Medicaid premiums decreased by $24.4 million, or 11.9% primarily as the result of a decrease in member month enrollment by 97,167, or 7.5%, reflecting the population decline in Puerto Rico. This decrease also includes, as a reduction to Medicaid premiums, the accrual of $14.6 million of excess profit (return premiums) due to a better loss experience that resulted in profits over the allowable 2.5% margin threshold.

Medical premiums generated by the Medicaid business amounted to $177.7 million, $24.5 million, or 12.1% lower when compared to the medical premiums earned during the three months ended March 31, 2016. Decrease primarily reflects lower fully-insured member months enrollment by approximately 48,600 lives and the 4% decrease in average premium rates that went into effect July 1, 2016. Also contributing to the lower premiums during this period are last year’s partial reversal of the accrued 2.5% excess profit of $3.6 million and to $2.6 million related to the suspension of the HIP fee pass-through as a result of the 2017 moratorium.

·	Medicare premiums decrease of $5.5 million, or 2.0% primarily results from lower enrollment by 4,834 member month when compared to 2015 combined with a 2.5% average reduction in 2016 Medicare reimbursement rates.

Medical premiums generated by the Commercial business decreased by $10.4 million, or 4.8%, to $205.1 million. This fluctuation primarily reflects lower fully-insured member enrollment during the quarter of approximately 83,000 member months and $3.5 million related to the suspension of the HIP fee pass-through; offset by an increase in average premium rates of approximately 5%.

Medical premiums generated by the Medicare business decreased by $3.3 million, or 1.3%, to $257.7 million, primarily reflecting lower average premium rates due to a change in membership mix, with the current period presenting a higher concentration of non-dual individuals and groups and a reduction in the 2017 Medicare reimbursement rates.

3635

Table of Contents

·	Commercial premiums increase of $3.4 million, or 1.6%, primarily results from the approximately 7% year over year increase in average premium rates, partially offset by a decrease in fully insured member month enrollment by 61,941, or 5.5%.

~~Administrative service fees decreased by $1.8 million, or 23.7%, to $5.8 million mainly due to a decrease in the Commercial self-funded member month enrollment during the 2016 period.~~

Medical Claims Incurred

Medical claims incurred during the three months ended March 31, 2017 decreased by ~~$18.2~~$9.0 million, or ~~3.0%~~1.5%, to ~~$590.2 million.~~$587.3 million when compared to the three months ended March 31, 2016. The medical loss ratio (MLR) of the segment increased 80380 basis points during the ~~2016~~2017 period, to ~~88.2%~~91.7%. This fluctuation is primarily attributed to the net effect of the following:

The medical claims incurred of the Medicaid business decreased by $24.3 million during the 2016 period primarily reflecting a favorable prior period reserve development due to lower utilization trends and the previously described lower member month enrollment. The favorable prior period reserve developments was in part, responsible for generating a profit for this program in excess of the allowable 2.5% maximum margin which made it necessary for us to record the previously discussed return premium. The Medicaid MLR was 89.3%, 120 basis points lower than last year.

The medical claims incurred in the Medicaid business decreased by $8.4 million, or 4.6%, during the 2017 period, mostly driven by lower enrollment offset by higher utilization. The MLR, at 97.8%, was 770 basis point higher than the same period last year. The higher MLR primarily reflects increased pharmacy and outpatient claim trends and the lower premium rates that went into effect July 1, 2016.

The medical claims incurred of the Medicare business decreased by $5.0 million, or 2.1%, during the 2016 period reflecting the previously mentioned decrease in membership and lower benefits in the 2016 products as compared to 2015 as the result of the decrease in reimbursement rates. Adjusting for the effect of prior period reserve developments, and moving the mid-year and 2015 final risk score revenue adjustments to their corresponding periods, our Medicare MLR would have been approximately 88.7% this quarter, about 280 basis points higher than last year, mostly driven by increased Part B drug costs, mainly related to cancer and rheumatoid arthritis.

The medical claims incurred of the Commercial business decreased by $7.6 million, or 4.3%, during the 2017 period mostly driven by lower enrollment. The MLR, at 83.5%, was 70 basis point higher than the same month last year. Adjusting for the effect of prior period reserve developments, the Commercial MLR would have been 83.3%, 240 basis points lower than the adjusted MLR for last year primarily reflecting claim trends that are lower than our premium trends following the continuity of our underwriting discipline.

The medical claims incurred of the Commercial business increased by $11.0 million, or 6.1%, during the 2016 period. The Commercial MLR was 89.2%, which is 380 basis points higher than the MLR for the prior year. These increases reflect the impact of unfavorable prior period reserve development. Excluding the effect of prior period reserve developments in 2016 and 2015, the MLR would have decreased by 100 basis points to 85.7%.

The medical claims incurred of the Medicare business increased by $7.0 million, or 3.0%, during the 2017 period and its MLR increased by 390 basis points, to 94.0%. Adjusting for the effect of prior period reserve developments in 2017 and 2016 and moving the risk score revenue adjustments to their corresponding period, the Medicare MLR would have been approximately 95.6% this quarter, about 280 basis points higher than last year, primarily reflecting higher trends in Part B drugs, pharmacy benefits and the improvement of benefits in 2017 products taking advantage of the HIP fee moratorium.

Medical Operating Expenses

Medical operating expenses decreased by $7.4 million, or 7.4%, to $92.8 million. The decrease reflects lower expenses related to the change in the Medicaid membership after we elected to decrease the number of regions we serve from eight regions under an ASO agreement to only two regions when the contract was changed to a fully-insured model. The lower operating expenses also reflect a decrease in the provision for doubtful accounts, mostly due to the strengthening of the allowance for doubtful receivables in the 2015 period. This decrease in the operating expenses was partially offset by a new business-to-business tax implemented in Puerto Rico during the third quarter 2015 and an increase in the Health Insurance Providers Fee, reflecting the Medicaid enrollment after the model change. For the three months ended ~~June 30, 2016, the operating expense ratio~~March 31, 2017 decreased ~~50 basis points, to 13.7%.~~

~~Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015~~

~~Medical Operating Revenues~~

~~Medical premiums earned increased~~ by ~~$179.6~~$11.5 million, or ~~15.4%,~~12.4 %, to ~~$1.3 billion. This increase is principally the result of the following:~~

Medical premiums generated by the Medicaid business increased by $177.8 million to $383.4 million during the six months ended June 30, 2016. This fluctuation is primarily the result of the change in the Medicaid service model, from an ASO agreement to a fully insured model effective April 1, 2015. This decrease also includes, as a reduction to Medicaid premiums, the accrual of $10.9 million of excess profit (return premiums) due to a better loss experience that resulted in profits over the allowable 2.5% margin threshold.

