Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ~~and nine months~~ ended ~~September 30~~March 31 is as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three months ended September 30,						Nine months ended September 30,						Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	2016			2015			2016			2015			2017			2016
Beginning balance	$	14,869		$	9,083		$	7,958		$	13,349		$	27,532		$	7,958
Realized gains		21			125			234			1,537			119			151
Unrealized in other accumulated comprehensive income		(485	)		18			(1,454	)		(3,284	)		(64	)		(649	)
Purchases		12,587			125			21,220			314			5,260			8
Capital distributions		(539	)		(175	)		(1,505	)		(2,740	)		(9,094	)		(471	)
Ending balance	$	26,453		$	9,176		$	26,453		$	9,176		$	23,753		$	6,997

In addition to the preceding disclosures on assets recorded at fair value in the condensed consolidated balance sheets, accounting guidance also requires the disclosure of fair values for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in the condensed consolidated balance sheets.

Non-financial instruments such as property and equipment, other assets, deferred income taxes and intangible assets, and certain financial instruments such as claim liabilities are excluded from the fair value disclosures. Therefore, the fair value amounts cannot be aggregated to determine our underlying economic value.

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, receivables, accounts payable and accrued liabilities, and short-term borrowings approximate fair value because of the short term nature of these items. These assets and liabilities are not listed in the table below.

~~The following methods, assumptions and inputs were used to estimate the fair value of each class of financial instrument:~~

~~(i)~~

~~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.

~~(ii)~~

~~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.~~

~~(iii)~~

~~Long-term Borrowings~~

The carrying amount of the loans payable to bank – variable approximates fair value due to its floating interest-rate structure. The fair value of the senior unsecured notes payable was determined using broker quotations.

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollar amounts in thousands, except per share data)~~

~~(unaudited)~~

A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on our condensed consolidated balance sheets at ~~September 30, 2016~~March 31, 2017 and December 31, ~~2015~~2016 are as follows:

	September 30, 2016										March 31, 2017
	Carrying		Fair Value								Carrying Value		Fair Value
	Value		Level 1		Level 2		Level 3		Total		Carrying Value		Level 1		Level 2		Level 3		Total
Assets:
Policy loans	$	8,372	$	-	$	8,372	$	-	$	8,372	$	8,546	$	-	$	8,546	$	-	$	8,546

Liabilities:
Policyholder deposits	$	181,323	$	-	$	181,323	$	-	$	181,323	$	179,599	$	-	$	179,599	$	-	$	179,599
Long-term borrowings:
Loans payable to bank - variable		11,597		-		11,597		-		11,597		34,465		-		34,465		-		34,465
6.6% senior unsecured notes payable		24,000		-		19,200		-		19,200
Total long-term borrowings		35,597		-		30,797		-		30,797		34,465		-		34,465		-		34,465
Total liabilities	$	216,920	$	-	$	212,120	$	-	$	212,120	$	214,064	$	-	$	214,064	$	-	$	214,064

	December 31, 2015										December 31, 2016
	Carrying		Fair Value								Carrying Value		Fair Value
	Value		Level 1		Level 2		Level 3		Total		Carrying Value		Level 1		Level 2		Level 3		Total
Assets:
Policy loans	$	7,901	$	-	$	7,901	$	-	$	7,901	$	8,564	$	-	$	8,564	$	-	$	8,564

Liabilities:
Policyholder deposits	$	179,287	$	-	$	179,287	$	-	$	179,287	$	179,382	$	-	$	179,382	$	-	$	179,382
Long-term borrowings:
Loans payable to bank - variable		12,827		-		12,827		-		12,827		11,187		-		11,187		-		11,187
6.6% senior unsecured notes payable		24,000		-		19,920		-		19,920		24,000		-		24,000		-		24,000
Total long-term borrowings		36,827		-		32,747		-		32,747		35,187		-		35,187		-		35,187
Total liabilities	$	216,114	$	-	$	212,034	$	-	$	212,034	$	214,569	$	-	$	214,569	$	-	$	214,569

2018

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

(6)	Claim Liabilities

~~The activity in~~A reconciliation of the beginning and ending balances of claim liabilities is as follows:

	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31, 2017
	2016			2015			2016			2015			Managed Care			Other Business Segments *			Consolidated
Claim liabilities at beginning of period	$	481,864		$	462,186		$	491,765		$	390,086

Claim liabilities at beginning of year													$	349,047		$	138,896		$	487,943
Reinsurance recoverable on claim liabilities		(38,109	)		(39,156	)		(40,714	)		(40,635	)		-			(38,998	)		(38,998	)
Net claim liabilities at beginning of period		443,755			423,030			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		615,125			631,135			1,878,029			1,700,653			602,620			28,226			630,846
Prior period insured events		6,908			(2,315	)		(20,619	)		(13,597	)		(15,340	)		(1,333	)		(16,673	)
Total		622,033			628,820			1,857,410			1,687,056			587,280			26,893			614,173
Payments of losses and loss-adjustment expenses:
Payments of losses and loss-adjustment expenses
Current period insured events		570,110			561,269			1,540,182			1,345,082			350,450			7,965			358,415
Prior period insured events		23,728			56,699			296,329			257,543			192,352			17,945			210,297
Total		593,838			617,968			1,836,511			1,602,625			542,802			25,910			568,712
Net claim liabilities at end of period		471,950			433,882			471,950			433,882
Net claim liabilities at end of year														393,525			100,881			494,406
Reinsurance recoverable on claim liabilities		39,427			39,099			39,427			39,099			-			35,898			35,898
Claim liabilities at end of period	$	511,377		$	472,981		$	511,377		$	472,981
Claim liabilities at end of year													$	393,525		$	136,779		$	530,304

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

	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

*	Other Business Segments include the Life Insurance and Property and Casualty segments, as well as intersegment eliminations.

As a result of differences between actual amounts and estimates of insured events in prior years, the amounts included as incurred claims for prior period insured events differ from anticipated claims incurred.

The amount in the incurred claims and loss-adjustment expenses for the prior period insured events for the three months ended September 30, 2016 is due primarily to higher than anticipated utilization trends. The favorable developments in the claims incurred and loss-adjustment expenses for prior period insured events for the ~~nine~~three months ended ~~September 30,~~March 31, 2017 and 2016 ~~and for the three months and nine months ended September 30, 2015~~ are due primarily to better than expected utilization trends. Reinsurance recoverable on unpaid claims is reported as premium and other receivables, net in the accompanying consolidated financial statements.

The claims incurred disclosed in this table exclude the portion of the change in the liability for future policy benefits expense, which amounted to ~~$7,136~~$6,690 and ~~$20,540~~$6,762 during the three months ~~and nine months~~ ended ~~September 30,~~March 31, 2017 and 2016, respectively.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

The ~~change~~following is information about total incurred but not reported (IBNR) liabilities plus expected development on reported claims included in the liability for ~~future policy benefits during~~unpaid claims adjustment expenses for the ~~three months and nine months ended September 30, 2015 amounted to $6,089 and $18,181, respectively.~~Managed Care segment as of March 31, 2017.

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

(7)	Long-Term Borrowings

A summary of the borrowings entered by the Company is as follows:

	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

On ~~March 11,~~December 28, 2016, ~~Triple-S Salud, Inc. (TSS)~~TSM entered into a ~~$30,000 revolving loan~~$35,500 credit agreement with a commercial bank in Puerto Rico. ~~This line~~The agreement consists of ~~credit, unused as~~three term loans: (i) Term Loan A in the principal amount of ~~September 30, 2016, has an interest rate~~$11,187, (ii) Term Loan B in the principal amount of ~~LIBOR plus 220 basis points, matures~~$20,150 and (iii) Term Loan C in the principal amount of $4,116. Term Loan A was used to refinance the previous $41,000 secured loan payable with the same commercial bank in Puerto Rico. Proceeds from Term Loans B and C were received on ~~March~~January 11, 2017 and ~~contains~~were used to prepay the outstanding principal amount plus accrued interest of the 6.6% Senior Unsecured Notes due January 2021 ($24,000), and fund a portion of a debt service reserve for the Loan (approximately $200). Interest payable commenced on January 1, 2017, in the case of Term Loan A, and on February 1, 2017, in the case of Term Loan B and Term Loan C. The Credit Agreement includes certain financial and non-financial covenants, ~~that are customary for this type of facility.~~including negative covenants imposing certain restrictions on the Corporation’s business.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

On March 11, 2016 Triple-S Salud, Inc. (TSS) entered into a $30,000 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 contained 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, Triple-S Advantage, Inc. (TSA) entered into a $10,000 revolving loan agreement with a commercial bank in Puerto Rico. This unused line of credit has an interest rate of 30-day LIBOR plus 25 basis points, matures on April 17, 2018, and includes certain financial and non-financial covenants that are customary for this type of facility.

(8)	~~Income Taxes~~

In connection with the Puerto Rico tax code, as amended, on April 15, 2015, the group of corporations that comprise TSM entered into a Closing Agreement with the Puerto Rico Department of Treasury. The Closing Agreement, among other matters, was related with the payment of the preferential tax rate on the increase in value of some of its long-term capital assets, as permitted by Act No. 238 of 2014 and Act No. 44 of 2015. The agreement also covered certain tax attributes of the Corporation. During the nine months ended September 30, 2016, as a result of the aforementioned tax laws and the Closing Agreement, the Company: (1) obtained a benefit from the lower tax rate provided under these statutes, (2) reassessed the realizability of some of its deferred taxes and (3) recorded a tax benefit of $3,129.

During the nine months ended September 30, 2016, our Property and Casualty subsidiary, Triple-S Propiedad, Inc. (TSP), reassessed the tax rate used to measure several temporary differences, from 20% to 39%, which resulted in an increase in the deferred tax expense of approximately $2,633.

