If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☑ No

Indicate the number of shares outstanding of each of the ~~issuer’s~~issuer's classes of common stock, as of the latest practicable date.

Title of each class		Outstanding at ~~March 31,~~June 30, 2017
Common Stock Class A, $1.00 par value		950,968
Common Stock Class B, $1.00 par value	~~23,491,670~~	23,494,170

Triple-S Management Corporation

FORM 10-Q

For the Quarter Ended ~~March 31,~~June 30, 2017

Table of Contents

Part I – Financial Information		3

	Item 1.	Financial Statements	3

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3031

		Cautionary Statement Regarding Forward-Looking Information	3031
		Overview	3031
		Recent Developments	3132
		Recent Accounting Standards	3234
		Managed Care Membership	3234
		Consolidated Operating Results	3335
		Managed Care Operating Results	3538
		Life Insurance Operating Results	3741
��		Property and Casualty Operating Results	3842
		Liquidity and Capital Resources	3944

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4146

	Item 4.	Controls and Procedures	4146

Part II – Other Information		4148

Item 1.	Legal Proceedings	48

Item 1A.	~~Item 1.~~ Risk Factors	~~Legal Proceedings~~	4148

	~~Item 1A.~~	~~Risk Factors~~	41

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4249

	Item 3.	Defaults Upon Senior Securities	4249

	Item 4.	Mine Safety Disclosures	4249

	Item 5.	Other Information	4249

	Item 6.	Exhibits	4249

SIGNATURES		4350

Table of Contents

Part I – Financial Information

Item 1.

Financial Statements

Triple-S Management Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(dollar amounts in thousands, except share data)

	March 31, 2017			December 31, 2016			June 30, 2017			December 31, 2016
Assets
Investments and cash:
Securities available for sale, at fair value:
Fixed maturities	$	1,153,545		$	1,151,643		$	1,196,161		$	1,151,643
Equity securities		277,149			270,349			287,820			270,349
Securities held to maturity, at amortized cost:
Fixed maturities		2,514			2,836			2,835			2,836
Policy loans		8,546			8,564			8,716			8,564
Cash and cash equivalents		218,884			103,428			172,526			103,428
Total investments and cash		1,660,638			1,536,820			1,668,058			1,536,820
Premiums and other receivables, net		292,837			286,365			320,548			286,365
Deferred policy acquisition costs and value of business acquired		195,513			194,787			200,034			194,787
Property and equipment, net		66,756			66,369			69,083			66,369
Deferred tax asset		64,128			57,768			69,576			57,768
Goodwill		25,397			25,397			25,397			25,397
Other assets		53,186			51,493			52,672			51,493
Total assets	$	2,358,455		$	2,218,999		$	2,405,368		$	2,218,999
Liabilities and Stockholders’ Equity
Liabilities and Stockholders' Equity
Claim liabilities	$	530,304		$	487,943		$	504,240		$	487,943
Liability for future policy benefits		326,162			321,232			331,427			321,232
Unearned premiums		163,780			79,310			175,561			79,310
Policyholder deposits		179,599			179,382			179,225			179,382
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs		37,206			34,370
Liability to Federal Employees' Health Benefits and Federal Employees' Programs								40,363			34,370
Accounts payable and accrued liabilities		171,643			169,449			204,194			169,449
Deferred tax liability		19,599			18,850			22,203			18,850
Long-term borrowings		34,465			35,085			33,667			35,085
Liability for pension benefits		30,472			30,892			30,496			30,892
Total liabilities		1,493,230			1,356,513			1,521,376			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 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
Triple-S Management Corporation stockholders' equity
Common stock Class A, $1 par value. Authorized 100,000,000 shares;issued and outstanding 950,968 at June 30, 2017and December 31, 2016, respectively								951			951
Common stock Class B, $1 par value. Authorized 100,000,000 shares; issued and outstanding 23,494,170 and 23,321,163 shares at June 30, 2017 and December 31, 2016, respectively								23,494			23,321
Additional paid-in capital		63,978			65,592			65,589			65,592
Retained earnings		726,562			730,904			739,267			730,904
Accumulated other comprehensive income		50,920			42,395			55,369			42,395
Total Triple-S Management Corporation stockholders’ equity		865,903			863,163
Total Triple-S Management Corporation stockholders' equity								884,670			863,163
Non-controlling interest in consolidated subsidiary		(678	)		(677	)		(678	)		(677	)
Total stockholders’ equity		865,225			862,486
Total liabilities and stockholders’ equity	$	2,358,455		$	2,218,999
Total stockholders' equity								883,992			862,486
Total liabilities and stockholders' equity							$	2,405,368		$	2,218,999

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Triple-S Management Corporation

Condensed Consolidated Statements of Earnings (Unaudited)

(dollar amounts in thousands, except per share data)

	Three months ended March 31,					Three months ended June 30,					Six months ended June 30,
	2017			2016		2017		2016			2017			2016
Revenues:
Premiums earned, net	$	702,273		$	738,534	$	722,891	$	729,049		$	1,425,164		$	1,467,583
Administrative service fees		4,379			5,083		4,548		4,520			8,927			9,603
Net investment income		12,016			11,358		12,698		12,875			24,714			24,233
Other operating revenues		965			812		1,121		915			2,086			1,727
Total operating revenues		719,633			755,787		741,258		747,359			1,460,891			1,503,146
Net realized investment gains (losses):
Total other-than-temporary impairment losses on securities							-		(1,434	)		-			(1,434	)
Net realized gains, excluding other-than-temporary impairment losses on securities							4,054		2,954			4,390			3,012
Net realized investment gains on sale of securities		336			58		4,054		1,520			4,390			1,578
Other income, net		2,525			875		587		3,859			3,112			4,734
Total revenues		722,494			756,720		745,899		752,738			1,468,393			1,509,458
Benefits and expenses:
Claims incurred		620,863			626,694		611,297		622,087			1,232,160			1,248,781
Operating expenses		110,946			122,980		118,720		121,112			229,666			244,092
Total operating costs		731,809			749,674		730,017		743,199			1,461,826			1,492,873
Interest expense		1,686			1,882		1,721		1,954			3,407			3,836
Total benefits and expenses		733,495			751,556		731,738		745,153			1,465,233			1,496,709
(Loss) income before taxes		(11,001	)		5,164
Income taxes		(6,658	)		1,709
Net (loss) income		(4,343	)		3,455
Income before taxes							14,161		7,585			3,160			12,749
Income tax expense (benefit)							1,456		3,707			(5,202	)		5,416
Net income							12,705		3,878			8,362			7,333
Less: Net loss attributable to non-controlling interest		1			1		-		2			1			3
Net (loss) income attributable to Triple-S Management Corporation	$	(4,342	)	$	3,456
Net income attributable to Triple-S Management Corporation						$	12,705	$	3,880		$	8,363		$	7,336
Earnings per share attributable to Triple-S Management Corporation
Basic net (loss) income per share	$	(0.18	)	$	0.14
Diluted net (loss) income per share	$	(0.18	)	$	0.14
Basic net income per share						$	0.52	$	0.16		$	0.35		$	0.30
Diluted net income per share						$	0.52	$	0.16		$	0.34		$	0.30

