance of the investee,
and the general market condition in the geographic area or industry the investee operates in.Premiums and discounts are amortized or accreted over the life of the related
held-to-maturity or available-for-sale security as an adjustment to yield using the effective
interest method. Dividend and interest income are recognized when earned.The Company regularly invests in mortgaged-backed securities and other securities subject to
prepayment and call risk. Significant changes in prevailing interest rates may adversely
affect the timing and amount of cash flows on such securities. In addition, the amortization
of market premium and accretion of market discount for mortgaged-backed securities is based
on historical experience and estimates of future payment speeds on the underlying mortgage
loans. Actual prepayment speeds will differ from original estimates and may result in
material adjustments to amortization or accretion recorded in future periods.Revenue Recognition
 a.
    
    Managed Care
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 Subscriber premiums on the managed care business are billed in advance of their
respective coverage period and the related revenue is recorded as earned during the
coverage period. Managed care premiums are billed in the month prior to the effective
date of the policy with a grace period of up to two months. If the insured fails to pay, the policy can be
canceled at the end of the grace period at the option of the Company. Managed care
premiums are reported as earned when due.Premiums for the Medicare Advantage (MA) business are based on a bid contract with the
Centers for Medicare and Medicaid Services (CMS) and billed in advance of the coverage
period. MA contracts provide for a risk factor to adjust premiums paid for members that
represent a higher or lower risk to the Company. Retroactive rate adjustments are made
periodically based on the aggregate health status and risk scores of the Companys MA
membership. These risk adjustments are evaluated quarterly based on actuarial estimates.
Actual results could differ from these estimates. As additional information becomes
available, the recorded estimate is revised and reflected in operating results.TSS offers prescription drug coverage to Medicare eligible beneficiaries as part of its
MA plans (MA-PD) and on a stand-alone basis (stand-alone PDP). Premiums are based on a
bid contract with CMS that considers the estimated costs of providing prescription drug
benefits to enrolled participants. MA-PD and stand-alone PDP premiums are subject to
adjustment, positive or negative, based upon the application of risk corridors that
compare the estimated prescription drug costs included in the bids to CMS to actual
prescription drug costs. Variances exceeding certain thresholds may result in CMS making
additional payments to the TSS or in TSS refunding CMS a portion of the premiums
collected. TSS estimates and records adjustments to earned premiums related to estimated
risk corridor payments based upon actual prescription drug costs for each reporting
period as if the annual contract were to end at the end of each reporting period.Administrative service fees include revenue from certain groups, including the Reform
Metro-North Region contract, which has managed care contracts that provide for the group
to be at risk for all or a portion of their claims experience. For these groups, the
Company is not at risk and only handles the administration of the insurance coverage for
an administrative service fee. The Company pays claims under self-funded arrangements
from its own funds, and subsequently receives reimbursement from these groups. Claims
paid under self-funded arrangements are excluded from the claims incurred in the
accompanying consolidated financial statements. Administrative service fees under the
self-funded arrangements are recognized based on the groups membership or incurred
claims for the period multiplied by an administrative fee rate plus other fees. In
addition, some of these self-funded groups purchase aggregate and/or specific stop-loss
coverage. In exchange for a premium, the groups aggregate liability or the groups
liability on any one episode of care is capped for the year. Premiums for the stop-loss
coverage are actuarially determined based on experience and other factors and are
recorded as earned over the period of the contract in proportion to the coverage
provided. This fully insured portion of premiums is included within the premiums earned,
net in the accompanying consolidated statements of earnings.
The contract for the Metro-North Region contains a savings-sharing provision whereby the Commonwealth of
Puerto Rico shares with TSS a portion of the medical cost savings obtained with the administration of the contract.
Any savings-sharing amount is recorded when earned as administrative service fees in the accompanying consolidated statements of earnings.b.
    
    Life and Accident and Health InsurancePremiums on life insurance policies are billed in advance of their respective coverage
period and the related revenue is recorded as earned when due. Premiums on accident and
health and other short-term policies are recognized as earned primarily on a pro rata
basis over the
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 
 contract period. Premiums on credit life policies are recognized as
earned in proportion to the amounts of insurance in-force. Revenues from universal life
and interest sensitive policies represent amounts assessed against policyholders,
including mortality charges, surrender charges actually paid, and earned policy service
fees. The revenues for limited payment
contracts are recognized over the period that benefits are provided rather than on
collection of premiums.c.
    
    Property and Casualty InsurancePremiums on property and casualty contracts are billed in advance of their respective
coverage period and they are recognized as earned on a pro rata basis over the policy
term. The portion of premiums related to the period prior to the end of coverage is
recorded in the consolidated balance sheets as unearned premiums and is transferred to
premium revenue as earned.
 Allowance for Doubtful Receivables
 The allowance for doubtful receivables is based on managements evaluation of the aging of
accounts and such other factors, which deserve current recognition. Actual results could
differ from these estimates. Receivables are charged against their respective allowance
accounts when deemed to be uncollectible.
 Deferred Policy Acquisition Costs and Value of Business Acquired
 Certain direct costs for acquiring life and accident and health, and property and casualty
insurance business are deferred by the Company. Substantially all acquisition costs related
to the managed care business are expensed as incurred.
 In the life and accident and health business deferred acquisition costs consist of
commissions and certain expenses related to the production of life, annuity, accident and
health, and credit business. In the event that future premiums, in combination with
policyholder reserves and anticipated investment income, could not provide for all future
maintenance and settlement expenses, the amount of deferred policy acquisition costs would be
reduced to provide for such amount. The related amortization is provided over the
anticipated premium-paying period of the related policies in proportion to the ratio of
annual premium revenue to expected total premium revenue to be received over the life of the
policies. Interest is considered in the amortization of deferred policy acquisition cost and
value of business acquired. For these contracts interest is considered at a level rate, at
the time of issue of each contract, currently 5.4%, and, in the case of the value of business
acquired, at the time of any acquisition. For certain other long-duration contracts,
deferred amounts are amortized at historical and forecasted credited interest rates.
Expected premium revenue is estimated by using the same mortality and withdrawal assumptions
used in computing liabilities for future policy benefits. The method followed in computing
deferred policy acquisition costs limits the amount of such deferred costs to their estimated
net realizable value. In determining estimated net realizable value, the computations give
effect to the premiums to be earned, related investment income, losses and loss-adjustment
expenses, and certain other costs expected to be incurred as the premium is earned. Costs
deferred on universal life and interest sensitive products are amortized as a level
percentage of the present value of anticipated gross profits from investment yields,
mortality, expenses and surrender charges. Estimates used are based on the Companys
experience as adjusted to provide for possible adverse deviations. These estimates are
periodically reviewed and compared with actual experience. When it is determined that future
expected experience differs significantly from that assumed, the estimates are revised for
current and future issues.
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 
 The value assigned to the insurance in-force of TSV at the date of the acquisition is
amortized using methods similar to those used to amortize the deferred policy acquisition
costs of the life and accident and health business.
 In the property and casualty business, acquisition costs consist of commissions incurred
during the production of business and are deferred and amortized ratably over the terms of
the policies.
 Property and Equipment
 Property and equipment are stated at cost. Maintenance and repairs are expensed as incurred.
Depreciation is calculated on the straight-line method over the estimated useful lives of
the assets. Costs of computer equipment, programs, systems, installations, and enhancements
are capitalized and amortized straight-line over their estimated useful lives. The following
is a summary of the estimated useful lives of the Companys property and equipment:
 EstimatedAsset Category
    
    Useful LifeBuildings 
Building improvements 
Leasehold improvements 

Office furniture 
Computer software 
Computer equipment, equipment, 
and automobiles
    
    20 to 50 years
3 to 5 years
Shorter of estimated useful
life or lease term
5 years
3 to 10 years
3 years
 Software Development Costs
 Costs related to software developed or obtained for internal use that is incurred in the
preliminary project stage are expensed as incurred. Once capitalization criteria are met,
directly attributable development costs are capitalized and amortized over the expected
useful life of the software. Upgrade and maintenance costs are expensed as incurred. During
the year ended December 31, 2009 and 2008 the Company capitalized approximately $10,993 and
$16,408 associated with the implementation of new software. No software development costs
were capitalized during the year ended December 31, 2007.
 Long-Lived Assets
 Long-lived assets, such as property and equipment, and purchased intangible assets subject to
amortization, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the fair value of
the asset. Assets to be disposed of would be separately presented in the balance sheets and
reported at the lower of the carrying amount or fair value less costs to sell, and are no
longer depreciated. The assets and liabilities of a disposal group classified as held for
sale would be presented separately in the appropriate asset and liability sections of the
consolidated balance sheets.
 Goodwill and intangible assets that have indefinite useful lives are tested annually for
impairment, and are tested for impairment more frequently if events and circumstances
indicate that the asset
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 
 might be impaired. An impairment loss is recognized to the extent
that the carrying amount exceeds the assets fair value. For goodwill, the impairment
determination is made at the reporting unit level and consists of two steps. First, the
Company determines the fair value of a reporting unit and compares it to its carrying amount.
Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment
loss is recognized for any excess of the carrying amount of the reporting units goodwill
over the implied fair value of that goodwill. The implied fair value of goodwill is
determined by allocating the fair value of the reporting unit in a manner similar to a
purchase price allocation. The residual fair value after this allocation is the implied fair
value of the reporting unit goodwill.
 Claim Liabilities
 Claim liabilities for managed care policies represent the estimated amounts to be paid to
providers based on experience and accumulated statistical data. Loss-adjustment expenses
related to such claims are currently accrued based on estimated future expenses necessary to
process such claims.
 TSS contracts with various independent practice associations (IPAs) for certain medical care
services provided to some policies subscribers. The IPAs are compensated on a capitation
basis. In the Reform business and one of the MA policies, TSS retains a portion of the
capitation payments to provide for incurred but not reported losses. At December 31, 2009
and 2008, total withholdings and capitation payable amounted to $25,568 and $24,462,
respectively, which are recorded as part of the claim liabilities in the accompanying
consolidated balance sheets.
 Claim liabilities include unpaid claims and loss-adjustment expenses of the life and accident
and health business based on a case-basis estimate for reported claims, and on estimates,
based on experience, for unreported claims and loss-adjustment expenses. The liability for
policy and contract claims and claims expenses has been established to cover the estimated
net cost of insured claims.
 Also included within the claim liabilities is the liability for losses and loss-adjustment
expenses for the property and casualty business represents individual case estimates for
reported claims and estimates for unreported losses, net of any salvage and subrogation based
on past experience modified for current trends and estimates of expenses for investigating
and settling claims.
 The above liabilities are necessarily based on estimates and, while management believes that
the amounts are adequate, the ultimate liability may be in excess of or less than the amounts
provided. The methods for making such estimates and for establishing the resulting liability
are continually reviewed, and any adjustments are reflected in the consolidated statements of
earnings in the period determined.
 Future Policy Benefits
 The liability for future policy benefits has been computed using the level-premium method
based on estimated future investment yield, mortality, morbidity and withdrawal experience.
The interest rate assumption ranges between 5.0% and 5.40% for all years in issue. Mortality
has been calculated principally on select and ultimate tables in common usage in the
industry. Withdrawals have been determined principally based on industry tables, modified by
Companys experience.
 Policyholder Deposits
 Amounts received for annuity contracts are considered deposits and recorded as a liability
along with the accrued interest and reduced for charges and withdrawals. Interest incurred
on such
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 
 deposits, which amounted to $1,665, $1,902, and $1,800, during the years ended
December 31, 2009, 2008, and 2007, respectively, is recorded as interest expense in the
accompanying consolidated statements of earnings.
 Reinsurance
 In the normal course of business, the insurance-related subsidiaries seek to limit their
exposure that may arise from catastrophes or other events that cause unfavorable underwriting
results by reinsuring certain levels of risk in various areas of exposure with other
insurance enterprises or reinsurers.
 Reinsurance premiums, commissions, and expense reimbursements, related to reinsured business
are accounted for on bases consistent with those used in accounting for the original policies
issued and the terms of the reinsurance contracts. Accordingly, reinsurance premiums are
reported as prepaid reinsurance premiums and amortized over the remaining contract period in
proportion to the amount of insurance protection provided.
 Premiums ceded and recoveries of losses and loss-adjustment expenses have been reported as a
reduction of premiums earned and losses and loss-adjustment expenses incurred, respectively.
Commission and expense allowances received by TSP in connection with reinsurance ceded have
been accounted for as a reduction of the related policy acquisition costs and are deferred
and amortized accordingly. Amounts recoverable from reinsurers are estimated in a manner
consistent with the claim liability associated with the reinsured policy.
 Derivative Instruments and Hedging Activities
 The Company recognizes all derivative instruments, including certain derivative instruments
embedded in other contracts, whether or not designated in hedging relationships, as either
assets or liabilities in the balance sheet at their respective fair values. Changes in the
fair value of derivative instruments are recorded in earnings, unless specific hedge
accounting criteria are met in which case the change in fair value of the instrument is
recorded within other comprehensive income for cash flow hedges.
 On the date the derivative contract designated as a hedging instrument is entered into, the
Company designates the instrument as either a hedge of the fair value of a recognized asset
or liability or of an unrecognized firm commitment (fair-value hedge), a hedge of a
forecasted transaction or the variability of cash flows to be received or paid related to a
recognized asset or liability (cash-flow hedge), a foreign currency fair-value or cash-flow
hedge (foreign-currency hedge), or a hedge of a net investment in a foreign operation. For
all hedging relationships the Company formally documents the hedging relationship and its
risk-management objective and strategy for undertaking the hedge, the hedging instrument, the
hedged item, the nature of the risk being hedged, how the hedging instruments effectiveness
in offsetting the hedged risk will be assessed, and a description of the method of measuring
ineffectiveness. This process includes linking all derivatives that are designated as
fair-value, cash-flow, or foreign-currency hedges to specific assets and liabilities on the
balance sheet or to specific firm commitments or forecasted transactions. The Company also
formally assesses, both at the hedges inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes
in fair values or cash flows of hedged items. Changes in the fair value of a derivative that
is highly effective and that is designated and qualifies as a fair-value hedge, along with
the loss or gain on the hedged asset or liability or unrecognized firm commitment of the
hedged item that is attributable to the hedged risk, are recorded in earnings. Changes in
the fair value of a derivative that is highly effective and that is designated and qualifies
as a cash-flow
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 
 hedge are recorded in other comprehensive income to the extent that the
derivative is effective as hedge, until earnings are affected by the variability in cash
flows of the designated hedged item. Changes in the fair value of derivatives that are
highly effective as hedges and that are designated and qualify as foreign-currency hedges are
recorded in either earnings or other comprehensive income, depending on whether the hedge
transaction is a fair-value hedge or a cash-flow hedge. However, if a derivative is used as
a hedge of a net investment in a foreign operation, its changes in fair value, to the extent
effective as a hedge, are recorded in the cumulative translation adjustments account within
other comprehensive income. The ineffective portion of the change in fair value of a
derivative instrument that qualifies as either a fair-value hedge or a cash-flow hedge is
reported in earnings. Changes in the fair value of derivative trading instruments are
reported in current period earnings.
 The Company discontinues hedge accounting prospectively when it is determined that the
derivative is no longer effective in offsetting changes in the fair value or cash flows of
the hedged item, the derivative expires or is sold, terminated, or exercised, the derivative
is de-designated as a hedging instrument, because it is unlikely that a forecasted
transaction will occur, a hedged firm commitment no longer meets the definition of a firm
commitment, or management determines that designation of the derivative as a hedging
instrument is no longer appropriate.
 In all situations in which hedge accounting is discontinued and the derivative is retained,
the Company continues to carry the derivative at its fair value on the balance sheet and
recognizes any subsequent changes in its fair value in earnings. When hedge accounting is
discontinued because it is determined that the derivative no longer qualifies as an effective
fair-value hedge, the Company no longer adjusts the hedged asset or liability for changes in
fair value. The adjustment of the carrying amount of the hedged asset or liability is
accounted for in the same manner as other components of the carrying amount of that asset or
liability. When hedge accounting is discontinued because the hedged item no longer meets the
definition of a firm commitment, the Company removes any asset or liability that was recorded
pursuant to recognition of the firm commitment from the balance sheet, and recognizes any
gain or loss in earnings. When it is probable that a forecasted transaction will not occur,
the Company discontinues hedge accounting if not already done and recognizes immediately in
earnings gains and losses that were accumulated in other comprehensive income.
 Income Taxes
 Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
consolidated statements of earnings in the period that includes the enactment date. The
Company recognizes the effect of income tax positions only if those positions are more likely
than not of being sustained. Recognized income tax positions are measured at the largest
amount that is greater than 50% likely of being realized. Changes in recognition or
measurement are reflected in the period in which the change in judgment occurs.
 The Company records any interest and penalties related to unrecognized tax benefits within
the operating expenses in the consolidated statement of earnings.
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Triple-S Management Corporation

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

(dollar amounts in thousands, except per share data)
 
 Insurance-Related Assessments
 The Company records a liability for insurance-related assessments when the following three
conditions are met: (1) the assessment has been imposed or the information available prior to
the issuance of the financial statements indicates it is probable that an assessment will be
imposed; (2) the event obligating an entity to pay (underlying cause of) an imposed or
probable assessment has occurred on or before the date of the financial statements; and
(3) the amount of the assessment can be reasonably estimated. A related asset is recognized
when the paid or accrued assessment is recoverable through either premium taxes or policy
surcharges.
 Commitments and Contingencies
 Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and
penalties and other sources are recorded when it is probable that a liability has been
incurred and the amount of the assessment and/or remediation can be reasonably estimated.
Legal costs incurred in connection with loss contingencies are expensed as incurred.
Recoveries of costs from third parties, which are probable of realization, are separately
recorded as assets, and are not offset against the related liability.
 Share-Based Compensation
 Share-based compensation is measured at the fair value of the award and recognized as an
expense in the financial statements over the vesting period. The Company recognizes
compensation expense based on estimated grant date fair value using the Black-Scholes
option-pricing model.
 Earnings Per Share
 Basic earnings per share excludes dilution and is computed by dividing net income available
to all classes of common stockholders by the weighted average number of all classes of common
shares outstanding for the period, excluding non-vested restricted stocks. Diluted earnings
per share is computed in the same manner as basic earnings per share except that the number
of shares is increased to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued. Dilutive common
shares are included in the diluted earnings per share calculation using the treasury stock
method.
 Fair Value
 The fair value information of financial instruments in the accompanying consolidated
financial statements was determined as follows:
 a.
    
