UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                to                               

Triple-S Management Corporation

Puerto Rico		66-0555678
(STATE OF INCORPORATION)		(I.R.S. ID)

Title of each class		Name of each exchange on which registered
Class B common stock, $1.00 par value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: Class A common stock, $1.00 par value

     Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ No

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

     Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes þ No

     As of February 14, 2011, the registrant had 9,042,809 of its Class A common stock outstanding and 19,736,720 of its Class B common stock outstanding.

     The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (assuming solely for the purposes of this calculation that all directors and executive officers of the registrant are “affiliates”) as of June 30, 2010 was approximately $373,047,753 for the Class B common stock (the only stock of the registrant that trades in a public market) and $9,042,809 for the Class A common stock (valued at its par value of $1.00 since it is not publicly traded).

 

 

Explanatory Note

     Triple-S Management Corporation (“TSM” or “the Corporation”) is filing this Amendment No. 1 to the Annual Report on Form 10-K/A for the purpose of correcting typographical errors in the PricewaterhouseCoopers LLP’s Report of Independent Registered Public Accounting Firm (“Auditor’s Report”) corresponding to the consolidated financial statements of the Corporation as of December 31, 2010 and 2009, and the results of operations and cash flows for each of the two years in the period ended December 31, 2010 to match the physical original report TSM received. The typographical errors that were corrected include the date of the Auditor’s Report. The auditors’ opinion on the Corporation’s consolidated financial statements, financial statement schedules, and internal control effectiveness remained unchanged. The Auditor’s Report was included in our 2010 Annual Report on Form 10-K as originally filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2011 (the “Original Filing”). Except for the aforementioned corrections to the Auditor’s Report, this Amendment does not amend, modify or update the Original Filing in any respect. Information included in this Amendment is stated as of December 31, 2010 and does not reflect events that have occurred subsequent to the filing of the Original Filing and, accordingly, this Amendment should be read in conjunction with our Original Filing made with the SEC.

     This Annual Report on Form 10-K/A consists of a cover page, this explanatory note, Item 15 (as amended) of the 2010 Annual Report on Form 10-K, including our consolidated financial statements at December 31, 2010 and 2009, and the results of our operations and cash flows for each of the three years in the period ended December 31, 2010, the corrected Auditor’s Report, the signature pages and the required certifications of TSM’s principal executive officer and the principal financial officer.

Triple-S Management Corporation

FORM 10-K

For The Fiscal Year Ended December 31, 2010

Table of Contents

Item 15. Exhibits and Financial Statements Schedules			4
SIGNATURES			8
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Item 15. Exhibits and Financial Statements Schedules

Financial Statements and Schedules

Financial Statements		Description
F-1		Reports of Independent Registered Public Accounting Firms
F-2		Consolidated Balance Sheets as of December 31, 2010 and 2009
F-3		Consolidated Statements of Earnings for the years ended December 31, 2010, 2009 and 2008
F-4		Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2010, 2009 and 2008
F-5		Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
F-7		Notes to Consolidated Financial Statements — December 31, 2010, 2009 and 2008

Financial Statements
Schedules		Description
S-1		Schedule II — Condensed Financial Information of the Registrant
S-2		Schedule III — Supplementary Insurance Information
S-3		Schedule IV — Reinsurance
S-4		Schedule V — Valuation and Qualifying Accounts

     Schedule I — Summary of Investments was omitted because the information is disclosed in the notes to the audited consolidated financial statements. Schedule VI — Supplemental Information Concerning Property Casualty Insurance Operations was omitted because the schedule is not applicable to the Corporation.

Exhibits

Exhibits		Description
3(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 of Triple-S Management Corporation (incorporated herein by reference to Exhibit 3.1 to TSM’s Current Report on Form 8-K filed on June 11, 2010 (File No. 001-33865)).
10.1		Extension to the agreement between the Puerto Rico Health Insurance Administration and TSS to act as third party administrator in the Metro-North Region until September 30, 2010 (incorporated herein by reference to Exhibit 10.1 to TSM’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 001-33865)).