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Triple-S Management Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(dollar amounts in thousands)

	Three months ended March 31,						Three months ended June 30,					Six months ended June 30,
	2017			2016			2017		2016			2017		2016
Net (loss) income	$	(4,343	)	$	3,455
Net income							$	12,705	$	3,878		$	8,362	$	7,333
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			4,396		15,830			12,868		35,407
Defined benefit pension plan:
Actuarial loss, net		53			722			53		507			106		1,229
Prior service credit, net		-			(88	)		-		(62	)		-		(150	)
Total other comprehensive income, net of tax		8,525			20,211			4,449		16,275			12,974		36,486
Comprehensive income		4,182			23,666			17,154		20,153			21,336		43,819
Comprehensive income attributable to non-controlling interest		1			1			-		2			1		3
Comprehensive income attributable to Triple-S Management Corporation	$	4,183		$	23,667		$	17,154	$	20,155		$	21,337	$	43,822

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Triple-S Management Corporation

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(dollar amounts in thousands)

	2017			2016			2017			2016
Balance at January 1	$	863,163		$	847,526		$	863,163		$	847,526
Share-based compensation		(1,443	)		1,421			170			2,649
Stock issued upon the exercise of stock options								-			55
Repurchase and retirement of common stock		-			(8,027	)		-			(14,616	)
Comprehensive income		4,183			23,667			21,337			43,822
Total Triple-S Management Corporation stockholders’ equity		865,903			864,587
Total Triple-S Management Corporation stockholders' equity								884,670			879,436
Non-controlling interest in consolidated subsidiary		(678	)		(671	)		(678	)		(673	)
Balance at March 31	$	865,225		$	863,916
Balance at June 30							$	883,992		$	878,763

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Triple-S Management Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(~~Dollar~~dollar amounts in thousands)

	Three months ended March 31,						Six months ended June 30,
	2017			2016			2017			2016
Cash flows from operating activities:
Net (loss) income	$	(4,343	)	$	3,455
Net income							$	8,362			7,333
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,990			3,700			6,454			7,300
Net amortization of investments		2,356			1,936			4,787			3,981
(Reductions) additions to the allowance for doubtful receivables		(3,209	)		1,531
Deferred tax benefit		(7,525	)		(2,435	)
Reductions to the allowance for doubtful receivables								(2,390	)		(313	)
Deferred tax (benefit) expense								(11,734	)		4,301
Net realized investment gain on sale of securities		(336	)		(58	)		(4,390	)		(1,578	)
Interest credited to policyholder deposits		991			1,195			2,144			2,436
Share-based compensation		(1,443	)		1,085			170			2,313
(Increase) decrease in assets:
Premium and other receivables, net		(3,263	)		(35,687	)		(25,078	)		(63,589	)
Deferred policy acquisition costs and value of business acquired		(822	)		(685	)		(5,621	)		(3,562	)
Deferred taxes		(265	)		162			(280	)		178
Other assets		(37	)		(26,485	)		(1,229	)		(31,425	)
Increase (decrease) in liabilities:
Claim liabilities		42,361			33,301			16,297			(9,901	)
Liability for future policy benefits		4,930			17,395			10,195			19,961
Unearned premiums		84,470			(4,387	)		96,251			1,791
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs		2,836			1,663
Liability to Federal Employees' Health Benefits and Federal Employees' Programs								5,993			(2,141	)
Accounts payable and accrued liabilities		11,274			35,574			33,774			52,350
Net cash provided by operating activities		130,965			31,260
(Continued)
Net cash provided by (used in) operating activities								133,705			(10,565	)

(Continued)

Table of Contents

Triple-S Management Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(~~Dollar~~dollar amounts in thousands)

	Three months ended March 31,						Six months ended June 30,
	2017			2016			2017			2016
Cash flows from investing activities:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold	$	26,023		$	90,328		$	88,141		$	163,150
Fixed maturities matured/called		5,001			699			8,938			14,301
Equity securities sold		10,272			11,257			21,499			32,252
Securities held to maturity:
Fixed maturities matured/called		703			-			703			700
Acquisition of investments:
Securities available for sale:
Fixed maturities		(33,738	)		(118,039	)		(141,116	)		(150,005	)
Equity securities		(5,482	)		(92,956	)		(20,424	)		(136,104	)
Securities held to maturity:
Fixed maturities		(382	)		-			(703	)		(609	)
Increase in other investments		(2,044	)		(182	)		(731	)		(1,383	)
Net change in policy loans		18			(231	)		(152	)		(400	)
Net capital expenditures		(3,295	)		(1,465	)		(8,704	)		(2,716	)
Net cash used in investing activities		(2,924	)		(110,589	)		(52,549	)		(80,814	)
Cash flows from financing activities:
Change in outstanding checks in excess of bank balances		(11,401	)		1,916			(8,545	)		4,074
Repayments of long-term borrowings		(24,676	)		(410	)		(1,212	)		(820	)
Proceeds from long-term borrowings		24,266			-
Repurchase and retirement of common stock		-			(8,027	)		-			(14,560	)
Proceeds from policyholder deposits		4,116			3,403			8,166			7,942
Surrenders of policyholder deposits		(4,890	)		(2,905	)		(10,467	)		(6,935	)
Net cash used in financing activities		(12,585	)		(6,023	)		(12,058	)		(10,299	)
Net increase (decrease) in cash and cash equivalents		115,456			(85,352	)		69,098			(101,678	)
Cash and cash equivalents:
Beginning of period		103,428			197,818			103,428			197,818
End of period	$	218,884		$	112,466		$	172,526		$	96,140

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

(1)	Basis of Presentation

The accompanying condensed consolidated interim financial statements prepared by Triple-S Management Corporation and its subsidiaries are unaudited. In this filing, the “Corporation”, the “Company”, “TSM”, “we”, “us” and “our” refer to Triple-S Management Corporation and its subsidiaries. The condensed consolidated interim financial statements do not include all of the information and the footnotes required by accounting principles generally accepted in the U.S. (GAAP) for complete financial statements. These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016.

In the opinion of management, all adjustments, consisting of a normal recurring nature necessary for a fair presentation of such condensed consolidated interim financial statements, have been included. The results of operations for the three months and six months ended ~~March 31,~~June 30, 2017 are not necessarily indicative of the results for the full year ending December 31, 2017.

(2)	Recent Accounting Standards

On May 10, 2017, the Financial Accounting Standard Board (FASB) issued guidance to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change in the terms and conditions of a share-based payment award. The amendments in this update affect any entity that changes the terms or conditions of a share-based payment award. This guidance indicates an entity should account for the effects of a modification unless the following criteria are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity or liability instrument is the same as the classification of the original award immediately before the original award is modified. For all companies, these amendments, which should be applied on a prospective basis, are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are currently evaluating the impact the adoption of this guidance may have on the Company's consolidated financial statements.