    Cash and Cash EquivalentsThe carrying amount approximates fair value because of the short-term nature of such
instruments.b.
    
    Investment in SecuritiesThe fair value of investment securities is estimated based on quoted market prices for
those or similar investments. Additional information pertinent to the estimated fair
value of investment in securities is included in note 3 and note 9.
 17




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 c.
    
    Policy Loans
 Policy loans have no stated maturity dates and are part of the related insurance
contract. The carrying amount of policy loans approximates fair value because their
interest rate is reset periodically in accordance with current market rates.
 d.
    
    Receivables, Accounts Payable, and Accrued Liabilities
 The carrying amount of receivables, accounts payable, and accrued liabilities
approximates fair value because they mature and should be collected or paid within
12 months after December 31.
 e.
    
    Policyholder Deposits
 The fair value of policyholder deposits is the amount payable on demand at the reporting
date, and accordingly, the carrying value amount approximates fair value.
 f.
    
    Borrowings
 The carrying amounts and fair value of the Companys borrowings are as follows:
 2009
    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLoans payable to bank
    
    
    22,667
    
    
    
    22,667
    
    
    $
    24,307
    
    
    $
    24,3076.3% senior unsecured notes payable
    
    
    50,000
    
    
    
    48,000
    
    
    
    50,000
    
    
    
    46,2506.6% senior unsecured notes payable
    
    
    60,000
    
    
    
    57,420
    
    
    
    60,000
    
    
    
    55,8006.7% senior unsecured notes payable
    
    
    35,000
    
    
    
    33,320
    
    
    
    35,000
    
    
    
    34,059$
    167,667
    
    
    $
    161,407
    
    
    $
    169,307
    
    
    $
    160,416
 The carrying amount of the loans payable to bank approximates fair value due to its
floating interest-rate structure. The fair value of the senior unsecured notes payable was
determined using market quotations. Additional information pertinent to borrowings is
included in Note 12.
 g.
    
    Derivative Instruments
 Current market pricing models were used to estimate fair value of structured notes agreements.  Fair
values were determined using market quotations provided by outside securities consultants or
prices provided by market makers.  Additional information pertinent to the estimated fair value of derivative instruments is included in note 12.Recently Issued Accounting StandardsIn April 2009, the Financial Accounting Standards Board (FASB) issued guidance to address
application issues raised by preparers, auditors, and members of the legal profession on
initial recognition and measurement, subsequent measurement and accounting, and disclosure of
assets and liabilities arising from contingencies in a business combination. This guidance is
effective for assets or liabilities arising from contingencies in business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008. The adoption of the new guidance did not have impact
on the Companys consolidated financial statements.In April 2009, the FASB issued guidance to amend the other-than-temporary impairment guidance
in GAAP for debt securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and equity securities
in the financial statements. This guidance does not amend existing recognition and
measurement guidance related to other-than-temporary impairments of equity securities. The guidance is effective
for
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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 interim and annual periods ending after June 15, 2009. The adoption of this new guidance did
not have a material impact on the consolidated financial position and results of operations.
See note 3, Investment in Securities, for the required disclosures.In April 2009, the FASB issued guidance to require disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies as well as in annual
financial statements. This guidance also requires those disclosures in summarized financial
information at interim reporting periods. The guidance is effective for interim and annual
periods ending after June 15, 2009. The adoption of this guidance did not have an impact on
the consolidated financial position and results of operations.In April 2009, the FASB issued guidance to provide additional assistance for estimating fair
value when the volume and level of activity for the asset or liability have significantly
decreased. This guidance also includes assistance on identifying circumstances that indicate
a transaction is not orderly. The guidance is effective for interim and annual periods ending
after June 15, 2009. The adoption of this guidance had no impact on the consolidated
financial position and results of operations.In May 2009, the FASB issued guidance to establish the general standards of accounting for and
disclosures of events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. This guidance requires disclosure of the date
through which subsequent events have been evaluated, as well as whether that date is the date
the financial statements were issued or the date the financial statements were available to be
issued. In February 2010, the FASB issued new guidance to amend these standards. Under this
new guidance, the Company is not required to disclose the date through which subsequent events
have been evaluated. This guidance is effective upon issuance The adoption of this guidance
did not have impact on the Companys consolidated financial statements.In August 2009, the FASB issued additional guidance for the fair value measurement of
liabilities. The Company had chosen not to elect the fair value option for any items that are
not already required to be measured at fair value in accordance with GAAP. This guidance is
effective for the first reporting period, including interim periods, beginning after issuance.
The adoption of this guidance did not have an impact on our consolidated financial
statements.In September 2009, the FASB issued guidance for the fair value measurement of investments in
certain entities that calculate net asset value per share (or its equivalent). The amendments
in this guidance improve financial reporting by permitting use of a practical expedient, with
appropriate disclosures, when measuring the fair value of an alternative investment that does
not have a readily determinable fair value. The amendments in this guidance also improve
transparency by requiring additional disclosures about investments in the scope of the
amendments in this guidance to enable users of financial statements to understand the nature
and risks of investments and whether the investments are probable of being sold at amounts
different from net asset value per share. The adoption of this guidance did not have a
material impact on the Companys consolidated financial statements.In January 2010, the FASB issued guidance for the fair value measurement and disclosure;
improving disclosures about fair value measurements. This guidance require new disclosures as
follows: (1) Disclose separately the amounts of significant transfers in and out of Levels1
and 2 fair value measurements and describe the reasons for the transfers; (2) In the
reconciliation for fair value measurements using significant unobservable inputs (Level 3),
present separately information about purchases, sales, issuances, and settlements (that is on
a gross basis rather than as one net number). This guidance also provides amendments that
clarify existing disclosure as follows: (1) Level of disaggregation  provide fair value
measurement disclosures for each class of assets and liabilities; (2) Disclosures about inputs
and valuation techniques  provide disclosures about the input and valuation techniques used to measure fair value for both recurring and nonrecurring
fair
 19




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 value measurements. Those disclosures are required for fair value measurements that fall in
either Level 2 or Level 3. This guidance is effective for annual or interim reporting periods
beginning after December 15, 2009, except for the requirement to provide the Level 3 activity
for purchases, sales, issuances, and settlements on a gross basis. That requirement will be
effective for fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years. This guidance does not require any new fair value
measurements. The Company does
not expect the adoption of this guidance to have an impact on our financial position or
results of operations.There were no other new accounting pronouncements issued that had or are expected to have a
material impact on our financial position, operating results or disclosures.
 3.
    
    Investment in SecuritiesThe amortized cost for debt and equity securities, gross unrealized gains, gross unrealized
losses, and estimated fair value for trading, available-for-sale, and held-to-maturity
securities by major security type and class of security at December 31, 2009 and 2008 were as
follows:
 2009Gross
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueTrading securitiesEquity securities
    
    $
    42,075
    
    
    $
    7,064
    
    
    $
    (5,230
    )
    
    $
    43,909
 2008Gross
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueTrading securitiesEquity securities
    
    $
    40,847
    
    
    $
    2,781
    
    
    $
    (11,444
    )
    
    $
    32,184
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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueSecurities available for saleFixed maturitiesObligations 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 securitiesCommon 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
 21




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueSecurities available for saleFixed maturitiesObligations of government-
sponsored enterprises
    
    $
    422,038
    
    
    $
    7,991
    
    
    $
    (220
    )
    
    $
    429,809U.S. Treasury securities and
obligations of U.S.
government instrumentalities
    
    
    78,024
    
    
    
    11,961
    
    
    
    
    
    
    
    89,985Obligations of the
Commonwealth of Puerto Rico
and its instrumentalities
    
    
    121,934
    
    
    
    448
    
    
    
    (6,077
    )
    
    
    116,305Municipal securities
    
    
    35,611
    
    
    
    426
    
    
    
    (116
    )
    
    
    35,921Corporate bonds
    
    
    100,745
    
    
    
    1,625
    
    
    
    (7,399
    )
    
    
    94,971Residential mortgage-backed securities
    
    
    17,420
    
    
    
    425
    
    
    
    (3
    )
    
    
    17,842Collateralized mortgage obligations
    
    
    103,891
    
    
    
    1,287
    
    
    
    (2,327
    )
    
    
    102,851Total fixed maturities
    
    
    879,663
    
    
    
    24,163
    
    
    
    (16,142
    )
    
    
    887,684Equity securitiesCommon stocks
    
    
    6,651
    
    
    
    1,541
    
    
    
    (1,185
    )
    
    
    7,007Preferred stocks
    
    
    8,746
    
    
    
    
    
    
    
    (406
    )
    
    
    8,340Perpetual preferred stocks
    
    
    3,617
    
    
    
    
    
    
    
    (335
    )
    
    
    3,282Mutual funds
    
    
    51,040
    
    
    
    217
    
    
    
    (1,257
    )
    
    
    50,000Total equity securities
    
    
    70,054
    
    
    
    1,758
    
    
    
    (3,183
    )
    
    
    68,629Total
    
    $
    949,717
    
    
    $
    25,921
    
    
    $
    (19,325
    )
    
    $
    956,313
 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueSecurities held to maturityObligations of government-
sponsored enterprises
    
    $
    925
    
    
    $
    6
    
    
    $
    
    
    
    $
    931U.S. Treasury securities and
obligations of U.S.
government instrumentalties
    
    
    3,786
    
    
    
    132
    
    
    
    
    
    
    
    3,918Corporate bonds
    
    
    9,063
    
    
    
    534
    
    
    
    
    
    
    
    9,597Residential mortgage-backed securities
    
    
    1,256
    
    
    
    25
    
    
    
    (1
    )
    
    
    1,280Certificates of deposits
    
    
    764
    
    
    
    
    
    
    
    
    
    
    
    764$
    15,794
    
    
    $
    697
    
    
    $
    (1
    )
    
    
    16,490
 22




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueSecurities held to maturityObligations of government-
sponsored enterprises
    
    $
    9,082
    
    
    $
    240
    
    
    $
    
    
    
    $
    9,322U.S. Treasury securities and
obligations of U.S.
government instrumentalties
    
    
    1,488
    
    
    
    379
    
    
    
    
    
    
    
    1,867Corporate bonds
    
    
    8,698
    
    
    
    698
    
    
    
    
    
    
    
    9,396Residential mortgage-backed securities
    
    
    1,749
    
    
    
    
    
    
    
    (7
    )
    
    
    1,742Certificates of deposits
    
    
    736
    
    
    
    
    
    
    
    
    
    
    
    736$
    21,753
    
    
    $
    1,317
    
    
    $
    (7
    )
    
    
    23,063
 Gross unrealized losses on investment securities and the estimated fair value of the
related securities, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position as of December 31, 2009 and
2008 were as follows:
 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 saleFixed maturitiesObligations of government-
sponsored enterprises
    
    $
    110,602
    
    
    $
    (2,264
    )
    
    
    21
    
    
    $
    25,468
    
    
    $
    (1,061
    )
    
    
    5
    
    
    $
    136,070
    
    
    $
    (3,325
    )
    
    
    26Obligations of the
Commonw ealth 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 securitiesPreferred 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
 23




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 2008Less 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 saleFixed
maturitiesObligations of government-
sponsored enterprises
    
    $
    16,550
    
    
    $
    (191
    )
    
    
    5
    
    
    $
    2,956
    
    
    $
    (29
    )
    
    
    1
    
    
    $
    19,506
    
    
    $
    (220
    )
    
    
    6Obligations of the
Commonw ealth of Puerto
Rico and its instrumentalities
    
    
    79,045
    
    
    
    (5,230
    )
    
    
    30
    
    
    
    8,932
    
    
    
    (847
    )
    
    
    9
    
    
    
    87,977
    
    
    
    (6,077
    )
    
    
    39Municipal securities
    
    
    2,223
    
    
    
    (75
    )
    
    
    2
    
    
    
    1,459
    
    
    
    (41
    )
    
    
    3
    
    
    
    3,682
    
    
    
    (116
    )
    
    
    5Corporate bonds
    
    
    31,324
    
    
    
    (2,688
    )
    
    
    22
    
    
    
    29,044
    
    
    
    (4,711
    )
    
    
    14
    
    
    
    60,368
    
    
    
    (7,399
    )
    
    
    36Residential mortgage-backed
securities
    
    
    1,374
    
    
    
    (2
    )
    
    
    1
    
    
    
    36
    
    
    
    (1
    )
    
    
    1
    
    
    
    1,410
    
    
    
    (3
    )
    
    
    2Collateralized mortgage
obligations
    
    
    5,797
    
    
    
    (2,327
    )
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    5,797
    
    
    
    (2,327
    )
    
    
    10Total fixed maturities
    
    
    136,313
    
    
    
    (10,513
    )
    
    
    70
    
    
    
    42,427
    
    
    
    (5,629
    )
    
    
    28
    
    
    
    178,740
    
    
    
    (16,142
    )
    
    
    98Equity securitiesCommon stocks
    
    
    3,917
    
    
    
    (1,106
    )
    
    
    6
    
    
    
    416
    
    
    
    (79
    )
    
    
    1
    
    
    
    4,333
    
    
    
    (1,185
    )
    
    
    7Preferred stocks
    
    
    3,594
    
    
    
    (406
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    3,594
    
    
    
    (406
    )
    
    
    1Perpetual preferred stocks
    
    
    1,033
    
    
    
    (335
    )
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    1,033
    
    
    
    (335
    )
    
    
    2Mutual funds
    
    
    10,027
    
    
    
    (343
    )
    
    
    6
    
    
    
    9,235
    
    
    
    (914
    )
    
    
    8
    
    
    
    19,262
    
    
    
    (1,257
    )
    
    
    14Total equity securities
    
    
    18,571
    
    
    
    (2,190
    )
    
    
    15
    
    
    
    9,651
    
    
    
    (993
    )
    
    
    9
    
    
    
    28,222
    
    
    
    (3,183
    )
    
    
    24Total for securities
available for sale
    
    $
    154,884
    
    
    $
    (12,703
    )
    
    
    85
    
    
    $
    52,078
    
    
    $
    (6,622
    )
    
    
    37
    
    
    $
    206,962
    
    
    $
    (19,325
    )
    
    
    122Securities held to maturity
Residential mortgage-backed
securities
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    1,741
    
    
    $
    (7
    )
    
    
    3
    
    
    $
    1,741
    
    
    $
    (7
    )
    
    
    3
 The Company regularly monitors and evaluates the difference between the cost and
estimated fair value of investments. For investments with a fair value below cost, the
process includes evaluating: (1) the length of time and the extent to which the estimated
fair value has been less than amortized cost for fixed maturity securities, or cost
for equity securities, (2) the financial condition, near-term and long-term prospects for the
issuer, including relevant industry conditions and trends, and implications of rating agency
actions, (3) the Companys intent to sell or the likelihood of a required sale prior to
recovery, (4) the recoverability of principal and interest for fixed maturity securities, or
cost for equity securities, and (5) other factors, as applicable. This process is not exact
and further requires consideration of risks such as credit and interest rate risks.
Consequently, if an investments cost exceeds its estimated fair value solely due to changes
in interest rates, other-than temporary impairment may not be appropriate. Due to the
subjective nature of the Companys analysis, along with the judgment that must be applied in
the analysis, it is possible that the Company could reach a different conclusion whether or
not to impair a security if it had access to additional information about the investee.
Additionally, it is possible that the investees ability to meet future contractual
obligations may be different than what the Company determined during its analysis, which may
lead to a different impairment conclusion in future periods. If after monitoring and
analyzing impaired securities, the Company determines that a decline in the estimated fair
value of any available-for-sale or held-to-maturity security below cost is
other-than-temporary, the carrying amount of the security is reduced
to its fair value by the credit component of the other-than-temporary
impairment. The
new cost basis of an impaired security is not adjusted for subsequent increases in estimated
fair value. In periods subsequent to the recognition of an other-than-temporary impairment,
the impaired security is accounted for as if it had been purchased on the measurement date of
the impairment. For debt securities, the discount (or reduced premium) based on the new cost
basis may be accreted into
 24




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 net investment income in future periods based on prospective changes in cash flow estimates,
to reflect adjustments to the effective yield.
  
    
    Identification and evaluation of securities that have possible indications of
other-than-temporary impairment, which includes an analysis of all investments with gross
unrealized investments losses that represent 20% or more of cost.
    