Exhibits				Description
	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 until September 30, 2010 (incorporated herein by reference to Exhibit 10.1 to TSM’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 001-33865)).
	10.3			Amendment to the Medicare Platino Contract (Medicare Wraparound) between the Puerto Rico Health Insurance Administration and TSS for the provision of wraparound coverage to health insurance dual-eligible population until December 31, 2011 (incorporated herein by reference to Exhibit 10.4 to TSM’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 (File No. 001-33865)).
	10.4			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)).
	10.5			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)).
	10.6			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)).
	10.7			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)).
	10.8			Blue Shield License Agreement by and between BCBSA and TSM, including revisions, if any, adopted by Member Plans through the November 19, 2009 meeting (incorporated herein by reference to Exhibit 10.11 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 001-33865)).
	10.9			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 (incorporated herein by reference to Exhibit 10.12 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 001-33865)).
	10.10			Blue Cross License Agreements by and between BCBSA and TSM, including revisions, if any, adopted by Member Plans through the November 19, 2009 meeting (incorporated herein by reference to Exhibit 10.13 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 001-33865)).
	10.11			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 (incorporated herein by reference to Exhibit 10.14 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 001-33865)).

Exhibits				Description
	10.12			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)).
	10.13			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)).
	10.14			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)).
	10.15			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)).
	10.16			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)).
	10.17			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)).
	10.18			Addendum Number Two to the Software License and Maintenance Agreement between Quality Care Solutions, Inc, and TSS (incorporated herein by reference to Exhibit 10.15(b) to TSM’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 001-33865)).
	10.19			Addendum Number Three to the Software License and Maintenance Agreement between Quality Care Solutions, Inc, and TSS (incorporated herein by reference to Exhibit 10.15(c) to TSM’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 001-33865)).
	10.20			Work Order Agreement between Quality Care Solutions, Inc. and TSS (incorporated herein by reference to Exhibit 10.16 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 001-33865)).
	10.21			Employment Contract between Ramón M. Ruiz Comas and TSM (incorporated herein by reference to Exhibit 10.24 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 001-33865)).
	11.1			Statement re computation of per share earnings; an exhibit describing the computation of the earnings per share has been omitted as the detail necessary to determine the computation of earnings per share can be clearly determined from the material contained in Part II of this Annual Report on Form 10-K.
	12.1			Statement re computation of ratios; an exhibit describing the computation of the loss ratio, expense ratio and combined ratio has been omitted as the detail necessary to determine the computation of the loss ratio, operating expense ratio and combined ratio can be clearly determined from the material contained in Part II of this Annual Report on Form 10-K.

Exhibits				Description
	21			List of Subsidiaries of TSM (incorporated herein by reference to Exhibit 21 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 001-33865)).
	23.1			Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP) (incorporated herein by reference to Exhibit 23.1 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 001-33865)).
	23.2			Consent of Independent Registered Public Accounting Firm (KPMG LLP) (incorporated herein by reference to Exhibit 23.2 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 001-33865)).
	31.1*			Certification of the President and Chief Executive Officer required by Rule 13a-14(a)/15d-14(a).
	31.2*			Certification of the Vice President of Finance and Chief Financial Officer required by Rule 13a-14(a)/15d-14(a).
	32.1*			Certification of the President and Chief Executive Officer required pursuant to 18 U.S. Section 1350.
	32.2*			Certification of the Vice President of Finance and Chief Financial Officer required pursuant to 18 U.S. Section 1350.
	99.1			Incentive Compensation Recoupment Policy (incorporated herein by reference to Exhibit 99.1 to TSM’s Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 001-33865)).

     All other exhibits for which provision is made in the applicable accounting regulation of the SEC are not required under the related instructions or are inapplicable, and therefore have been omitted.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Triple-S Management Corporation
Registrant

By:		/s/ Ramón M. Ruiz-Comas   Ramón M. Ruiz-Comas		Date: March 29, 2011
		President and Chief Executive Officer
By:		/s/ Juan J. Román   Juan J. Román		Date: March 29, 2011
		Vice President of Finance and Chief Financial Officer
		Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:		/s/ Luis A. Clavell-Rodríguez   Luis A. Clavell-Rodríguez		Date: March 29, 2011
		Director and Chairman of the Board
By:		/s/ Vicente J. León-Irizarry   Vicente J. León-Irizarry		Date: March 29, 2011
		Director and Vice-Chairman of the Board
By:		/s/ Jesús R. Sánchez-Colón   Jesús R. Sánchez-Colón		Date: March 29, 2011
		Director and Assistant Secretary of the Board
By:		/s/ Adamina Soto-Martínez   Adamina Soto-Martínez		Date: March 29, 2011
		Director
By:		/s/ Carmen Ana Culpeper-Ramírez   Carmen Ana Culpeper-Ramírez		Date: March 29, 2011
		Director