·	Medical premiums generated by the Commercial business increased by $6.4 million, or 1.5%, to $430.5 million. This fluctuation is primarily the result of approximately 7% year over year increase in average premium rates, partially offset by a decrease in fully insured member month enrollment.

~~Table of Contents~~

~~Medical premiums generated by the Medicare business decreased by $4.6 million, or 0.9%, to $534.0 million. This fluctuation primarily results from lower risk score revenue as~~$81.3 million when compared ~~with 2015 and a reduction in 2016 Medicare reimbursement rates, offset in part by higher member month enrollment.~~

~~Administrative service fees decreased by $25.5 million, or 67.8%, to $12.1 million mainly due~~ to the ~~previously mentioned change in the Medicaid contract effective April 1, 2015.~~

~~Medical Claims Incurred~~

Medical claims incurred increased by $178.0 million, or 17.6%, to $1.2 billion. The MLR of the segment increased 170 basis points during the 2016 period, to 88.0%. These fluctuations are primarily attributed to the net effect of the following:

~~The medical claims incurre~~d of the Medicaid business increased by $157.9 million during the 2016 period reflecting the previously mentioned change in the Medicaid contract effective April 1, 2015. The Medicaid MLR was 89.7%, 80 basis points lower than last year, primarily reflecting ~~lower utilization.~~

The medical claims incurred of the Commercial business increased by $12.8 million, or 3.6%, during the 2016 period mostly reflecting the impact of prior period reserve development. The Commercial MLR was 86.0%, which is 170 basis points higher than the MLR for the prior year. Excluding the effect of prior period reserve developments in 2016 and 2015, the MLR would have decreased by 240 basis points, reflecting the continuity of our underwriting discipline and premium trends higher than claims trends.

The medical claims incurred of the Medicare business increased by $7.3 million, or 1.6%, during the 2016 period and its MLR was 88.3%, which is 210 basis points higher than the MLR for the prior period. Adjusting for the effect of prior period reserve developments, and moving the 2015 final risk score revenue adjustment to its corresponding period, our Medicare MLR would have been 90.4%, about 270 basis points higher than last year. The higher MLR primarily reflects, a higher number of HRAs completed in 2016 compared to last year and higher Part B drug costs, mainly related to cancer and rheumatoid arthritis.

~~Medical Operating Expenses~~

Medical operating expenses decreased by $9.0 million, or 4.6%, to $185.6 million. The decrease mostly reflects lower expenses related to the change in the Medicaid membership after we elected to decrease the number of regions we serve from eight regions under an ASO agreement to only two regions when the contract was changed to a fully-insured model. The lower operating expenses also reflect a decrease in the provision for doubtful accounts, mostly due to the strengthening of the allowance for doubtful receivables in the 2015 period. This decrease in the operating expenses was partially offset by a new business-to-business tax implemented in Puerto Rico during the third quarter 2015 and an increase in the Health Insurance Providers Fee, reflecting the Medicaid enrollment after the model change.three months ended March 31, 2016. The operating expense ratio decreased ~~250~~by 90 basis points to ~~13.6%~~12.6% in ~~2016 as a~~2017. The lower operating expenses and expense ratio are mostly the result of the ~~increase~~decrease in ~~premiums revenue and~~the HIP Fee of $10.7 million due to the 2017 moratorium as well as lower ~~expenses.~~personnel costs.

3836

Table of Contents

Life Insurance Operating Results

	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
(dollar amounts in millions)	2016			2015			2016			2015			2017			2016
Operating revenues:
Premiums earned, net:
Premiums earned	$	39.7		$	38.1		$	79.5		$	76.8		$	41.8		$	39.8
Assumed earned premiums		1.2			0.6			2.7			2.2			0.9			1.5
Ceded premiums earned		(2.1	)		(2.4	)		(4.3	)		(4.9	)		(2.2	)		(2.2	)
Premiums earned, net		38.8			36.3			77.9			74.1			40.5			39.1
Net investment income		6.4			6.1			12.3			11.9			6.1			5.9
Total operating revenues		45.2			42.4			90.2			86.0			46.6			45.0
Operating costs:
Policy benefits and claims incurred		21.9			19.2			43.4			40.7			23.7			21.4
Underwriting and other expenses		18.2			17.9			36.2			35.2			19.0			18.0
Total operating costs		40.1			37.1			79.6			75.9			42.7			39.4
Operating income	$	5.1		$	5.3		$	10.6		$	10.1		$	3.9		$	5.6
Additional data:
Loss ratio		56.4	%		52.9	%		55.7	%		54.9	%		58.5	%		54.7	%
Operating expense ratio		46.9	%		49.3	%		46.5	%		47.5	%		46.9	%		46.0	%

Three Months Ended ~~June 30, 2016~~March 31, 2017 Compared to Three Months Ended ~~June 30, 2015~~March 31, 2016

Operating Revenues

Premiums earned, net increased by ~~$2.5~~$1.4 million, or ~~6.9%~~3.6% to ~~$38.8~~$40.5 million as the result of premium growth in the segment’s Individual Life and Cancer lines of business, as well as growth in the ~~premiums assumed on reinsurance agreements.~~Costa Rica operations.

Policy Benefits and Claims Incurred

Policy benefits and claims incurred increased by ~~$2.7~~$2.3 million, or ~~14.1%~~10.7%, to ~~$21.9~~$23.7 million, mostly ~~reflecting a~~as the result of the higher volume of business during the year, particularly in the Individual Life and Cancer lines of business and inhigher number of claims ~~assumed under reinsurance retrocession agreements, which carry a high loss ratio, and an increase in actuarial reserves.~~paid. The loss ratio for the period increased ~~from 52.9%~~to 58.5% in ~~2015~~2017, or 380 basis points, reflecting the higher volume in the Cancer line of business, which has a higher loss ratio, as well as to ~~56.4%~~a higher claims experience in ~~2016, or 350 basis points.~~this particular line of business.

Underwriting and Other Expenses

Increase in underwriting and other expenses of $1.0 million, or 5.6%, to $19.0 million mostly reflects higher commissions following the segment’s premium growth mentioned above. In addition, the segment has incurred in higher development and marketing expenses related to the ~~development~~expansion of the Costa Rica operations. ~~The~~As a result, the segment’s operating expense ratio ~~decreased 240~~increased to 46.9%, 90 basis ~~points from 49.3% in 2015 to 46.9% in 2016, reflecting the increase in premiums during the period.~~

~~Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015~~

~~Operating Revenues~~

Premiums earned, net increased by $3.8 million, or 5.1% to $77.9 million as the result of premium growth in the segment’s Individual Life and Cancer lines of business as well as in the premiums assumed on reinsurance agreements.