    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 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:
 25




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 Residential Mortgage-Backed Securities and Collateralized Mortgage Obligations:
 Preferred Stocks:
 Perpetual Preferred Stocks:
 Mutual Funds:
 26




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 Maturities of investment securities classified as available for sale and held to maturity
were as follows at December 31, 2009:
 Amortized
    
    
    EstimatedCost
    
    
    Fair ValueSecurities available for saleDue in one year or less
    
    $
    13,800
    
    
    $
    14,172Due after one year through five years
    
    
    122,706
    
    
    
    126,690Due after five years through ten years
    
    
    190,032
    
    
    
    193,183Due after ten years
    
    
    338,907
    
    
    
    336,741Residential mortgage-backed securities
    
    
    16,605
    
    
    
    17,281Collateralized mortgage obligations
    
    
    229,312
    
    
    
    230,910$
    911,362
    
    
    $
    918,977Securities held to maturityDue in one year or less
    
    $
    10,752
    
    
    $
    11,291Due after one year through five years
    
    
    510
    
    
    
    524Due after five years through ten years
    
    
    1,793
    
    
    
    1,800Due after ten years
    
    
    1,483
    
    
    
    1,595Residential mortgage-backed securities
    
    
    1,256
    
    
    
    1,280$
    15,794
    
    
    $
    16,490
 Expected maturities may differ from contractual maturities because some issuers have the
right to call or prepay obligations with or without call or prepayment penalties.Investments with an amortized cost of $4,642 and $5,356
(fair value of $4,758 and $5,602) at
December 31, 2009 and 2008, respectively, were deposited with the Commissioner of Insurance
to comply with the deposit requirements of the Insurance Code of the Commonwealth of Puerto
Rico (the Insurance Code). Investment with an amortized cost of $577 and $554 (fair value of
$577 and $554) at December 31, 2009 and 2008, respectively, were deposited with the
Commissioner of Insurance of the Government of the U.S. Virgin Islands.
 27




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
  2009
    
    
    2008
    
    
    2007Realized gains (losses)Fixed maturity securitiesSecurities available for saleGross gains from sales
    
    $
    5,323
    
    
    $
    1,876
    
    
    $
    1,208Gross losses from sales
    
    
    (3
    )
    
    
    (225
    )
    
    
    (1,797
    )Gross losses from other-than-temporary
impairments
    
    
    (1,712
    )
    
    
    (3,872
    )
    
    
    Total debt securities
    
    
    3,608
    
    
    
    (2,221
    )
    
    
    (589
    )Equity securitiesTrading securities:Gross gains from sales
    
    
    717
    
    
    
    3,358
    
    
    
    8,873Gross losses from sales
    
    
    (1,381
    )
    
    
    (3,160
    )
    
    
    (1,558
    )(664
    )
    
    
    198
    
    
    
    7,315Securities available for saleGross gains from sales
    
    
    3,468
    
    
    
    881
    
    
    
    292Gross losses from sales
    
    
    (391
    )
    
    
    (176
    )
    
    
    Gross losses from other-than-temporary
impairments
    
    
    (5,407
    )
    
    
    (12,622
    )
    
    
    (1,087
    )(2,330
    )
    
    
    (11,917
    )
    
    
    (795
    )Total equity securities
    
    
    (2,994
    )
    
    
    (11,719
    )
    
    
    6,520Net realized gains (losses) on
securities
    
    $
    614
    
    
    $
    (13,940
    )
    
    $
    5,931
  2009
    
    
    2008
    
    
    2007Changes in unrealized gains (losses)Recognized in incomeEquity securities  trading
    
    $
    10,497
    
    
    $
    (21,064
    )
    
    $
    (4,116
    )Recognized in accumulated other
comprehensive lossFixed maturities  available for sale
    
    
    (406
    )
    
    
    928
    
    
    
    18,640Equity securities  available for sale
    
    
    4,583
    
    
    
    (5,734
    )
    
    
    (7,251
    )$
    4,177
    
    
    $
    (4,806
    )
    
    $
    11,389Not recognized in the consolidated
financial statementsFixed maturities  held to maturity
    
    $
    (614
    )
    
    $
    1,152
    
    
    $
    1,266
 28




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
   4.
    
    Net Investment Income
  Years ended December 312009
    
    
    2008
    
    
    2007Fixed maturities
    
    $
    46,285
    
    
    $
    48,197
    
    
    $
    37,205Equity securities
    
    
    4,077
    
    
    
    5,451
    
    
    
    5,271Policy loans
    
    
    411
    
    
    
    387
    
    
    
    394Cash
equivalents and interest-bearing deposits
    
    
    577
    
    
    
    1,003
    
    
    
    2,187Other
    
    
    786
    
    
    
    1,215
    
    
    
    2,137Total
    
    $
    52,136
    
    
    $
    56,253
    
    
    $
    47,194
 5.
    
    Premium and Other Receivables, Net
  2009
    
    
    2008Premium
    
    $
    98,429
    
    
    $
    90,315Self-funded group receivables
    
    
    70,315
    
    
    
    35,749FEHBP
    
    
    10,297
    
    
    
    9,600Agent balances
    
    
    37,888
    
    
    
    38,491Accrued interest
    
    
    9,287
    
    
    
    11,802Reinsurance recoverable
    
    
    43,951
    
    
    
    42,181Other
    
    
    27,999
    
    
    
    23,765298,166
    
    
    
    251,903Less allowance for doubtful receivables:Premium
    
    
    20,280
    
    
    
    10,467Other
    
    
    4,954
    
    
    
    4,27825,234
    
    
    
    14,745Premium and other receivables, net
    
    $
    272,932
    
    
    $
    237,158
 6.
    
    Deferred Policy Acquisition Costs and Value of Business Acquired
  29




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 DPAC
    
    
    VOBA
    
    
    TotalBalance, December 31, 2006
    
    $
    38,825
    
    
    $
    72,592
    
    
    $
    111,417Additions
    
    
    46,898
    
    
    
    
    
    
    
    46,898VOBA interest at an average rate of 5.27%
    
    
    
    
    
    
    3,874
    
    
    
    3,874Amortization
    
    
    (32,508
    )
    
    
    (12,442
    )
    
    
    (44,950
    )Net change
    
    
    14,390
    
    
    
    (8,568
    )
    
    
    5,822Balance, December 31, 2007
    
    
    53,215
    
    
    
    64,024
    
    
    
    117,239Additions
    
    
    49,470
    
    
    
    
    
    
    
    49,470VOBA interest at an average rate of 5.40%
    
    
    
    
    
    
    3,425
    
    
    
    3,425Amortization
    
    
    (33,442
    )
    
    
    (10,345
    )
    
    
    (43,787
    )Net change
    
    
    16,028
    
    
    
    (6,920
    )
    
    
    9,108Balance, December 31, 2008
    
    
    69,243
    
    
    
    57,104
    
    
    
    126,347Additions
    
    
    55,632
    
    
    
    
    
    
    
    55,632VOBA interest at an average rate of 5.29%
    
    
    
    
    
    
    3,066
    
    
    
    3,066Amortization
    
    
    (35,923
    )
    
    
    (9,205
    )
    
    
    (45,128
    )Net change
    
    
    19,709
    
    
    
    (6,139
    )
    
    
    13,570Balance, December 31, 2009
    
    $
    88,952
    
    
    $
    50,965
    
    
    $
    139,917
   Year ending December 31:2010
    
    $
    8,2392011
    
    
    7,3972012
    
    
    6,6072013
    
    
    5,8082014
    
    
    5,159
 7.
    
    Property and Equipment, Net
  2009
    
    
    2008Land
    
    $
    7,309
    
    
    $
    6,531Buildings and leasehold improvements
    
    
    45,034
    
    
    
    44,791Office furniture and equipment
    
    
    16,821
    
    
    
    16,208Computer equipment and software
    
    
    69,652
    
    
    
    56,482Automobiles
    
    
    513
    
    
    
    461139,329
    
    
    
    124,473Less accumulated depreciation and amortization
    
    
    70,526
    
    
    
    66,025Property and equipment, net
    
    $
    68,803
    
    
    $
    58,448
 30




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 8.
    
    Acquired Intangible Asset
  9.
    
    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.
  31




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
  2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity securities held for trading
    
    $
    43,909
    
    
    $
    
    
    
    $
    
    
    
    $
    43,909Securities available for saleFixed maturity securities
    
    
    51,339
    
    
    
    867,638
    
    
    
    
    
    
    
    918,977Equity securities
    
    
    19,724
    
    
    
    44,190
    
    
    
    775
    
    
    
    64,689Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    1,608
    
    
    
    
    
    
    
    1,608$
    114,972
    
    
    $
    913,436
    
    
    $
    775
    
    
    $
    1,029,183
 2008Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity securities held for trading
    
    $
    32,184
    
    
    $
    
    
    
    $
    
    
    
    $
    32,184Securities available for saleFixed maturity securities
    
    
    89,985
    
    
    
    796,418
    
    
    
    1,281
    
    
    
    887,684Equity securities
    
    
    18,953
    
    
    
    48,590
    
    
    
    1,086
    
    
    
    68,629Derivatives (reported within other assets in
the consolidated balance sheets)
    
    
    
    
    
    
    1,674
    
    
    
    
    
    
    
    1,674$
    141,122
    
    
    $
    846,682
    
    
    $
    2,367
    
    
    $
    990,171
  FixedMaturity
    
    
    EquitySecurities
    
    
    Securities
    
    
    TotalBeginning balance December 31, 2007
    
    $
    4,280
    
    
    $
    989
    
    
    $
    5,269Total gains or (losses)Realized in earnings
    
    
    (3,883
    )
    
    
    
    
    
    
    (3,883
    )Unrealized in other accumulated
comprehensive income
    
    
    884
    
    
    
    97
    
    
    
    981Ending balance December 31, 2008
    
    $
    1,281
    
    
    $
    1,086
    
    
    $
    2,367Total losses realized in earnings
    
    
    (1,281
    )
    
    
    
    
    
    
    (1,281
    )Sales
    
    
    
    
    
    
    (1,086
    )
    
    
    (1,086
    )Transfers in to Level 3
    
    
    
    
    
    
    775
    
    
    
    775Ending balance December 31, 2009
    
    $
    
    
    
    $
    775
    
    
    $
    775
  32




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 10.
    
    Claim Liabilities
  2009
    
    
    2008
    
    
    2007Claim liabilities at beginning of year
    
    $
    323,710
    
    
    $
    353,830
    
    
    $
    314,682Reinsurance recoverable on claim liabilities
    
    
    (30,432
    )
    
    
    (54,834
    )
    
    
    (32,066
    )Net claim liabilities at beginning of year
    
    
    293,278
    
    
    
    298,996
    
    
    
    282,616Claims incurredCurrent period insured events
    
    
    1,601,802
    
    
    
    1,432,843
    
    
    
    1,241,866Prior period insured events
    
    
    (1,887
    )
    
    
    (9,918
    )
    
    
    (31,007
    )Total
    
    
    1,599,915
    
    
    
    1,422,925
    
    
    
    1,210,859Payments of losses and loss-adjustment
expensesCurrent period insured events
    
    
    1,316,292
    
    
    
    1,195,414
    
    
    
    1,004,346Prior period insured events
    
    
    247,167
    
    
    
    233,229
    
    
    
    190,133Total
    
    
    1,563,459
    
    
    
    1,428,643
    
    
    
    1,194,479Net claim liabilities at end of year
    
    
    329,734
    
    
    
    293,278
    
    
    
    298,996Reinsurance recoverable on claim liabilities
    
    
    30,712
    
    
    
    30,432
    
    
    
    54,834Claim liabilities at end of year
    
    $
    360,446
    
    
    $
    323,710
    
    
    $
    353,830
    11.
    
    Federal Employees Health Benefits Program (FEHBP)
   33




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
       12.
    
    Borrowings
  34




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##### Table of Contents



Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 2009
    
    
    2008Senior unsecured notes payable of $50,000 issued on
September 2004; due September 2019. Interest is
payable semiannually at a fixed rate of 6.30%.
    
    $
    50,000
    
    
    $
    50,000Senior unsecured notes payable of $60,000 issued on
December 2005; due December 2020. Interest is
payable monthly at a fixed rate of 6.60%.
    
    
    60,000
    
    
    
    60,000Senior unsecured notes payable of $35,000 issued on
January 2006; due January 2021. Interest is payable
monthly at a fixed rate of 6.70%.
    
    
    35,000
    
    
    
    35,000Secured loan payable of $41,000, payable in monthly
installments of $137 through July 1, 2024, plus
interest at a rate reset periodically of 100 basis
points over selected LIBOR maturity (which was
1.28% and 2.43% at December 31, 2009,
and 2008, respectively).
    
    
    22,667
    
    
    
    24,307Total borrowings
    
    $
    167,667
    
    
    $
    169,307
  Year ending December 312010
    
    $
    1,6402011
    
    
    1,6402012
    
    
    1,6402013
    
    
    1,6402014
    
    
    1,640Thereafter
    
    
    159,467$
    167,667
    35




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##### Table of Contents



Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
   13.
    
    Derivative Instruments and Hedging Activities
       36




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 amortized cost of the investment component of both structured notes
amounted to $9,396 and $8,698, respectively.
 14.
    
    Agency Contract and Expense ReimbursementTSS processed and paid claims as fiscal intermediary for the Medicare  Part B Program until
February 2009, the contract termination date. TSS was reimbursed for administrative expenses
incurred in performing this service. For the years ended December 31, 2009, 2008, and 2007,
TSS was reimbursed by $1,842, $8,678, and $10,783, respectively, for such services, which are
deducted from operating expenses in the accompanying consolidated statements of earnings.The operating expense reimbursements in connection with processing Medicare claims have been
audited through 2005 by federal government representatives. Management is of the opinion that
no significant adjustments will be made affecting cost reimbursements through December 31,
2009.On September 12, 2008, the Centers for Medicare and Medicaid Services (CMS) announced that
First Coast Service Options (FCSO), a non-affiliated third party organization based in
Jacksonville, Florida, was awarded the Medicare Administrative Contract (MAC) for Jurisdiction
9 (Florida, Puerto Rico and the U.S. Virgin Islands). FCSO proposed TSS as a subcontractor in
MAC Jurisdiction 9 to perform certain provider customer service functions, subject to terms
and conditions negotiated between FSCO and TSS. Pursuant to this, TSS was reimbursed $2,650
for performing the customer service functions during the year ended December 31, 2009.
 15.
    
    Reinsurance ActivityThe effect of reinsurance on premiums earned and claims incurred is as follows:
 Premiums Earned
    
    
    Claims Incurred(1)2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007Premiums written
    
    $
    1,957,085
    
    
    $
    1,780,765
    
    
    $
    1,564,873
    
    
    $
    1,618,663
    
    
    $
    1,443,046
    
    
    $
    1,249,554Premiums ceded
    
    
    (81,013
    )
    
    
    (85,308
    )
    
    
    (81,325
    )
    
    
    (18,748
    )
    
    
    (20,121
    )
    
    
    (38,695
    )$
    1,876,072
    
    
    $
    1,695,457
    
    
    $
    1,483,548
    
    
    $
    1,599,915
    
    
    $
    1,422,925
    
    
    $
    1,210,859
 
 (1)
    
    The claims incurred disclosed in this table exclude the change in the
liability for future policy benefits amounting to $12,945, $11,989 and $12,916 during the
years ended December 31, 2009, 2008 and 2007, respectively. TSS, TSP and TSV, in accordance with general industry practices, annually purchase
reinsurance to protect them from the impact of large unforeseen losses and prevent sudden and
unpredictable changes in net income and stockholders equity of the Company. Reinsurance
contracts do not relieve any of the subsidiaries from their obligations to policyholders. In
the event that all or any of the reinsuring companies might be unable to meet their
obligations under existing reinsurance agreements, the subsidiaries would be liable for such
defaulted amounts. During 2009, 2008 and 2007 TSP placed 13.53%, 11.84% and 10.92% of its
reinsurance business with one reinsurance company.TSS has two excess of loss reinsurance treaties whereby it cedes a portion of its premiums to
third parties. Reinsurance contracts are primarily for periods of one year, and are subject
to modifications and negotiations in each renewal date. Premiums ceded under these contracts
amounted to $7,341, $5,623 and $3,349 in 2009, 2008 and 2007, respectively. Claims ceded
 37




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##### Table of Contents



Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 amounted to $3,870, $8,407 and $2,957 in 2009, 2008 and 2007, respectively. Principal
reinsurance agreements are as follows:
 
    
    Organ transplant excess of loss treaty covering 100% of the claims up to a maximum of
$1,000 per person, per life.
    
    Routine medical care excess of loss treaty covering 100% of claims from the amount of
$100 and up to a maximum of $900 per covered person, per contract year.
 TSP has a number of pro rata and excess of loss reinsurance treaties whereby the subsidiary
retains for its own account all loss payments for each occurrence that does not exceed the
stated amount in the agreements and a catastrophe cover, whereby it protects itself from a
loss or disaster of a catastrophic nature. Under these treaties, TSP ceded premiums of
$67,541, $72,115, and $69,137, in 2009, 2008, and 2007, respectively.Reinsurance cessions are made on excess of loss and on a proportional basis. Principal
reinsurance agreements are as follows:
 
    
    Property quota share treaty covering for a maximum of $20,000 for any one risk.
Under this treaty 35% of the risk is ceded to reinsurers. The remaining exposure is
covered by a property per risk excess of loss treaty that provides reinsurance in excess
of $500 up to a maximum of $10,000, or the remaining 65% for any one risk. In addition,
TSP has an additional property catastrophe excess of loss contract that provides
protection for losses in excess of $5,000 resulting from any catastrophe, subject to a
maximum loss of $10,000.
    