By:		/s/ Jorge L. Fuentes-Benejam   Jorge L. Fuentes-Benejam		Date: March 29, 2011
		Director
By:		/s/ Antonio F. Faría-Soto   Antonio F. Faría-Soto		Date: March 29, 2011
		Director
By:		/s/ Manuel Figueroa-Collazo   Manuel Figueroa-Collazo		Date: March 29, 2011
		Director
By:		/s/ José Hawayek-Alemañy   José Hawayek-Alemañy		Date: March 29, 2011
		Director
By:		/s/ Jaime Morgan-Stubbe   Jaime Morgan-Stubbe		Date: March 29, 2011
		Director
By:		/s/ Roberto Muñoz-Zayas   Roberto Muñoz-Zayas		Date: March 29, 2011
		Director
By:		/s/ Juan E. Rodríguez-Díaz   Juan E. Rodríguez-Díaz		Date: March 29, 2011
		Director

Triple-S Management Corporation
Consolidated Financial Statements
December 31, 2010, 2009, and 2008

		Page(s)
Reports of Independent Registered Public Accounting Firms			1
Consolidated Financial Statements
Consolidated Balance Sheets			3
Consolidated Statements of Earnings			4
Consolidated Statements of Stockholders’ Equity and Comprehensive Income			5
Consolidated Statements of Cash Flows			6
Notes to Consolidated Financial Statements			8–63

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Triple-S Management Corporation

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, stockholders’ equity and comprehensive income, and of cash flows present fairly, in all material respects, the financial position of Triple-S Management Corporation and its subsidiaries (the Company) at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules as of and for the years ended December 31, 2010 and 2009 listed in the index appearing under Item 15 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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 financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

San Juan, Puerto Rico
March 9, 2011

CERTIFIED PUBLIC ACCOUNTANTS
(OF PUERTO RICO)
License No. 216 Expires Dec. 1, 2013
Stamp 2493533 of the P.R. Society of
Certified Public Accountants has been
affixed to the file copy of this report

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Triple-S Management Corporation:

We have audited the accompanying consolidated statements of earnings, stockholders’ equity and comprehensive income, and cash flows of Triple-S Management Corporation and Subsidiaries (the Company) for the year ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows of Triple-S Management Corporation and Subsidiaries for the year ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

March 18, 2009
Stamp No. 2530990 of the Puerto Rico
Society of Certified Public Accountants
was affixed to the record copy of this report.

Triple-S Management Corporation

Consolidated Balance Sheets
December 31, 2010 and 2009
(dollar amounts in thousands, except per share data)

		2010				2009
Assets
Investments and cash
Equity securities held for trading, at fair value (cost of $43,832 in 2010 and $42,075 in 2009)		$	51,099			$	43,909
Securities available for sale, at fair value:
Fixed maturities (amortized cost of $947,957 in 2010 and $911,362 in 2009)			977,586				918,977
Equity securities (cost of $47,750 in 2010 and $61,531 in 2009)			56,739				64,689
Securities held to maturity, at amortized cost:
Fixed maturities (fair value of $15,424 in 2010 and $16,490 in 2009)			14,615				15,794
Policy loans			5,887				5,940
Cash and cash equivalents			45,021				40,376
Total investments and cash			1,150,947				1,089,685
Premium and other receivables, net			325,780				272,932
Deferred policy acquisition costs and value of business acquired			146,086				139,917
Property and equipment, net			76,745				68,803
Deferred tax asset			29,445				37,551
Other assets			30,367				39,816
Total assets		$	1,759,370			$	1,648,704
Liabilities and Stockholders’ Equity
Claim liabilities			360,210				360,446
Liability for future policy benefits			236,523				222,619
Unearned premiums			98,341				108,342
Policyholder deposits			49,936				47,563
Liability to Federal Employees’ Health Benefits Program			15,018				13,002
Accounts payable and accrued liabilities			136,567				139,161
Deferred tax liability			12,655				11,088
Short term borrowings			15,575				—
Long term borrowings			166,027				167,667
Liability for pension benefits			51,246				41,044
Total liabilities			1,142,098				1,110,932
Commitments and contingencies
Stockholders’ equity
Common stock Class A, $1 par value. Authorized 100,000,000 shares; issued and outstanding 9,042,809 at December 31, 2010 and 2009			9,043				9,043
Common stock Class B, $1 par value. Authorized 100,000,000 shares; issued and outstanding 19,772,614 and 20,110,391 shares at December 31, 2010 and 2009, respectively			19,773				20,110
Additional paid-in capital			155,299				159,303
Retained earnings			427,693				360,892
Accumulated other comprehensive income (loss), net			5,464				(11,576	)
Total stockholders’ equity			617,272				537,772
Total liabilities and stockholders’ equity		$	1,759,370			$	1,648,704