~~(9)~~

Pension Plan

The components of net periodic benefit cost for the three months ~~and nine months~~ ended ~~September 30~~March 31 were as follows:

	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2016			2015			2016			2015			2017			2016
Components of net periodic benefit cost:
Service cost	$	779		$	1,160		$	2,907		$	3,217		$	-		$	1,250
Interest cost		1,874			2,322			6,575			6,544			1,798			2,762
Expected return on assets		(1,928	)		(2,350	)		(6,908	)		(6,564	)		(2,199	)		(2,926	)
Amortization of prior service benefit		(96	)		(126	)		(342	)		(352	)		-			(144	)
Amortization of actuarial loss		863			1,665			2,877			4,784			86			1,183
Net periodic benefit cost	$	1,492		$	2,671		$	5,109		$	7,629		$	(315	)	$	2,125

Effective January 31, 2017, the Company froze the pay and service amounts used to calculate pension benefits for active employees who participated in the pension plan. Therefore, as of the Effective Date, active employees in the pension plan will not accrue additional benefits for future service and eligible compensation received.

Employer Contributions: The Corporation disclosed in its audited consolidated financial statements for the year ended December 31, ~~2015~~2016 that it expected to contribute ~~$8,000~~$4,000 to the pension program in ~~2016.~~2017. As of ~~September 30, 2016,~~March 31, 2017, the Corporation has ~~contributed $10,000~~not made contributions to the pension program.

~~(10)~~

~~Stock Repurchase Program~~

The Company repurchases shares through open-market purchases of Class B shares only, in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, under repurchase programs authorized by the Board of Directors.

In November 2015 the Company’s Board of Directors authorized a $25,000 repurchase program of its Class B common stock. During the three months ended September 30, 2016, the Company repurchased and retired under this program 299,884 shares at an average per share price of $22.60, for an aggregate cost of $6,825. During the nine months ended September 30, 2016, the Company repurchased and retired under this program 951,831 shares at an average per share price of $22.54, for an aggregate cost of $21,418. This program was completed on September 14, 2016.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

~~(11)~~(9)

Comprehensive Income

The accumulated balances for each classification of other comprehensive income, net of tax, are as follows:

	Net Unrealized Gain on Securities												Three months ended March 31,
	Three months ended September 30,						Nine months ended September 30,						2017			2016
	2016			2015			2016			2015
Beginning Balance	$	97,885		$	74,217		$	62,478		$	101,467
Net Unrealized Gain on Securities Beginning Balance													$	62,371		$	62,478
Other comprehensive income before reclassifications		2,417			(5,764	)		40,233			(17,269	)		8,741			19,623
Amounts reclassified from accumulated other comprehensive income		(4,301	)		943			(6,710	)		(14,802	)		(269	)		(46	)
Net current period change		(1,884	)		(4,821	)		33,523			(32,071	)		8,472			19,577
Ending Balance	$	96,001		$	69,396		$	96,001		$	69,396			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

Liability for Pension Benefits

Three months ended
September 30,

Nine months ended
September 30,

2016 2015 2016 2015
Beginning Balance $ (35,776 ) $ (50,926 ) $ (36,855 ) $ (52,691 )
Other comprehensive income before reclassifications - - - -
Amounts reclassified from accumulated other comprehensive income 466 939 1,545 2,704
Net current period change 466 939 1,545 2,704
Ending Balance $ (35,310 ) $ (49,987 ) $ (35,310 ) $ (49,987 )

Accumulated Other Comprehensive Income

Three months ended
September 30,

Nine months ended
September 30,

2016 2015 2016 2015
Beginning Balance $ 62,109 $ 23,291 $ 25,623 $ 48,776
Other comprehensive income before reclassifications 2,417 (5,764 ) 40,233 (17,269 )
Amounts reclassified from accumulated other comprehensive income (3,835 ) 1,882 (5,165 ) (12,098 )
Net current period change (1,418 ) (3,882 ) 35,068 (29,367 )
Ending Balance $ 60,691 $ 19,409 $ 60,691 $ 19,409

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

~~(12)~~(10)

Share-Based Compensation

Share-based compensation ~~expense~~ (benefit) ~~recorded during the three months and nine months ended September 30, 2016 was ($383) and $1,931, respectively. Share-based compensation~~ expense recorded during the three months ended March 31, 2017 and ~~nine months ended September 30,~~2016 was ($1,443) and $1,085, respectively. The benefit recorded in the 2017 period results from a decrease in the 2014 and 2015 ~~was $2,321 and $5,520, respectively.~~ grants expected performance shares payouts. There ~~was~~were no ~~cash received from~~ stock option exercises during the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017 and ~~2015. During the nine months ended September 30, 2016 and 2015, 2,290 and 7,235 shares, respectively, were repurchased and retired as a result of non-cash exercises of stock options.~~2016.

~~(13)~~(11)

Net Income Available to Stockholders and Net Income per Share

The following table sets forth the computation of basic and diluted earnings per ~~share for the three and nine months ended September 30:~~share:

	Three months ended September 30,					Nine months ended September 30,				Three months ended March 31,
	2016			2015		2016		2015		2017			2016
Numerator for earnings per share:
Net (loss) income attributable to TSM available to stockholders	$	(1,941	)	$	4,194	$	5,395	$	37,956	$	(4,342	)	$	3,456
Denominator for basic earnings per share:
Weighted average of common shares		24,386,076			25,388,077		24,534,647		25,932,049		24,143,261			24,587,681
Effect of dilutive securities		-			72,983		70,632		88,688		-			72,353
Denominator for diluted earnings per share		24,386,076			25,461,060		24,605,279		26,020,737		24,143,261			24,660,034
Basic net (loss) income per share attributable to TSM	$	(0.08	)	$	0.17	$	0.22	$	1.46	$	(0.18	)	$	0.14
Diluted net (loss) income per share attributable to TSM	$	(0.08	)	$	0.16	$	0.22	$	1.46	$	(0.18	)	$	0.14

~~No dilutive securities have been included in~~The Company generated a loss from continuing operations attributable to the ~~diluted earnings per share calculation~~Company’s common stockholders for the three months ended ~~September 30, 2016 due to our reporting~~March 31, 2017, so the effect of ~~a net loss for~~dilutive securities is not considered because their effect would be antidilutive. If the ~~quarter.~~Company had generated income from continuing operations during the three months ended March 31, 2017, the effect of restricted stock awards on the diluted shares calculation would have been an increase in shares of 59,284 shares.

~~(14)~~(12)

Contingencies

The following information supplements and amends, as applicable, the disclosures in Note 24 to the Consolidated Financial Statements of the Company’s ~~2015~~2016 Annual Report on Form 10-K. Our business is subject to numerous laws and regulations promulgated by Federal, Puerto Rico, USVI, Costa Rica, BVI, and Anguilla governmental authorities. Compliance with these laws and regulations can be subject to government review and interpretation, as well as regulatory actions unknown and unasserted at this time. The Commissioner of Insurance of Puerto Rico, as well as other Federal, Puerto Rico, USVI, Costa Rica, BVI, and Anguilla government authorities, regularly make inquiries and conduct audits concerning the ~~Company's~~Company’s compliance with such laws and regulations. Penalties associated with violations of these laws and regulations may include significant fines and exclusion from participating in certain publicly funded programs and may require the Company to comply with corrective action plans or changes in our practices.

We are involved in various legal actions arising in the ordinary course of business. We are also defendants in various other litigations and proceedings, some of which are described below. Where the Company believes that a loss is both probable and estimable, such amounts have been recorded. Although we believe our estimates of such losses are reasonable, these estimates could change as a result of further developments in these matters. In other cases, it is at least reasonably possible that the Company may incur a loss related to one or more of the mentioned pending lawsuits or investigations, but the Company is unable to estimate the range of possible loss which may be ultimately realized, either individually or in the aggregate, upon their resolution. The outcome of legal proceedings is inherently uncertain and pending matters for which accruals have not been established have not progressed sufficiently to enable us to estimate a range of possible loss, if any. Given the inherent unpredictability of these matters, it is possible that an adverse outcome in one or more of these matters could have a material adverse effect on the consolidated financial condition, operating results and/or cash flows of the Company.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

Additionally, we may face various potential litigation claims that have not been asserted to date, including claims from persons purporting to have rights to acquire shares of the Company on favorable terms pursuant to agreements previously entered by our predecessor managed care subsidiary, Seguros de Servicios de Salud de Puerto Rico, Inc. (SSS), with physicians or dentists who joined our provider network to sell such new provider shares of SSS at a future date (Share Acquisition Agreements) or to have inherited such shares notwithstanding applicable transfer and ownership restrictions.

~~Claims by Heirs~~ASES Audits

The Company is subject to numerous audits in connection with the provision of ~~Former Shareholders~~services to private and governmental entities. These audits may include numerous aspects of our business, including claim payment practices, contractual obligations, service delivery, third-party obligations, and business practices, among others. Deficiencies in audits could have a material adverse effect on our reputation and business, including termination of contracts, significant increases in the cost of managing and remediating deficiencies, payment of contractual penal clauses, and others, any of which could have a material and adverse effect on our results of operations, financial position and cash flows.

InOn July 2, 2014, ASES notified TSS that the results of an audit conducted in connection with the government health plan contract for several periods between October 2005 to September 2013, reflected an overpayment of premiums made to TSS pursuant to prior contracts with ASES in the amount of $7,900. The alleged overpayments were related to duplicated payments or payments made for deceased members, and ASES requested the reimbursement of the alleged overpayment. On January 16, 2015, TSS filed an injunction against ASES under the case ~~entitled Cebollero Santamaría v.~~ Triple-S Salud, Inc.~~, et al, was filed~~ v. Administracion de Seguros de Salud de Puerto Rico. TSS contends that ASES’ request for reimbursement has no merits on ~~March 26, 2013,~~several grounds, including a 2011 settlement between both parties covering the majority of the amount claimed by ASES, and ~~the Company filed its response on May 16, 2013. On October 29, 2013, the Company filed a motion for summary judgment on the grounds~~ that ~~the claim is time-barred~~ASES, under the ~~fifteen-year statute~~terms of ~~limitations of~~the contracts, was responsible for certifying the membership. TSS also amended its claim to include the Puerto Rico ~~Civil Code~~Health Department (PRHD), as it asserts the PRHD is an indispensable party for ~~collection~~the resolution of ~~monies~~this matter and to seek the payment of approximately $5,000, since the premiums paid to TSS should have been higher than what ASES actually paid given the additional risk assumed by TSS. The case was assigned to a Special Commissioner, who has received a joint expert report concerning the case. On March 17, 2017, the Special Commissioner issued a report recommending the court to dismiss the complaint in favor of TSS. TSS is awaiting the ~~alternative, that plaintiff failed~~court’s decision in connection to ~~state a claim for which relief can be granted, which was denied~~the report issued by the ~~court. On November 2, 2015, the Company filed~~Special Commissioner. TSS will continue to conduct a ~~petition~~vigorous defense of ~~Writ~~this matter.