~~Policy Benefits and Claims Incurred~~

Policy benefits and claims incurred increased by $2.7 million, or 6.6%, to $43.4 million, mostly reflecting a higher volume of business during the year, particularly in the Cancer business which has a higher loss ratio, and an increase in the actuarial reserves. The loss ratio for the period increased from 54.9% in 2015 to 55.7% in 2016, or 80 basis points.

3937

Table of Contents

~~Underwriting and Other Expenses~~

Underwriting and other expenses increased by $1.0 million, or 2.8%, primarily reflecting higher development and marketing expenses related to the development of the Costa Rica operations. The segment’s operating expense ratio decreased 100 basis points from 47.5% in 2015 to 46.5% in 2016, reflecting the increase in premiums during the period.

Property and Casualty Insurance Operating Results

	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
(Dollar amounts in millions)	2016			2015			2016			2015
(dollar amounts in millions)													2017			2016
Operating revenues:
Premiums earned, net:
Premiums written	$	40.9		$	39.1		$	68.5		$	67.0		$	27.4		$	27.6
Premiums ceded		(13.1	)		(12.5	)		(23.5	)		(23.3	)		(10.1	)		(10.4	)
Change in unearned premiums		(6.1	)		(4.1	)		(2.0	)		1.6			4.4			4.1
Premiums earned, net		21.7			22.5			43.0			45.3			21.7			21.3
Net investment income		2.3			2.1			4.3			4.2			1.9			1.9
Total operating revenues		24.0			24.6			47.3			49.5			23.6			23.2
Operating costs:
Claims incurred		10.8			11.4			20.6			22.7			10.6			9.7
Underwriting and other expenses		9.8			10.7			21.2			22.8			10.9			11.4
Total operating costs		20.6			22.1			41.8			45.5			21.5			21.1
Operating income	$	3.4		$	2.5		$	5.5		$	4.0		$	2.1		$	2.1
Additional data:
Loss ratio		49.8	%		50.7	%		47.9	%		50.1	%		48.8	%		45.5	%
Operating expense ratio		45.2	%		47.6	%		49.3	%		50.3	%		50.2	%		53.5	%
Combined ratio		95.0	%		98.3	%		97.2	%		100.4	%

Three Months Ended ~~June 30, 2016~~March 31, 2017 Compared to Three Months Ended ~~June 30, 2015~~March 31, 2016

Operating Revenues

Total premiums written ~~increased~~decreased by ~~$1.8~~$0.2 million, or ~~4.6%~~0.7%, to ~~$40.9~~$27.4 million, ~~mostly resulting from higher~~driven by lower sales of Commercial ~~and Compulsory Vehicle Liability~~package products.

The premiums ceded to reinsurers decreased by $0.3 million, or 2.9%, mostly reflecting lower premiums written in Commercial insurance products.

The change in unearned premiums presents an increase of ~~$2.0~~$0.3 million mostly ~~resulting from~~reflecting the ~~segment’s higher volume of~~segments lower premiums written in ~~2016.~~2017 and lower cost.

Claims Incurred

Claims incurred ~~decreased~~increased by ~~$0.6~~$0.9 million, or ~~5.3%~~9.3%, to ~~$10.8~~$10.6 million. The loss ratio ~~decreased~~increased by 90330 basis points, to ~~49.8%~~48.8% during this period, primarily as a result of ~~favorable loss experience in the General Liability and Surety business.~~

~~Underwriting and Other Expenses~~

~~Underwriting and other operating expenses decreased by $0.9 million, or 8.4%, to $9.8 million primarily due to the receipt of a refund distribution from the~~ ~~Joint Underwriting Association (JUA) during the 2016 period.~~

~~Table of Contents~~

~~Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015~~

~~Operating Revenues~~

~~Total premiums written increased by $1.5 million, or 2.2%, to $68.5 million, mostly reflecting higher sales of Compulsory Vehicle Liability and Commercial insurance products.~~

~~The change in unearned premiums presents a decrease of $3.6 million mostly reflecting the segments higher volume of premiums written in 2016.~~

~~Claims Incurred~~

~~Claims incurred decreased by $2.1 million, or 9.3%, to $20.6 million. The loss ratio decreased by 220 basis points, to 47.9% during this period, primarily as a result of favorable~~an unfavorable loss experience in the Commercial and Personal Auto ~~line~~lines of business.

Underwriting and Other Expenses

Underwriting and other operating expenses decreased by ~~$1.6~~$0.5 million, or ~~7.0%~~4.4%, to ~~$21.2~~$10.9 million mostly due to lower ~~net commission expenses driven by a decrease in net premiums earned, and the receipt~~personnel costs. The operating expense ratio was 50.2%, 330 basis points lower than last year.

Table of ~~the refund distribution from JUA during the 2016 period~~.Contents

Liquidity and Capital Resources

Cash Flows

A summary of our major sources and uses of cash for the periods indicated is presented in the following table:

	Six months ended June 30,						Three months ended March 31,
(dollar amounts in millions)	2016			2015			2017			2016
Sources (uses) of cash:
Cash (used in) provided by operating activities	$	(10.6	)	$	76.7
Net (purchases) proceeds of investment securities		(76.3	)		69.9
Cash provided by operating activities							$	131.0		$	31.3
Net proceeds (purchases) of investment securities								0.4			(108.9	)
Net capital expenditures		(2.7	)		(3.0	)		(3.3	)		(1.5	)
Proceeds from long-term borrowings								24.3			-
Payments of long-term borrowings		(0.8	)		(11.8	)		(24.7	)		(0.4	)
Proceeds from policyholder deposits		7.9			4.5			4.1			3.4
Surrenders of policyholder deposits		(6.9	)		(6.3	)		(4.9	)		(2.9	)
Repurchase and retirement of common stock		(14.6	)		(26.0	)		-			(8.0	)
Other		2.3			(1.5	)		(11.4	)		1.6
Net (decrease) increase in cash and cash equivalents	$	(101.7	)	$	102.5
Net increase (decrease) in cash and cash equivalents							$	115.5		$	(85.4	)

Cash flow from operating activities ~~decreased~~increased by $99.7 million for the three months ended March 31, 2017 as ~~a result of higher claims paid by $262.7 million, offset in part by~~compared to the three months ended March 31, 2016, principally due to an increase in premium collections of ~~$160.3~~$67.1 million,, lower claims paid by $16.5 million and a decrease in cash paid to suppliers and employees of ~~$11.1~~$14.4 million. The ~~increase~~higher premium collections follow the collection in ~~claims paid and premiums collected is principally the result~~advance of the ~~change~~April 2017 Medicare premiums from CMS.