The accompanying notes are an integral part of these financial statements.

Triple-S Management Corporation

Consolidated Statements of Earnings
Years Ended December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

		2010				2009				2008
Revenues
Premiums earned, net		$	1,901,100			$	1,869,084			$	1,692,344
Administrative service fees			39,546				48,643				19,187
Net investment income			49,145				52,136				56,253
Total operating revenues			1,989,791				1,969,863				1,767,784
Net realized investment gains (losses):
Total other-than-temporary impairment losses on securities			(2,997	)			(7,118	)			(16,494	)
Net realized gains, excluding other-than-temporary impairment losses on securities			5,529				7,732				2,554
Total net realized investment gains (losses)			2,532				614				(13,940	)
Net unrealized investment gains (losses) on trading securities			5,433				10,497				(21,064	)
Other income (expense), net			889				1,237				(2,467	)
Total revenues			1,998,645				1,982,211				1,730,313
Benefits and expenses
Claims incurred			1,596,789				1,605,872				1,431,801
Operating expenses			304,995				279,418				251,887
Total operating costs			1,901,784				1,885,290				1,683,688
Interest expense			12,658				13,270				14,681
Total benefits and expenses			1,914,442				1,898,560				1,698,369
Income before taxes			84,203				83,651				31,944
Income tax expense (benefit)
Current			14,348				19,197				11,542
Deferred			3,054				(4,326	)			(4,388	)
Total income taxes			17,402				14,871				7,154
Net income		$	66,801			$	68,780			$	24,790
Basic net income per share		$	2.30			$	2.33			$	0.77
Diluted net income per share		$	2.28			$	2.33			$	0.77

The accompanying notes are an integral part of these financial statements.

Triple-S Management Corporation
Consolidated Statements of Earnings
Years Ended December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

																		Accumulated
		Class A				Class B				Additional								Other				Total
		Common				Common				Paid-in				Retained				Comprehensive				Stockholders’
		Stock				Stock				Capital				Earnings				Income (Loss)				Equity
Balance, December 31, 2007		$	16,043			$	16,266			$	188,935			$	267,336			$	(6,042	)		$	482,538
Conversion of Class A common stock to Class B common stock			(7,000	)			7,000				—				—				—				—
Share-based compensation			—				—				3,268				—				—				3,268
Grant of restricted Class B common stock			—				20				—				—				—				20
Repurchase and retirement of common stock			—				(1,181	)			(12,699	)			—				—				(13,880	)
Other			—				—				—				(14	)			—				(14	)
Comprehensive income
Net income			—				—				—				24,790				—				24,790
Net unrealized change in fair value of available for sale securities			—				—				—				—				(3,952	)			(3,952	)
Defined benefit pension plan
Prior service credit, net			—				—				—				—				(266	)			(266	)
Actuarial loss			—				—				—				—				(7,349	)			(7,349	)
Net change in fair value of cash flow hedges			—				—				—				—				(56	)			(56	)
Total comprehensive income																							13,167
Balance, December 31, 2008			9,043				22,105				179,504				292,112				(17,665	)			485,099
Share-based compensation			—				—				3,897				—				—				3,897
Grant of restricted Class B common stock			—				27				—				—				—				27
Repurchase and retirement of common stock			—				(2,022	)			(24,098	)			—				—				(26,120	)
Comprehensive income
Net income			—				—				—				68,780				—				68,780
Net unrealized change in fair value of available for sale securities			—				—				—				—				3,539				3,539
Defined benefit pension plan
Prior service credit, net			—				—				—				—				(273	)			(273	)
Actuarial gain			—				—				—				—				2,823				2,823
Total comprehensive income																							74,869
Balance, December 31, 2009			9,043				20,110				159,303				360,892				(11,576	)			537,772
Share-based compensation			—				—				1,878				—				—				1,878
Grant of restricted Class B common stock			—				16				—				—				—				16
Repurchase and retirement of common stock			—				(353	)			(5,882	)			—				—				(6,235	)
Comprehensive income
Net income			—				—				—				66,801				—				66,801
Net unrealized change in fair value of available for sale securities			—				—				—				—				23,602				23,602
Defined benefit pension plan
Prior service credit, net			—				—				—				—				(265	)			(265	)
Actuarial loss			—				—				—				—				(6,297	)			(6,297	)
Total comprehensive income																							83,841
Balance, December 31, 2010		$	9,043			$	19,773			$	155,299			$	427,693			$	5,464			$	617,272