On March 10, 2017, the FASB issued guidance to improve the presentation of defined benefit costs in the income statement. In particular, the guidance requires that an employer report the service cost component in the same line item(s) as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. Additionally, this guidance allows only the service cost component to be eligible for capitalization, when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). For public companies, these amendments, which should be applied on a prospective basis, are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Since we do not present a subtotal of income from operations, the adoption of this guidance should not have a material impact on the presentation of the Company’s consolidated result of operations.

Table of Contents

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

On January 26, 2017, the FASB issued guidance to simplify the manner in which an entity is required to evaluate goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this guidance, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, this guidance removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. For public companies, these amendments, which should be applied on a prospective basis, are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently evaluating the impact the adoption of this guidance may have on the ~~Company’s~~Company's consolidated financial statements.

Other than the accounting pronouncement disclosed above, there were no other new accounting pronouncements issued during the three months and six months ended ~~March 31,~~June 30, 2017 that could have a material impact on the Corporation’s financial position, operating results or ~~financials statement~~financial statements disclosures.

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

(3)	Investment in Securities

The amortized cost for debt securities and cost for equity securities, gross unrealized gains, gross unrealized losses, and estimated fair value for available-for-sale and held-to-maturity securities by major security type and class of security at ~~March 31,~~June 30, 2017 and December 31, 2016, were as follows:

	March 31, 2017									June 30, 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	$	41,485	$	61	$	-		$	41,546	$	40,358	$	29	$	(4	)	$	40,383
U.S. Treasury securities and obligations of U.S. government instrumentalities		72,723		169		(14	)		72,878		79,932		180		(115	)		79,997
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		18,248		857		(37	)		19,068		11,719		445		(3	)		12,161
Municipal securities		651,091		34,191		(304	)		684,978		682,576		34,459		(393	)		716,642
Corporate bonds		279,540		12,457		(367	)		291,630		278,417		15,626		(89	)		293,954
Residential mortgage-backed securities		638		29		-			667		11,877		35		(3	)		11,909
Collateralized mortgage obligations		42,919		83		(224	)		42,778		41,129		97		(111	)		41,115
Total fixed maturities		1,106,644		47,847		(946	)		1,153,545		1,146,008		50,871		(718	)		1,196,161
Equity securities - Mutual funds		236,356		40,910		(117	)		277,149
Equity securities:
Mutual funds											214,923		43,446		(6	)		258,363
Alternative investments											29,336		368		(247	)		29,457
Total equity maturites											244,259		43,814		(253	)		287,820
Total	$	1,343,000	$	88,757	$	(1,063	)	$	1,430,694	$	1,390,267	$	94,685	$	(971	)	$	1,483,981

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

	December 31, 2016
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Securities available for sale:
Fixed maturities:
Obligations of government-sponsored enterprises	$	41,442	$	87	$	(15	)	$	41,514
U.S. Treasury securities and obligations of U.S.government instrumentalities		85,652		157		(9	)		85,800
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		17,930		2,189		(68	)		20,051
Municipal securities		650,175		34,187		(559	)		683,803
Corporate bonds		263,351		12,182		(661	)		274,872
Residential mortgage-backed securities		684		34		-			718
Collateralized mortgage obligations		45,069		58		(242	)		44,885
Total fixed maturities		1,104,303		48,894		(1,554	)		1,151,643
Equity securities - Mutual funds		240,699		30,101		(451	)		270,349
Total	$	1,345,002	$	78,995	$	(2,005	)	$	1,421,992

December 31, 2016

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair value

Securities available for sale:
Fixed maturities:
Obligations of government-sponsored enterprises $ 41,442 $ 87 $ (15 ) $ 41,514
U.S. Treasury securities and obligations of U.S. government instrumentalities 85,652 157 (9 ) 85,800
Obligations of the Commonwealth of Puerto Rico and its instrumentalities 17,930 2,189 (68 ) 20,051
Municipal securities 650,175 34,187 (559 ) 683,803
Corporate bonds 263,351 12,182 (661 ) 274,872
Residential mortgage-backed securities 684 34 - 718
Collateralized mortgage obligations 45,069 58 (242 ) 44,885
Total fixed maturities 1,104,303 48,894 (1,554 ) 1,151,643
Equity securities - Mutual funds 240,699 30,101 (451 ) 270,349
Total $ 1,345,002 $ 78,995 $ (2,005 ) $ 1,421,992

	March 31, 2017								June 30, 2017
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Securities held to maturity:
U.S. Treasury securities and obligations of U.S. government instrumentalities	$	619	$	160	$	-	$	779
U.S. Treasury securities and obligations of U.S.government instrumentalities									$	618	$	166	$	-	$	784
Residential mortgage-backed securities		191		18		-		209		191		2		-		193
Certificates of deposit		1,704		-		-		1,704		2,026		-		-		2,026
Total	$	2,514	$	178	$	-	$	2,692	$	2,835	$	168	$	-	$	3,003

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

	December 31, 2016
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Securities held to maturity:
U.S. Treasury securities and obligations of U.S.government instrumentalities	$	619	$	158	$	-	$	777
Residential mortgage-backed securities		191		18		-		209
Certificates of deposit		2,026		-		-		2,026
Total	$	2,836	$	176	$	-	$	3,012

December 31, 2016

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair value

Securities held to maturity:
U.S. Treasury securities and obligations of U.S. government instrumentalities $ 619 $ 158 $ - $ 777
Residential mortgage-backed securities 191 18 - 209
Certificates of deposit 2,026 - - 2,026
Total $ 2,836 $ 176 $ - $ 3,012

Gross unrealized losses on investment securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of ~~March 31,~~June 30, 2017 and December 31, 2016 were as follows:

	March 31, 2017																					June 30, 2017
	Less than 12 months							12 months or longer							Total							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		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

Securities available for sale
Securities available for sale:
Fixed maturities
Obligations of government-sponsored enterprises																						$	6,495	$	(4	)		2	$	-	$	-			-	$	6,495	$	(4	)		2
U.S. Treasury securities and obligations of U.S. governmental instrumentalities	$	12,940	$	(14	)		1	$	-	$	-			-	$	12,940	$	(14	)		1		41,408		(115	)		5		-		-			-		41,408		(115	)		5
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		12,704		(37	)		6		-		-			-		12,704		(37	)		6		7,939		(3	)		5		-		-			-		7,939		(3	)		5
Municipal securities		64,518		(304	)		9		-		-			-		64,518		(304	)		9		90,575		(393	)		12		-		-			-		90,575		(393	)		12
Corporate bonds		84,093		(367	)		18		-		-			-		84,093		(367	)		18		32,355		(89	)		10		-		-			-		32,355		(89	)		10
Residential mortgage-backed securities																							2,017		(3	)		1		-		-			-		2,017		(3	)		1
Collateralized mortgage obligations		26,043		(222	)		6		665		(2	)		1		26,708		(224	)		7		25,454		(108	)		6		564		(3	)		1		26,018		(111	)		7
Total fixed maturities		200,298		(944	)		40		665		(2	)		1		200,963		(946	)		41		206,243		(715	)		41		564		(3	)		1		206,807		(718	)		42
Equity securities-Mutual funds		2,831		(49	)		4		2,006		(68	)		1		4,837		(117	)		5
Equity securities
Mutual funds																							1,994		(6	)		1		-		-			-		1,994		(6	)		1
Alternative investments																							4,983		(129	)		7		2,431		(118	)		1		7,414		(247	)		8
Total equity securities																							6,977		(135	)		8		2,431		(118	)		1		9,408		(253	)		9
Total for securities available for sale	$	203,129	$	(993	)		44	$	2,671	$	(70	)		2	$	205,800	$	(1,063	)		46	$	213,220	$	(850	)		49	$	2,995	$	(121	)		2	$	216,215	$	(971	)		51