Table of Certiorari with the Puerto Rico Court of Appeals, which was denied on March 8, 2016. On March 23, 2016, the Company filed a request for reconsideration to its petition of Writ of Certiorari with the Puerto Rico Court of Appeals, which the plaintiff opposed. The Court of Appeals denied reconsideration on April 28, 2016. The Company filed a Writ of Certiorari before the Supreme Court on May 31, 2016, which was denied on September 23, 2016. Defendants requested reconsideration on October 11, 2016 and are still waiting for the Court’s determination.. The same has been opposed by the plaintiff.Contents

~~In the case entitled Gallardo Mendez, et al, v.~~ Triple-S Management Corporation ~~which was filed on December 30, 2014, the Company filed a motion~~

Notes to dismiss on March 13, 2015. After an extension of time granted by the court, plaintiff did not file an opposition. Therefore, on June 16, 2015, the court deemed our motion to dismiss unopposed. On March 18, 2016, the court dismissed the complaint with prejudice. Since plaintiff did not file within 30 days an appeal brief opposing the trial court’s determination, the dismissal of the case is final.Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

~~Claims Relating to the Provision of Health Care Services~~(unaudited)

On June 5, 2014, ASES initiated an administrative hearing against TSS moved by a primary medical group for alleged outstanding claims related to services provided to Medicaid beneficiaries from 2005 to 2010, totaling approximately $3,000. On June 19, 2014, TSS filed its response. On June 25, 2014, the hearing officer ordered the parties to file a joint working plan and schedule. In the process of executing said plan and after discovery was completed, this matter was settled for $316 on June 6, 2016.

~~(15)~~(13)

Segment Information

The operations of the Corporation are conducted principally through three business segments: Managed Care, Life Insurance, and Property and Casualty Insurance. The Corporation evaluates performance based primarily on the operating revenues and operating income of each segment. Operating revenues include premiums earned, net, administrative service fees, net investment income, and revenues derived from other segments. Operating costs include claims incurred and operating expenses. The Corporation calculates operating income or loss as operating revenues less operating costs.

The Managed Care segment participates in the Commonwealth of Puerto Rico Health Insurance Plan (similar to Medicaid) (Medicaid) program to provide health coverage to medically indigent citizens in Puerto Rico, as defined by the laws of the government of Puerto Rico, by administering the provision of the physical health component in designated service regions in Puerto Rico. We served all eight service regions on an administrative service only basis (ASO) until March 31, 2015. During the nine months ended September administrative service fees related to this agreement amounted to $24,367. Effective April 1, 2015, we started to provide healthcare services to only two regions of the Medicaid program on a risk based model.

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~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollar amounts in thousands, except per share data)~~

~~(unaudited)~~

The following tables summarize the operations by reportable segment for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2017 and ~~2015:~~2016:

	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2016			2015			2016			2015			2017			2016
Operating revenues:
Managed Care:
Premiums earned, net	$	660,660		$	689,532		$	2,007,972		$	1,857,216		$	640,147		$	678,380
Administrative service fees		4,146			6,163			13,749			39,835			4,379			5,083
Intersegment premiums/service fees		1,384			(248	)		4,521			4,257			1,534			1,485
Net investment income		3,628			2,727			11,215			8,444			3,892			3,480
Total managed care		669,818			698,174			2,037,457			1,909,752			649,952			688,428
Life Insurance:
Premiums earned, net		38,729			35,636			116,286			109,661			40,298			38,966
Intersegment premiums		212			54			551			185			191			137
Net investment income		6,355			5,840			18,681			17,724			6,087			5,914
Total life insurance		45,296			41,530			135,518			127,570			46,576			45,017
Property and Casualty Insurance:
Premiums earned, net		21,798			21,550			64,512			66,506			21,548			21,188
Intersegment premiums		153			153			460			460			153			153
Net investment income		2,358			1,951			6,612			6,172			1,924			1,929
Total property and casualty insurance		24,309			23,654			71,584			73,138			23,625			23,270
Other segments: *
Intersegment service revenues		2,502			2,770			7,664			7,932			1,586			2,545
Operating revenues from external sources		878			905			2,693			2,768			1,000			856
Total other segments		3,380			3,675			10,357			10,700			2,586			3,401
Total business segments		742,803			767,033			2,254,916			2,121,160			722,739			760,116
TSM operating revenues from external sources		7			15			12			45			78			4
Elimination of intersegment premiums/service fees		(1,749	)		41			(5,532	)		(4,902	)		(1,598	)		(1,775	)
Elimination of intersegment service revenues		(2,502	)		(2,770	)		(7,664	)		(7,932	)		(1,586	)		(2,545	)
Other intersegment eliminations		(18	)		42			(45	)		37			-			(13	)
Consolidated operating revenues	$	738,541		$	764,361		$	2,241,687		$	2,108,408		$	719,633		$	755,787

*	Includes segments that are not required to be reported separately, primarily the data processing services organization and the health clinic.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

	Three months ended March 31,
	2017			2016
Operating income (loss):
Managed care	$	(18,582	)	$	(641	)
Life insurance		3,935			5,598
Property and casualty insurance		2,067			2,111
Other segments *		143			(179	)
Total business segments		(12,437	)		6,889
TSM operating revenues from external sources		78			4
TSM unallocated operating expenses		(2,217	)		(3,167	)
Elimination of TSM intersegment charges		2,400			2,387
Consolidated operating (loss) income		(12,176	)		6,113
Consolidated net realized investment gains		336			58
Consolidated interest expense		(1,686	)		(1,882	)
Consolidated other income, net		2,525			875
Consolidated (loss) income before taxes	$	(11,001	)	$	5,164

Depreciation and amortization expense:
Managed care	$	2,239		$	2,934
Life insurance		280			255
Property and casualty insurance		114			161
Other segments*		160			153
Total business segments		2,793			3,503
TSM depreciation expense		197			197
Consolidated depreciation and amortization expense	$	2,990		$	3,700

Three months ended
September 30,

Nine months ended
September 30,

2016 2015 2016 2015
Operating (loss) income:
Managed care $ (22,022 ) $ (2,169 ) $ (26,443 ) $ 6,288
Life insurance 4,247 4,300 14,899 14,402
Property and casualty insurance 4,017 2,593 9,516 6,553
Other segments * (894 ) (219 ) (1,255 ) (503 )
Total business segments (14,652 ) 4,505 (3,283 ) 26,740
TSM operating revenues from external sources 7 15 12 45
TSM unallocated operating expenses (1,771 ) (3,397 ) (7,645 ) (10,937 )
Elimination of TSM intersegment charges 2,382 2,442 7,155 7,237
Consolidated operating income (14,034 ) 3,565 (3,761 ) 23,085
Consolidated net realized investment gains (losses) 5,376 (1,561 ) 6,954 15,259
Consolidated interest expense (1,893 ) (1,979 ) (5,729 ) (6,235 )
Consolidated other income, net 734 2,289 5,468 5,131
Consolidated (loss) income before taxes $ (9,817 ) $ 2,314 $ 2,932 $ 37,240

Depreciation and amortization expense:
Managed care $ 2,622 $ 3,227 $ 8,395 $ 9,987
Life insurance 247 261 751 810
Property and casualty insurance 91 88 402 278
Other segments* 160 120 479 365
Total business segments 3,120 3,696 10,027 11,440
TSM depreciation expense 197 197 590 591
Consolidated depreciation and amortization expense $ 3,317 $ 3,893 $ 10,617 $ 12,031

*	Includes segments that are not required to be reported separately, primarily the data processing services organization and the health clinic.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

	March 31, 2017			December 31, 2016
Assets:
Managed care	$	1,144,927		$	1,013,872
Life insurance		820,481			816,920
Property and casualty insurance		347,282			349,159
Other segments *		26,274			26,034
Total business segments		2,338,964			2,205,985
Unallocated amounts related to TSM:
Cash, cash equivalents, and investments		22,531			17,033
Property and equipment, net		22,228			22,380
Other assets		21,337			21,646
		66,096			61,059
Elimination entries-intersegment receivables and others		(46,605	)		(48,045	)
Consolidated total assets	$	2,358,455		$	2,218,999

September 30,
2016

December 31,
2015

Assets:
Managed care $ 1,165,750 $ 1,034,725
Life insurance 830,074 770,721
Property and casualty insurance 360,314 350,514
Other segments * 26,064 25,629
Total business segments 2,382,202 2,181,589
Unallocated amounts related to TSM:
Cash, cash equivalents, and investments 2,269 12,304
Property and equipment, net 22,620 23,219
Other assets 29,362 31,732
54,251 67,255
Elimination entries-intersegment receivables and others (61,535 ) (42,699 )
Consolidated total assets $ 2,374,918 $ 2,206,145

*	Includes segments that are not required to be reported separately, primarily the data processing services organization and the health clinic.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

~~(16)~~(14)

Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued. No events, other than those described in these notes, have occurred that require adjustment or disclosure pursuant to current Accounting Standards Codification.

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Item 2.

~~Item 2.~~

Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), the “Corporation”, the “Company”, “TSM”, “we”, “us” and “our” refers to Triple-S Management Corporation and its subsidiaries. The MD&A included in this Quarterly Report on Form 10-Q is intended to update the reader on matters affecting the financial condition and results of operations for the three months ~~and nine months~~ ended ~~September 30, 2016.~~March 31, 2017. Therefore, the following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K filed with the United States Securities and Exchange Commission as of and for the year ended December 31, ~~2015~~2016 and the MD&A included therein, and our unaudited consolidated financial statements and accompanying notes as of and for the three months ~~and nine months~~ ended ~~September 30, 2016~~March 31, 2017 included in this Quarterly Report on Form 10-Q.