    Personal property catastrophe excess of loss. This treaty provides protection for
losses in excess of $5,000 resulting from any catastrophe, subject to a maximum loss of
$80,000.
    
    Commercial property catastrophe excess of loss. This treaty provides protection for
losses in excess of $5,000 resulting from any catastrophe, subject to a maximum loss of
$205,000.
    
    Property catastrophe excess of loss. This treaty provides protection for $185,000 in
excess of $80,000 and $205,000 with respect to personal and commercial lines,
respectively, resulting from any catastrophe, subject to a maximum
loss of $157,500 in respect of the ceded portion of the Commercial
Lines Quota Share.
    
    Personal lines quota share. This treaty provides protection of 4.5% on all ground-up
losses, subject to a limit of $1,000 for any one risk.
    
    Reinstatement premium protection. This treaty provides a maximum limit of
approximately $5,000 for personal lines and $13,800 in commercial lines to cover the
necessity of reinstating the catastrophe program in the event it is activated.
    
    Casualty excess of loss treaty. This treaty provides reinsurance for losses in
excess of $225 up to a maximum of $12,000.
    
    Medical malpractice excess of loss. This treaty provides reinsurance in excess of
$150 up to a maximum of $1,500 per incident.
 38




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##### Table of Contents



Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 
    
    Builders risk quota share and first surplus covering contractors risk. This treaty
provides protection on a 20/80 quota share basis for the initial $2,500 and a first
surplus of $10,000 for a maximum of $12,000 for any one risk.
    
    Surety quota share treaty covering contract and miscellaneous surety bond business.
This treaty provides reinsurance of up to $5,000 for contract surety bonds, subject to
an aggregate of $10,000 per contractor and $3,000 per miscellaneous surety bond.
 Facultative reinsurance is obtained when coverage per risk is required. During the year 2007
the ceded claims incurred of TSP include approximately $23.4 million related to one policy
ceded under a facultative reinsurance treaty. No individually significant policies were ceded
during the years 2009 and 2008. All principal  reinsurance contracts are for a period of one year, on a
calendar basis, and are subject to modifications and negotiations in each renewal.The ceded unearned reinsurance premiums on TSP arising from these reinsurance transactions
amounted to $16,746 and $20,357 at December 31, 2009 and 2008, respectively, and are reported
as other assets in the accompanying consolidated balance sheets.TSV also cedes insurance with various reinsurance companies under a number of pro rata,
excess of loss and catastrophe treaties. Under these treaties, TSV ceded premiums of $6,131,
$7,570, and $8,839, in 2009, 2008, and 2007, respectively. Principal reinsurance agreements
are as follows:
 
    
    Group life pro rata agreement, reinsuring 50% of the risk up to $250 on the life of
any participating individual of certain groups insured. This contract was cancelled on
June 30, 2009.
    
    Group life insurance facultative agreement, reinsuring risk in excess of $25 of
certain group life policies and a combined pro rata and excess of loss agreement
effective July 1, 2008, reinsuring 50% of the risk up to $200 and ceding the excess.
    
    Group life insurance facultative excess of loss agreements in which TSV retains a
portion of the losses on the life of any participating individual of certain groups
insured. Any excess will be recovered from the reinsurer. This agreement provides for
various retentions ($25, $50 and $75) of the losses.
    
    Facultative pro rata agreements for the long-term disability insurance, reinsuring
65% of the risk.
    
    Accidental death catastrophic reinsurance covering each and every accident arising
out of one event or occurrence resulting in the death or dismemberment of five or more
persons. The retention for each event is $250 with a maximum of $1,000 for each event
and $2,000 per year.
    
    Several reinsurance agreements, mostly on an excess of loss basis up to a maximum
retention of $50. For certain new life products that have been issued after 1999, the
retention limit is $175.
 39




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##### Table of Contents



Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 16.
    
    Income TaxesUnder Puerto Rico income tax law, the Company is not allowed to file consolidated tax returns
with its subsidiaries. The Company and its subsidiaries are subject to Puerto Rico income
taxes. The Companys insurance subsidiaries are also subject to U.S. federal income taxes for
foreign source dividend income. As of December 31, 2009, tax years 2004 through 2009 of the
Company and its subsidiaries are subject to examination by Puerto Rico taxing authorities.TSS and TSP are taxed essentially the same as other corporations, with taxable income
primarily determined on the basis of the statutory annual statements filed with the insurance
regulatory authorities. Also, operations are subject to an alternative minimum income tax,
which is calculated based on the formula established by existing tax laws. Any alternative
minimum income tax paid may be used as a credit against the excess, if any, of regular income
tax over the alternative minimum income tax in future years.TSV operates as a qualified domestic life insurance company and is subject to the alternative
minimum tax and taxes on its capital gains.Federal income taxes recognized by the Companys insurance subsidiaries amounted to
approximately $125, $112, and $164, in 2009, 2008, and 2007, respectively.TSM, TC, and ISI are subject to Puerto Rico income taxes as a regular corporation, as defined
in the P.R. Internal Revenue Code, as amended.On July 10, 2009 the Governor of Puerto Rico signed into law Puerto Ricos Act No. 37, which
requires certain corporations to pay a 5% additional special tax over
the tax obligation through December 31, 2011.
The effective tax rate includes the additional special tax, as enacted.The income tax expense differs from the amount computed by applying the Puerto Rico statutory
income tax rate to the income before income taxes as a result of the following:
 40




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##### Table of Contents



Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 2009
    
    
    2008
    
    
    2007Income before taxes
    
    $
    83,651
    
    
    $
    31,944
    
    
    $
    72,645Statutory tax rate
    
    
    40.95
    %
    
    
    39.0
    %
    
    
    39.0
    %Income tax expense at statutory rate
    
    
    34,255
    
    
    
    12,458
    
    
    
    28,332Increase (decrease) in taxes resulting fromExempt interest income
    
    
    (13,201
    )
    
    
    (13,561
    )
    
    
    (9,990
    )Effect of
taxing life insurance operations as a qualified domestic life
insurance company instead of as a regular corporation
    
    
    (4,759
    )
    
    
    (1,336
    )
    
    
    (1,115
    )Effect of
using earnings under statutory accounting principles instead of GAAP
for TSS and TSP
    
    
    (3,089
    )
    
    
    6,406
    
    
    
    371Effect of
taxing capital gains at a preferential rate
    
    
    446
    
    
    
    (237
    )
    
    
    (1,406
    )Dividends received deduction
    
    
    (262
    )
    
    
    (810
    )
    
    
    (821
    )Other permanent disallowances, net:Effect of
capital gains preferential rate on impairments
    
    
    1,385
    
    
    
    2,916
    
    
    
    140Disallowance
of expenses related to exempt interest income
    
    
    871
    
    
    
    1,792
    
    
    
    603Disallowed interest expense
    
    
    730
    
    
    
    1,014
    
    
    
    1,086Other
    
    
    1,404
    
    
    
    (158
    )
    
    
    600Total other permanent differences
    
    
    4,151
    
    
    
    5,564
    
    
    
    2,429Adjustment
to deferred tax assets and liabilities for changes in effective tax rates
    
    
    (239
    )
    
    
    
    
    
    
    (2,131
    )Other
adjustments to deferred tax assets and liabilities
    
    
    (771
    )
    
    
    (300
    )
    
    
    (423
    )Tax credit benefit
    
    
    (2,386
    )
    
    
    (1,286
    )
    
    
    Other
    
    
    487
    
    
    
    256
    
    
    
    (1,119
    )Total income tax expense
    
    $
    14,871
    
    
    $
    7,154
    
    
    $
    14,127
 41




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##### Table of Contents



Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 Deferred income taxes reflect the tax effects of temporary differences between carrying
amounts of assets and liabilities for financial reporting purposes and income tax purposes.
The net deferred tax asset at December 31, 2009 and 2008 of the Company and its subsidiaries
is composed of the following:
 2009
    
    
    2008Deferred tax assetsAllowance for doubtful receivables
    
    $
    9,869
    
    
    $
    5,325Liability for pension benefits
    
    
    13,161
    
    
    
    14,681Employee benefits plan
    
    
    3,142
    
    
    
    4,214Postretirement benefits
    
    
    1,668
    
    
    
    1,454Deferred compensation
    
    
    1,952
    
    
    
    1,661Accumulated depreciation
    
    
    312
    
    
    
    334Impairment loss on investments
    
    
    3,654
    
    
    
    2,816Contingency reserves
    
    
    214
    
    
    
    Share-based compensation
    
    
    592
    
    
    
    Unrealized loss on trading securities
    
    
    
    
    
    
    1,300Unrealized loss on derivative instruments
    
    
    89
    
    
    
    82Alternative minimum income tax credit
    
    
    955
    
    
    
    940Purchased tax credits
    
    
    7,388
    
    
    
    8,337Other
    
    
    754
    
    
    
    767Gross deferred tax assets
    
    
    43,750
    
    
    
    41,911Deferred tax liabilitiesDeferred policy acquisition costs
    
    
    (8,103
    )
    
    
    (7,531
    )Catastrophe loss reserve trust fund
    
    
    (5,935
    )
    
    
    (5,495
    )Unrealized gain upon acquisition of GA Life
    
    
    (982
    )
    
    
    (1,753
    )Unrealized gain on trading securities
    
    
    (285
    )
    
    
    Unrealized gain on securities available for sale
    
    
    (1,626
    )
    
    
    (988
    )Unamortized bond issue costs
    
    
    (318
    )
    
    
    (347
    )Contingency reserves
    
    
    
    
    
    
    (302
    )Other
    
    
    (38
    )
    
    
    (300
    )Gross deferred tax liabilities
    
    
    (17,287
    )
    
    
    (16,716
    )Net deferred tax asset
    
    $
    26,463
    
    
    $
    25,195
 The net deferred tax asset shown in the table above at December 31, 2009 and 2008 is
reflected in the consolidated balance sheets as $37,551 and $35,926, respectively, in
deferred tax assets and $11,088 and $10,731 in deferred tax liabilities, respectively,
reflecting the aggregate deferred tax assets or liabilities of individual tax-paying
subsidiaries of the Company.In assessing the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences become
deductible. Management believes that it is more likely than not that the Company will realize
the benefits of these deductible differences.
 42




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##### Table of Contents



Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 17.
    
    Pension PlansNoncontributory Defined-Benefit Pension PlanThe Company sponsors a noncontributory defined-benefit pension plan for all of its employees
and for the employees for certain of its subsidiaries. Pension benefits begin to vest after
five years of vesting service, as defined, and are based on years of service and final
average salary, as defined. The funding policy is to contribute to the plan as necessary to
meet the minimum funding requirements set forth in the Employee Retirement Income Security
Act of 1974, as amended, plus such additional amounts as the Company may determine to be
appropriate from time to time. The measurement date used to determine pension benefit
measures for the pension plan is December 31.The following table sets forth the plans benefit obligations, fair value of plan assets, and
funded status as of December 31, 2009 and 2008, accordingly:
 2009
    
    
    2008Change in benefit obligationProjected benefit obligation at beginning of year
    
    $
    84,776
    
    
    $
    89,598Service cost
    
    
    4,912
    
    
    
    5,287Interest cost
    
    
    5,712
    
    
    
    5,458Benefit payments
    
    
    (7,004
    )
    
    
    (7,926
    )Actuarial losses (gains)
    
    
    2,492
    
    
    
    (7,641
    )Projected benefit obligation at end of year
    
    $
    90,888
    
    
    $
    84,776Accumulated benefit obligation at end of year
    
    $
    67,825
    
    
    $
    62,371Change in fair value of plan assetsFair value of plan assets at beginning of year
    
    $
    44,100
    
    
    $
    63,614Actual return on assets (net of expenses)
    
    
    8,337
    
    
    
    (16,588
    )Employer contributions
    
    
    8,000
    
    
    
    5,000Benefit payments
    
    
    (7,004
    )
    
    
    (7,926
    )Fair value of plan assets at end of year
    
    $
    53,433
    
    
    $
    44,100Funded status at end of year
    
    $
    (37,455
    )
    
    $
    (40,676
    )Amounts in accumulated other comprehensive income not yet
recognized as a component of net periodic pension costDevelopment of prior service credit
Balance at beginning of year
    
    $
    (5,372
    )
    
    $
    (5,822
    )Amortization
    
    
    450
    
    
    
    450Net prior service credit
    
    
    (4,922
    )
    
    
    (5,372
    )Development of actuarial lossBalance at beginning of year
    
    
    42,559
    
    
    
    30,373Amortization
    
    
    (2,487
    )
    
    
    (1,788
    )(Gain)/Loss arising during the year
    
    
    (1,827
    )
    
    
    13,974Actuarial net loss
    
    
    38,245
    
    
    
    42,559Sum of deferrals
    
    $
    33,323
    
    
    $
    37,187Net amount recognized
    
    $
    (4,132
    )
    
    $
    (3,489
    )
 43




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 The amounts recognized in the balance sheets as of December 31, 2009 and 2008 consist of
the following:
 2009
    
    
    2008Pension liability
    
    $
    37,455
    
    
    $
    40,676Accumulated other comprehensive
loss, net of a deferred tax of
$12,944 and $14,383 in 2009 and
2008, respectively
    
    
    20,379
    
    
    
    22,805
 The components of net periodic benefit cost income for 2009, 2008, and 2007 were as follows:
 2009
    
    
    2008
    
    
    2007Components of net periodic benefit costService cost
    
    $
    4,912
    
    
    $
    5,287
    
    
    $
    5,489Interest cost
    
    
    5,712
    
    
    
    5,458
    
    
    
    5,072Expected return on assets
    
    
    (4,018
    )
    
    
    (5,027
    )
    
    
    (4,383
    )Amortization of prior service (benefit) cost
    
    
    (450
    )
    
    
    (450
    )
    
    
    58Amortization of actuarial loss
    
    
    2,487
    
    
    
    1,788
    
    
    
    1,959Net periodic benefit cost
    
    $
    8,643
    
    
    $
    7,056
    
    
    $
    8,195
 Net periodic pension expense may include settlement charges as a result of retirees
selecting lump-sum distributions. Settlement charges may increase in the future if the number
of eligible participants deciding to receive distributions and the amount of their benefits
increases.The estimated net loss and prior service benefit that will be amortized from accumulated
other comprehensive loss into net periodic pension benefits cost during the next twelve
months is as follows:
 Prior service cost
    
    $
    (450
    )Actuarial loss
    
    
    2,281
 The following assumptions were used on a weighted average basis to determine benefit
obligations of the plan and in computing the periodic benefit cost as of and for the years
ended December 31, 2009, 2008, and 2007:
 2009
    
    
    2008
    
    
    2007Discount rate
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    6.25
    %Expected return on plan assets
    
    
    7.75
    %
    
    
    8.00
    %
    
    
    8.00
    %Rate of compensation increase
    
    Graded; 3.50%
    
    Graded; 3.50%
    
    Graded; 3.50%to 8.00%
    
    to 8.00%
    
    to 8.00%
 As of December 31, 2009, the basis of the overall expected long-term rate of return on assets
assumption is a forward-looking approach based on the current long-term capital market outlook
assumptions of the assets categories the trust invests in and the trusts target asset
allocation. At December 31, 2009, the assumed target asset allocation for the program is:
44%-56% equity securities, 35%-45% debt securities, and 6%-14% other securities. Using a
mean-variance model to project return over 15-years horizon under the target asset allocation,
the 35% to 65% percentile
 44




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##### Table of Contents



Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 range of annual rates of return is 6.4%-8.4%. The Company selected a
rate from within this range of 7.75%, which reflects the Companys best estimate for this
assumption based on the data described above, information on the historical returns on assets
invested in the pension trust, and expected future conditions. This rate is net of both
investment related expenses and a 0.10% reduction for other administrative expenses charged to
the trust.The assumed discount rate of 6.75% at December 31, 2009 reflects the hypothetical rate at
which the projected benefit obligations could be effectively settled or paid out to
participants on that date. The Company determined the discount rate based on a range of
factors, including a yield curve comprised of the rates of return on high-quality,
fixed-income corporate bonds available at the measurement date and the related expected
duration for the obligations.Plan AssetsPlan assets recorded at fair value are categorized based upon the level of judgment
associated with the inputs used to measure their fair value. For level inputs and input
definition, see note 9.The following table summarizes fair value measurements by level at December 31, 2009 for
assets measured at fair value on a recurring basis.
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalEquity InvestmentsDomestic Large Cap
    
    $
    2,557
    
    
    $
    13,624
    
    
    $
    961
    
    
    $
    17,142Domestic Small Cap
    
    
    107
    
    
    
    4,204
    
    
    
    
    
    
    
    4,311International Large Cap
    
    
    2
    
    
    
    4,198
    
    
    
    
    
    
    
    4,200International Small Cap
    
    
    717
    
    
    
    
    
    
    
    
    
    
    
    717Emerging Markets
    
    
    
    
    
    
    2,014
    
    
    
    
    
    
    
    2,014Fixed Income InvestmentsHigh Yield
    
    
    145
    
    
    
    2,586
    
    
    
    277
    
    
    
    3,008Core
    
    
    989
    
    
    
    12,594
    
    
    
    28
    
    
    
    13,611Long Duration
    
    
    82
    
    
    
    5,352
    
    
    
    
    
    
    
    5,434Real Estate InvestmentsREIT
    
    
    
    
    
    
    655
    
    
    
    
    
    
    
    655Real Estate Assets
    
    
    47
    
    
    
    4
    
    
    
    2,290
    
    
    
    2,341$
    4,646
    
    
    $
    45,231
    
    
    $
    3,556
    
    
    $
    53,433
 A reconciliation of the beginning and ending balances of assets measured at fair value on
a recurring basis using significant unobservable inputs (Level 3) for the year ended December
31, 2009 is as follows:
 Domestic
    
    
    
    
    
    
    FixedLarge
    
    
    Fixed Income
    
    
    Income
    
    
    RealCap
    
    
    High Yield
    
    
    Core
    
    
    Estate
    
    
    TotalBeginning Balance at December 31, 2008
    
    $
    695
    
    
    $
    212
    
    
    $
    33
    
    
    $
    3,508
    
    
    $
    4,448Actual return on program assets:Relating to assets still held at the reporting date
    
    
    266
    
    
    
    52
    
    
    
    
    
    
    
    (1,343
    )
    
    
    (1,025
    )Relating to assets sold during the period
    
    
    
    
    
    
    2
    
    
    
    (5
    )
    
    
    (23
    )
    
    
    (26
    )Purchases
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    148
    
    
    
    159Ending balance at December 31, 2009
    
    $
    961
    
    
    $
    277
    
    
    $
    28
    
    
    $
    2,290
    
    
    $
    3,556
 The Companys plan assets are invested in the National Retirement Trust. The National
Retirement Trust was formed to provide financial and legal resources to help members of the
BCBSA offer retirement benefits to their employees.
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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 The investment program for the National Retirement Trust is based on the precepts of capital
market theory that are generally followed by institutional investors, who by definition are
long-term oriented investors. This philosophy holds that:
 
    
    Increasing risk is rewarded with compensating returns over time, and therefore,
prudent risk taking is justifiable for long-term investors.
    