Net proceeds from sales of investments securities primarily results from net cash flows received from the sales, maturities, and purchases of investment securities during the period following our asset/liability management strategy.

During the three months ended March 31, 2017, we received $24.3 million from a commercial bank in Puerto Rico related with a credit agreement entered into in December 2016. These proceeds were used during the 2017 period to prepay the outstanding principal amount of $24.0 million of the 6.6% senior unsecured notes.

There were no repurchase and retirement of common stock during the three months ended March 31, 2017.

The fluctuation in the ~~Medicaid delivery model from an ASO agreement~~Other uses/sources of cash is attributed to ~~a fully insured model effective April 1, 2015.~~

~~During 2016, we increased~~changes in the amount of ~~investments in securities as part of our asset/liability management strategy using cash on hand.~~

Payments of long-term borrowings decreased by $11.0 million during the six months ended June 30, 2016, primarily due to an $11.0 million repayment of certain senior unsecured notes principal during the 2015 period.outstanding checks over bank balances.

4139

Table of Contents

In November 2015 the Company’s Board of Directors authorized a $25.0 million repurchase program of our Class B common stock. 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 the six months ended June 30, 2016, the Company repurchased and retired 651,947 shares of our Class B Common Stock at an average per share price of $22.~~50, for an aggregate cost of $14.6 million.~~

Financing and Financing Capacity

We have several short-term facilities available to address timing differences between cash receipts and disbursements. These short-term facilities are mostly in the form of arrangements to sell securities under repurchase agreements. As of ~~June 30, 2016,~~March 31, 2017, we had $60.0 million of available credit under these facilities. There are no outstanding short-term borrowings under these facilities as of ~~June 30, 2016.~~March 31, 2017.

On December 21, 2005, we issued and sold $60.0 million of our 6.6% senior unsecured notes originally due December 2020 (the 6.6% notes). ~~On October 1, 2010 and May 14, 2015 we repaid $25.0 million and $11.0 million, respectively, of the principal of these senior~~These unsecured ~~notes. Amount currently outstanding is $24.0 million. The 6.6%~~ notes ~~contain certain non-financial covenants with which we are~~were paid in ~~compliance at June 30, 2016.~~full on January 11, 2017.

~~In addition, we are~~On December 28, 2016, TSM entered into a ~~party to a secured term loan~~$35.5 million credit agreement with a commercial bank in Puerto Rico. ~~This~~The agreement consists of three term loans: (i) Term Loan A in the principal amount of $11.2 million, (ii) Term Loan B in the principal amount of $20.2 million and (iii) Term Loan C in the principal amount of $4.1 million. Term Loan A matures in October 2023 while the Term Loans B and C mature in January 2024. Term Loan A was used to refinance the previous $41.0 million secured loan payable with ~~original~~the same commercial bank in Puerto Rico. Proceeds from Term Loans B and C were received on January 11, 2017 and were used to prepay the outstanding principal ~~balance~~amount plus accrued interest of ~~$41.0 million, bears interest at a rate equal~~the 6.6% senior unsecured notes due January 2021 ($24.0 million). Pursuant to the ~~London Interbank Offered Rate (LIBOR) plus 100 basis points and requires monthly principal repayments of $0.1 million. As of June 30, 2016, this secured loan had an~~credit agreement, interest is payable on the outstanding balance of ~~$12.0 million~~the Loan at the following annual rate: (i) 1% over LIBOR for Term Loan A, (ii) 2.75% over LIBOR for Term Loan B, and ~~average annual interest rate of 1.41%. This secured~~(iii) 3.25% over LIBOR for Term Loan C. The loan ~~is guaranteed by a first lien on our land, buildings~~includes certain financial and ~~substantially all leasehold improvements, as collateral for the term of the agreements under a continuing general security agreement. This secured loan contains certain~~ non-financial covenants, ~~that~~which are customary for this type of facility, including but not limited to, restrictions on the granting of certain liens, limitations on acquisitions and limitations on changes in ~~control. As of June 30, 2016 we are in compliance with these covenants.~~control and dividends. Failure to meet these covenants may trigger the accelerated payment of the outstanding balance. As of March 31, 2017 we are in compliance with these covenants.

On ~~November 4, 2015,~~ March 11, 2016 TSS entered into a ~~$50.0~~$30.0 million revolving loan agreement with a commercial bank in Puerto Rico. This unused line of credit had an interest rate of LIBOR plus 220 basis points and includes certain financial and non-financial covenants that are customary for this type of facility. This revolving loan agreement matured on March 11, 2017, and was not renewed.

On April 18, 2017, TSA entered into a $10.0 million revolving loan agreement with a commercial bank in Puerto Rico. This unused line of credit has an interest rate of 30-day LIBOR plus ~~250~~25 basis points, matures on November 4, 2016, and contains certain financial and non-financial covenants that are customary for this type of facility. The agreement stipulates that any unused balance would become unavailable should TSS stop collecting payments under the Medicaid contract for four consecutive weeks.

On March 11, 2016, TSS entered into a $30.0 million revolving loan agreement with a commercial bank in Puerto Rico. This line of credit, unused as of June 30, 2016, has an interest rate of LIBOR plus 220 basis points, matures on March 11, 2017, and contains certain financial and non-financial covenants that are customary for this type of facility.

We anticipate that we will have sufficient liquidity to support our currently expected needs.

Further details regarding the senior unsecured notes and the credit agreements are incorporated by reference to “Item 7.—Management Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

Table of Contents

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks that are inherent in our financial instruments, which arise from transactions entered into in the normal course of business. We have exposure to market risk mostly in our investment activities. For purposes of this disclosure, “market risk” is defined as the risk of loss resulting from changes in interest rates and equity prices. No material changes have occurred in our exposure to financial market risks since December 31, ~~2015.~~2016. A discussion of our market risk is incorporated by reference to “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” of our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

In 2016 we have increased our market risk exposure to equity instruments to include certain mutual funds, whose underlying assets are mostly comprised of US and international equities, debt instruments and loan participations, and a smaller amount of private investments. We hold these positions in our available-for-sale portfolio. The mutual funds invest primarily in equity and debt securities issued or guaranteed by corporations and financial institutions that are either unrated or have non-investment grade ratings from either Standard & Poor’s or Moody’s. The private investments are comprised of private equity style closed end funds, which make direct equity and debt investments. Our additional investments increase our exposure to equity price risk and credit risk. We manage this indirect exposure to credit risk by closely monitoring the performance of these mutual funds. Assuming an immediate decrease of 10% in the market value of our investments in equity securities as of June 30, 2016 and December 31, 2015, the hypothetical loss in the fair value of these investments would have been approximately $31.0 million and $19.7 million, respectively. See note 3 to consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