Table of Contents

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

	December 31, 2016																					December 31, 2016
	Less than 12 months							12 months or longer							Total							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		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
Securities available for sale:
Fixed maturities
Obligations of government-sponsored enterprises	$	9,483	$	(15	)		1	$	-	$	-			-	$	9,483	$	(15	)		1	$	9,483	$	(15	)		1	$	-	$	-			-	$	9,483	$	(15	)		1
U.S. Treasury securities and obligations of U.S. governmental instrumentalities		12,937		(9	)		1		-		-			-		12,937		(9	)		1		12,937		(9	)		1		-		-			-		12,937		(9	)		1
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		7,758		(68	)		5		-		-			-		7,758		(68	)		5		7,758		(68	)		5		-		-			-		7,758		(68	)		5
Municipal securities		84,252		(559	)		13		-		-			-		84,252		(559	)		13		84,252		(559	)		13		-		-			-		84,252		(559	)		13
Corporate bonds		105,054		(661	)		22		-		-			-		105,054		(661	)		22		105,054		(661	)		22		-		-			-		105,054		(661	)		22
Collateralized mortgage obligations		32,120		(239	)		8		784		(3	)		1		32,904		(242	)		9		32,120		(239	)		8		784		(3	)		1		32,904		(242	)		9
Total fixed maturities		251,604		(1,551	)		50		784		(3	)		1		252,388		(1,554	)		51		251,604		(1,551	)		50		784		(3	)		1		252,388		(1,554	)		51
Equity securities-Mutual funds		22,615		(451	)		4		-		-			-		22,615		(451	)		4		22,615		(451	)		4		-		-			-		22,615		(451	)		4
Total for securities available for sale	$	274,219	$	(2,002	)		54	$	784	$	(3	)		1	$	275,003	$	(2,005	)		55	$	274,219	$	(2,002	)		54	$	784	$	(3	)		1	$	275,003	$	(2,005	)		55

The Corporation reviews the investment portfolios under the Corporation’s impairment review policy. Given market conditions and the significant judgments involved, there is a continuing risk that declines in fair value may occur and material other-than-temporary impairments may be recorded in future periods. The Corporation from time to time may sell investments as part of its asset/liability management process or to reposition its investment portfolio based on current and expected market conditions.

Obligations of Government-Sponsored Enterprises, Obligations of U.S. Government Instrumentalities and Municipal Securities: The unrealized losses on the Corporation’s investments in obligations of Government-Sponsored Enterprises, U.S. Government Instrumentalities and Municipal Securities were mainly caused by fluctuations in interest rates and general market conditions. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment. In addition, these ~~investments~~positions have investment grade ratings. Because the decline in fair value is attributable to changes in interest rates and not credit quality; because the Corporation does not intend to sell the investments and it is ~~not~~ more likely than not that the Corporation will not be required to sell the investments before recovery of their amortized cost basis, which may be maturity; and because the Corporation expects to collect all contractual cash flows, these investments are not considered other-than-temporarily impaired.

Obligations of the Commonwealth of Puerto Rico and its Instrumentalities: Our holdings in Puerto Rico municipals can be divided in (1) escrowed bonds with a fair value of ~~$7,848~~$7,939 and a gross unrealized loss of ~~$37,~~$3, and (2) senior lien bonds issued by the Puerto Rico Sales Tax Financing Corporation (Cofina) with a fair value of ~~$11,220~~$4,222 and a gross unrealized gain of ~~$857.~~$445. As of ~~March 31,~~June 30, 2017, investments in escrow bonds are not considered other-than-temporarily impaired based on the length of time the funds have been in a loss position, the decline in estimated fair value is principally attributable to changes in interest rates, and the fact that these bonds are backed by US Government securities, and therefore have an implicit AA+/Aaa rating.

There was no impairment on Cofina positions during the three months and six months ended ~~March 31,~~June 30, 2017 and 2016.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

Corporate Bonds: The unrealized losses of these bonds were principally caused by fluctuations in interest rates and general market conditions. All corporate bonds with an unrealized loss have investment grade ratings. Because the decline in estimated fair value is principally attributable to changes in interest rates; because the Company does not intend to sell the investments and it is ~~not~~ more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost basis, which may be maturity; and because the Company expects to collect all contractual cash flows, these investments are not considered other-than-temporarily impaired.

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

Residential Mortgage-Backed Securities and Collateralized ~~mortgage obligations~~Mortgage Obligations: The unrealized losses on investments in residential mortgage-backed securities collateralized mortgage obligations (“CMOs”) were mostly caused by fluctuations in interest rates and credit spreads. The contractual cash flows of these securities, other than private CMOs, are guaranteed by a U.S. government-sponsored enterprise. Any loss in these securities is determined according to the seniority level of each tranche, with the least senior (or most junior), typically the unrated residual tranche, taking any initial loss. The investment grade credit rating of our securities reflects the seniority of the securities that the Corporation owns. The Corporation does not consider these investments other-than-temporarily impaired because the decline in fair value is attributable to changes in interest rates and not credit quality; the Corporation does not intend to sell the investments and it is more likely than not that the Corporation will not be required to sell the investments before recovery of their amortized cost basis, which may be maturity; and because the Corporation expects to collect all contractual cash flows.

Mutual ~~Funds:~~Funds and Alternative Investments: As of ~~March 31,~~June 30, 2017, investments in mutual funds and alternative investments with unrealized losses are not considered other-than-temporarily impaired based on market conditions and the length of time the funds have been in a loss position. There were no ~~impairment~~impairments on mutual funds and alternative investments during the three months and six months ended ~~March 31, 2017~~June 30, 2017. During the three and ~~2016.~~six months ended June 30, 2016, we recorded an other-than-temporary impairment related to these mutual funds amounting to $1,434.