    Risk can be controlled through diversification of asset classes and investment
approaches, as well as diversification of individual securities.
    
    Risk is reduced by time, and over time the relative performance of different asset
classes is reasonably consistent. Over the long-term, equity investments have provided
and should continue to provide superior returns over other security types. Fixed-income
securities can dampen volatility and provide liquidity in periods of depressed economic
activity. Lengthening duration of fixed income securities may reduce surplus
volatility.
    
    The strategic or long-term allocation of assets among various asset classes is an
important driver of long-term returns.
    
    Relative performance of various asset classes is unpredictable in the short-term and
attempts to shift tactically between asset classes are unlikely to be rewarded.
 Investments will be made for the sole interest of the participants and beneficiaries of the
programs participating in the National Retirement Trust. Accordingly, the assets of the
National Retirement Trust shall be invested in accordance with these objectives:
 
    
    Ensure assets are available to meet current and future obligations of the
participating programs when due.
    
    Earn a minimum rate of return no less than the actuarial interest rate.
    
    Earn the maximum return that can be realistically achieved in the markets over the
long-term at a specified and controlled level of risk in order to minimize future
contributions.
    
    Invest the assets with the care, skill, and diligence that a prudent person acting in
a like capacity would undertake. In the process, the Administration of the Trust has the
objective of controlling the costs involved with administering and managing the
investments of the National Retirement Trust.
 Cash FlowsThe Company expects to contribute $7,000 to its pension program in 2010.The following benefit payments, which reflect expected future service, as appropriate, are
expected to be paid:
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Triple-S Management Corporation
Note to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 Year ending December 312010
    
    $
    3,8092011
    
    
    4,1452012
    
    
    4,7702013
    
    
    5,6412014
    
    
    6,2362015  2019
    
    
    46,530
 Noncontributory Supplemental Pension PlanIn addition, the Company sponsors a noncontributory supplemental pension plan. This plan
covers employees with qualified defined benefit retirement plan benefits limited by the U.S.
Internal Revenue Code maximum compensation and benefit limits. At December 31, 2009 and 2008,
the Company has recorded a pension liability of $3,033 and $3,426, respectively. The charge
to accumulated other comprehensive loss related to the noncontributory pension plan at
December 31, 2009 and 2008 amounted to $339 and $464, respectively, net of a deferred tax
asset of $217 and $296, respectively.
 18.
    
    Catastrophe Loss Reserve and Trust FundIn accordance with Chapter 25 of the Insurance Code, as amended, TSP is required to record a
catastrophe loss reserve. This catastrophe loss reserve is supported by a trust fund for the
payment of catastrophe losses. The reserve increases by amounts determined by applying a
contribution rate, not in excess of 5%, to catastrophe written premiums as instructed
annually by the Commissioner of Insurance, unless the level of the reserve exceeds 8% of
catastrophe exposure, as defined. The reserve also increases by an amount equal to the
resulting return in the supporting trust fund and decreases by payments on catastrophe losses
or authorized withdrawals from the trust fund. Additions to the catastrophe loss reserve are
deductible for income tax purposes.This trust may invest its funds in securities authorized by the Insurance Code, but not in
investments whose value may be affected by hazards covered by the catastrophic insurance
losses. The interest earned on these investments and any realized gains (loss) on investment
transactions are part of the trust fund and are recorded as income (expense) of the Company.
An amount equal to the investment returns is recorded as an addition to the catastrophe loss
reserve.The interest earning assets in this fund, which amounted to $33,489 and $31,359 as of
December 31, 2009 and 2008, respectively, are to be used solely and exclusively to pay
catastrophe losses covered under policies written in Puerto Rico.TSP is required to make deposits to the trust fund, if any, on or before January 31 of the
following year. Contributions are determined by a rate imposed by the Commissioner of
Insurance for the catastrophe policies written in that year. Additions in 2009 and 2008,
amounting to $810 and $850, respectively, were determined by applying a rate of 1% to
catastrophe premiums written.The amount in the trust fund may be withdrawn or released in the case that TSP ceases to
underwrite risks subject to catastrophe losses. Also, authorized withdrawals are allowed when
the catastrophe loss reserve exceeds 8% of the catastrophe exposure, as defined.
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Triple-S Management Corporation
Note to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 Retained earnings are restricted in the accompanying consolidated balance sheets by the total
catastrophe loss reserve balance, which as of December 31, 2009 and 2008 amounted to $34,411
and $32,200, respectively.
 19.
    
    Stockholders Equity
 a.
    
    Common StockOn April 24, 2007, the Companys board of directors (the Board) authorized a
3,000-for-one stock split of its Class A common stock effected in the form of a dividend
of 2,999 shares for every one share outstanding. This stock split was effective on May 1,
2007 to all stockholders of record at the close of business on April 24, 2007. The total
number of authorized shares and par value per share were unchanged by this action. The
par value of the additional shares resulting from the stock split was reclassified from
additional paid in capital to common stock. All references to the number of shares and
per share amounts in this consolidated financial statements are presented after giving
retroactive effect to the stock split.In May 2007, the Company cancelled 24,000 director qualifying shares. Since February
2007, Board members are no longer required to hold qualifying shares to participate in
the Board of the Company.In December 7, 2007, the Company completed the initial public offering (IPO) of its Class
B common stock. In this public offering the Company sold 16,100,000 shares, 10,813,191 of
which were shares previously owned by selling shareholders. Proceeds received under this
public offering amounted to $70,279, net of $6,380 of expenses directly related to the
offering.For a period of five years after the completion of the IPO, subject to the extension or
shortening under certain circumstances, each holder of Class B common stock will benefit
from anti-dilution protections provided in the Companys amended and restated certificate
of incorporation.On December 8, 2008, the Company converted 7 million issued and outstanding Class A
shares into Class B shares, in conjunction with the expiration of the lockup agreements
signed by holders of Class A shares at the time of the Companys initial public offering.
 b.
    
    Stock Repurchase ProgramThe Company repurchased shares of its common stock under a $40,000 share repurchase
program authorized by the Companys Board in October 2008. Repurchases were conducted
through open-market purchases of Class B shares only, in accordance with Rule 10b-18
under the Securities Exchange Act of 1934, as amended. During 2009 and 2008, the Company
repurchased and retired 2,021,960 and 1,181,500 shares at an average per share price of
$12.92 and $11.75, for an aggregate cost of $26,120 and $13,880.. The repurchase program
was completed during 2009. At December 31, 2008, the Company had unsettled shares
repurchases amounting to $6,235 under this program. Such amount is included in the
accompanying consolidated balance sheet as account payable and accrued liabilities.c.
    
    Preferred Stock
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Triple-S Management Corporation
Note to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 Authorized capital stock includes 100,000,000 of preferred stock with a par value of
$1.00 per share. As of December 31, 2009 and 2008, there are no issued and outstanding
preferred shares.d.
    
    DividendsDuring the years 2009 and 2008 there were no dividends declared or paid to the Companys
stockholders.On March 12, 2007, the Board declared a cash dividend of $2,448 distributed pro rata
among all of the Companys issued and outstanding Class A common shares, excluding those
 shares issued to the representatives of the community that were members of the Board (the
qualifying shares). All stockholders of record as of the close of business on March 23,
2007, except those who only hold qualifying shares, received a dividend per share of
$0.09 for each share held on that date.e.
    
    Liquidity RequirementsAs members of the BCBSA, the Company and TSS are required by membership standards of the
association to maintain liquidity as defined by BCBSA. That is, to maintain net worth
exceeding the Company Action Level as defined in the National Association of Insurance
Commissioners (NAIC) Risk-Based Capital for Insurers Model Act. The companies are in
compliance with this requirement.
 20.
    
    Comprehensive IncomeThe accumulated balances for each classification of other comprehensive income (loss) are as
follows:
 AccumulatedUnrealized
    
    
    Liability
    
    
    OtherGains (Losses) on
    
    
    for Pension
    
    
    Comprehensivesecurities
    
    
    Benefits
    
    
    LossBeginning balance
    
    $
    5,602
    
    
    $
    (23,267
    )
    
    $
    (17,665
    )Net current period change
    
    
    4,630
    
    
    
    2,550
    
    
    
    7,180Reclassification adjustments for
gains and losses reclassified
in income
    
    
    (1,091
    )
    
    
    
    
    
    
    (1,091
    )Ending balance
    
    $
    9,141
    
    
    $
    (20,717
    )
    
    $
    (11,576
    )
 The related deferred tax effects allocated to each component of other comprehensive
income in the accompanying consolidated statements of stockholders equity and comprehensive
income in 2009, 2008 and 2007 are as follows:
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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 2009Deferred TaxBefore-Tax
    
    
    (Expense)
    
    
    Net-of-TaxAmount
    
    
    Benefit
    
    
    AmountUnrealized holding losses on securities
arising during the period
    
    $
    5,455
    
    
    $
    (825
    )
    
    $
    4,630Less reclassification adjustment
for gains and losses realized in
income
    
    
    (1,278
    )
    
    
    187
    
    
    
    (1,091
    )Net change in unrealized loss
    
    
    4,177
    
    
    
    (638
    )
    
    
    3,539Liability for pension benefits
    
    
    4,070
    
    
    
    (1,520
    )
    
    
    2,550Net current period change
    
    $
    8,247
    
    
    $
    (2,158
    )
    
    $
    6,089
 2008Deferred TaxBefore-Tax
    
    
    (Expense)
    
    
    Net-of-TaxAmount
    
    
    Benefit
    
    
    AmountUnrealized holding losses on securities
arising during the period
    
    $
    (18,944
    )
    
    $
    2,088
    
    
    $
    (16,856
    )Less reclassification adjustment
for gains and losses realized in
income
    
    
    14,138
    
    
    
    (1,234
    )
    
    
    12,904Net change in unrealized loss
    
    
    (4,806
    )
    
    
    854
    
    
    
    (3,952
    )Liability for pension benefits
    
    
    (12,411
    )
    
    
    4,796
    
    
    
    (7,615
    )Cash-flow hedges
    
    
    (93
    )
    
    
    37
    
    
    
    (56
    )Net current period change
    
    $
    (17,310
    )
    
    $
    5,687
    
    
    $
    (11,623
    )
 2007Deferred TaxBefore-Tax
    
    
    (Expense)
    
    
    Net-of-TaxAmount
    
    
    Benefit
    
    
    AmountUnrealized holding losses on securities
arising during the period
    
    $
    10,005
    
    
    $
    (1,622
    )
    
    $
    8,383Less reclassification adjustment for
gains and losses realized in income
    
    
    1,384
    
    
    
    (218
    )
    
    
    1,166Net change in unrealized loss
    
    
    11,389
    
    
    
    (1,840
    )
    
    
    9,549Liability for pension benefits
    
    
    6,697
    
    
    
    (2,607
    )
    
    
    4,090Cash-flow hedges
    
    
    (409
    )
    
    
    159
    
    
    
    (250
    )Net current period change
    
    $
    17,677
    
    
    $
    (4,288
    )
    
    $
    13,389
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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 21.
    
    Share-Based CompensationIn December 2007 the Company adopted the 2007 Incentive Plan (the Plan), which permits the
Board the grant of stock options, restricted stock awards and performance awards to eligible
officers, directors and key employees. The Plan authorizes grants to issue up to 4,700,000 of
Class B common shares of authorized but unissued stock. At December 31, 2009, there were
3,303,963 shares available for the Company to grant under the Plan. Stock options can be
granted with an exercise price at least equal the stocks fair market value at the date of
grant. The stock option awards vest in equal annual installments over 3 years and its
expiration date cannot exceed 7 years. The restricted stock and performance awards are issued
at the fair value of the stock on the grant date with vesting periods
ranging from one to three years. Restricted stock awards vest in
installments, as stipulated in each restricted stock agreement. Performance awards vest on
the last day of the performance period, provided that at least minimum performance standards
were achieved.The fair value of each option award is estimated on the date of grant using the Black-Scholes
option-pricing model that used the weighted average assumptions in the following table. In
absence of adequate historical data, the Company estimates the expected life of the option
using the simplified method allowed by Staff Accounting Bulletin (SAB) No. 107. Since the
Company was a newly public entity, expected volatility was computed based on the average
historical volatility of similar entities with publicly traded shares. The risk-free rate for
the expected term of the option was based on the U.S. Treasury zero-coupon bonds yield curve
in effect at the time of grant.The following assumptions were used in the development of fair value of option awards:
 2009
    
    2008
    
    2007Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    Expected volatility (per year)
    
    
    53.85
    %
    
    
    
    
    
    
    33.00
    %Expected term (in years)
    
    
    4.50
    
    
    
    
    
    
    
    4.50Risk-free interest rate
    
    
    1.47
    %
    
    
    
    
    
    
    3.51
    %
 Stock option activity during the year ended December 31, 2009 is as follows:
 Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term (Years)
    
    
    ValueOutstanding balance at January 1, 2009
    
    
    999,309
    
    
    $
    14.50Grants
    
    
    13,321
    
    
    $
    12.49Outstanding balance at December 31, 2009
    
    
    1,012,630
    
    
    $
    14.47
    
    
    
    4.95
    
    
    $
    3,166Exercisable at December 31, 2009
    
    
    666,206
    
    
    $
    14.50
    
    
    
    4.93
    
    
    $
    2,065
 The weighted average grant date fair value of options granted during 2009 and 2007 was $5.63
and $4.83, respectively. No options were granted in 2008.There were no options exercised
during the years ended December 31, 2009, 2008 and 2007.
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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 A summary of the status of the Companys nonvested restricted and performance shares as of
December 31, 2009, and changes during the year ended December 31, 2009, are presented below:
 Restricted Awards
    
    
    Performance AwardsWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageNumber of
    
    
    Fair
    
    
    Number of
    
    
    ExerciseShares
    
    
    Value
    
    
    Shares
    
    
    PriceOutstanding balance at January 1, 2009
    
    
    130,973
    
    
    $
    15.16
    
    
    
    166,554
    
    
    $
    14.50Granted
    
    
    27,362
    
    
    
    12.33
    
    
    
    3,002
    
    
    
    12.49Vested
    
    
    (76,660
    )
    
    
    15.62
    
    
    
    
    
    
    
    Forefeited
    
    
    
    
    
    
    
    
    
    
    (2,414
    )
    
    
    14.50Outstanding balance at December 31, 2009
    
    
    81,675
    
    
    $
    13.77
    
    
    
    167,142
    
    
    $
    14.46
 The weighted average grant date fair value of restricted shares granted during the year
2009, 2008 and 2007 were $12.33, $18.81 and $14.50, respectively. Total fair value of
restricted stock vested during the year ended December 31, 2009 was $1,158.At December 31, 2009 there was $2,571 of total unrecognized compensation cost related to
nonvested share-based compensation arrangements granted under the Plan. That cost is expected
to be recognized over a weighted average period of 0.97 years. The Company currently uses
authorized and unissued Class B common shares to satisfy share award exercises.
 22.
    
    Net Income Available to Stockholders and Basic Net Income per ShareThe following table sets forth the computation of basic and diluted earnings per share for
the three-year period ended December 31, 2009.
 2009
    
    
    2008
    
    
    2007Numerator for earnings per shareNet income available to stockholders
    
    $
    68,780
    
    
    $
    24,790
    
    
    $
    58,518Denominator for basic earnings per share Weighted average of common shares
    
    
    29,494,468
    
    
    
    32,120,461
    
    
    
    27,200,067Effect of dilutive securities  Nonvested
restricted stock awards
    
    
    68,862
    
    
    
    42,094
    
    
    
    2,038Denominator for diluted earnings per share
    
    $
    29,563,330
    
    
    $
    32,162,555
    
    
    
    27,202,105Basic net income per share
    
    $
    2.33
    
    
    $
    0.77
    
    
    $
    2.15Diluted net income per share
    
    
    2.33
    
    
    
    0.77
    
    
    
    2.15
 During the years ended December 31, 2009, 2008 and 2007, the weighted average of stock option
 shares of 1,012,594, 999,309 and 83,276, respectively, were excluded from the denominator for
diluted earnings per share because the stock options were anti-dilutive.
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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 23.
    