~~Table of Contents~~

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Based~~In connection with the preparation of this Quarterly Report on ~~an evaluation of the effectiveness of the Corporation’s disclosure controls and procedures conducted~~Form 10-Q, management, under the supervision and with the participation of ~~management,~~ the chief executive officer ~~(CEO)~~ and ~~the~~ chief financial officer, ~~(CFO) concluded that, as of June 30, 2016, which is the end~~conducted an evaluation of the ~~period covered by this Quarterly Report on Form 10-Q, our disclosure~~effectiveness of the “disclosure controls and procedures” (as such term is defined under Exchange Act Rule 13a-15(e)) of the Corporation and its subsidiaries. Disclosure controls and procedures are ~~effective~~designed to ensure that information required to be disclosed ~~by the Corporation~~ in ~~the report that it files~~reports filed or ~~submits~~submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to management, including the ~~CEO~~chief executive officer and ~~CFO, as appropriate~~chief financial officer, to allow timely decisions regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility that judgments in decision-making can be faulty, and breakdowns as a result of simple errors or mistake. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on this evaluation, our chief executive officer and chief financial officer have concluded that as of March 31, 2017, which is the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective to a reasonable level of assurance.

There were no significant changes in our disclosure controls and procedures, or in factors that could significantly affect internal controls, subsequent to the date the ~~CEO~~chief executive officer and ~~CFO~~chief financial officer completed the evaluation referred to above.

Changes in Internal Controls Over Financial Reporting

No changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended ~~June 30, 2016~~March 31, 2017 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II – Other Information

Item 1.

Legal Proceedings

For a description of legal proceedings that have experienced significant developments during this quarter, see note 1413 to the unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q.

Item 1A.

Risk Factors

For a description of our risk factors see Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

43The following text updates the disclosure included in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016, under the sub-caption “The health care reform law and the implementation of that law could have a material adverse effect on our business, financial condition, cash flows, or results of operations.”

On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Further, in January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of legislation that would repeal portions of the ACA. Following the passage of the Budget Resolution, on March 6, 2017, the U.S. House of Representatives introduced legislation known as the American Health Care Act, which, if enacted, would amend or repeal significant portions of the ACA. Among other changes, the American Health Care Act would sunset the annual insurance industry assessment as of December 31, 2017, essentially eliminate the individual and employer mandates by eliminating penalties and providing retroactive relief for failing to maintain or provide minimum essential coverage, and permit insurers to charge individuals a 30% surcharge on premiums for failing to demonstrate continuous coverage. The American Health Care Act would also make significant changes to Medicaid by, among other things, making the ACA Medicaid expansion optional for states, repealing the ACA requirement that state Medicaid plans provide the same essential health benefits that are required by plans available through the exchanges, implementing a per capita cap on federal payments to states beginning in fiscal year 2020, and changing certain eligibility requirements. On May 4, 2017, the U.S. House of Representatives approved the American Health Care Act to repeal portions of the ACA. The American Health Care Act will now be considered by the U.S. Senate. While it is uncertain when or if the provisions in the American Health Care Act will become law, or the extent to which any such changes may impact our business, it is clear that Congress is taking concrete steps to repeal and replace certain aspects of the ACA.

Table of Contents

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

~~Purchases of Equity Securities by the Issuer~~Not applicable.

~~The following table presents information related to our repurchases of common stock for the period indicated:~~

(Dollar amounts in millions, except per share data)
Total Number
of Shares
Purchased

Average
Price
Paid per
Share

Total Number of
Shares
Purchased as
Part of Publicly
Announced
Programs ¹

Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the
Programs

April 1, 2016 to April 30, 2016 - $ - - $ 13.3
May 1, 2016 to May 31, 2016 177,678 22.42 177,678 9.3
June 1, 2016 to June 30, 2016 107,168 23.75 107,168 6.8

¹	~~In November 2015 the Company's Board of Directors authorized a $25.0 million Share Repurchase Program of its Class B common stock.~~

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

Not applicable.

Item 6.

Exhibits

Exhibits	Description

3(i)(c)	Articles of Incorporation of Triple-S Management Corporation, 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(i)(d)*	Amendments to Article Tenth and Thirteenth of the Amended and Restated Articles of Incorporation of Triple-S Management Corporation.

3(i)(e)*	Composite Amended and Restated Articles of Incorporation of Triple-S Management Corporation.

11	Statement re computation of per share earnings; an exhibit describing the computation of the earnings per share for the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ has been omitted as the detail necessary to determine the computation of earnings per share can be clearly determined from the material contained in Part I of this Quarterly Report on Form 10-Q.

31.1*	Certification of the President and Chief Executive Officer required by Rule 13a-14(a)/15d-14(a).

31.2*	Certification of the Executive Vice President and Chief Financial Officer required by Rule 13a-14(a)/15d-14(a).

32.1*	Certification of the President and Chief Executive Officer required pursuant to 18 U.S.C Section 1350.

32.2*	Certification of the Executive Vice President and Chief Financial Officer required pursuant to 18 U.S.C Section 1350.

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

*	Filed herein.

4442

Table of Contents

SIGNATURES

Pursuant to the requirements of the United States Securities and 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

Date:	~~August 5, 2016~~May 9, 2017	By:	/s/ Roberto García-Rodríguez
			Roberto García-Rodríguez
			President and Chief Executive Officer

Date:	~~August 5, 2016~~May 9, 2017	By:	/s/ Juan J. Román-Jiménez
			Juan J. Román-Jiménez
			Executive Vice President and Chief Financial Officer

4543

Puerto Rico		66-0555678
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1441 F.D. Roosevelt Avenue
San Juan, Puerto Rico		00920
(Address of principal executive offices)		(Zip code)

	Large accelerated filer ☐	Accelerated filer ☑
	Non-accelerated filer ☐	Smaller reporting company ☐

Title of each class		Outstanding at ~~June 30, 2016~~March 31, 2017
Common Stock Class A, $1.00 par value		950,968
Common Stock Class B, $1.00 par value		~~23,622,795~~23,491,670