The accompanying notes are an integral part of these financial statements

Triple-S Management Corporation
Consolidated Statements of Earnings
Years Ended December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

		2010				2009				2008
Cash flows from operating activities
Net income		$	66,801			$	68,780			$	24,790
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization			15,500				9,643				7,367
Net amortization of investments			4,511				744				952
Provision (reversal of provision) for doubtful receivables			(5,200	)			10,489				(1,180	)
Deferred tax expense (benefit)			3,054				(4,326	)			(4,388	)
Net realized investment (gains) losses			(2,532	)			(614	)			13,940
Net unrealized (gains) losses on trading securities			(5,433	)			(10,497	)			21,064
Share-based compensation			1,894				3,924				3,268
Proceeds from trading securities sold
Equity securities			4,871				4,240				24,640
Acquisition of securities in trading portfolio
Equity securities			(6,506	)			(6,132	)			(10,737	)
Gain on sale of property and equipment			6				—				11
(Increase) decrease in assets
Premium and other receivables, net			(47,648	)			(46,263	)			(32,210	)
Deferred policy acquisition costs and value of business acquired			(6,169	)			(13,570	)			(9,108	)
Other deferred taxes			6,658				900				(8,337	)
Other assets			5,223				(1,593	)			(933	)
Increase (decrease) in liabilities
Claim liabilities			(236	)			36,736				(30,120	)
Liability for future policy benefits			13,904				15,074				13,414
Unearned premiums			(10,001	)			(1,799	)			(22,458	)
Policyholder deposits			733				1,665				1,902
Liability to FEHBP			2,016				1,845				(10,181	)
Accounts payable and accrued liabilities			(3,790	)			3,339				15,322
Net cash provided by (used in) operating activities			37,656				72,585				(2,982	)

The accompanying notes are an integral part of these financial statements

Triple-S Management Corporation
Consolidated Statements of Earnings
Years Ended December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

		2010				2009				2008
Cash flows from investing activities
Proceeds from investments sold or matured
Securities available for sale
Fixed maturities sold		$	121,968			$	241,368			$	228,436
Fixed maturities matured			175,483				189,144				91,732
Equity securities sold			41,802				9,877				4,450
Securities held to maturity
Fixed maturities matured			2,587				7,819				22,875
Acquisition of investments
Securities available for sale
Fixed maturities			(337,569	)			(459,705	)			(505,896	)
Equity securities			(26,957	)			(3,684	)			(19,636	)
Securities held to maturity
Fixed maturities			(1,050	)			(1,502	)			(554	)
Net (disbursements) repayment for policy loans			53				(489	)			30
Capital expenditures			(19,222	)			(18,706	)			(22,411	)
Net cash used in investing activities			(42,905	)			(35,878	)			(200,974	)
Cash flows from financing activities
Repurchase and retirement of common stock			(6,235	)			(32,355	)			(7,645	)
Change in outstanding checks in excess of bank balances			281				(5,645	)			18,353
Repayments of long-term borrowings			(26,367	)			(1,640	)			(1,639	)
Net proceeds from short-term borrowings			15,575				—				—
Proceeds from long-term borrowings			25,000				—				—
Proceeds from annuity contracts			10,691				4,307				8,018
Surrenders of annuity contracts			(9,051	)			(7,093	)			(7,195	)
Other			—				—				6
Net cash provided by (used in) financing activities			9,894				(42,426	)			9,898
Net increase (decrease) in cash and cash equivalents			4,645				(5,719	)			(194,058	)
Cash and cash equivalents
Beginning of year			40,376				46,095				240,153
End of year		$	45,021			$	40,376			$	46,095

The accompanying notes are an integral part of these financial statements

Triple-S Management Corporation and Subsidiaries

Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(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 Insurance Plan (Similar to Medicaid)(Medicaid) business. Also, TC provides healthcare advisory services to TSS and other health insurance-related services to the health insurance industry.