    CommitmentsThe Company leases its regional offices, certain equipment, and warehouse facilities under
noncancelable operating leases. Minimum annual rental commitments at December 31, 2009 under
existing agreements are summarized as follows:
 Year ending December 312010
    
    $
    4,5572011
    
    
    3,3442012
    
    
    2,2432013
    
    
    1,6892014
    
    
    1,561Thereafter
    
    
    6,690Total
    
    $
    20,084
 Rental expense for 2009, 2008, and 2007 was $4,690, $3,532, and $4,007, respectively,
after deducting the amount of $132, $265, and $303, respectively, reimbursed by CMS for the
administration of the Medicare Part B Program (see note 14).
 24.
    
    ContingenciesLegal ProceedingsAs of December 31, 2009, the Company is a defendant in various lawsuits arising in the
ordinary course of business. The Company is also a defendant in various other claims and
proceedings, some of which are described below. Furthermore, the Commissioner of Insurance,
as well as other Federal and Puerto Rico government authorities, regularly make inquiries and
conduct audits concerning the Companys compliance with applicable insurance and other laws
and regulations.Management believes that the aggregate liabilities, if any, arising from all such claims,
assessments, audits and lawsuits will not have a material adverse effect on the consolidated
financial position or results of operations of the Company. However, given the inherent
unpredictability of these matters, it is possible that an adverse outcome in certain matters
could have a material adverse effect on the Companys financial condition, operating results
and/or cash flows. Where the Company believes that a loss is both probable and estimable,
such amounts have been recorded. In other cases, it is at least reasonably possible that the
Company may incur a loss related to one or more of the mentioned pending lawsuits or
investigations, but the Company is unable to estimate the range of possible loss which may be
ultimately realized, either individually or in the aggregate, upon their resolution.Additionally, the Company may face various potential litigation claims that have not been
asserted to date, including claims from persons purporting to have contractual rights to
acquire shares of the Company on favorable terms or to have inherited such shares notwithstanding applicable
transfer and ownership restrictions.Hau et al Litigation (formerly known as Jordan et al)On April 24, 2002, Octavio Jordán, Agripino Lugo, Ramón Vidal, and others filed a suit
against the Company, TSS and others in the Court of First Instance for San Juan, Superior
Section (the Court), alleging, among other things, violations by the defendants of
provisions of the Puerto Rico Insurance Code, antitrust violations, unfair business
practices, RICO violations, breach of contract with providers, and damages in the amount of
$12 million. Following years of complaint
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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 amendments, motions practice and interim appeals up to the level of the Puerto Rico Supreme
Court, the plaintiffs amended their complaint on June 20, 2008 to allege with particularity
the same claims initially asserted but on behalf of a more limited group of plaintiffs, and
increase their claim for damages to approximately $207 million. Discovery is expected to
conclude by March 2010. The Company intends to vigorously defend this claim.Colón LitigationOn October 15, 2007, José L. Colón-Dueño, a former holder of one share of TSS predecessor
stock, filed suit against TSS and the Commissioner of Insurance in the Court of First
Instance. The sale of that share to Mr. Colón-Dueño was voided in 1999 pursuant to an order
issued by the Commissioner of Insurance in which the sale of 1,582 shares to a number of TSS
shareholders was voided. TSS, however, appealed the Commissioner of Insurances order before
the Puerto Rico Court of Appeals, which upheld the order on March 31, 2000. Plaintiff
requests that the court direct TSS to return his share of stock and compensate him for
alleged damages in excess of $500,000 plus attorneys fees. The Company is vigorously
contesting this lawsuit because, among other reasons, the Commissioner of Insurances order
is final and cannot be collaterally attacked in this litigation.Puerto Rico Center for Municipal Revenue CollectionOn March 1, 2006 and March 3, 2006, respectively, the Puerto Rico Center for Municipal
Revenue Collection (CRIM) imposed a real property tax assessment of approximately $1.3
million and a personal property tax assessment of approximately $4.0 million upon TSS for
fiscal years 1992-1993 through 2002-2003. During that time, TSS qualified as a tax-exempt
entity under Puerto Rico law pursuant to rulings issued by the Puerto Rico tax authorities.
In imposing the tax assessments, CRIM revoked the tax rulings retroactively, based on its
contention that a for-profit corporation such as TSS is not entitled to such an exemption. On
March 28, 2006 and March 29, 2006, respectively, TSS challenged the real and personal
property tax assessments in the Court of First Instance. The court granted summary judgment
affirming the real property and personal property tax assessments on October 29, 2007 and
December 5, 2007, respectively.After unsuccessfully filing motions for reconsideration in both cases, TSS appealed the
courts decisions before the Puerto Rico Court of Appeals on November 29, 2007 and February
21, 2008, respectively. TSS also requested a consolidation of both cases, which the Court of
Appeals approved on April 17, 2008. On June 30, 2008 the Court of Appeals confirmed the
summary judgment issued by the Court of First Instance in both property tax cases. On
September 29, 2008, TSS timely filed a certiorari petition with the Puerto Rico Supreme
Court. The court denied the petition on March 13, 2009. TSS filed a request for
reconsideration before the Puerto Rico Supreme Court on March 30, 2009, which was denied on
April 29, 2009. TSS filed a second request for reconsideration, which was denied on May 22,
2009. The Company recorded an accrual which is included within accounts payable and accrued
liabilities in the accompanying consolidated financial statements.The Company submitted a petition for certiorari to the U.S. Supreme Court on August 26, 2009,
based on its strong belief that CRIMs retroactive revocation of applicable tax rulings and
its imposition of a tax liability reaching back over ten years constituted a violation of the
Companys due process rights. The U.S. Supreme Court has requested that CRIM filed a response on
December 2, 2009. On January 11, 2010, the U.S. Supreme Court invited the Solicitor General
of the U.S. to file a brief in this case expressing the views of the United States.
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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 Dentists Association LitigationOn February 11, 2009, the Puerto Rico Dentists Association (Colegio de Cirujanos Dentistas de
Puerto Rico) filed a complaint in the Court of First Instance against 24 health plans
operating in Puerto Rico that offer dental health coverage. The Company and two of its
subsidiaries, TSS and TC were included as defendants. This litigation purports to be a class
action filed on behalf of Puerto Rico dentists who are similarly situated; however, the
complaint does not include a single dentist as a class representative nor a definition of the
intended class.The complaint alleges that the defendants, on their own and as part of a common scheme,
systematically deny, delay and diminish the payments due to dentists so that they are not
paid in a timely and complete manner for the covered medically necessary services they
render. The complaint also alleges, among other things, violations to the Puerto Rico
Insurance Code, antitrust laws, the Puerto Rico racketeering statute, unfair business
practices, breach of contract with providers, and total damages in the amount of $150
million. In addition, the complaint claims that the Puerto Rico Insurance Companies
Association is the hub of an alleged conspiracy concocted by the member plans to defraud
dentists.There are numerous available defenses to oppose both the request for class certification and
the merits. The Company intends to vigorously defend this claim.Two codefendant plans removed the case to federal court, which the plaintiffs and the other
codefendants, including the Company, opposed. The federal District Court decided that it
lacked jurisdiction under the Class Action Fairness Act (CAFA) and remanded the case to
state court. The removing defendants petitioned to appeal to the First Circuit Court of
Appeals. Having accepted the appeal, the First Circuit Court of Appeals issued an order in
late October 2009 which found the lower courts decision premature. The Court of Appeals
remanded the case to the federal District Court and allowed limited discovery to determine
whether the case should be heard in federal court pursuant to CAFA.Claims by Heirs of Former ShareholdersThe Company and TSS are defending four individual lawsuits, all filed in state court, from
persons who claim to have inherited a total of 90 shares of the Company or one of its
predecessors or affiliates (before giving effect to the 3,000-for-one stock split). While
each case presents unique facts, the lawsuits generally allege that the redemption of the
 shares by the Company pursuant to transfer and ownership restrictions contained in the
Companys (or its predecessors or affiliates) articles of incorporation and bylaws was
improper. Discovery is underway in each case. Management believes all these claims are time
barred under one or more statutes of limitations and is vigorously defending them.Guarantee AssociationsPursuant to the Insurance Code, TSP is a member of Sindicato de Aseguradores para la
Suscripción Conjunta de Seguros de Responsabilidad Professional Médico-Hospitalaria (SIMED)
and of the Sindicato de Aseguradores de Responsabilidad Professional para Médicos. Both
syndicates were organized for the purpose of underwriting medical-hospital professional
liability insurance. As a member, the subsidiary shares risks with other member companies
and, accordingly, is contingently liable in the event that the above-mentioned syndicates
cannot meet their obligations. During 2009, 2008, and 2007, no assessments or payments were
made for this contingency.
 55




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 Additionally, pursuant to Article 12 of Rule LXIX of the Insurance Code, TSP is a member of
the Compulsory Vehicle Liability Insurance Joint Underwriting Association (the Association).
The Association was organized during 1997 to underwrite insurance coverage of motor vehicle
property damage liability risks effective January 1, 1998. As a participant, TSP shares the
risk, proportionately with other members, based on a formula established by the Insurance
Code. During the three-year period ended December 31, 2009, the Association distributed good
experience refunds. TSP received refunds amounting to $1,193, $1,131, and $1,023, in 2009,
2008, and 2007, respectively.TSP is a member of the Asociación de Garantía de Seguros de Todas Clases, excepto Vida,
Incapacidad y Salud and TSS and TSV are members of the Asociación de Garantía de Seguros de
Vida, Incapacidad y Salud. As members, they are required to provide funds for the payment of
claims and unearned premiums reimbursements for policies issued by insurance companies
declared insolvent. During 2009, 2008 and 2007 no assessment or payment was made by TSP in
connection with insurance companies declared insolvent. Moreover, no assessments were
attributable to TSS and TSV during 2009, 2008, and 2007.
 25.
    
    Statutory AccountingTSS, TSV and TPS (collectively known as the regulated subsidiaries) are regulated by the
Commissioner of Insurance. The regulated subsidiaries are required to prepare financial
statements using accounting practices prescribed or permitted by the Commissioner of
Insurance, which differ from GAAP.The accumulated earnings of TSS, TSV, and TSP are restricted as to the payment of dividends
by statutory limitations applicable to domestic insurance companies. Such limitations
restrict the payment of dividends by insurance companies generally to unrestricted unassigned
surplus funds reported for statutory purposes. As more fully described in note 18, a portion
of the accumulated earnings of TSP are also restricted by the catastrophe loss reserve
balance (amounting to $34,411 and $32,200 as of December 31, 2009 and 2008, respectively) as
required by the Insurance Code.The combined net admitted assets, unassigned surplus and net income of the regulated
subsidiaries at December 31, 2009, 2008 and 2007 are as follows:
 (dollar amounts in millions)
    
    2009
    
    2008
    
    2007Net admitted assets
    
    $
    1,298
    
    
    $
    1,197
    
    
    $
    1,286Capital and surplus
    
    
    416
    
    
    
    260
    
    
    
    359Net income
    
    
    43
    
    
    
    30
    
    
    
    64
 56




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 26.
    
    Supplementary Information on Cash Flow Activities
 2009
    
    2008
    
    2007Supplementary informationNoncash transactions affecting cash flows activitiesChange in net unrealized gain on securities
available for sale, including deferred income tax
(asset)/liability of $(638), $854, and $1,840
in 2009, 2008, and 2007, respectively
    
    $
    3,539
    
    
    $
    (3,952
    )
    
    $
    9,549Change in cash-flow hedges, including deferred
income tax liability of $37 and $159 in 2008
and 2007, respectively
    
    $
    
    
    
    $
    (56
    )
    
    $
    (250
    )Change in liability for pension benefits, and
deferred income tax (liability)/asset of $(1,520),
$4,796, $2,189, in 2009, 2008, and 2007,
respectively
    
    $
    2,550
    
    
    $
    (7,615
    )
    
    $
    4,090Unsettled shares repurchases
    
    $
    
    
    
    $
    6,235
    
    
    $
    Unsettled investment acquisitions
    
    $
    
    
    
    $
    
    
    
    $
    117,706Unsettled investment sales
    
    $
    
    
    
    $
    (1,500
    )
    
    $
    OtherIncome taxes paid
    
    $
    15,552
    
    
    $
    25,597
    
    
    $
    25,940Interest paid
    
    $
    11,605
    
    
    $
    14,330
    
    
    $
    14,102
 27.
    
    Segment InformationThe operations of the Company are conducted principally through three business segments:
Managed Care, Life Insurance, and Property and Casualty Insurance. Business segments were
identified according to the type of insurance products offered and consistent with the
information provided to the chief operating decision maker. These segments and a description
of their respective operations are as follows:
 
    
    Managed Care segment TSS is engaged in the sale of managed care products to the
Commercial, Medicare and Reform market sectors. The Commercial accounts sector includes
corporate accounts, U.S. federal government employees, individual accounts, local
government employees, and Medicare supplement. The following represents a description of
the major contracts by sector:
 
    
    TSS is a qualified contractor to provide health coverage to federal
government employees within Puerto Rico. Earned premiums revenue related to this
contract amounted to $125,994, $124,239, and $121,126 for the three-year period ended December 31, 2009,
2008, and 2007, respectively (see note 11).
    
    Under its commercial business, TSS also provides health coverage to certain
employees of the Commonwealth of Puerto Rico and its instrumentalities. Earned
premium revenue
 57




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Triple-S Management Corporation
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
(dollar amounts in thousands, except per share data)
 related to such health plans amounted to $46,114, $40,686, and $46,649, for the
three-year period ended December 31, 2009, 2008, and 2007, respectively.
 
    
    TSS provides services through its Medicare health plans pursuant to a
limited number of contracts with CMS. Earned premium revenue related to the Medicare
business amounted to $513,823, $438,723, and $255,570, for the three-year period ended
December 31, 2009, 2008, and 2007, respectively.
    
    TSS participates in the Reform program to provide health coverage to
medically indigent citizens in Puerto Rico, as defined by the laws of the
Commonwealth of Puerto Rico. TSS provides managed care services to Reform members in
the North and Southwest regions on a fully-insured basis and in the Metro-North
region on an Administrative Service Only (ASO) basis. Earned premium revenue related
to this business amounted to $348,096, $340,123, and $327,544, for three-year period
ended December 31, 2009, 2008, and 2007, respectively. Administrative service fee for
the Metro-North Region for the year ended December 31, 2009 and 2008 amounted to
$23,299 and $2,712; which is included in the Administrative service fee in the
accompanying consolidated statement of earnings.
 
    
    Life Insurance segment This segment offers primarily life and accident and health
insurance coverage, and annuity products. The premiums for this segment are mainly
subscribed through TSVs internal sales force and a network of independent brokers and
agents.
    