Maturities of investment securities classified as available for sale and held to maturity were as follows:

	March 31, 2017				June 30, 2017
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
Securities available for sale:
Due in one year or less	$	48,742	$	48,946	$	71,618	$	71,772
Due after one year through five years		322,122		325,519		324,426		327,707
Due after five years through ten years		131,128		137,138		131,235		137,195
Due after ten years		561,095		598,497		565,723		606,463
Residential mortgage-backed securities		638		667		11,877		11,909
Collateralized mortgage obligations		42,919		42,778		41,129		41,115
	$	1,106,644	$	1,153,545	$	1,146,008	$	1,196,161
Securities held to maturity:
Due in one year or less	$	1,704	$	1,704	$	2,026	$	2,026
Due after ten years		619		779		618		784
Residential mortgage-backed securities		191		209		191		193
	$	2,514	$	2,692	$	2,835	$	3,003

Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

Information regarding realized and unrealized gains and losses from investments is as follows:

	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016			2017			2016
Realized gains (losses):
Fixed maturity securities:
Securities available for sale:
Gross gains from sales	$	17		$	961		$	384		$	912		$	401		$	1,873
Gross losses from sales		(119	)		(1,359	)		(517	)		(103	)		(636	)		(1,462	)
Total fixed maturity securities		(102	)		(398	)		(133	)		809			(235	)		411
Equity securities:
Securities available for sale:
Gross gains from sales		438			587			4,189			2,525			4,627			3,112
Gross losses from sales		-			(131	)		(2	)		(380	)		(2	)		(511	)
Gross losses from other-than-temporary impairments								-			(1,434	)		-			(1,434	)
Total equity securities		438			456			4,187			711			4,625			1,167
Net realized gains on securities available for sale	$	336		$	58		$	4,054		$	1,520		$	4,390		$	1,578

	Three months ended March 31,					Three months ended June 30,					Six months ended June 30,
	2017			2016		2017			2016		2017			2016
Changes in net unrealized gains (losses):
Recognized in accumulated other comprehensive income:
Fixed maturities – available for sale	$	(439	)	$	22,589	$	3,252		$	18,739	$	2,813		$	41,328
Equity securities – available for sale		11,143			6,769		2,768			2,908		13,911			9,677
	$	10,704		$	29,358	$	6,020		$	21,647	$	16,724		$	51,005
Not recognized in the consolidated financial statements:
Fixed maturities – held to maturity	$	2		$	36	$	(10	)	$	27	$	(8	)	$	63

The change in deferred tax liability on unrealized gains recognized in accumulated other comprehensive income during the ~~three~~six months ended ~~March 31,~~June 30, 2017 and 2016 was ~~$2,136~~$3,931 and $~~9,781~~15,598, respectively.

As of ~~March 31,~~June 30, 2017 and December 31, 2016, no individual investment in securities exceeded 10% of stockholders’ equity.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

(4)	Premiums and Other Receivables, Net

Premiums and other receivables, net were as follows:

	March 31, 2017		December 31, 2016		June 30, 2017		December 31, 2016
Premium	$	100,691	$	91,528	$	107,058	$	91,528
Self-funded group receivables		50,643		57,728		51,646		57,728
FEHBP		14,274		14,321		15,582		14,321
Agent balances		27,468		25,495		40,340		25,495
Accrued interest		11,338		13,668		13,839		13,668
Reinsurance recoverable		54,854		58,295		55,772		58,295
Unsettled sales						6,715		-
Other		65,152		62,637		62,859		62,637
		324,420		323,672		353,811		323,672
Less allowance for doubtful receivables:
Premium		23,584		27,320		23,949		27,320
Other		7,999		9,987		9,314		9,987
		31,583		37,307		33,263		37,307
Total premium and other receivables, net	$	292,837	$	286,365	$	320,548	$	286,365

As of ~~March 31,~~June 30, 2017 and December 31, 2016, the Company had premiums and other receivables of ~~$51,533~~$63,565 and $57,750, respectively, from the Government of Puerto Rico, including its agencies, municipalities and public corporations. The related allowance for doubtful receivables as of ~~March 31,~~June 30, 2017 and December 31, 2016 were ~~$14,050~~$14,853 and $18,812, respectively.

Table of Contents

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

(5)	Fair Value Measurements

Our condensed consolidated balance sheets include the following financial instruments: securities available for sale, policy loans, policyholder deposits, and long-term borrowings. We consider the carrying amounts of policy loans, policyholder deposits, and long-term borrowings to approximate their fair value due to the short period of time between the origination of these instruments and the expected realization or payment. Certain assets are measured at fair value on a recurring basis and are disclosed below. These assets are classified into one of three levels of a hierarchy defined by GAAP. For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see the consolidated financial statements and notes thereto included in our 2016 Form 10-K.

The following tables summarize fair value measurements by level for assets measured at fair value on a recurring basis:

	March 31, 2017								June 30, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Securities available for sale:
Fixed maturity securities
Obligations of government-sponsored enterprises	$	-	$	41,546	$	-	$	41,546	$	-	$	40,383	$	-	$	40,383
U.S. Treasury securities and obligations of U.S government instrumentalities		72,878		-		-		72,878		79,997		-		-		79,997
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		-		19,068		-		19,068		-		12,161		-		12,161
Municipal securities		-		684,978		-		684,978		-		716,642		-		716,642
Corporate bonds		-		291,630		-		291,630		-		293,954		-		293,954
Residential agency mortgage-backed securities		-		667		-		667		-		11,909		-		11,909
Collateralized mortgage obligations		-		42,778		-		42,778		-		41,115		-		41,115
Total fixed maturities		72,878		1,080,667		-		1,153,545		79,997		1,116,164		-		1,196,161
Equity securities - Mutual funds		174,593		78,803		23,753		277,149		173,957		84,406		-		258,363
Alternative investments - measured at net asset value										-		-		-		29,457
Total	$	247,471	$	1,159,470	$	23,753	$	1,430,694	$	253,954	$	1,200,570	$	-	$	1,483,981

December 31, 2016
Level 1 Level 2 Level 3 Total
Securities available for sale:
Fixed maturity securities
Obligations of government-sponsored enterprises $ - $ 41,514 $ - $ 41,514
U.S. Treasury securities and obligations of U.S government instrumentalities 85,800 - - 85,800
Obligations of the Commonwealth of Puerto Rico and its instrumentalities - 20,051 - 20,051
Municipal securities - 683,803 - 683,803
Corporate bonds - 274,872 - 274,872
Residential agency mortgage-backed securities - 718 - 718
Collateralized mortgage obligations - 44,885 - 44,885
Total fixed maturities 85,800 1,065,843 - 1,151,643
Equity securities - Mutual funds 166,595 76,222 27,532 270,349
Total $ 252,395 $ 1,142,065 $ 27,532 $ 1,421,992

Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value amount presented in this table is intended to facilitate the reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Securities available for sale:
Fixed maturity securities
Obligations of government-sponsored enterprises	$	-	$	41,514	$	-	$	41,514
U.S. Treasury securities and obligations of U.S government instrumentalities		85,800		-		-		85,800
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		-		20,051		-		20,051
Municipal securities		-		683,803		-		683,803
Corporate bonds		-		274,872		-		274,872
Residential agency mortgage-backed securities		-		718		-		718
Collateralized mortgage obligations		-		44,885		-		44,885
Total fixed maturities		85,800		1,065,843		-		1,151,643
Equity securities - Mutual funds		166,595		76,222		27,532		270,349
Total	$	252,395	$	1,142,065	$	27,532	$	1,421,992

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

There were no transfers in and/or out of Level 3 and between Levels 1 and 2 during the three months and six months ended ~~March 31,~~June 30, 2017 and 2016. Level 3 securities are partnerships measured at fair value using the net asset value affected by changes in the fair market value of the investments held in these partnerships.