Cautionary Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q and other of our publicly available documents may include statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, among other things: statements concerning our business and our financial condition and results of operations. These statements are not historical, but instead represent our belief regarding future events, any of which, by their nature, are inherently uncertain and outside of our control. These statements may address, among other things, future financial results, strategy for growth, and market position. It is possible that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. The factors that could cause actual results to differ from those in the forward-looking statements are discussed throughout this form. We are not under any obligation to update or alter any forward-looking statement (and expressly disclaims any such obligations), whether as a result of new information, future events or otherwise. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, but are not limited to, rising healthcare costs, business conditions and competition in the different insurance segments, government action and other regulatory issues.

Overview

We are one of the ~~largest~~most significant players in the managed care industry in Puerto Rico ~~with~~and have over 5055 years of experience in this industry. We offer a broad portfolio of managed care and related products in the Commercial, Medicaid and Medicare Advantage markets. In the Commercial market we offer products to corporate accounts, U.S. federal government employees, local government employees, individual accounts and Medicare Supplement. We also participate in the Government of Puerto Rico Health Insurance Plan (a government of Puerto ~~Rico and U.S. Federal Government funded~~Rico-funded managed care program for the medically indigent that is similar to the Medicaid program in the U.S.) (Medicaid), by administering the provision of ~~the physical~~ health ~~component~~benefits in designated service regions in Puerto Rico. We served all eight regions on an administrative service only basis (ASO) until March 31, 2015. Effective April 1, 2015, the government changed the Medicaid delivery model from ASO to a risk-based model that includes the physical and mental health components. We elected to participate in this sector as a fully-insured provider in only two regions. See details of the Medicaid contract in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 under the sub-caption “We are dependent on a small number of government contracts to generate a significant amount of the revenues of our managed care business.”

We have the exclusive right to use the Blue Cross Blue Shield (BCBS) name and mark throughout Puerto Rico, the U.S. Virgin Islands, Costa Rica, the British Virgin Islands and Anguilla. As of ~~September 30, 2016,~~March 31, 2017, we served approximately 1,0~~38,000 members.��~~1,016,000 members across all regions of Puerto Rico. For the ~~nine~~three months ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015,~~respectively, our managed care segment represented approximately ~~92%~~91% and ~~91%, respectively,~~92% of our total consolidated premiums earned. We also have significant positions in the life insurance and property and casualty insurance markets.

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We participate in the managed care market through our subsidiaries, Triple-S Salud, Inc. (TSS) and Triple-S Advantage, Inc. (TSA), and Triple-S Blue, Inc. I.I. (TSB). TSS, TSA and ~~Triple-S Blue, Inc. (TSB)~~TSB are Blue Cross Blue Shield Association (BCBSA) ~~BCBSA~~ licensees, which provides us with exclusive use of the Blue Cross and Blue Shield name and mark throughout Puerto Rico, the U.S. Virgin Islands, Costa Rica, the British Virgin Islands, and Anguilla.

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We participate in the life insurance market through our subsidiary, Triple-S Vida, Inc. ~~(TSV)~~, and in the property and casualty insurance market through our subsidiary, Triple-S Propiedad, Inc. (TSP).

Intersegment revenues and expenses are reported on a gross basis in each of the operating segments but eliminated in the consolidated results. Except as otherwise indicated, the numbers for each segment presented in this Quarterly Report on Form 10-Q do not reflect intersegment eliminations. These intersegment revenues and expenses affect the amounts reported on the financial statement line items for each segment, but are eliminated in consolidation and do not change net income. See note 1513 of the Condensed Consolidated Financial Statements included in ~~this~~ Quarterly Report on Form 10-Q.

Our revenues primarily consist of premiums earned, net and administrative service fees. These revenues are derived from the sale of managed care products in the Commercial market to employer groups, individuals and government-sponsored programs, principally Medicare and the Government of Puerto Rico Health Insurance Plan. Premiums are derived from insurance ~~contracts. Administrative~~contracts and administrative service fees are derived from self-funded contracts, under which we provide a range of services, including claims administration, billing and membership services, among others. Revenues also include premiums earned from the sale of property and casualty and life insurance contracts, and investment income and revenues derived from other segments. Substantially all of our earnings are generated in Puerto Rico.

Claims incurred include the payment of benefits and losses, mostly to physicians, hospitals and other service providers, and to policyholders. Each segment’s results of operations depend to a significant extent on their ability to accurately predict and effectively manage claims. A portion of the claims incurred for each period consists of claims reported but not paid during the period, as well as a management and actuarial estimate of claims incurred but not reported during the period. Operating expenses consist primarily of compensation, commission payments to brokers and other overhead business expenses. ~~Operating expenses also includes the Health Insurance Providers Fee paid under the Affordable Care Act (ACA).~~

We use operating income as a measure of performance of the underwriting and investment functions of our segments. We also use the loss ratio and the operating expense ratio as measures of performance. The loss ratio is claims incurred divided by premiums earned, net, multiplied by 100. The operating expense ratio is operating expenses divided by premiums earned; net and administrative service fees, multiplied by 100.

Recent Developments

Puerto Rico Economy ~~Update~~

During ~~recent years,~~the past decade, Puerto Rico has been facing economic and fiscal challenges and its economy has been contracting.

On In response to the Commonwealth of Puerto Rico (the Commonwealth) fiscal and economic crisis, on June 30, 2016, the ~~President of the United States signed~~U.S. Congress enacted the Puerto Rico Oversight, Management and Economic Stability Act ~~(PROMESA)~~(“PROMESA”), which, ~~grants~~among other things, established a Federally-appointed oversight board (the “Oversight Board”) comprised of seven members with ample powers over the finances of the Commonwealth ~~of Puerto Rico (Commonwealth)~~ and its ~~component units, access to an orderly mechanism to restructure their debts in exchange for significant federal oversight over the Commonwealth’s finances. In general,~~instrumentalities. PROMESA ~~seeks to provide Puerto Rico with fiscal and economic discipline through the creation of a control board, relief from creditor lawsuits through the enactment of~~also established a temporary stay on litigation ~~and two alternative methods~~ to ~~adjust unsustainable debt.~~

~~On July 1, 2016,~~enforce rights or remedies related to financial liabilities of the Commonwealth, ~~defaulted~~its instrumentalities and municipalities, which expired on ~~$911 million~~May 1, 2017. Finally, PROMESA established two separate mechanisms to restructure the debts of ~~bond payments,~~the Commonwealth, its public corporations and municipalities. The first mechanism permits modifications of financial indebtedness with the consent of a supermajority of affected financial creditors. The second mechanism, known as Title III, is a court-supervised debt-adjustment process, which ~~included $780 million~~is modeled after Chapter 9 of ~~General Obligation debt, after~~the U.S. Bankruptcy Code.

Pursuant to PROMESA, the Oversight Board required the Commonwealth to deliver a fiscal plan by January 15, 2017, which deadline was later extended until February 28, 2017. In a letter dated January 18, 2017, the Oversight Board recommended to the Governor a series of measures for inclusion in the fiscal plan, including: (i) a $1.0 billion reduction in health care spending by fiscal year 2019, (ii) the elimination of budgetary subsidies to municipalities and (iii) significant reductions in payroll expenditures and pension and/or pension-related benefits. On February 28, 2017, the Governor of Puerto Rico ~~evoked~~submitted a ~~local~~10-year fiscal plan to the Oversight Board, for its review and approval. After certain revisions, a final plan was approved by the Oversight Board on March 13, 2017, which includes spending reductions of $25.7 billion. The plan implies larger concessions from bondholders since there would be approximately $8 billion available for debt ~~moratorium provision.~~service payments over the next 10 years, compared to around $35 billion that is owed over that period. The plan also proposes (i) certain significant changes to the Commonwealth’s healthcare delivery model in order to reduce expenses and (ii) the elimination of subsidies to the municipalities, many of which have contracts for the provision of healthcare or other insurance products with our subsidiaries. The plan, however, does not provide details about the proposed changes or the timeline for their implementation. Also, it is uncertain if and how the elimination of municipal subsidies will affect municipal finances and their ability to continue to meet their contractual obligations.

~~On August 31, 2016, the President of the United States appointed the seven members of the Financial~~The Oversight ~~and Management~~ Board also required that certain Commonwealth instrumentalities, such as Government Development Bank for Puerto Rico, ~~(the~~the Puerto Rico Aqueduct and Sewer Authority, the Puerto Rico Electric Power Authority and the University of Puerto Rico, prepare and submit fiscal plans. All such fiscal plans have been submitted and approved, other than the plan for the University of Puerto Rico, and include significant expenditure reductions across all types of expenses. In the future, the Oversight ~~Board) created by PROMESA, which held its first official meeting on September 30, 2016.~~Board may require other instrumentalities and municipalities to prepare and submit fiscal plans.

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On ~~October 10, 2016,~~May 1, 2017, the temporary stay on litigation established by PROMESA expired. After the expiration of the temporary stay, several ~~hedge funds, which hold General Obligation~~investors holding general obligation and sales and use tax-backed bonds filed lawsuits to enforce their rights and remedies related to the financial liabilities of the Commonwealth, its instrumentalities and municipalities. On May 3, 2017, after not reaching an agreement with its creditors, the Oversight Board filed ~~a lawsuit against~~an order seeking the ~~Commonwealth, demanding~~protection of the ~~Commonwealth to discontinue directing sales tax revenues towards~~provisions of Title III of PROMESA for the Commonwealth. On May 5, 2017, the Oversight Board also sought the protection of Title III of PROMESA for the Puerto Rico Sales Tax Financing Corporation ~~(Cofina) debt service~~(“COFINA” by its Spanish acronym), which issued the sales and ~~requesting~~use tax-backed bonds. While the ~~court to declare that the General Obligations bonds~~proceedings under Title III of PROMESA are ongoing, all enforcement and collection actions against the Commonwealth ~~have payment priority over Cofina debt.~~and COFINA by its creditors are stayed. As a result of this court-supervised debt-adjustment process, the principal and interest payments due on general obligation and sales and use tax-backed bonds will likely be restructured and such restructuring could lead to significant additional losses on such holdings.