	June 30,			December 31,
	2016			2015			March 31, 2017			December 31, 2016
Assets
Investments and cash:
Securities available for sale, at fair value:
Fixed maturities	$	1,144,588		$	1,133,645		$	1,153,545		$	1,151,643
Equity securities		310,103			197,071			277,149			270,349
Securities held to maturity, at amortized cost:
Fixed maturities		2,838			2,929			2,514			2,836
Policy loans		8,301			7,901			8,546			8,564
Cash and cash equivalents		96,140			197,818			218,884			103,428
Total investments and cash		1,561,970			1,539,364			1,660,638			1,536,820
Premiums and other receivables, net		348,204			282,646			292,837			286,365
Deferred policy acquisition costs and value of business acquired		188,976			190,648			195,513			194,787
Property and equipment, net		70,356			73,953			66,756			66,369
Deferred tax asset		46,716			52,361			64,128			57,768
Goodwill		25,397			25,397			25,397			25,397
Other assets		73,675			41,776			53,186			51,493
Total assets	$	2,315,294		$	2,206,145		$	2,358,455		$	2,218,999
Liabilities and Equity
Liabilities and Stockholders’ Equity
Claim liabilities	$	481,864		$	491,765		$	530,304		$	487,943
Liability for future policy benefits		309,491			289,530			326,162			321,232
Unearned premiums		82,051			80,260			163,780			79,310
Policyholder deposits		182,730			179,287			179,599			179,382
Liability to Federal Employees' Health Benefits Program (FEHBP)		24,554			26,695
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs								37,206			34,370
Accounts payable and accrued liabilities		229,860			176,910			171,643			169,449
Deferred tax liability		24,745			15,070			19,599			18,850
Long-term borrowings		36,007			36,827			34,465			35,085
Liability for pension benefits		65,229			62,945			30,472			30,892
Total liabilities		1,436,531			1,359,289			1,493,230			1,356,513
Stockholders’ equity:
Triple-S Management Corporation stockholders' equity
Common stock Class A, $1 par value. Authorized 100,000,000 shares; issued and outstanding 950,968 at June 30, 2016 and December 31, 2015, respectively		951			951
Common stock Class B, $1 par value. Authorized 100,000,000 shares; issued and outstanding 23,622,795 and 24,047,755 shares at June 30, 2016 and December 31, 2015, respectively		23,623			24,048
Triple-S Management Corporation stockholders’ equity
Common stock Class A, $1 par value. Authorized 100,000,000 shares; issued and outstanding 950,968 at March 31, 2017 and December 31, 2016, respectively								951			951
Common stock Class B, $1 par value. Authorized 100,000,000 shares; issued and outstanding 23,491,670 and 23,321,163 shares at March 31, 2017 and December 31, 2016, respectively								23,492			23,321
Additional paid-in capital		71,951			83,438			63,978			65,592
Retained earnings		720,802			713,466			726,562			730,904
Accumulated other comprehensive income		62,109			25,623			50,920			42,395
Total Triple-S Management Corporation stockholders' equity		879,436			847,526
Total Triple-S Management Corporation stockholders’ equity								865,903			863,163
Non-controlling interest in consolidated subsidiary		(673	)		(670	)		(678	)		(677	)
Total stockholders' equity		878,763			846,856
Total liabilities and equity	$	2,315,294		$	2,206,145
Total stockholders’ equity								865,225			862,486
Total liabilities and stockholders’ equity							$	2,358,455		$	2,218,999

	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2016			2015			2016			2015			2017			2016
Revenues:
Premiums earned, net	$	729,049		$	754,107		$	1,467,583		$	1,286,665		$	702,273		$	738,534
Administrative service fees		4,520			4,549			9,603			33,672			4,379			5,083
Net investment income		12,875			10,998			24,233			21,916			12,016			11,358
Other operating revenues		915			641			1,727			1,794			965			812
Total operating revenues		747,359			770,295			1,503,146			1,344,047			719,633			755,787
Net realized investment gains (losses):
Total other-than-temporary impairment losses on securities		(1,434	)		(1,660	)		(1,434	)		(2,862	)
Net realized gains, excluding other-than-temporary impairment losses on securities		2,954			12,267			3,012			19,682
Total net realized investment gains on sale of securities		1,520			10,607			1,578			16,820
Net realized investment gains on sale of securities														336			58
Other income, net		3,859			1,083			4,734			2,842			2,525			875
Total revenues		752,738			781,985			1,509,458			1,363,709			722,494			756,720
Benefits and expenses:
Claims incurred		622,087			637,898			1,248,781			1,070,328			620,863			626,694
Operating expenses		121,112			126,824			244,092			254,199			110,946			122,980
Total operating costs		743,199			764,722			1,492,873			1,324,527			731,809			749,674
Interest expense		1,954			2,074			3,836			4,256			1,686			1,882
Total benefits and expenses		745,153			766,796			1,496,709			1,328,783			733,495			751,556
Income before taxes		7,585			15,189			12,749			34,926
Income tax expense (benefit)		3,707			(3,712	)		5,416			1,219
Net income		3,878			18,901			7,333			33,707
(Loss) income before taxes														(11,001	)		5,164
Income taxes														(6,658	)		1,709
Net (loss) income														(4,343	)		3,455
Less: Net loss attributable to non-controlling interest		2			25			3			55			1			1
Net income attributable to Triple-S Management Corporation	$	3,880		$	18,926		$	7,336		$	33,762
Net (loss) income attributable to Triple-S Management Corporation													$	(4,342	)	$	3,456
Earnings per share attributable to Triple-S Management Corporation
Basic net income per share	$	0.16		$	0.73		$	0.30		$	1.29
Diluted net income per share	$	0.16		$	0.73		$	0.30		$	1.28
Basic net (loss) income per share													$	(0.18	)	$	0.14
Diluted net (loss) income per share													$	(0.18	)	$	0.14

Part I – Financial Information			3

	Item 1.	Financial Statements	3

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

		Cautionary Statement Regarding Forward-Looking Information	30
		Overview	30
		Recent Developments	31
		Recent Accounting Standards	32
		Managed Care Membership	3332
		Consolidated Operating Results	33
		Managed Care Operating Results	3635
		Life Insurance Operating Results	3937
��		Property and Casualty ~~Insurance~~ Operating Results	4038
		Liquidity and Capital Resources	39

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41

	Item 4.	Controls and Procedures	41

Part II – Other Information			41

	Item 1.	Legal Proceedings	41

	Item 1A.	Risk Factors	41

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

	Item 3.	~~Quantitative and Qualitative Disclosures about Market Risk~~Defaults Upon Senior Securities	42