    Property and Casualty Insurance segmentThe predominant insurance lines of business
of this segment are commercial multiple peril, auto physical damage, auto liability, and
dwelling. The premiums for this segment are originated through a network of independent
insurance agents and brokers. Agents or general agencies collect the premiums from the
insureds, which are subsequently remitted to TSP, net of commissions. Remittances are
due 60 days after the closing date of the general agents account current.
 The Company evaluates performance based primarily on the operating revenues and operating
income of each segment. Operating revenues include premiums earned, net, administrative
service fees and net investment income. Operating costs include claims incurred and operating
expenses. The Company calculates operating income or loss as operating revenues less
operating costs.The accounting policies for the segments are the same as those described in the summary of
significant accounting policies included in the notes to consolidated financial statements.
The financial data of each segment is accounted for separately; therefore no segment
allocation is necessary. However, certain operating expenses are centrally managed, therefore
requiring an allocation to each segment. Most of these expenses are distributed to each
segment based on different parameters, such as payroll hours, processed claims, or square
footage, among others. In addition, some depreciable assets are kept by one segment, while
allocating the depreciation expense to other segments. The allocation of the depreciation
expense is based on the proportion of asset used by each segment. Certain expenses are not
allocated to the segments and are kept within TSMs operations.
 58




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Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
 The following tables summarize the operations by operating segment for each of the years in
the three-year period ended December 31, 2009, 2008, and 2007.
 2009
    
    
    2008
    
    
    2007Operating revenuesManaged carePremiums earned, net
    
    $
    1,680,750
    
    
    $
    1,509,778
    
    
    $
    1,298,776Fee revenue
    
    
    48,643
    
    
    
    19,187
    
    
    
    14,018Intersegment premiums/fee revenue
    
    
    5,995
    
    
    
    6,538
    
    
    
    6,229Net investment income
    
    
    21,641
    
    
    
    23,091
    
    
    
    19,673Total managed care
    
    $
    1,757,029
    
    
    
    1,558,594
    
    
    
    1,338,696LifePremiums earned, net
    
    
    99,726
    
    
    
    92,469
    
    
    
    88,505Intersegment premiums
    
    
    386
    
    
    
    374
    
    
    
    356Net investment income
    
    
    16,763
    
    
    
    16,482
    
    
    
    15,016Total life
    
    
    116,875
    
    
    
    109,325
    
    
    
    103,877Property and casualtyPremiums earned, net
    
    
    95,596
    
    
    
    93,211
    
    
    
    96,267Intersegment premiums
    
    
    613
    
    
    
    610
    
    
    
    616Net investment income
    
    
    11,679
    
    
    
    12,545
    
    
    
    11,849Total property and casualty
    
    
    107,888
    
    
    
    106,366
    
    
    
    108,732Other segments  intersegment service revenues*
    
    
    52,997
    
    
    
    46,578
    
    
    
    44,971Total business segments
    
    
    2,034,789
    
    
    
    1,820,863
    
    
    
    1,596,276TSM operating revenues from external sources
    
    
    2,053
    
    
    
    4,135
    
    
    
    656Elimination of intersegment premiums
    
    
    (6,994
    )
    
    
    (7,523
    )
    
    
    (7,201
    )Elimination of intersegment service revenue
    
    
    (52,997
    )
    
    
    (46,578
    )
    
    
    (44,971
    )Consolidated operating revenues
    
    $
    1,976,851
    
    
    $
    1,770,897
    
    
    $
    1,544,760
 
 *
    
    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 health insurance services. 59




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Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
 2009
    
    
    2008
    
    
    2007Operating incomeManaged care
    
    $
    57,193
    
    
    $
    52,632
    
    
    $
    57,392Life
    
    
    14,555
    
    
    
    12,489
    
    
    
    10,716Property and casualty
    
    
    8,746
    
    
    
    13,147
    
    
    
    10,740Other segments*
    
    
    1,482
    
    
    
    985
    
    
    
    891Total business segments
    
    
    81,976
    
    
    
    79,253
    
    
    
    79,739TSM operating revenues from external sources
    
    
    2,053
    
    
    
    4,135
    
    
    
    656TSM unallocated operating expenses
    
    
    (9,004
    )
    
    
    (9,283
    )
    
    
    (7,846
    )Elimination of TSM charges
    
    
    9,548
    
    
    
    9,991
    
    
    
    10,903Consolidated operating income
    
    
    84,573
    
    
    
    84,096
    
    
    
    83,452Consolidated net realized investment gains (losses)
    
    
    614
    
    
    
    (13,940
    )
    
    
    5,931Consolidated net unrealized gain (loss) on trading securities
    
    
    10,497
    
    
    
    (21,064
    )
    
    
    (4,116
    )Consolidated interest expense
    
    
    (13,270
    )
    
    
    (14,681
    )
    
    
    (15,839
    )Consolidated other income (expense), net
    
    
    1,237
    
    
    
    (2,467
    )
    
    
    3,217Consolidated income before taxes
    
    $
    83,651
    
    
    $
    31,944
    
    
    $
    72,645
 2009
    
    
    2008
    
    
    2007Depreciation expenseManaged care
    
    $
    6,640
    
    
    $
    4,339
    
    
    $
    4,277Life
    
    
    663
    
    
    
    656
    
    
    
    677Property and casualty
    
    
    1,477
    
    
    
    1,450
    
    
    
    1,488Total business segments
    
    
    8,780
    
    
    
    6,445
    
    
    
    6,442TSM depreciation expense
    
    $
    863
    
    
    
    922
    
    
    
    1,120Consolidated depreciation expense
    
    $
    9,643
    
    
    $
    7,367
    
    
    $
    7,562
 
 *
    
    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 health insurance services. 60




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Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
 2009
    
    
    2008AssetsManaged care
    
    $
    746,674
    
    
    $
    678,889Life
    
    
    487,290
    
    
    
    460,109Property and casualty
    
    
    351,793
    
    
    
    337,869Other segments*
    
    
    14,193
    
    
    
    12,620Total business segments
    
    
    1,599,950
    
    
    
    1,489,487Unallocated amounts related to TSMCash, cash equivalents, and investments
    
    
    39,029
    
    
    
    58,480Property and equipment, net
    
    
    21,577
    
    
    
    21,648Other assets
    
    
    4,780
    
    
    
    4,07965,386
    
    
    
    84,207Elimination entries  intersegment receivables and others
    
    
    (16,632
    )
    
    
    (14,504
    )Consolidated total assets
    
    $
    1,648,704
    
    
    $
    1,559,190
 2009
    
    
    2008Significant noncash itemsNet change in unrealized gain on securities available for saleManaged care
    
    $
    (282
    )
    
    $
    (4,359
    )Life
    
    
    (2,427
    )
    
    
    538Property and casualty
    
    
    (489
    )
    
    
    1,139Total business segments
    
    
    (3,198
    )
    
    
    (2,682
    )Amount related to TSM
    
    
    (341
    )
    
    
    (1,270
    )Consolidated net change in unrealized gain on securities available for sale
    
    $
    (3,539
    )
    
    $
    (3,952
    )Net change in liability for pension benefitsManaged care
    
    $
    2,254
    
    
    $
    (4,946
    )Life
    
    
    212
    
    
    
    (81
    )Property and casualty
    
    
    (78
    )
    
    
    (490
    )Other segments*
    
    
    74
    
    
    
    (1,948
    )Total business segments
    
    
    2,462
    
    
    
    (7,465
    )Amount related to TSM
    
    
    88
    
    
    
    (150
    )Consolidated net change in liability for pension benefits
    
    $
    2,550
    
    
    $
    (7,615
    )
 
 *
    
    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 health insurance services. 61




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Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
 28.
    
    Quarterly Financial Information (Unaudited)
 2009March 31
    
    
    June 30
    
    
    September 30
    
    
    December 31
    
    
    TotalRevenuesPremiums earned, net
    
    $
    452,484
    
    
    $
    466,221
    
    
    $
    477,503
    
    
    $
    479,864
    
    
    $
    1,876,072Administrative service fees
    
    
    8,866
    
    
    
    11,319
    
    
    
    9,797
    
    
    
    18,661
    
    
    
    48,643Net investment income
    
    
    12,541
    
    
    
    13,360
    
    
    
    12,955
    
    
    
    13,280
    
    
    
    52,136Total operating
revenues
    
    
    473,891
    
    
    
    490,900
    
    
    
    500,255
    
    
    
    511,805
    
    
    
    1,976,851Net realized investment
(losses) gains
    
    
    (1,727
    )
    
    
    (1,625
    )
    
    
    2,150
    
    
    
    1,816
    
    
    
    614Net unrealized investment
(losses) gains on trading securities
    
    
    (2,476
    )
    
    
    5,652
    
    
    
    4,860
    
    
    
    2,461
    
    
    
    10,497Other (loss) income, net
    
    
    (379
    )
    
    
    704
    
    
    
    67
    
    
    
    845
    
    
    
    1,237Total revenues
    
    
    469,309
    
    
    
    495,631
    
    
    
    507,332
    
    
    
    516,927
    
    
    
    1,989,199Benefits and expensesClaims incurred
    
    
    394,532
    
    
    
    398,420
    
    
    
    413,626
    
    
    
    406,282
    
    
    
    1,612,860Operating expenses
    
    
    68,252
    
    
    
    68,603
    
    
    
    71,205
    
    
    
    71,358
    
    
    
    279,418Total operating costs
    
    
    462,784
    
    
    
    467,023
    
    
    
    484,831
    
    
    
    477,640
    
    
    
    1,892,278Interest expense
    
    
    3,264
    
    
    
    3,357
    
    
    
    3,338
    
    
    
    3,311
    
    
    
    13,270Total benefits and
expenses
    
    
    466,048
    
    
    
    470,380
    
    
    
    488,169
    
    
    
    480,951
    
    
    
    1,905,548Income before taxes
    
    
    3,261
    
    
    
    25,251
    
    
    
    19,163
    
    
    
    35,976
    
    
    
    83,651Income tax expense (benefit)Current
    
    
    451
    
    
    
    9,090
    
    
    
    2,096
    
    
    
    7,560
    
    
    
    19,197Deferred
    
    
    (1,122
    )
    
    
    (2,499
    )
    
    
    (1,017
    )
    
    
    312
    
    
    
    (4,326
    )Total income taxes
    
    
    (671
    )
    
    
    6,591
    
    
    
    1,079
    
    
    
    7,872
    
    
    
    14,871Net income
    
    $
    3,932
    
    
    $
    18,660
    
    
    $
    18,084
    
    
    $
    28,104
    
    
    $
    68,780Basic net income per share
    
    $
    0.13
    
    
    $
    0.64
    
    
    $
    0.62
    
    
    $
    0.96
    
    
    $
    2.33Diluted net income per share
    
    
    0.13
    
    
    
    0.63
    
    
    
    0.62
    
    
    
    0.96
    
    
    
    2.33
 62




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Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
 2008March 31
    
    
    June 30
    
    
    September 30
    
    
    December 31
    
    
    TotalRevenuesPremiums earned, net
    
    $
    404,399
    
    
    $
    419,157
    
    
    $
    433,219
    
    
    $
    438,682
    
    
    $
    1,695,457Administrative service fees
    
    
    3,713
    
    
    
    3,920
    
    
    
    4,448
    
    
    
    7,106
    
    
    
    19,187Net investment income
    
    
    13,432
    
    
    
    14,302
    
    
    
    14,072
    
    
    
    14,447
    
    
    
    56,253Total operating
revenues
    
    
    421,544
    
    
    
    437,379
    
    
    
    451,739
    
    
    
    460,235
    
    
    
    1,770,897Net realized investment
gains (losses)
    
    
    609
    
    
    
    (1,741
    )
    
    
    (1,101
    )
    
    
    (11,707
    )
    
    
    (13,940
    )Net unrealized investment
loss on trading securities
    
    
    (6,250
    )
    
    
    (951
    )
    
    
    (3,605
    )
    
    
    (10,258
    )
    
    
    (21,064
    )Other (loss) income, net
    
    
    (1,521
    )
    
    
    1,360
    
    
    
    (1,147
    )
    
    
    (1,159
    )
    
    
    (2,467
    )Total revenues
    
    
    414,382
    
    
    
    436,047
    
    
    
    445,886
    
    
    
    437,111
    
    
    
    1,733,426Benefits and expensesClaims incurred
    
    
    350,207
    
    
    
    354,780
    
    
    
    365,585
    
    
    
    364,342
    
    
    
    1,434,914Operating expenses
    
    
    60,031
    
    
    
    61,399
    
    
    
    63,572
    
    
    
    66,885
    
    
    
    251,887Total operating costs
    
    
    410,238
    
    
    
    416,179
    
    
    
    429,157
    
    
    
    431,227
    
    
    
    1,686,801Interest expense
    
    
    3,673
    
    
    
    3,926
    
    
    
    3,749
    
    
    
    3,333
    
    
    
    14,681Total benefits and
expenses
    
    
    413,911
    
    
    
    420,105
    
    
    
    432,906
    
    
    
    434,560
    
    
    
    1,701,482Income before taxes
    
    
    471
    
    
    
    15,942
    
    
    
    12,980
    
    
    
    2,551
    
    
    
    31,944Income tax expense (benefit)Current
    
    
    (184
    )
    
    
    4,291
    
    
    
    4,580
    
    
    
    2,855
    
    
    
    11,542Deferred
    
    
    (547
    )
    
    
    (486
    )
    
    
    (1,071
    )
    
    
    (2,284
    )
    
    
    (4,388
    )Total income taxes
    
    
    (731
    )
    
    
    3,805
    
    
    
    3,509
    
    
    
    571
    
    
    
    7,154Net income
    
    $
    1,202
    
    
    $
    12,137
    
    
    $
    9,471
    
    
    $
    1,980
    
    
    $
    24,790Basic net income per share
    
    $
    0.04
    
    
    $
    0.38
    
    
    $
    0.29
    
    
    $
    0.06
    
    
    $
    0.77Diluted net income per share
    
    
    0.04
    
    
    
    0.38
    
    
    
    0.29
    
    
    
    0.06
    
    
    
    0.77
 29.` Subsequent Events
  63




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##### Table of Contents



Triple-S Management Corporation
Schedule II
Condensed Financial Information of Triple-S Management Corporation
(Registrant)
Balance Sheets
(in thousands)
 As of December 31,2009
    
    
    2008Assets:Cash and cash equivalents
    
    $
    361
    
    
    $
    1,952Investment securities available for sale, at fair value (amortized
cost $39,713 and $57,975 in 2009 and 2008, respectively)
    
    
    38,668
    
    
    
    56,528Investment in subsidiaries
    
    
    560,448
    
    
    
    484,535Note receivable and accrued interest from subsidiary
    
    
    46,354
    
    
    
    48,339Due from subsidiaries
    
    
    2,552
    
    
    
    8,956Other assets
    
    
    26,357
    
    
    
    25,727Total assets
    
    $
    674,740
    
    
    $
    626,037Liabilities:Due to subsidiary
    
    
    4,335
    
    
    
    197Borrowings
    
    
    117,667
    
    
    
    119,307Other liabilities
    
    
    14,966
    
    
    
    21,434Total liabilities
    
    
    136,968
    
    
    
    140,938Stockholders equity:Common stock, class A
    
    
    9,043
    
    
    
    9,043Common stock, class B
    
    
    20,110
    
    
    
    22,105Additional paid-in-capital
    
    
    159,303
    
    
    
    179,504Retained earnings
    
    
    360,892
    
    
    
    292,112Accumulated other comprehensive loss, net
    
    
    (11,576
    )
    
    
    (17,665
    )Total stockholders equity
    
    
    537,772
    
    
    
    485,099Total liabilities and stockholders equity
    
    $
    674,740
    
    
    $
    626,037




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##### Table of Contents



Triple-S Management Corporation
Schedule II
Condensed Financial Information of Triple-S Management Corporation
Triple-S Management Corporation
Statements of Earnings
(in thousands)
 2009
    
    
    2008
    
    
    2007Investment income
    
    $
    5,068
    
    
    $
    7,324
    
    
    $
    5,477Other revenues
    
    
    8,690
    
    
    
    8,215
    
    
    
    11,373Total revenues
    
    
    13,758
    
    
    
    15,539
    
    
    
    16,850Operating expenses:General and administrative expenses
    
    
    9,004
    
    
    
    9,283
    
    
    
    7,846Interest expense
    
    
    6,693
    
    
    
    7,301
    
    
    
    8,034Total operating expenses
    
    
    15,697
    
    
    
    16,584
    
    
    
    15,880(Loss) income before income taxes
    
    
    (1,939
    )
    
    
    (1,045
    )
    
    
    970Income tax (benefit) expense
    
    
    (463
    )
    
    
    268
    
    
    
    432(Loss) Income of parent company
    
    
    (1,476
    )
    
    
    (1,313
    )
    
    
    538Equity in income of subsidiaries
    
    
    70,256
    
    
    
    26,103
    
    
    
    57,980Net income
    
    $
    68,780
    
    
    $
    24,790
    
    
    $
    58,518




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##### Table of Contents



Triple-S Management Corporation
Schedule II
Condensed Financial Information of Triple-S Management
Corporation 
(Registrant) 
Statements of Cash Flows
(in thousands)
 12/31/2009
    
    
    12/31/2008
    
    
    12/31/2007Net income
    
    $
    68,780
    
    
    $
    24,790
    
    
    $
    58,518Adjustment to reconcile net income to net cash (used in)
provided by operating activities:Equity in net income of subsidiaries
    
    
    (70,256
    )
    
    
    (26,103
    )
    
    
    (57,980
    )Depreciation and amortization
    
    
    863
    
    
    
    922
    
    
    
    1,120Shared- based compensation
    
    
    3,924
    
    
    
    3,268
    
    
    
    200Deferred income tax benefit
    
    
    (644
    )
    
    
    (363
    )
    
    
    (88
    )Other
    
    
    934
    
    
    
    1,965
    
    
    
    (394
    )Changes in assets and liabilities:Accrued interest from subisidiary
    
    
    1,985
    
    
    
    (3,188
    )
    
    
    (4,150
    )Due from subsidiaries
    
    
    6,404
    
    
    
    (8,359
    )
    
    
    (237
    )Other assets
    
    
    (175
    )
    
    
    (1,173
    )
    
    
    (236
    )Due to subsidiary
    
    
    4,138
    
    
    
    (5,818
    )
    
    
    (9,144
    )Other liabilities
    
    
    (85
    )
    
    
    2,343
    
    
    
    4,908Net cash provided by (used in) operating activities
    
    
    15,868
    
    
    
    (11,716
    )
    
    
    (7,483
    )Cash flows from investing activities:Acquisition of investment in securities classified as available for sale
    
    
    (40,996
    )
    
    
    (70,684
    )
    
    
    (28,202
    )Proceeds from sale and maturities of investment in securities
classified as available for sale
    
    
    58,324
    
    
    
    45,905
    
    
    
    4,393Notes receivable from subsidiaries
    
    
    
    
    
    
    
    
    
    
    22,000Net (acquisition) retirement of property and equipment
    
    
    (792
    )
    
    
    (47
    )
    
    
    149Net cash provided by (used in) investing activities
    
    
    16,536
    
    
    
    (24,826
    )
    
    
    (1,660
    )Cash flow from financing activities:Repayments of borrowings
    
    
    (1,640
    )
    
    
    (1,639
    )
    
    
    (12,141
    )Net proceeds from initial public offering
    
    
    
    
    
    
    
    
    
    
    70,279Dividends
    
    
    
    
    
    
    
    
    
    
    (2,448
    )Repurchase of common stock
    
    
    (32,355
    )
    
    
    (7,645
    )
    
    
    Other
    
    
    
    
    
    
    6
    
    
    
    1Net cash (used in) provided by financing activities
    
    
    (33,995
    )
    
    
    (9,278
    )
    
    
    55,691Net increase (decrease) in cash and cash equivalents
    
    
    (1,591
    )
    
    
    (45,820
    )
    
    
    46,548Cash and cash equivalents, beginning of year
    
    
    1,952
    
    
    
    47,772
    
    
    
    1,224Cash and cash equivalents, end of year
    
    $
    361
    
    
    $
    1,952
    
    
    $
    47,772




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##### Table of Contents



Triple-S Management Corporation
 The accompanying notes to the condensed financial statements should be read in
conjunction with the consolidated financial statements and the accompanying notes thereto
included in Item 15 to the Annual Report on Form 10-K.
 (1)
    
    For purposes of these condensed financial statements, Triple-S Management Corporations (the
Company or TSM) investment in its wholly owned subsidiaries is recorded using the equity basis
accounting.
 (2)
    
    Significant Accounting Policies
 The significant accounting policies followed by the Company are set forth in the notes to the
consolidated financial statements and the accompanying notes thereto. Refer to Item 15 to the
Annual Report of Form 10-K.
 (3)
    
    Long-Term Borrowings
 A summary of the long-term borrowings entered into by the Company at December 31, 2009 and
2008 follows:
 2009
    
    
    2008Senior unsecured notes payable of $60,000 issued on
December 2005; due December 2020. Interest is
payable monthly at a fixed rate of 6.60%.
    