~~On October 14, 2016, the Government of Puerto Rico presented the Commonwealth of Puerto Rico Fiscal Plan to the Oversight Board. The fiscal plan, which is subject to the review and approval of~~Although the Oversight Board ~~includes structural reforms to reduce~~has not sought the ~~size~~protection of Title III of PROMESA for the Puerto Rico Health Insurance Administration (“ASES” by its Spanish acronym), the instrumentality responsible for the administration of the ~~government,~~Government’s health plan, ASES may be affected by the ~~deficit~~Commonwealth’s fiscal plan and the proceedings commenced for the Commonwealth under Title III of PROMESA because its state-based funding is solely dependent on appropriations from the Government’s general fund. Notwithstanding the Government’s statement in recent legislation that its public ~~spending and proposals to achieve economic growth, while providing for~~policy includes guaranteeing the continuity of public services in essential ~~services~~areas such as ~~healthcare, public safety~~health, security, education, social work and ~~education.~~development, among others, it is uncertain how the Commonwealth’s Title III proceeding will affect ASES and the contracts administered by it.

If the liquidity of the Government of Puerto Rico, its agencies, municipalities and public corporations becomes significantly affected as a result of their inability to raise funding in the market or generate enough revenues, we may face credit losses in our premium and fees receivables from these and other government related entities. As of ~~September 30, 2016,~~March 31, 2017, the Company had premiums and other receivables of ~~$112.0~~$51.5 million from the Government of Puerto Rico, including its agencies, municipalities and public corporations with a related allowance for doubtful receivables of ~~$20.6~~$14.1 million. We also hold several positions categorized as Obligations of the Commonwealth of Puerto Rico, including Cofina bonds, which are susceptible to aforementioned recent developments in the economy, see note 3 to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Puerto Rico Government Health Reform Program

Current Medicaid premiums rates are effective until June 30, 2017; the negotiation for new rates, until the end of the three year agreement, is ongoing. See Item 1A. Risk Factors—Risks Related to Our Business – “~~Our business is geographically concentrated in Puerto Rico and weakness in the economy and the fiscal health of the government has adversely impacted and may continue to adversely impact us.” and~~ “We are dependent on a small number of government contracts to generate a significant amount of the revenues of our managed care ~~business.~~business.’’ included in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

~~Managed Care –~~Political and Regulatory Developments

CMS announced final benchmark rates for the 2018 Medicare Advantage

~~On October 12, 2016,~~ plans. The call letter included revenue adjustments reflecting the ~~Centers~~physician payment increases, maintaining the zero claims adjustment, and allowing certain Puerto Rico counties to qualify for double bonus status. The impact of these updates result in a benchmark increase of about 4%. See Item 1A. Risk Factors—Risks Related to the Regulation of our Industry – “The revised rate calculation system for Medicare ~~& Medicaid Services (CMS) published~~Advantage, the ~~STAR Ratings~~payment system for ~~payment year 2018. Contract H5774,~~ the ~~Triple-S Advantage Health Maintenance Organization (HMO) contract, scored 4.0 overall on a 5.0 star rating system, increasing 1.0 versus the prior year, and achieved 5 stars in~~Medicare Part D ~~all this demonstrating~~and changes in the methodology and payment policies used by CMS to establish rates could reduce our ~~dedication to providing~~profitability and the ~~highest quality of care~~benefits we offer our beneficiaries’’ included in our Annual Report on Form 10-K for ~~our members as well as~~ the significant investments we have made in technology and systems. Contract H4005, the Triple-S Advantage Preferred Provider Organization (PPO) contract, scored 3.5 overall, sustaining the rating from the previous year and achieved 4.5 stars in Part D. It is worth noting that no plan in Puerto Rico has achieved more than a 4 overall star rating. Star ratings are calculated annually and are subject to change each year.ended December 31, 2016.

Recent Accounting Standards

For a description of recent accounting standards, see note 2 to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

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Managed Care Membership

	As of September 30,				As of March 31,
	2016		2015		2017		2016
Managed care enrollment:
Commercial ¹		521,994		552,471		505,848		544,846
Medicare		113,950		124,004		121,352		119,224
Medicaid		402,358		423,944		389,130		402,933
Total		1,038,302		1,100,419		1,016,330		1,067,003
Managed care enrollment by funding arrangement:
Fully-insured		860,619		919,374		847,327		886,547
Self-insured		177,683		181,045		169,003		180,456
Total		1,038,302		1,100,419		1,016,330		1,067,003

(1)	Commercial membership includes corporate accounts, self-funded employers, individual accounts, Medicare Supplement, Federal government employees and local government employees.

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Consolidated Operating Results

The following table sets forth the Corporation’s consolidated operating results. Further details of the results of operations of each reportable segment are included in the analysis of operating results for the respective segments.

	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(dollar amounts in millions)	2016			2015			2016			2015			2017			2016
Revenues:
Premiums earned, net	$	721.2		$	746.7		$	2,188.8		$	2,033.4		$	702.3		$	738.5
Administrative service fees		4.2			6.2			13.7			39.8			4.4			5.1
Net investment income		12.3			10.6			36.6			32.5			12.0			11.4
Other operating revenues		0.9			0.9			2.6			2.7			0.9			0.8
Total operating revenues		738.6			764.4			2,241.7			2,108.4			719.6			755.8
Net realized investment gains (losses)		5.4			(1.6	)		7.0			15.3
Net realized investment gains														0.3			-
Other income, net		0.7			2.3			5.4			5.1			2.6			0.9
Total revenues		744.7			765.1			2,254.1			2,128.8			722.5			756.7
Benefits and expenses:
Claims incurred		629.2			634.9			1,878.0			1,705.2			620.9			626.7
Operating expenses		123.4			125.9			367.5			380.1			110.9			123.0
Total operating expenses		752.6			760.8			2,245.5			2,085.3			731.8			749.7
Interest expense		1.9			2.0			5.7			6.3			1.7			1.9
Total benefits and expenses		754.5			762.8			2,251.2			2,091.6			733.5			751.6
(Loss) income before taxes		(9.8	)		2.3			2.9			37.2			(11.0	)		5.1
Income tax benefit		(7.9	)		(1.9	)		(2.5	)		(0.7	)
Net (loss) income		(1.9	)		4.2			5.4			37.9
Less: net loss attributable to non-controlling interest		-			-			-			0.1
Income taxes (benefit) / expense														(6.7	)		1.7
Net (loss) income attributable to TSM	$	(1.9	)	$	4.2		$	5.4		$	38.0		$	(4.3	)	$	3.4

~~Table of Contents~~

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

Operating Revenues

Consolidated premiums earned, net for the three months ended March 31, 2017 decreased by ~~$25.5~~$36.2 million, or ~~3.4%~~4.9%, to ~~$721.2 million.~~$702.3 million when compared to the three months ended March 31, 2016. This decrease primarily reflects lower premiums in the Managed Care segment by ~~$28.8~~$38.2 million mainly due to lower ~~fully-insured~~ membership ~~across all sectors. This impact is offset~~ in ~~part by an~~the segment’s Medicaid and Commercial businesses.

Other Income, Net

The $1.7 million increase in ~~Life Insurance premiums and~~consolidated other income reflects the ~~increase in Medicaid premiums resulting from the release~~collection of ~~the accrual of excess profit (previously recorded as accrual return premiums)~~interest charged for late payment related to the ~~government of Puerto Rico. This release of the accrual of excess profit is in line with the provisions of the~~current Medicaid ~~at-risk~~ contract.

Claims Incurred

Consolidated claims incurred decreased by ~~$5.7~~$5.8 million, or 0.9%, to ~~$629.2~~$620.9 million during the three months ended March 31, 2017 when compared to the claims incurred during the three months ended March 31, 2016, mostly due to lower claims in the Managed Care ~~segment’s~~segment. The decrease in ~~fully-insured membership, partially~~Managed Care claims primarily reflects lower claims incurred in the segment’s Medicaid and Commercial businesses primarily driven by lower enrollment, offset in part by ~~unfavorable prior period reserve developments across all sectors. Also, we experienced~~higher pharmacy claims trends in the Medicare and Medicaid businesses, higher Part B drugs in the Medicare business, and enhanced benefits in the Medicare 2017 offerings. This decrease was also offset by higher claims incurred in the Life Insurance segment. The consolidated loss ratio increased by ~~220~~350 basis points to ~~87.2%~~88.4%. ~~Excluding the impact~~

Table of ~~prior period reserve developments, as well as moving risk score revenue adjustments to its corresponding period, consolidated loss ratio was 83.8%, 90 basis points lower than last year.~~Contents

Operating Expenses

Consolidated operating expenses during the three months ended March 31, 2017 decreased by ~~$2.5~~$12.1 million, or ~~2.0%~~9.8%, to ~~$123.4 million.~~$110.9 million as compared to the operating expenses during the three months ended March 31, 2016. The lower operating expenses ~~reflects a $4.4 million contingency accrual recorded in~~are mostly the ~~2015 period and lower personnel costs and professional service fees in~~result of the ~~2016 period. These decreases were partially offset by an increase~~decrease in the Health Insurance Providers Fee ~~reflecting~~(HIP fee) of $10.8 million due to the ~~at-risk Medicaid enrollment after the model changed in 2015, as well as to a new business-to-business~~2017 tax ~~implemented in Puerto Rico at the end of the third quarter of 2015.~~holiday, and lower personnel costs. For the three months ended ~~September 30, 2016,~~March 31, 2017, the consolidated operating expense ratio ~~increased 30~~decreased 80 basis points to ~~17.0%~~15.7%.

Income Taxes

Consolidated income ~~tax benefit increased~~taxes decreased by ~~$6.0~~$8.4 million, to ~~$7.9~~a benefit of $6.7 million for the three months ended ~~September 30, 2016.~~March 31, 2017. The year over year change in income taxes primarily results from ~~the~~a loss before taxes incurred in the ~~2016~~2017 period incurred in the Managed Care segment.

Table of Contents

~~Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015~~

~~Operating Revenues~~

Consolidated premiums earned, net increased by $155.4 million, or 7.6%, to $2.2 billion. This increase primarily reflects higher premiums in the Managed Care segment by $150.8 million after the change in the Medicaid business model from an ASO agreement to a fully insured model effective April 1, 2015 and higher premium rates in the Commercial business.