	Item 4.	~~Controls and Procedures~~	43

~~Part II – Other Information~~			43

	~~Item 1.~~	~~Legal Proceedings~~	43

	~~Item 1A.~~	~~Risk Factors~~	43

	~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	44

	~~Item 3.~~	~~Defaults Upon Senior Securities~~	44

	~~Item 4.~~	Mine Safety Disclosures	4442

	Item 5.	Other Information	4442

	Item 6.	Exhibits	4442

SIGNATURES			4543

	June 30, 2016									March 31, 2017
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Securities available for sale:
Fixed maturities:
Obligations of government-sponsored enterprises	$	70,523	$	791	$	-		$	71,314	$	41,485	$	61	$	-		$	41,546
U.S. Treasury securities and obligations of U.S. government instrumentalities		95,105		1,517		-			96,622		72,723		169		(14	)		72,878
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		25,981		2,666		-			28,647		18,248		857		(37	)		19,068
Municipal securities		648,892		60,786		(5	)		709,673		651,091		34,191		(304	)		684,978
Corporate bonds		197,493		20,776		-			218,269		279,540		12,457		(367	)		291,630
Residential mortgage-backed securities		775		47		-			822		638		29		-			667
Collateralized mortgage obligations		19,104		138		(1	)		19,241		42,919		83		(224	)		42,778
Total fixed maturities		1,057,873		86,721		(6	)		1,144,588		1,106,644		47,847		(946	)		1,153,545
Equity securities - Mutual funds		272,948		38,044		(889	)		310,103		236,356		40,910		(117	)		277,149
Total	$	1,330,821	$	124,765	$	(895	)	$	1,454,691	$	1,343,000	$	88,757	$	(1,063	)	$	1,430,694

	December 31, 2015									December 31, 2016
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Securities available for sale:
Fixed maturities:
Obligations of government-sponsored enterprises	$	115,965	$	301	$	(26	)	$	116,240	$	41,442	$	87	$	(15	)	$	41,514
U.S. Treasury securities and obligations of U.S. government instrumentalities		163,322		234		(286	)		163,270		85,652		157		(9	)		85,800
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		25,302		317		-			25,619		17,930		2,189		(68	)		20,051
Municipal securities		612,225		35,418		(197	)		647,446		650,175		34,187		(559	)		683,803
Corporate bonds		148,198		9,782		(572	)		157,408		263,351		12,182		(661	)		274,872
Residential mortgage-backed securities		883		54		-			937		684		34		-			718
Collateralized mortgage obligations		22,363		368		(6	)		22,725		45,069		58		(242	)		44,885
Total fixed maturities		1,088,258		46,474		(1,087	)		1,133,645		1,104,303		48,894		(1,554	)		1,151,643
Equity securities - Mutual funds		169,593		27,851		(373	)		197,071		240,699		30,101		(451	)		270,349
Total	$	1,257,851	$	74,325	$	(1,460	)	$	1,330,716	$	1,345,002	$	78,995	$	(2,005	)	$	1,421,992

	June 30, 2016
	Less than 12 months							12 months or longer						Total
	Estimated Fair Value		Gross Unrealized Loss			Number of Securities		Estimated Fair Value		Gross Unrealized Loss		Number of Securities		Estimated Fair Value		Gross Unrealized Loss			Number of Securities
Securites available for sale
Fixed maturities
Municipal securities	$	7,857	$	(5	)		1	$	-	$	-		-	$	7,857	$	(5	)		1
Collateralized mortgage obligations		1,117		(1	)		1		-		-		-		1,117		(1	)		1
Total fixed maturities		8,974		(6	)		2		-		-		-		8,974		(6	)		2
Equity securities-Mutual funds		21,569		(889	)		6		-		-		-		21,569		(889	)		6
Total for securities available for sale	$	30,543	$	(895	)		8	$	-	$	-		-	$	30,543	$	(895	)		8

	March 31, 2017		December 31, 2016
Premium	$	100,691	$	91,528
Self-funded group receivables		50,643		57,728
FEHBP		14,274		14,321
Agent balances		27,468		25,495
Accrued interest		11,338		13,668
Reinsurance recoverable		54,854		58,295
Other		65,152		62,637
		324,420		323,672
Less allowance for doubtful receivables:
Premium		23,584		27,320
Other		7,999		9,987
		31,583		37,307
Total premium and other receivables, net	$	292,837	$	286,365

	June 30, 2016		December 31, 2015
Premium	$	137,649	$	92,600
Self-funded group receivables		66,724		73,552
FEHBP		14,129		13,859
Agent balances		31,934		25,424
Accrued interest		13,102		12,624
Reinsurance recoverable		56,941		48,506
Other		63,928		53,325
		384,407		319,890
Less allowance for doubtful receivables:
Premium		27,805		28,944
Other		8,398		8,300
		36,203		37,244
Total premium and other receivables, net	$	348,204	$	282,646

~~Level Input:~~		~~Input Definition:~~
~~Level 1~~		~~Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at~~determine 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.~~

	June 30, 2016								March 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Securities available for sale:
Fixed maturity securities
Obligations of government-sponsored enterprises	$	-	$	71,314	$	-	$	71,314	$	-	$	41,546	$	-	$	41,546
U.S. Treasury securities and obligations of U.S government instrumentalities		96,622		-		-		96,622		72,878		-		-		72,878
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		-		28,647		-		28,647		-		19,068		-		19,068
Municipal securities		-		709,673		-		709,673		-		684,978		-		684,978
Corporate bonds		-		218,269		-		218,269		-		291,630		-		291,630
Residential agency mortgage-backed securities		-		822		-		822		-		667		-		667
Collateralized mortgage obligations		-		19,241		-		19,241		-		42,778		-		42,778
Total fixed maturities		96,622		1,047,966		-		1,144,588		72,878		1,080,667		-		1,153,545
Equity securities - Mutual funds		230,610		64,624		14,869		310,103		174,593		78,803		23,753		277,149

Total	$	327,232	$	1,112,590	$	14,869	$	1,454,691	$	247,471	$	1,159,470	$	23,753	$	1,430,694

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three months ended June 30,						Six months ended June 30,						Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	2016			2015			2016			2015			2017			2016
Beginning balance	$	6,997		$	10,191		$	7,958		$	13,349		$	27,532		$	7,958
Realized gains		63			(700	)		214			1,412			119			151
Unrealized in other accumulated comprehensive income		(321	)		(519	)		(969	)		(3,302	)		(64	)		(649	)
Purchases		8,525			111			8,633			189			5,260			8
Capital distributions		(395	)		-			(967	)		(2,565	)		(9,094	)		(471	)
Ending balance	$	14,869		$	9,083		$	14,869		$	9,083		$	23,753		$	6,997

	June 30, 2016										March 31, 2017
	Carrying Value		Fair Value								Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total		Carrying Value		Level 1		Level 2		Level 3		Total
Assets:
Policy loans	$	8,301	$	-	$	8,301	$	-	$	8,301	$	8,546	$	-	$	8,546	$	-	$	8,546