The alternative investments represent investments in partnerships which invest in several equity and private equity funds. Portfolios are diversified by vintage year, stage, geography, business sectors and number of investments. These investments are not redeemable with the funds. Distributions from each fund are received as the underlying investments of the funds are liquidated. It is estimated that the underlying assets of the funds will be liquidated in the next 5 to 12 years. The fair values of the investments in this class have been estimated using the net asset value of the Company’s ownership interest in the partnerships. Total unfunded capital commitments for these positions as of June 30, 2017 amounted to $118,668.

1718

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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 ended March 31 is as follows:

Fair Value Measurements
Using Significant
Unobservable Inputs (Level 3)

2017 2016
Beginning balance $ 27,532 $ 7,958
Realized gains 119 151
Unrealized in other accumulated comprehensive income (64 ) (649 )
Purchases 5,260 8
Capital distributions (9,094 ) (471 )
Ending balance $ 23,753 $ 6,997

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 March 31, 2017 and December 31, 2016~~ are as follows:

	March 31, 2017										June 30, 2017
	Carrying Value		Fair Value								Carrying		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Assets:
Policy loans	$	8,546	$	-	$	8,546	$	-	$	8,546	$	8,716	$	-	$	8,716	$	-	$	8,716

Liabilities:
Policyholder deposits	$	179,599	$	-	$	179,599	$	-	$	179,599	$	179,225	$	-	$	179,225	$	-	$	179,225
Long-term borrowings:
Loans payable to bank - variable		34,465		-		34,465		-		34,465		33,968		-		33,968		-		33,968
Total long-term borrowings		34,465		-		34,465		-		34,465		33,968		-		33,968		-		33,968
Total liabilities	$	214,064	$	-	$	214,064	$	-	$	214,064	$	213,193	$	-	$	213,193	$	-	$	213,193

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

Liabilities:
Policyholder deposits	$	179,382	$	-	$	179,382	$	-	$	179,382	$	179,382	$	-	$	179,382	$	-	$	179,382
Long-term borrowings:
Loans payable to bank - variable		11,187		-		11,187		-		11,187		11,187		-		11,187		-		11,187
6.6% senior unsecured notes payable		24,000		-		24,000		-		24,000		24,000		-		24,000		-		24,000
Total long-term borrowings		35,187		-		35,187		-		35,187		35,187		-		35,187		-		35,187
Total liabilities	$	214,569	$	-	$	214,569	$	-	$	214,569	$	214,569	$	-	$	214,569	$	-	$	214,569

1819

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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

A reconciliation of the beginning and ending balances of claim liabilities is as follows:

	Three months ended March 31, 2017									Three months ended June 30, 2017									Six months ended June 30, 2017
	Managed Care			Other Business Segments *			Consolidated			Managed Care			Other Business Segments *			Consolidated			Managed Care			Other Business Segments *			Consolidated

Claim liabilities at beginning of year	$	349,047		$	138,896		$	487,943		$	393,525		$	136,779		$	530,304		$	349,047		$	138,896		$	487,943
Reinsurance recoverable on claim liabilities		-			(38,998	)		(38,998	)		-			(35,898	)		(35,898	)		-			(38,998	)		(38,998	)
Net claim liabilities at beginning of year		349,047			99,898			448,945			393,525			100,881			494,406			349,047			99,898			448,945
Claims incurred
Current period insured events		602,620			28,226			630,846			580,608			26,282			606,890			1,183,241			54,508			1,237,749
Prior period insured events		(15,340	)		(1,333	)		(16,673	)		(1,355	)		(1,196	)		(2,551	)		(16,695	)		(2,529	)		(19,224	)
Total		587,280			26,893			614,173			579,253			25,086			604,339			1,166,546			51,979			1,218,525
Payments of losses and loss-adjustment expenses
Current period insured events		350,450			7,965			358,415			576,135			14,944			591,079			926,585			22,917			949,502
Prior period insured events		192,352			17,945			210,297			25,208			11,586			36,794			217,573			29,523			247,096
Total		542,802			25,910			568,712			601,343			26,530			627,873			1,144,158			52,440			1,196,598
Net claim liabilities at end of year		393,525			100,881			494,406			371,435			99,437			470,872			371,435			99,437			470,872
Reinsurance recoverable on claim liabilities		-			35,898			35,898			-			33,368			33,368			-			33,368			33,368
Claim liabilities at end of year	$	393,525		$	136,779		$	530,304		$	371,435		$	132,805		$	504,240		$	371,435		$	132,805		$	504,240

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

	Three months ended June 30, 2016									Six months ended June 30, 2016
	Managed Care			Other Business Segments *			Consolidated			Managed Care			Other Business Segments *			Consolidated

Claim liabilities at beginning of year	$	381,448		$	143,618		$	525,066		$	348,297		$	143,468		$	491,765
Reinsurance recoverable on claim liabilities		-			(39,871	)		(39,871	)		-			(40,714	)		(40,714	)
Net claim liabilities at beginning of year		381,448			103,747			485,195			348,297			102,754			451,051
Claims incurred
Current period insured events		596,909			25,950			622,859			1,192,499			51,840			1,244,339
Prior period insured events		(6,728	)		(686	)		(7,414	)		(6,028	)		(2,934	)		(8,962	)
Total		590,181			25,264			615,445			1,186,471			48,906			1,235,377
Payments of losses and loss-adjustment expenses
Current period insured events		583,381			16,557			599,938			948,420			21,653			970,073
Prior period insured events		46,743			10,204			56,947			244,843			27,757			272,600
Total		630,124			26,761			656,885			1,193,263			49,410			1,242,673
Net claim liabilities at end of year		341,505			102,250			443,755			341,505			102,250			443,755
Reinsurance recoverable on claim liabilities		-			38,109			38,109			-			38,109			38,109
Claim liabilities at end of year	$	341,505		$	140,359		$	481,864		$	341,505		$	140,359		$	481,864

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.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

The favorable developments in the claims incurred and loss-adjustment expenses for prior period insured events for the three months and six months ended ~~March 31,~~June 30, 2017 and 2016 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 ~~$6,690~~$6,945 and ~~$6,762~~$13,635 during the three months and six months ended ~~March 31,~~June 30, 2017, respectively. The change in the liability for future policy benefits during the three months and six months ended June 30, 2016 amounted to $6,642 and $13,404, respectively.

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

The following is information about total incurred but not reported (IBNR) liabilities plus expected development on reported claims included in the liability for unpaid claims adjustment expenses for the Managed Care segment as of ~~March 31,~~June 30, 2017.