    $
    60,000
    
    
    $
    60,000Senior unsecured notes payable of $35,000 issued on
January 2006; due January 2021. Interest is payable
monthly at a fixed rate of 6.70%.
    
    
    35,000
    
    
    
    35,000Secured loan payable of $41,000, payable in monthly
installments of $137 through July 1, 2024, plus
interest at a rate reset periodically of 100 basis
points over selected LIBOR maturity (which was
1.28% and 2.43% at December 31, 2009,
and 2008, respectively).
    
    
    22,667
    
    
    
    24,307Total borrowings
    
    $
    117,667
    
    
    $
    119,307
 Aggregate maturities of the Companys long term borrowings as of December 31, 2009 are
summarized as follows:
 Year ending December 312010
    
    $
    1,6402011
    
    
    1,6402012
    
    
    1,6402013
    
    
    1,6402014
    
    
    1,640Thereafter
    
    
    109,467$
    117,667
 All of the Companys senior notes can be prepaid at par, in total or partially, five
years after issuance as determined by the Company.
 1




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##### Table of Contents



Triple-S Management Corporation
 Debt issuance costs related to each of the Companys senior unsecured notes were deferred and
are being amortized over the term of its respective senior note. Unamortized debt issuance
costs related to these senior unsecured notes as of December 31, 2009 and 2008 amounted to
$651 and $710, respectively, and are included within the other assets in the accompanying
condensed balance sheets.
 The secured loan note payable previously described is guaranteed by a first position held by
the bank on the Companys and its subsidiaries land, building, and substantially all leasehold
improvements, as collateral for the term of the loans under a continuing general security
agreement. This secured loan contains certain non-financial covenants, which are customary in
this type of facility, including but not limited to, restrictions on the granting of certain
liens, limitations on acquisitions and limitation on changes in control.
 (4) Transactions
with Related Parties
 The following are the significant related-party transactions made for the three-year period
ended December 31, 2009, 2008 and 2007:
 2009
    
    2008
    
    2007Rent charges to subsidiaries
    
    $
    7,422
    
    
    $
    7,286
    
    
    $
    7,023Interest charged to subsidiary
on note receivable
    
    
    3,015
    
    
    
    3,189
    
    
    
    4,821
 As of December 31, 2009 the Company has a note receivable from a subsidiary pursuant to the
provisions of Article 29.30 of the Puerto Rico Insurance Code.
 
    
    On December 22, 2005, TSV borrowed $57,000 from TSM. This note receivable has a
balance of $37,000 as of December 31, 2009 and 2008 and bears interest at an annual rate
6.6%. Accrued interest at December 31, 2009 and 2008 amounted to $9,354 and $11,339,
respectively.
 The note receivable from subsidiary is due on demand; however, pursuant to the requirements
established by the Commissioner of Insurance, the parties agreed that no payment of the total
principal nor the interest due on the loan will be made without first obtaining written
authorization from the Commissioner of Insurance within at least 60 days prior to the proposed
payment date. Written authorization to convert $20,000 of the TSVs note receivable into a
capital contribution was obtained from the Commissioner of Insurance during 2008.(5)
    
    Contingencies
 At December 31, 2009 and 2008, the Company is defendant in various lawsuits in the ordinary
course of business. In the opinion of management, with the advice of its legal counsel, the
ultimate disposition of these matters will not have a material adverse effect on the position
and results of operations of the Company.
 Hau et al Litigation (formerly known as Jordan et al)
 On April 24, 2002, Octavio Jordán, Agripino Lugo, Ramón Vidal, and others filed a suit against
the Company, TSS and others in the Court of First Instance for San Juan, Superior Section (the
Court), alleging, among other things, violations by the defendants of provisions of the
Puerto Rico Insurance Code, antitrust violations, unfair business practices, RICO violations,
breach of contract with providers, and damages in the amount of $12 million. Following years
of complaint amendments, motions practice and interim appeals up to the level of the Puerto
Rico Supreme Court, the plaintiffs amended their complaint on
 2




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##### Table of Contents



Triple-S Management Corporation
 June 20, 2008 to allege with
particularity the same claims initially asserted but on behalf of a more limited group of
plaintiffs, and increase their claim
for damages to approximately $207 million. Discovery is expected to conclude by March 2010.
The Company intends to vigorously defend this claim.
 Dentists Association Litigation
 On February 11, 2009, the Puerto Rico Dentists Association (Colegio de Cirujanos Dentistas de
Puerto Rico) filed a complaint in the Court of First Instance against 24 health plans
operating in Puerto Rico that offer dental health coverage. The Company and two of its
subsidiaries, TSS and TC were included as defendants. This litigation purports to be a class
action filed on behalf of Puerto Rico dentists who are similarly situated; however, the
complaint does not include a single dentist as a class representative nor a definition of the
intended class.
 The complaint alleges that the defendants, on their own and as part of a common scheme,
systematically deny, delay and diminish the payments due to dentists so that they are not
paid in a timely and complete manner for the covered medically necessary services they
render. The complaint also alleges, among other things, violations to the Puerto Rico
Insurance Code, antitrust laws, the Puerto Rico racketeering statute, unfair business
practices, breach of contract with providers, and total damages in the amount of $150
million. In addition, the complaint claims that the Puerto Rico Insurance Companies
Association is the hub of an alleged conspiracy concocted by the member plans to defraud
dentists.
 There are numerous available defenses to oppose both the request for class certification and
the merits. The Company intends to vigorously defend this claim.
 Two codefendant plans removed the case to federal court, which the plaintiffs and the other
codefendants, including the Company, opposed. The federal District Court decided that it
lacked jurisdiction under the Class Action Fairness Act (CAFA) and remanded the case to
state court. The removing defendants petitioned to appeal to the First Circuit Court of
Appeals. Having accepted the appeal, the First Circuit Court of Appeals issued an order in
late October 2009 which found the lower courts decision premature. The Court of Appeals
remanded the case to the federal District Court and allowed limited discovery to determine
whether the case should be heard in federal court pursuant to CAFA.
 Claims by Heirs of Former Shareholders
 The Company and TSS are defending four individual lawsuits, all filed in state court, from
persons who claim to have inherited a total of 90 shares of the Company or one of its
predecessors or affiliates (before giving effect to the 3,000-for-one stock split). While
each case presents unique facts, the lawsuits generally allege that the redemption of the
shares by the Company pursuant to transfer and ownership restrictions contained in the
Companys (or its predecessors or affiliates) articles of incorporation and bylaws was
improper. Discovery is underway in each case. Management believes all these claims are time
barred under one or more statutes of limitations and is vigorously defending them.(6)
    
    Stockholders Equity
 Dividends
 On March 12, 2007, the Board declared a cash dividend of $2,448 distributed pro rata among all
of the Companys issued and outstanding Class A common shares, excluding those shares issued
to the representatives of the community that are members of the Board (the qualifying shares).
All stockholders of record as of the close of business on March 23, 2007, except those who
only hold qualifying shares, received a dividend per share of $0.09 for each share held on
that date.
 3




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##### Table of Contents



Triple-S Management Corporation and Subsidiaries
Schedule III  Supplementary Insurance Information
For the years ended December 31, 2009, 2008 and 2007  (Dollar amounts in thousands)
 Deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization ofPolicy
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred PolicyAcquisition
    
    
    
    
    
    
    Liability for
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AcquisitionCosts and Value
    
    
    
    
    
    
    Future
    
    
    
    
    
    
    Policy Claims
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    Costs and Value
    
    
    Other
    
    
    Netof Business
    
    
    Claim
    
    
    Policy
    
    
    Unearned
    
    
    and Benefits
    
    
    Premium
    
    
    Investment
    
    
    Claims
    
    
    of Business
    
    
    Operating
    
    
    PremiumsSegment
    
    Acquired
    
    
    Liabilities
    
    
    Benefits
    
    
    Premiums
    
    
    Payable
    
    
    Revenue
    
    
    Income
    
    
    Incurred
    
    
    Acquired
    
    
    Expenses
    
    
    Written2009Managed care
    
    $
    
    
    
    $
    236,366
    
    
    $
    
    
    
    $
    6,996
    
    
    $
    
    
    
    $
    1,684,068
    
    
    $
    21,641
    
    
    $
    1,515,173
    
    
    $
    
    
    
    $
    184,663
    
    
    $
    1,684,068Life insurance
    
    
    112,908
    
    
    
    40,100
    
    
    
    222,619
    
    
    
    4,163
    
    
    
    
    
    
    
    100,112
    
    
    
    16,763
    
    
    
    50,353
    
    
    
    16,844
    
    
    
    35,123
    
    
    
    100,112Property and casualty insurance
    
    
    27,009
    
    
    
    83,980
    
    
    
    
    
    
    
    97,183
    
    
    
    
    
    
    
    96,209
    
    
    
    11,679
    
    
    
    47,334
    
    
    
    28,284
    
    
    
    23,524
    
    
    
    95,817Other non-reportable segments, parent
company operations and net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    consolidating entries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,317
    )
    
    
    2,053
    
    
    
    
    
    
    
    
    
    
    
    (9,020
    )
    
    
    Total
    
    $
    139,917
    
    
    $
    360,446
    
    
    $
    222,619
    
    
    $
    108,342
    
    
    $
    
    
    
    $
    1,876,072
    
    
    $
    52,136
    
    
    $
    1,612,860
    
    
    $
    45,128
    
    
    $
    234,290
    
    
    $
    1,879,9972008Managed care
    
    $
    
    
    
    $
    201,849
    
    
    $
    
    
    
    $
    5,585
    
    
    $
    
    
    
    $
    1,513,025
    
    
    $
    23,091
    
    
    $
    1,345,371
    
    
    $
    
    
    
    $
    160,591
    
    
    $
    1,513,025Life insurance
    
    
    101,243
    
    
    
    39,948
    
    
    
    207,545
    
    
    
    3,370
    
    
    
    
    
    
    
    92,843
    
    
    
    16,482
    
    
    
    47,432
    
    
    
    16,404
    
    
    
    33,000
    
    
    
    92,843Property and casualty insurance
    
    
    25,104
    
    
    
    81,913
    
    
    
    
    
    
    
    101,186
    
    
    
    
    
    
    
    93,821
    
    
    
    12,546
    
    
    
    42,111
    
    
    
    27,383
    
    
    
    23,725
    
    
    
    95,867Other non-reportable segments, parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    company operations and net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    consolidating entries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,232
    )
    
    
    4,134
    
    
    
    
    
    
    
    
    
    
    
    (9,216
    )
    
    
    Total
    
    $
    126,347
    
    
    $
    323,710
    
    
    $
    207,545
    
    
    $
    110,141
    
    
    $
    
    
    
    $
    1,695,457
    
    
    $
    56,253
    
    
    $
    1,434,914
    
    
    $
    43,787
    
    
    $
    208,100
    
    
    $
    1,701,7352007Managed care
    
    $
    
    
    
    $
    201,604
    
    
    $
    
    
    
    $
    27,923
    
    
    $
    
    
    
    $
    1,301,792
    
    
    $
    19,673
    
    
    $
    1,133,241
    
    
    $
    
    
    
    $
    148,063
    
    
    $
    1,301,792Life insurance
    
    
    93,564
    
    
    
    35,485
    
    
    
    194,131
    
    
    
    2,931
    
    
    
    
    
    
    
    88,861
    
    
    
    15,016
    
    
    
    45,669
    
    
    
    16,033
    
    
    
    31,459
    
    
    
    88,861Property and casualty insurance
    
    
    23,675
    
    
    
    116,741
    
    
    
    
    
    
    
    101,745
    
    
    
    
    
    
    
    96,883
    
    
    
    11,849
    
    
    
    44,865
    
    
    
    28,917
    
    
    
    24,210
    
    
    
    101,747Other non-reportable segments, parentcompany operations and netconsolidating entries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,988
    )
    
    
    656
    
    
    
    
    
    
    
    
    
    
    
    (11,149
    )
    
    
    Total
    
    $
    117,239
    
    
    $
    353,830
    
    
    $
    194,131
    
    
    $
    132,599
    
    
    $
    
    
    
    $
    1,483,548
    
    
    $
    47,194
    
    
    $
    1,223,775
    
    
    $
    44,950
    
    
    $
    192,583
    
    
    $
    1,492,400




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##### Table of Contents



Triple-S Management Corporation and Subsidiaries
Schedule IV  Reinsurance
For the years ended December 31, 2009, 2008 and 2007
 (Dollar amounts in thousands)
 PercentageCeded to
    
    
    Assumed
    
    
    
    
    
    
    of AmountGross
    
    
    Other
    
    
    from Other
    
    
    Net
    
    
    AssumedAmount
    
    
    Companies (1)
    
    
    Companies
    
    
    Amount
    
    
    to Net2009Life insurance in force
    
    $
    10,714,252
    
    
    $
    2,937,377
    
    
    $
    
    
    
    $
    7,776,875
    
    
    
    0.0
    %Premiums:Life insurance
    
    $
    106,243
    
    
    $
    6,131
    
    
    $
    
    
    
    $
    100,112
    
    
    
    0.0
    %Accident and health insurance
    
    
    1,691,409
    
    
    
    7,341
    
    
    
    
    
    
    
    1,684,068
    
    
    
    0.0
    %Property and casualty insurance
    
    
    163,358
    
    
    
    67,541
    
    
    
    
    
    
    
    95,817
    
    
    
    0.0
    %Total premiums
    
    $
    1,961,010
    
    
    $
    81,013
    
    
    $
    
    
    
    $
    1,879,997
    
    
    
    0.0
    %2008Life insurance in force
    
    $
    10,503,170
    
    
    $
    2,823,647
    
    
    $
    
    
    
    $
    7,679,523
    
    
    
    0.0
    %Premiums:Life insurance
    
    $
    100,413
    
    
    $
    7,570
    
    
    $
    
    
    
    $
    92,843
    
    
    
    0.0
    %Accident and health insurance
    
    
    1,518,648
    
    
    
    5,623
    
    
    
    
    
    
    
    1,513,025
    
    
    
    0.0
    %Property and casualty insurance
    
    
    167,982
    
    
    
    72,115
    
    
    
    
    
    
    
    95,867
    
    
    
    0.0
    %Total premiums
    
    $
    1,787,043
    
    
    $
    85,308
    
    
    $
    
    
    
    $
    1,701,735
    
    
    
    0.0
    %2007Life insurance in force
    
    $
    10,321,749
    
    
    $
    2,459,100
    
    
    $
    
    
    
    $
    7,862,649
    
    
    
    0.0
    %Premiums:Life insurance
    
    $
    97,700
    
    
    $
    8,839
    
    
    $
    
    
    
    $
    88,861
    
    
    
    0.0
    %Accident and health insurance
    
    
    1,305,141
    
    
    
    3,349
    
    
    
    
    
    
    
    1,301,792
    
    
    
    0.0
    %Property and casualty insurance
    
    
    170,884
    
    
    
    69,137
    
    
    
    
    
    
    
    101,747
    
    
    
    0.0
    %Total premiums
    
    $
    1,573,725
    
    
    $
    81,325
    
    
    $
    
    
    
    $
    1,492,400
    
    
    
    0.0
    %
 
 (1)
    
    Premiums ceded on the life insurance business are net of commission income on
reinsurance amounting to $42, $287 and $258 for the years ended December 31, 2009, 2008 and
2007.




---



##### Table of Contents



Triple-S Management Corporation and
Subsidiaries 
Schedule V  Valuation and Qualifying Accounts
 For the years ended December
31, 2009, 2008 and 2007
 (Dollar amounts in thousands)
 AdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning of
    
    
    Costs and
    
    
    Other Accounts
    
    
    Deductions -
    
    
    End ofPeriod
    
    
    Expenses
    
    
    - Describe (1)
    
    
    Describe (2)
    
    
    Period2009Allowance for doubtful receivables
    
    $
    14,745
    
    
    
    2,149
    
    
    
    10,065
    
    
    
    (1,725
    )
    
    
    25,2342008Allowance for doubtful receivables
    
    $
    15,925
    
    
    
    821
    
    
    
    
    
    
    
    (2,001
    )
    
    
    14,7452007Allowance for doubtful receivables
    
    $
    18,230
    
    
    
    6,661
    
    
    
    
    
    
    
    (8,966
    )
    
    
    15,925
 
 (1)
    
    Represents premiums adjustment to provide for unresolved reconciliation items with the
Government of Puerto Rico and other entities.(2)
    
    Deductions represent the write-off of accounts deemed uncollectible.