The consolidated administrative service fees decreased $26.1 million, or 65.6%, mostly as a result of the previously mentioned change in the Medicaid contract model. Total administrative fees related to the previous Medicaid ASO agreement during the 2015 period amounted to $24.4 million.

~~Net investment income increased by $4.1 million, or 12.6%, to $36.6 million mostly as a result of higher invested balances.~~

~~Claims Incurred~~

Consolidated claims incurred increased by $172.8 million, or 10.1%, to $1.9 billion, mostly due to higher claims in the Managed Care segment. This increase primarily reflects higher claims incurred in the segment’s Medicaid business by $151.9 million after the contract changed to a fully insured model, the impact of Managed Care prior period reserve developments. The consolidated loss ratio increased by 190 basis points to 85.8%. Excluding the impact of prior period development, as well as moving the 2015 risk score revenue adjustments to its corresponding period, consolidated loss ratio was 85.5%, 60 basis points higher than last year.

~~Operating Expenses~~

Consolidated operating expenses decreased by $12.6 million, or 3.3%, to $367.5 million. The decrease reflects lower expenses following 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 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, as well as a $4.4 million contingency accrual recorded in 2015. These decreases were partially offset by a new business-to-business tax implemented in Puerto Rico at the end of the third quarter 2015 and an increase in the Health Insurance Providers Fee, reflecting the at-risk Medicaid enrollment after the model changed in 2015. For the nine months ended September 30, 2016, the consolidated operating expense ratio decreased 160 basis points to 16.7%, as the result of the increase in premiums and lower expenses.

~~Income Taxes~~

~~Consolidated income tax benefit increased by $1.8 million, to $2.5 million. The higher tax benefit primarily results from the net effect of the following:~~

·	~~For the 2016 period the Managed Care segment,~~ ~~which has a higher effective tax rate than our other segments,~~ ~~incurred in a loss before taxes, resulting in the recording of a tax benefit during the period.~~

~~During the 2015 period, the Company executed a~~ Closing Agreement between TSM and its subsidiaries and the Puerto Rico Treasury Department in connection with a local law that provided a temporary preferential tax rate in capital asset transactions. These events allowed the Company to record a $3.1 million benefit in the 2015 period resulting from the enacted lower taxable rate and the reassessment of the realizability of some of its deferred taxes.

·	The Property and Casualty segment reassessed the tax rate used to measure several temporary differences; as a consequence such rate was increased from 20% to 39%, resulting in an increase to its deferred tax expense of approximately $2.6 million.

~~Table of Contents~~

Managed Care Operating Results

	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(dollar amounts in millions)	2016			2015			2016			2015			2017			2016
Operating revenues:
Medical premiums earned, net:
Commercial	$	206.3		$	210.6		$	636.8		$	634.9		$	205.1		$	215.5
Medicare		255.3			279.4			789.4			818.0			257.7			261.0
Medicaid		199.4			199.8			582.8			405.3			177.7			202.2
Medical premiums earned, net		661.0			689.8			2,009.0			1,858.2			640.5			678.7
Administrative service fees		5.2			5.6			17.3			43.2			5.6			6.3
Net investment income		3.6			2.7			11.2			8.4			3.9			3.5
Total operating revenues		669.8			698.1			2,037.5			1,909.8			650.0			688.5
Medical operating costs:
Medical claims incurred		598.0			605.5			1,784.5			1,614.0			587.3			596.3
Medical operating expenses		93.8			94.8			279.4			289.5			81.3			92.8
Total medical operating costs		691.8			700.3			2,063.9			1,903.5			668.6			689.1
Medical operating (loss) income	$	(22.0	)	$	(2.2	)	$	(26.4	)	$	6.3
Medical operating loss													$	(18.6	)	$	(0.6	)
Additional data:
Member months enrollment:
Commercial:
Fully-insured		1,039,842			1,119,344			3,199,546			3,388,436			1,013,205			1,096,282
Self-funded		534,653			544,881			1,617,900			1,680,435			507,167			543,026
Total Commercial member months		1,574,495			1,664,225			4,817,446			5,068,871

Medicare member months		344,167			370,702			1,059,702			1,073,726

Medicaid:
Fully-insured		1,205,792			1,279,692			3,634,029			2,583,204
Self-insured		-			-			-			4,229,082
Total Medicaid member months		1,205,792			1,279,692			3,634,029			6,812,286
Total Commercial														1,520,372			1,639,308
Medicare														363,727			364,427
Medicaid														1,173,273			1,221,892
Total member months		3,124,454			3,314,619			9,511,177			12,954,883			3,057,372			3,225,627
Medical loss ratio		90.5	%		87.8	%		88.8	%		86.9	%		91.7	%		87.9	%
Operating expense ratio		14.1	%		13.6	%		13.8	%		15.2	%		12.6	%		13.5	%

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

Medical Operating Revenues

Medical premiums earned for the three months ended ~~September 30, 2016~~March 31, 2017 decreased by ~~$28.8~~$38.2 million, or ~~4.2%~~5.6%, to ~~$661.0 million.~~$640.5 million when compared to the medical premiums earned during the three months ended March 31, 2016. This decrease is principally the result of the following:

·	Medicare premiums decrease of $24.1 million, or 8.6%, primarily results from lower member months enrollment when compared to 2015 combined with a 2.4% average reduction in 2016 Medicare reimbursement rates.

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.

·	Commercial premiums decrease of $4.3 million, or 2.0%, primarily results from a decrease in fully-insured member months enrollment, partially offset by an approximately 5% year over year increase in average premium rates.

Medicaid premiums decreased by $0.4 million, or 0.2% primarily as the result of a lower member months enrollment, reflecting the population decline in Puerto Rico, and the lower average premium rates negotiated with the government of Puerto Rico that went into effect July 1, 2016. These decreases are partially offset by a $15.6 million increase in the Medicaid premiums resulting from a partial reduction of the accrual of excess profit, which was driven by the previously mentioned decrease in premium rates and higher utilization trends.

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.

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Medical Claims Incurred

Medical claims incurred during the three months ended March 31, 2017 decreased by ~~$7.5~~$9.0 million, or ~~1.2%~~1.5%, to ~~$598.0 million.~~$587.3 million when compared to the three months ended March 31, 2016. The medical loss ratio (MLR) of the segment increased ~~270~~380 basis points during the ~~2016~~2017 period, to ~~90.5%~~91.7%. This fluctuation is primarily attributed to the net effect of the following:

·	The medical claims incurred of the Medicaid business decreased by $6.0 million during the 2016 period primarily reflecting the net effect of the previously described decrease in member months enrollment partially offset by higher pharmacy and outpatient trends.

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 $2.5 million, or 1.0%, during the 2016 period reflecting the previously mentioned decrease in membership and changes in benefit design included in 2016 products as the result of the decrease in reimbursement rates. This decrease is offset by unfavorable prior period reserve developments related to previous quarters. Adjusting for the effect of prior period reserve developments, and moving risk score revenue adjustments to their corresponding periods, our Medicare MLR would have been approximately 87.1% this quarter, about 180 basis points higher than last year, mostly driven by increased Part B drug costs, mainly related to cancer and rheumatoid arthritis and the decrease in premium rates reimbursements from CMS.

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 $1.0 million, or 0.6%, during the 2016 period. This increase mostly reflects the impact of unfavorable prior period reserve developments. Excluding the effect of prior period reserve developments in 2016 and 2015, the MLR would have decreased by 270 basis points to 83.4%, reflecting the continuity of our underwriting discipline and premium trends higher than claims trends.

The medical claims incurred of the Medicare business increased by $7.0 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 $1.0 million, or 1.1%, to $93.8 million. The lower operating expenses reflect a $4.4 million contingency accrual recorded in the 2015 period, and lower professional service fees in the 2016 period. These decreases were partially offset by an increase in the Health Insurance Providers Fee, reflecting the at-risk Medicaid enrollment after the model changed in 2015, as well as to a new business-to-business tax implemented in Puerto Rico at the end of the third quarter of 2015. Forfor the three months ended ~~September 30, 2016, the operating expense ratio increased 50 basis points to 14.1%.~~

~~Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015~~

~~Medical Operating Revenues~~

~~Medical premiums earned increased~~March 31, 2017 decreased by ~~$150.8~~$11.5 million, or ~~8.1%,~~12.4 %, to ~~$2.0 billion. This increase is principally the result of the following:~~

·	Medical premiums generated by the Medicaid business increased by $177.5 million to $582.8 million, primarily as the result of the change in the Medicaid service model, from an ASO agreement to a fully-insured model effective April 1, 2015.

·	Medical premiums generated by the Commercial business increased by $1.9 million, or 0.3%, to $636.8 million. This fluctuation is primarily the result of approximately 6% year over year increase in average premium rates, partially offset by a decrease in fully insured member month enrollment.

~~Medical premiums generated by the Medicare business decreased by $28.6 million, or 3.5%, to $789.4 million. This fluctuation primarily results from lower risk score revenue as~~$81.3 million when compared ~~with 2015, lower member months enrollment, and a reduction in 2016 Medicare reimbursement rates.~~

~~Administrative service fees decreased by $25.9 million, or 60.0%, to $17.3 million mainly due~~ to the ~~previously mentioned change in the Medicaid contract effective April 1, 2015.~~

~~Table of Contents~~

~~Medical Claims Incurred~~

Medical claims incurred increased by $170.5 million, or 10.6%, to $1.8 billion. The MLR of the segment increased 190 basis points during the 2016 period, to 88.8%. These fluctuations are primarily attributed to the net effect of the following:

·	~~The medical claims incurred of the Medicaid business increased by $151.9 million during the 2016 period reflecting the previously mentioned change in the Medicaid contract effective April 1, 2015.~~

The medical claims incurred of the Commercial business increased by $13.8 million, or 2.6%, during 2016, mostly reflecting the impact of prior period reserve developments, partially offset by lower member months enrollment. The Commercial MLR was 86.4%, which is 200 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 150 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 $4.8 million, or 0.7%, during 2016 and its MLR was 90.0%, which is 370 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 adjustments to its corresponding period, our Medicare MLR would have been 90.2%, about 310 basis points higher than last year. The higher MLR primarily reflects higher Part B drug costs, mainly related to cancer and rheumatoid arthritis, and the effect of the decrease in 2016 Medicare reimbursement rates. The impact of the lower reimbursement rates was partially offset by a change in benefit design in the 2016 products.