Incurred Year	Total of IBNR Liabilities Plus Expected Development on Reported Claims		Total of IBNR Liabilities Plus Expected Development on Reported Claims
2015		60,717		68,022
2016		80,062		46,181
2017		252,163		256,656

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

(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

	June 30,		December 31,
	2017		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 2.00% at June 30, 2017.)		10,367		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 3.90% at June 30, 2017.)		19,730		-
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 4.40% at June 30, 2017.)		3,871		-

Total borrowings		33,968		35,187

Less: unamortized debt issuance costs		301		102
	$	33,667	$	35,085

On December 28, 2016, TSM entered into a $35,500 credit agreement with a commercial bank in Puerto Rico. The agreement consists of three term loans: (i) Term Loan A in the principal amount of $11,187, (ii) Term Loan B in the principal amount of $20,150 and (iii) Term Loan C in the principal amount of $4,116. Term Loan A was used to refinance the outstanding balance of 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 January 11, 2017 and 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, including negative covenants imposing certain restrictions on the Corporation’s business.

~~Table of Contents~~

~~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. As of June 30, 2017, there is no outstanding balance in this line of credit.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

(8)	Pension Plan

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

	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016			2017			2016
Components of net periodic benefit cost:
Service cost	$	-		$	1,250		$	-		$	878		$	-		$	2,128
Interest cost		1,798			2,762			1,798			1,939			3,596			4,701
Expected return on assets		(2,199	)		(2,926	)		(2,199	)		(2,054	)		(4,398	)		(4,980	)
Amortization of prior service benefit		-			(144	)		-			(102	)		-			(246	)
Amortization of actuarial loss		86			1,183			86			831			172			2,014
Settlement loss								631			-			631			-
Net periodic benefit cost	$	(315	)	$	2,125		$	316		$	1,492		$	1		$	3,617

Effective January 31, 2017, the Company froze the pay and service components of 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, 2016 that it expected to contribute $4,000 to the pension program in 2017. As of ~~March 31,~~June 30, 2017, the Corporation has not made contributions to the pension program.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

(unaudited)

(9)	Comprehensive Income

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

							Three months ended June 30,						Six months ended June 30,
	Three months ended March 31,						2017			2016			2017			2016
	2017			2016

Net Unrealized Gain on Securities Beginning Balance	$	62,371		$	62,478		$	70,843		$	82,055		$	62,371		$	62,478
Other comprehensive income before reclassifications		8,741			19,623			7,639			18,193			16,380			37,817
Amounts reclassified from accumulated other comprehensive income		(269	)		(46	)		(3,243	)		(2,363	)		(3,512	)		(2,410	)
Net current period change		8,472			19,577			4,396			15,830			12,868			35,407
Ending Balance		70,843			82,055			75,239			97,885			75,239			97,885
Liability for Pension Benefits Beginning Balance		(19,976	)		(36,855	)		(19,923	)		(36,221	)		(19,976	)		(36,855	)
Amounts reclassified from accumulated other comprehensive income		53			634			53			445			106			1,079
Ending Balance		(19,923	)		(36,221	)		(19,870	)		(35,776	)		(19,870	)		(35,776	)
Accumulated Other Comprehensive Income Beginning Balance		42,395			25,623			50,920			45,834			42,395			25,623
Other comprehensive income before reclassifications		8,741			19,623			7,639			18,193			16,380			37,817
Amounts reclassified from accumulated other comprehensive income		(216	)		588			(3,190	)		(1,918	)		(3,406	)		(1,331	)
Net current period change		8,525			20,211			4,449			16,275			12,974			36,486
Ending Balance	$	50,920		$	45,834		$	55,369		$	62,109		$	55,369		$	62,109

Puerto Rico Economy

During the past decade, Puerto Rico has been facing economic and fiscal challenges and its economy has been contracting. In response to the Commonwealth of Puerto Rico (the ~~Commonwealth)~~“Commonwealth”) fiscal and economic crisis, on June 30, 2016, the U.S. Congress enacted the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”), which, 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 and its instrumentalities. PROMESA also established a temporary stay on litigation to enforce rights or remedies related to financial liabilities of the Commonwealth, its instrumentalities and municipalities, which expired on May 1, 2017. Finally, PROMESA established two separate mechanisms to restructure the debts of 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 is modeled after Chapter 9 of 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 submitted a 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 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.

~~The~~ Oversight Board also required ~~that certain Commonwealth~~and approved fiscal plans for several government instrumentalities, ~~such as Government Development Bank for Puerto Rico,~~including the Puerto Rico Aqueduct and Sewer Authority, the Puerto Rico Electric Power Authority (“PREPA”), and the ~~University of~~ Puerto Rico ~~prepare~~Highways 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 may require other instrumentalities and municipalities to prepare and submit fiscal plans.Transportation Authority (“PRHTA”), among others.

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On May 1, 2017, the temporary stay on litigation established by PROMESA expired. After the expiration of the temporary stay, several 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 an order seeking the protection of the provisions of Title III of PROMESA for the Commonwealth. ~~On May 5, 2017,~~Subsequently, the Oversight Board ~~also sought the protection of~~filed Title III ~~of PROMESA for~~petitions with respect to the Puerto Rico Sales Tax Financing Corporation (“COFINA” by its Spanish acronym), which issued the sales and use tax-backed ~~bonds.~~bonds, the Employee Retirement System, PRHTA and PREPA. While the proceedings under Title III of PROMESA are ongoing, all enforcement and collection actions against the Commonwealth and ~~COFINA~~these instrumentalities 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, and bonds from these government instrumentalities will likely be restructured and such restructuring could lead to significant additional losses on such holdings. Further, on May 30, 2017, pursuant to a court order under COFINA’s Title III proceeding, funds held by the trustee of the COFINA bonds have not been applied for the payment of such bonds pending the resolution of various legal disputes. On June 6, 2017, S&P downgraded COFINA to “D”. Although as of the date hereof, these entities are the only instrumentalities for which the Oversight Board has sought the restructuring authority provided by PROMESA, in the future, the Oversight Board may use the restructuring mechanisms of PROMESA for other instrumentalities of the Commonwealth, including it municipalities.

Although the Oversight Board has not sought the 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’s health plan, ASES may be affected by the 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 policy includes guaranteeing the continuity of public services in essential areas such as health, security, education, social work and 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 ~~March 31,~~June 30, 2017, the Company had premiums and other receivables of ~~$51.5~~$63.6 million from the Government of Puerto Rico, including its agencies, municipalities and public corporations with a related allowance for doubtful receivables of ~~$14.1~~$14.9 million. We also hold several positions categorized as Obligations of the Commonwealth of Puerto Rico, including ~~Cofina bonds,~~one COFINA bond, which are susceptible to the aforementioned recent developments in the economy, see note 3 to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Legislation

On July 23, 2017, the Commonwealth enacted Act 47-2017 (“Act 47”), which, among other things, imposes restrictions on utilization review (“UR”) processes related to hospitalizations and the ability of managed care organizations (“MCO”s), to conduct internal review processes at any level of appeal. Act 47 also creates a statutory cause of action against MCOs for intervening with the “diagnostic and medical treatment of a patient” making them joint and severally liable in those cases in which the patient suffers damages as a direct or indirect result of such intervention. Act 47 orders the Puerto Rico Patient's Advocate Office and the Puerto Rico Health Insurance Administration (“ASES”), to adopt the necessary regulations to ensure compliance with the provisions of Act 47 within 60 days of its enactment. Act 47 specifically orders ASES to regulate UR according to the United States’ national standards. We are closely monitoring how Act 47 and its regulations will impact the Company.