The contract with the Commonwealth of Puerto Rico (the government of Puerto Rico) that allowed us to provide services to Medicaid enrollees, expired by its own terms on September 30, 2010, thus effective October 1st, 2010 we no longer provide services to these enrollees. As a result, TC will cease to exist during 2011.

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 Presentation

The 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 Estimates

The 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

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

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. Although some variability is inherent in these estimates, the Company believes the amounts provided are adequate.

Reclassifications

Certain amounts in the 2009 and 2008 consolidated financial statements were reclassified to conform to the 2010 presentation.

Cash Equivalents

The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash equivalents of $626 and $920 at December 31, 2010 and 2009, respectively, consist principally of obligations of government-sponsored enterprises and certificates of deposit with an initial term of less than three months.

Investments

Investment in securities at December 31, 2010 and 2009 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

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

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 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 statements of earnings 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 earnings.

A 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.

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

Revenue Recognition

	a.		Managed Care
			Subscriber premiums on the managed care business are billed in advance of their respective 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 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 Medicaid contract with the Government of Puerto Rico contained a savings-sharing provision whereby the Government of Puerto Rico shares with TSS a portion of the medical cost savings obtained with the administration of the region served on an administrative service basis. Any savings-sharing amount is recorded when

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

earned as administrative service fees in the accompanying consolidated statements of earnings.

b.

Life and Accident and Health Insurance

Premiums 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 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 Insurance

Premiums 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, 5.4% for 2010 and 2009, 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

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

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.

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:

		Estimated
Asset Category		Useful Life
Buildings		20 to 50 years
Building improvements		3 to 5 years
Leasehold improvements		Shorter of estimated useful life or lease term
Office furniture		5 years
Computer software		3 to 10 years
Computer equipment, equipment, and automobiles		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, 2010 and 2009 the Company capitalized approximately $11,647 and $10,993 associated with the implementation of new software.

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

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

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 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 Medicaid 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, 2010 and 2009, total withholdings and capitation payable amounted to $22,428 and $25,568, 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 which 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.

Claim 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

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

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 deposits, which amounted to $1,688, $1,665, and $1,902, during the years ended December 31, 2010, 2009, and 2008, 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

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

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 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.

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

The Company records any interest and penalties related to unrecognized tax benefits within the operating expenses in the consolidated statement of earnings.

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 for its stock options 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 Equivalents

The carrying amount approximates fair value because of the short-term nature of such instruments.

b.

Investment in Securities

The 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.

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(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.

Short-term Borrowings

The carrying amount of securities sold under agreements to repurchase approximates fair value due to its short-term nature.

g.

Long-term Borrowings

The carrying amounts and fair value of the Company’s long-term borrowings are as follows:

		2010								2009
		Carrying				Fair				Carrying				Fair
		Amount				Value				Amount				Value
Loans payable to bank			21,027				21,027				22,667				22,667
6.3% senior unsecured notes payable			50,000				49,625				50,000				48,000
6.6% senior unsecured notes payable			35,000				34,388				60,000				57,420
6.7% senior unsecured notes payable			35,000				35,000				35,000				33,320
1.96% repurchase agreement			25,000				24,575				—				—
		$	166,027			$	164,615			$	167,667			$	161,407

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 and the repurchase agreement was determined using market quotations. Additional information pertinent to borrowings is included in Note 13.

h.

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 14.

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

Recently Issued Accounting Standards

In April 2010, the FASB issued guidance to address the classification of an employee share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. The guidance clarifies that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, such an award should not be classified as a liability if it otherwise qualifies as equity. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2010. We do not expect the adoption of this guidance to have an impact on our financial position or results of operations.

In October 2010, the FASB issued guidance to address diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral. This guidance specifies that the following costs incurred in the acquisition of new and renewal contracts should be capitalized: (1) Incremental direct costs of contract acquisition. Incremental direct costs are those costs that result directly from and are essential to the contract transaction and would not have been incurred by the insurance entity had the contract transaction not occurred. (2) Certain costs related directly to the following acquisition activities performed by the insurer for the contract: a. Underwriting, b. Policy issuance and processing, c. Medical and inspection, and d. Sales force contract selling. Advertising costs should be included in deferred acquisition costs only if the capitalization criteria in the direct-response advertising guidance in Subtopic 340-20, Other Assets and Deferred Costs— Capitalized Advertising Costs, are met. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2011. The Company is currently evaluating the impact the adoption of this guidance will have on its financial position or results of operations.