~~Medical Operating Expenses~~

Medical operating expenses decreased by $10.1 million, or 3.5%, to $279.4 million. The decrease mostly reflects lower expenses following 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 includes the effect of a decrease in the provision for doubtful accounts, mostly due to the strengthening of the allowance for doubtful receivables in the 2015 period, as well as to a $4.4 million contingency accrual recorded in 2015. These decreases were partially offset by a new business-to-business tax implemented in Puerto Rico during the third quarter of 2015 and an increase in the Health Insurance Providers Fee, reflecting the at-risk Medicaid enrollment after the model changed in 2015.three months ended March 31, 2016. The operating expense ratio decreased ~~140~~by 90 basis points to ~~13.8%~~12.6% in ~~2016 as a~~2017. The lower operating expenses and expense ratio are mostly the result of the ~~increase~~decrease in ~~premiums and~~the HIP Fee of $10.7 million due to the 2017 moratorium as well as lower ~~expenses.~~personnel costs.

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Life Insurance Operating Results

	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(dollar amounts in millions)	2016			2015			2016			2015			2017			2016
Operating revenues:
Premiums earned, net:
Premiums earned	$	40.8		$	38.2		$	120.3		$	115.1		$	41.8		$	39.8
Assumed earned premiums		0.4			-			3.1			2.2			0.9			1.5
Ceded premiums earned		(2.3	)		(2.5	)		(6.6	)		(7.4	)		(2.2	)		(2.2	)
Premiums earned, net		38.9			35.7			116.8			109.9			40.5			39.1
Net investment income		6.4			5.8			18.7			17.7			6.1			5.9
Total operating revenues		45.3			41.5			135.5			127.6			46.6			45.0
Operating costs:
Policy benefits and claims incurred	$	22.5			19.8			65.8			60.5			23.7			21.4
Underwriting and other expenses		18.6			17.4			54.8			52.7			19.0			18.0
Total operating costs		41.1			37.2			120.6			113.2			42.7			39.4
Operating income	$	4.2		$	4.3		$	14.9		$	14.4		$	3.9		$	5.6
Additional data:
Loss ratio		57.8	%		55.5	%		56.3	%		55.1	%		58.5	%		54.7	%
Operating expense ratio		47.8	%		48.7	%		46.9	%		48.0	%		46.9	%		46.0	%

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

Operating Revenues

Premiums earned, net increased by ~~$3.2~~$1.4 million, or ~~9.0%,~~3.6% to ~~$38.9~~$40.5 million ~~reflecting improved policy retention and higher sales principally~~as the result of premium growth in the segment’s Individual Life and Cancer lines of business, as well as ~~the~~ growth in the Costa Rica operations.

Policy Benefits and Claims Incurred

Policy benefits and claims incurred increased by ~~$2.7~~$2.3 million, or ~~13.6%~~10.7%, to ~~$22.5~~$23.7 million, mostly as the result of the higher volume of business during the year, particularly in the Individual Life and Cancer lines of business ~~as well as to an increase in actuarial reserves.~~and higher number of claims paid. The loss ratio for the period increased ~~from 55.5%~~to 58.5% in ~~2015 to 57.8% in 2016,~~2017, or ~~230~~380 basis points, reflecting the higher volume in the Cancer line of business, which has a higher loss ratio, ~~and~~as well as to a higher claims experience in ~~the Individual Life~~this particular line of business.

Underwriting and Other Expenses

Increase in underwriting and other expenses of ~~$1.2~~$1.0 million, or ~~6.9%~~5.6%, to ~~$18.6~~$19.0 million is mostly ~~reflecting~~reflects higher commissions following the segment’s premium growth mentioned above. ~~The operating expense ratio decreased 90 basis points from 48.7% in 2015 to 47.8% in 2016, reflecting the increase in premiums during the period.~~

~~Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015~~

~~Operating Revenues~~

Premiums earned, net increased by $6.9 million, or 6.3% to $116.8 million as the result of premium improved policy retention and higher sales in the segment’s Individual Life and Cancer lines of business, premiums assumed on reinsurance agreements, as well as growth in the Costa Rica operations.

~~Policy Benefits and Claims Incurred~~

Policy benefits and claims incurred increased by $5.3 million, or 8.8%, to $65.8 million, mostly reflecting a higher volume of business during the year, particularly in the Cancer line of business, and in premiums assumed under reinsurance agreements, which carry a higher loss ratio, as well as to an increase in actuarial reserves. The loss ratio for the period increased 120 basis points to 56.3% in 2016.

~~Table of Contents~~

~~Underwriting and Other Expenses~~

~~Underwriting and other expenses increased by $2.1 million, or 4.0%, primarily reflecting an~~ ~~increase in commissions expense following the segment’s premium growth during these period~~. 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 110~~increased to 46.9%, 90 basis ~~points to 46.9% in 2016, reflecting the increase in premiums during the period~~points..

Table of Contents

Property and Casualty Insurance Operating Results

	Three months ended September 30,						Nine months ended September 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	$	32.4		$	32.3		$	100.9		$	99.3		$	27.4		$	27.6
Premiums ceded		(11.8	)		(12.0	)		(35.3	)		(35.3	)		(10.1	)		(10.4	)
Change in unearned premiums		1.4			1.4			(0.6	)		3.0			4.4			4.1
Premiums earned, net		22.0			21.7			65.0			67.0			21.7			21.3
Net investment income		2.3			2.0			6.6			6.1			1.9			1.9
Total operating revenues		24.3			23.7			71.6			73.1			23.6			23.2
Operating costs:
Claims incurred		9.4			10.3			30.0			32.9			10.6			9.7
Underwriting and other expenses		10.9			10.8			32.1			33.6			10.9			11.4
Total operating costs		20.3			21.1			62.1			66.5			21.5			21.1
Operating income	$	4.0		$	2.6		$	9.5		$	6.6		$	2.1		$	2.1
Additional data:
Loss ratio		42.7	%		47.5	%		46.2	%		49.1	%		48.8	%		45.5	%
Operating expense ratio		49.5	%		49.8	%		49.4	%		50.1	%		50.2	%		53.5	%
Combined ratio		92.2	%		97.3	%		95.6	%		99.2	%

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

Operating Revenues

Total premiums written ~~increased~~decreased by ~~$0.1~~$0.2 million, or ~~0.3%~~0.7%, to ~~$32.4~~$27.4 million, ~~mostly resulting from higher~~driven by lower sales of Commercial ~~Auto insurance products, offset by lower sales in the Commercial Package insurance~~package products.

The premiums ceded to reinsurers decreased by ~~$0.2~~$0.3 million, or ~~1.7%~~2.9%, mostly reflecting ~~favorable pricing~~lower premiums written in Commercial insurance products.

The change in unearned premiums presents an increase of $0.3 million mostly reflecting the ~~market for nonproportional reinsurance treaties.~~segments lower premiums written in 2017 and lower cost.

Claims Incurred

Claims incurred ~~decreased~~increased by $0.9 million, or ~~8.7%~~9.3%, to ~~$9.4~~$10.6 million. The loss ratio ~~decreased 480~~increased by 330 basis points, to ~~42.7%,~~48.8% during this period, primarily as a result of ~~favorable~~an unfavorable loss experience in the ~~Medical Malpractice line~~Commercial and Personal Auto lines of business.

Underwriting and Other Expenses

Underwriting and other operating expenses increased by $0.1 million, or 0.9%, mostly due to the timing of the receipt of a refund distribution from the Joint Underwriting Association (JUA), which was received during the second quarter in 2016 and during the third quarter in 2015.

~~Table of Contents~~

~~Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015~~

~~Operating Revenues~~

~~Total premiums written increased by $1.6 million, or 1.6%, to $100.9 million, mostly reflecting higher sales of the Compulsory Vehicle Liability and Commercial Package insurance product.~~

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

~~Claims Incurred~~

Claims incurred decreased by $2.9 million, or 8.8%, to $30.0 million. The loss ratio decreased by 290 basis points, to 46.2% during this period, mostly reflecting a favorable loss experience in the Commercial Auto line of business.

~~Underwriting and Other Expenses~~

Underwriting and other operating expenses decreased by ~~$1.5~~$0.5 million, or ~~4.5%~~4.4%, to ~~$32.1~~$10.9 million mostly due to lower ~~net commission expenses driven by a decrease in net premiums earned~~personnel costs. The operating expense ratio was 50.2%, 330 basis points lower than last year.

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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:

	Nine months ended September 30,						Three months ended March 31,
(dollar amounts in millions)	2016			2015			2017			2016
Sources (uses) of cash:
Cash provided by operating activities	$	83.0		$	171.5		$	131.0		$	31.3
Net purchases of investment securities		(86.6	)		(17.6	)
Net proceeds (purchases) of investment securities								0.4			(108.9	)
Net capital expenditures		(3.5	)		(5.6	)		(3.3	)		(1.5	)
Proceeds from long-term borrowings								24.3			-
Payments of long-term borrowings		(1.2	)		(12.2	)		(24.7	)		(0.4	)
Proceeds from policyholder deposits		12.5			5.6			4.1			3.4
Surrenders of policyholder deposits		(13.5	)		(10.5	)		(4.9	)		(2.9	)
Repurchase and retirement of common stock		(21.4	)		(41.0	)		-			(8.0	)
Other		(1.6	)		(5.8	)		(11.4	)		1.6
Net (decrease) increase in cash and cash equivalents	$	(32.3	)	$	84.4
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~~compared to the three months ended March 31, 2016, principally due to an increase in premium collections of ~~higher~~$67.1 million, lower claims paid by ~~$240.4~~$16.5 million and ~~an increase~~a decrease in cash paid to suppliers and employees ~~by $25.0 million, offset in part by an increase in~~of $14.4 million. The higher premium collections ~~of $165.8 million. The increase~~follow the collection in ~~claims paid and premiums collected is principally the result~~advance of the ~~change in~~April 2017 Medicare premiums from CMS.