Liabilities:
Policyholder deposits	$	182,730	$	-	$	182,730	$	-	$	182,730	$	179,599	$	-	$	179,599	$	-	$	179,599
Long-term borrowings:
Loans payable to bank - variable		12,007		-		12,007		-		12,007		34,465		-		34,465		-		34,465
6.6% senior unsecured notes payable		24,000		-		19,200		-		19,200
Total long-term borrowings		36,007		-		31,207		-		31,207		34,465		-		34,465		-		34,465
Total liabilities	$	218,737	$	-	$	213,937	$	-	$	213,937	$	214,064	$	-	$	214,064	$	-	$	214,064

	Three months ended June 30,						Six months ended June 30,						Three months ended March 31, 2017
	2016			2015			2016			2015			Managed Care			Other Business Segments *			Consolidated
Claim liabilities at beginning of period	$	525,066		$	401,642		$	491,765		$	390,086

Claim liabilities at beginning of year													$	349,047		$	138,896		$	487,943
Reinsurance recoverable on claim liabilities		(39,871	)		(39,958	)		(40,714	)		(40,635	)		-			(38,998	)		(38,998	)
Net claim liabilities at beginning of period		485,195			361,684			451,051			349,451
Incurred claims and loss-adjustment expenses:
Net claim liabilities at beginning of year														349,047			99,898			448,945
Claims incurred
Current period insured events		622,859			628,900			1,244,339			1,080,137			602,620			28,226			630,846
Prior period insured events		(7,414	)		3,783			(8,962	)		(21,901	)		(15,340	)		(1,333	)		(16,673	)
Total		615,445			632,683			1,235,377			1,058,236			587,280			26,893			614,173
Payments of losses and loss-adjustment expenses:
Payments of losses and loss-adjustment expenses
Current period insured events		599,938			539,085			970,073			783,813			350,450			7,965			358,415
Prior period insured events		56,947			32,252			272,600			200,844			192,352			17,945			210,297
Total		656,885			571,337			1,242,673			984,657			542,802			25,910			568,712
Net claim liabilities at end of period		443,755			423,030			443,755			423,030
Net claim liabilities at end of year														393,525			100,881			494,406
Reinsurance recoverable on claim liabilities		38,109			39,156			38,109			39,156			-			35,898			35,898
Claim liabilities at end of period	$	481,864		$	462,186		$	481,864		$	462,186
Claim liabilities at end of year													$	393,525		$	136,779		$	530,304

	Three months ended March 31, 2016
	Managed Care			Other Business Segments *			Consolidated

Claim liabilities at beginning of year	$	348,297		$	143,468		$	491,765
Reinsurance recoverable on claim liabilities		-			(40,714	)		(40,714	)
Net claim liabilities at beginning of year		348,297			102,754			451,051
Claims incurred
Current period insured events		614,754			25,890			640,644
Prior period insured events		(18,464	)		(2,248	)		(20,712	)
Total		596,290			23,642			619,932
Payments of losses and loss-adjustment expenses
Current period insured events		365,039			5,096			370,135
Prior period insured events		198,100			17,553			215,653
Total		563,139			22,649			585,788
Net claim liabilities at end of year		381,448			103,747			485,195
Reinsurance recoverable on claim liabilities		-			39,871			39,871
Claim liabilities at end of year	$	381,448		$	143,618		$	525,066

Incurred Year	Total of IBNR Liabilities Plus Expected Development on Reported Claims
2015		60,717
2016		80,062
2017		252,163

	March 31, 2017		December 31, 2016

Senior unsecured notes payable of $60,000 issued on December 2005; due December 2020. Interest is payable monthly at a fixed rate of 6.60%.	$	-	$	24,000
Secured loan payable of $11,187, payable in monthly installments of $137 through October 1, 2023, plus interest at a rate reset periodically of 100 basis points over selected LIBOR maturity (which was 1.79% at March 31, 2017.)		10,777		11,187
Secured loan payable of $20,150, payable in monthly installments of $84 through January 1, 2024, plus interest at a rate reset periodically of 275 basis points over selected LIBOR maturity (which was 3.77% at March 31, 2017.)		19,982		-
Secured loan payable of $4,116, payable in monthly installments of $49 through January 1, 2024, plus interest at a rate reset periodically of 325 basis points over selected LIBOR maturity (which was 4.27% at March 31, 2017.)		4,018		-
Total borrowings		34,777		35,187

Less unamortized debt issuance costs		312		102
	$	34,465	$	35,085

	Net Unrealized Gain on Securities												Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,						2017			2016
	2016			2015			2016			2015
Beginning Balance	$	82,055		$	103,261		$	62,478		$	101,467
Net Unrealized Gain on Securities Beginning Balance													$	62,371		$	62,478
Other comprehensive income before reclassifications		18,193			(12,336	)		37,817			(11,504	)		8,741			19,623
Amounts reclassified from accumulated other comprehensive income		(2,363	)		(16,708	)		(2,410	)		(15,746	)		(269	)		(46	)
Net current period change		15,830			(29,044	)		35,407			(27,250	)		8,472			19,577
Ending Balance	$	97,885		$	74,217		$	97,885		$	74,217			70,843			82,055
Liability for Pension Benefits Beginning Balance														(19,976	)		(36,855	)
Amounts reclassified from accumulated other comprehensive income														53			634
Ending Balance														(19,923	)		(36,221	)
Accumulated Other Comprehensive Income Beginning Balance														42,395			25,623
Other comprehensive income before reclassifications														8,741			19,623
Amounts reclassified from accumulated other comprehensive income														(216	)		588
Net current period change														8,525			20,211
Ending Balance													$	50,920		$	45,834

	As of June 30,				As of March 31,
	2016		2015		2017		2016
Managed care enrollment:
Commercial ¹		528,902		561,440		505,848		544,846
Medicare		116,215		120,147		121,352		119,224
Medicaid		402,661		433,093		389,130		402,933
Total		1,047,778		1,114,680		1,016,330		1,067,003
Managed care enrollment by funding arrangement:
Fully-insured		868,157		928,323		847,327		886,547
Self-insured		179,621		186,357		169,003		180,456
Total		1,047,778		1,114,680		1,016,330		1,067,003

(Dollar amounts in millions, except per share data)	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs ¹		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs

April 1, 2016 to April 30, 2016		-	$	-		-	$	13.3
May 1, 2016 to May 31, 2016		177,678		22.42		177,678		9.3
June 1, 2016 to June 30, 2016		107,168		23.75		107,168		6.8