In December 2010, the FASB issued guidance to modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. We do not expect the adoption of this guidance to have a significant impact on our financial position or results of operations.

In December 2010, the FASB issued guidance to require a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period for all the periods presented. This guidance also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This guidance is effective for business combinations for which the acquisition dates is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. We expect to adopt this guidance during 2011 as part of our disclosures related to our business combination. Additional information pertinent to the business combination is included in note 28.

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.

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

3.

Investment in Securities

The 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, 2010 and 2009 were as follows:

		2010
						Gross				Gross				Estimated
						Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Trading securities
Equity securities		$	43,832			$	10,738			$	(3,471	)		$	51,099

		2009
						Gross				Gross				Estimated
						Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Trading securities
Equity securities		$	42,075			$	7,064			$	(5,230	)		$	43,909

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

		2010
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Securities available for sale
Fixed maturities
Obligations of government-sponsored enterprises		$	124,735			$	6,650			$	—			$	131,385
U.S. Treasury securities and obligations of U.S. government instrumentalities			47,427				5,451				—				52,878
Obligations of the Commonwealth of Puerto Rico and its instrumentalities			117,519				3,115				(10	)			120,624
Municipal securities			272,383				3,979				(2,798	)			273,564
Corporate bonds			102,184				7,698				(250	)			109,632
Residential mortgage-backed securities			12,560				801				(1	)			13,360
Collateralized mortgage obligations			271,149				6,158				(1,164	)			276,143
Total fixed maturities			947,957				33,852				(4,223	)			977,586
Equity securities
Common stocks			901				3,430				—				4,331
Preferred stocks			4,298				68				(737	)			3,629
Perpetual preferred stocks			1,000				—				(94	)			906
Mutual funds			41,551				6,632				(310	)			47,873
Total equity securities			47,750				10,130				(1,141	)			56,739
Total		$	995,707			$	43,982			$	(5,364	)		$	1,034,325

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

		2009
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Securities available for sale
Fixed maturities
Obligations of government-sponsored enterprises		$	252,513			$	2,240			$	(3,325	)		$	251,428
U.S. Treasury securities and obligations of U.S. government instrumentalities			48,190				3,148				—				51,338
Obligations of the Commonwealth of Puerto Rico and its instrumentalities			154,754				3,113				(1,919	)			155,948
Municipal securities			107,441				1,117				(1,851	)			106,707
Corporate bonds			102,547				3,546				(728	)			105,365
Residential mortgage-backed securities			16,605				677				(1	)			17,281
Collateralized mortgage obligations			229,312				4,237				(2,639	)			230,910
Total fixed maturities			911,362				18,078				(10,463	)			918,977
Equity securities
Common stocks			4,074				3,435				—				7,509
Preferred stocks			4,000				—				(1,325	)			2,675
Perpetual preferred stocks			2,849				—				(270	)			2,579
Mutual funds			50,608				4,150				(2,832	)			51,926
Total equity securities			61,531				7,585				(4,427	)			64,689
Total		$	972,893			$	25,663			$	(14,890	)		$	983,666

		2010
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Securities held to maturity
Obligations of government-sponsored enterprises		$	1,793			$	151			$	—			$	1,944
U.S. Treasury securities and obligations of U.S. government instrumentalties			1,478				203				—				1,681
Corporate bonds			9,443				414				—				9,857
Residential mortgage-backed securities			660				41				—				701
Certificates of deposits			1,241				—				—				1,241
		$	14,615			$	809			$	—				15,424

Triple-S Management Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
(dollar amounts in thousands, except per share data)

		2009
						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Securities held to maturity
Obligations of government-sponsored enterprises		$	925			$	6			$	—			$	931
U.S. Treasury securities and obligations of U.S. government instrumentalties			3,786				132				—				3,918
Corporate bonds			9,063				534				—				9,597
Residential mortgage-backed securities			1,256				25				(1	)			1,280
Certificates of deposits			764				—				—				764
		$	15,794			$	697			$	(1	)			16,490