Net proceeds from sales of investments securities primarily results from net cash flows received from the ~~Medicaid delivery model from an ASO agreement to a fully insured model effective April 1, 2015.~~

~~Increase in net~~sales, maturities, and purchases of ~~investments in~~investment securities ~~are part of~~during the period following our asset/liability management ~~strategy using cash on hand.~~strategy.

~~Payments of long-term borrowings decreased by $11.0~~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 ~~nine~~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 ~~September 30, 2016, primarily due~~March 31, 2017.

The fluctuation in the Other uses/sources of cash is attributed to ~~an $11.0 million repayment~~changes in the amount of ~~certain senior unsecured notes principal during the 2015 period.~~

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 nine months ended September 30, 2016, the Company repurchased and retired ~~951,831~~ ~~shares of our Class B Common Stock at an average per share price of $22.54, for an aggregate cost of $21.4 million.~~ ~~This program was completed on September 14, 2016.~~outstanding checks over bank balances.

4139

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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 ~~September 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 ~~September 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). These unsecured notes were paid in full on January 11, 2017.

On ~~October 1, 2010 and May 14, 2015 we repaid $25.0~~December 28, 2016, TSM entered into a $35.5 million and $11.0 million, respectively, of the principal of these senior unsecured notes. Amount currently outstanding is $24.0 million. The 6.6% notes contain certain non-financial covenants with which we are in compliance at September 30, 2016.

~~In addition, we are a party to a secured term loan~~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 September 30, 2016, this secured loan had an~~credit agreement, interest is payable on the outstanding balance of ~~$11.6 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 1.44%. 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 September 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.

~~Critical Accounting Estimates – Goodwill and Other Intangible Asset~~40

~~Our consolidated goodwill and intangible assets as~~Table of September 30, 2016 were $25.4 million and $5.3 million, respectively, primarily related to the TSA acquisition in 2011. We perform our annual test of goodwill impairment during the fourth quarter, using October 1 as the measurement date. The result of the annual impairment test performed in 2015 indicated that the fair value of the TSA unit exceeded its carrying value by approximately 30%. Certain interim impairment tests are also performed when potential impairment indicators exist or other changes in our business occur. TSA, through which we manage the Medicare business of our Managed Care segment, has experienced net losses in 2016 largely due to unfavorable prior period reserve developments. If this business continues experiencing net losses, it is possible that the related goodwill or long-lived assets could result in a future impairment charge. On the other hand, in October 2016 the TSA HMO contract scored 4.0 overall on a 5.0 star ~~rating~~ system, increasing 1.0 versus the prior year, and achieved 5 stars in Part D, all of this is expected to generate additional premiums in 2018. See discussion regarding goodwill and other intangible assets in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2015.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.~~

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 common equities, preferred equity, debt instruments and loan participations, and 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 September 30, 2016 and December 31, 2015, the hypothetical loss in the fair value of these investments would have been approximately $30.2 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.2016.

~~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 September 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 ~~September 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

July 1, 2016 to July 31, 2016 - $ - - $ 6.8
August 1, 2016 to August 31, 2016 174,500 22.93 174,500 2.8
September 1, 2016 to September 30, 2016 125,384 22.31 125,384 -

~~¹ In November 2015 the Company's Board of Directors authorized a $25.0 million Share Repurchase Program of its Class B common stock. This program was completed on September 14, 2016.~~

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 nine~~ months ended ~~September 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

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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:	~~November 4, 2016~~May 9, 2017	By:	/s/ Roberto García-Rodríguez
			Roberto García-Rodríguez
			President and Chief Executive Officer

Date:	~~November 4, 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 ~~September 30, 2016~~March 31, 2017
Common Stock Class A, $1.00 par value	950,968
Common Stock Class B, $1.00 par value	~~23,321,748~~23,491,670

	September 30, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Assets
Investments and cash:
Securities available for sale, at fair value:
Fixed maturities	$	1,162,209		$	1,133,645		$	1,153,545		$	1,151,643
Equity securities		302,077			197,071			277,149			270,349
Securities held to maturity, at amortized cost:
Fixed maturities		2,833			2,929			2,514			2,836
Policy loans		8,372			7,901			8,546			8,564
Cash and cash equivalents		165,523			197,818			218,884			103,428
Total investments and cash		1,641,014			1,539,364			1,660,638			1,536,820
Premiums and other receivables, net		333,964			282,646			292,837			286,365
Deferred policy acquisition costs and value of business acquired		190,443			190,648			195,513			194,787
Property and equipment, net		68,184			73,953			66,756			66,369
Deferred tax asset		57,950			52,361			64,128			57,768
Goodwill		25,397			25,397			25,397			25,397
Other assets		57,966			41,776			53,186			51,493
Total assets	$	2,374,918		$	2,206,145		$	2,358,455		$	2,218,999
Liabilities and Equity
Liabilities and Stockholders’ Equity
Claim liabilities	$	511,377		$	491,765		$	530,304		$	487,943
Liability for future policy benefits		315,404			289,530			326,162			321,232
Unearned premiums		160,066			80,260			163,780			79,310
Policyholder deposits		181,323			179,287			179,599			179,382
Liability to Federal Employees' Health Benefits Program (FEHBP)		34,474			26,695
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs								37,206			34,370
Accounts payable and accrued liabilities		188,517			176,910			171,643			169,449
Deferred tax liability		23,938			15,070			19,599			18,850
Long-term borrowings		35,597			36,827			34,465			35,085
Liability for pension benefits		56,015			62,945			30,472			30,892
Total liabilities		1,506,711			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 September 30, 2016 and December 31, 2015, respectively		951			951
Common stock Class B, $1 par value. Authorized 100,000,000 shares; issued and outstanding 23,321,748 and 24,047,755 shares at September 30, 2016 and December 31, 2015, respectively		23,322			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		65,058			83,438			63,978			65,592
Retained earnings		718,861			713,466			726,562			730,904
Accumulated other comprehensive income		60,691			25,623			50,920			42,395
Total Triple-S Management Corporation stockholders' equity		868,883			847,526
Total Triple-S Management Corporation stockholders’ equity								865,903			863,163
Non-controlling interest in consolidated subsidiary		(676	)		(670	)		(678	)		(677	)
Total stockholders' equity		868,207			846,856
Total liabilities and equity	$	2,374,918		$	2,206,145
Total stockholders’ equity								865,225			862,486
Total liabilities and stockholders’ equity							$	2,358,455		$	2,218,999

	Three months ended March 31,
	2017			2016
Net (loss) income	$	(4,343	)	$	3,455
Other comprehensive (loss) income, net of tax:
Net unrealized change in fair value of available for sale securities, net of taxes		8,472			19,577
Defined benefit pension plan:
Actuarial loss, net		53			722
Prior service credit, net		-			(88	)
Total other comprehensive income, net of tax		8,525			20,211
Comprehensive income		4,182			23,666
Comprehensive income attributable to non-controlling interest		1			1
Comprehensive income attributable to Triple-S Management Corporation	$	4,183		$	23,667

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	4139

	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.	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

	September 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	$	59,423	$	512	$	-		$	59,935
Obligations of government-sponsored enterprises										$	41,485	$	61	$	-		$	41,546
U.S. Treasury securities and obligations of U.S. government instrumentalities		77,790		948		(2	)		78,736		72,723		169		(14	)		72,878
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		17,624		3,248		-			20,872		18,248		857		(37	)		19,068
Municipal securities		687,107		55,639		(37	)		742,709		651,091		34,191		(304	)		684,978
Corporate bonds		226,761		20,642		(93	)		247,310		279,540		12,457		(367	)		291,630
Residential mortgage-backed securities		728		43		-			771		638		29		-			667
Collateralized mortgage obligations		11,823		61		(8	)		11,876		42,919		83		(224	)		42,778
Total fixed maturities		1,081,256		81,093		(140	)		1,162,209		1,106,644		47,847		(946	)		1,153,545
Equity securities - Mutual funds		262,314		39,968		(205	)		302,077		236,356		40,910		(117	)		277,149
Total	$	1,343,570	$	121,061	$	(345	)	$	1,464,286	$	1,343,000	$	88,757	$	(1,063	)	$	1,430,694

	September 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
U.S. Treasury securities and obligations of U.S. governmental instrumentalities	$	2,497	$	(2	)		1	$	-	$	-			-	$	2,497	$	(2	)		1
Municipal securities		13,251		(37	)		2		-		-			-		13,251		(37	)		2
Corporate bonds		26,644		(93	)		7		-		-			-		26,644		(93	)		7
Collateralized mortgage obligations		5,561		(4	)		4		940		(4	)		1		6,501		(8	)		5
Total fixed maturities		47,953		(136	)		14		940		(4	)		1		48,893		(140	)		15
Equity securities-Mutual funds		7,958		(205	)		5		-		-			-		7,958		(205	)		5
Total for securities available for sale	$	55,911	$	(341	)		19	$	940	$	(4	)		1	$	56,851	$	(345	)		20

~~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.~~

(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

July 1, 2016 to July 31, 2016		-	$	-		-	$	6.8
August 1, 2016 to August 31, 2016		174,500		22.93		174,500		2.8
September 1, 2016 to September 30, 2016		125,384		22.31		125,384		-

	September 30, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Premium	$	137,064	$	92,600	$	100,691	$	91,528
Self-funded group receivables		60,094		73,552		50,643		57,728
FEHBP		12,421		13,859		14,274		14,321
Agent balances		26,463		25,424		27,468		25,495
Accrued interest		11,325		12,624		11,338		13,668
Reinsurance recoverable		58,076		48,506		54,854		58,295
Other		67,153		53,325		65,152		62,637
		372,596		319,890		324,420		323,672
Less allowance for doubtful receivables:
Premium		29,950		28,944		23,584		27,320
Other		8,682		8,300		7,999		9,987
		38,632		37,244		31,583		37,307
Total premium and other receivables, net	$	333,964	$	282,646	$	292,837	$	286,365