Table of Contents

Puerto Rico Government Health Reform Program

~~Current Medicaid premiums rates are effective until~~On June 30, ~~2017;~~2017, TSS agreed to extend its contract with ASES for the ~~negotiation~~provision of health services in the Metro North and West regions of the Puerto Rico Government’s health insurance program, which expired on June 30, 2017, for a three-month period beginning July 1, 2017 and ending September 30, 2017. This extension is intended to ensure the continuity of services while the parties conclude negotiations for the renewal of the contract through the remainder of the Puerto Rico Government’s 2017-2018 fiscal year, which ends June 30, 2018. Under the contract extension, ASES will increase its payment to TSS from a rate of $165.93 to $183.38 per member per month (PMPM) for the Metro North region and from $138.37 to $148.99 PMPM for the West region. The new rates reflect cost and utilization trends for the 2016-2017 fiscal year and are subject to CMS approval, which is expected to occur during the 90 day extension period. ASES will continue to pay current PMPM rates until CMS approves new PMPM rates, at which time ASES will pay the ~~end~~cumulative difference between both rates. Upon reaching an agreement on outstanding terms of the ~~three year agreement, is ongoing.~~contract renewal, the new rates will also apply for the remainder of the 2017-2018 fiscal year. See Item 1A. Risk Factors—Risks Related to Our Business – “We are dependent on a small number of government contracts to generate a significant amount of the revenues of our managed care business.’’ included in our Annual Report on Form 10-K for the year ended December 31, 2016.

~~Political and Regulatory Developments~~

CMS announced final benchmark rates for the 2018 Medicare Advantage plans. The call letter included revenue adjustments reflecting the 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 Advantage, the payment system for the Medicare Part D and changes in the methodology and payment policies used by CMS to establish rates could reduce our profitability and the benefits we offer our beneficiaries’’ included in our Annual Report on Form 10-K for the 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.

Managed Care Membership

	As of March 31,				As of June 30,
	2017		2016		2017		2016
Managed care enrollment:
Commercial ¹		505,848		544,846		498,393		528,902
Medicare		121,352		119,224		121,240		116,215
Medicaid		389,130		402,933		386,070		402,661
Total		1,016,330		1,067,003		1,005,703		1,047,778
Managed care enrollment by funding arrangement:
Fully-insured		847,327		886,547		839,299		868,157
Self-insured		169,003		180,456		166,404		179,621
Total		1,016,330		1,067,003		1,005,703		1,047,778

(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 March 31,					Three months ended June 30,				Six months ended June 30,
(dollar amounts in millions)	2017			2016		2017		2016		2017			2016
Revenues:
Premiums earned, net	$	702.3		$	738.5	$	722.9	$	729.1	$	1,425.2		$	1,467.6
Administrative service fees		4.4			5.1		4.5		4.5		8.9			9.6
Net investment income		12.0			11.4		12.7		12.9		24.7			24.2
Other operating revenues		0.9			0.8		1.1		0.9		2.1			1.7
Total operating revenues		719.6			755.8		741.2		747.4		1,460.9			1,503.1
Net realized investment gains		0.3			-		4.1		1.5		4.4			1.6
Other income, net		2.6			0.9		0.6		3.8		3.1			4.7
Total revenues		722.5			756.7		745.9		752.7		1,468.4			1,509.4
Benefits and expenses:
Claims incurred		620.9			626.7		611.3		622.1		1,232.2			1,248.8
Operating expenses		110.9			123.0		118.7		121.1		229.6			244.1
Total operating expenses		731.8			749.7		730.0		743.2		1,461.8			1,492.9
Interest expense		1.7			1.9		1.7		1.9		3.4			3.8
Total benefits and expenses		733.5			751.6		731.7		745.1		1,465.2			1,496.7
(Loss) income before taxes		(11.0	)		5.1
Income taxes (benefit) / expense		(6.7	)		1.7
Net (loss) income attributable to TSM	$	(4.3	)	$	3.4
Income before taxes							14.2		7.6		3.2			12.7
Income tax expense (benefit)							1.5		3.7		(5.2	)		5.4
Net income attributable to TSM							12.7		3.9		8.4			7.3

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

Operating Revenues

Consolidated premiums earned, net for the three months ended ~~March 31,~~June 30, 2017 decreased by ~~$36.2~~$6.2 million, or ~~4.9%~~0.9%, to ~~$702.3~~$722.9 million when compared to the three months ended ~~March 31,~~June 30, 2016. This decrease primarily reflects lower premiums in the Managed Care segment by ~~$38.2~~$7.6 million mainly due to lower Medicare risk score revenue adjustments and lower membership in the segment’s Medicaid and Commercial businesses. These decreases were partially offset by higher Life Insurance premiums, and by the Medicaid profit sharing accrual recorded during the three months ended June 30, 2016.

Net Realized Investment Gains

Consolidated net realized investment gains are the result of sales of debt and equity securities classified as available for sale, following our asset/liability management and tax planning strategies. The net realized gains for the period ending June 30, 2016 were partially offset by $1.4 million other-than-temporary impairments related to certain equity investments.

Other Income, Net

The ~~$1.7~~$3.2 million ~~increase~~decrease in consolidated other income reflects the collection of interest charged for late payment related to the current Medicaid ~~contract.~~contract during the three months ended June 30, 2016.

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Claims Incurred

Consolidated claims incurred decreased by ~~$5.8~~$10.8 million, or ~~0.9%~~1.7%, to ~~$620.9~~$611.3 million during the three months ended ~~March 31,~~June 30, 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. The decrease in Managed Care claims primarily reflects lower claims incurred in the segment’s ~~Medicaid~~Commercial and ~~Commercial~~Medicaid businesses primarily driven by lower enrollment, better claim experience in the Commercial business, offset in part by 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~~decreased by ~~350~~70 basis points to ~~88.4%~~84.6%.

~~Table of Contents~~

Operating Expenses

Consolidated operating expenses during the three months ended ~~March 31,~~June 30, 2017 decreased by ~~$12.1~~$2.4 million, or ~~9.8%~~2.0%, to ~~$110.9 million as compared to the operating expenses during the three months ended March 31, 2016.~~$118.7 million. The lower operating expenses are mostly the result of the decrease in the Health Insurance Providers Fee (HIP fee) of ~~$10.8~~$10.7 million due to the 2017 tax holiday, ~~and lower personnel costs.~~offset by increase in general operating expenses totaling approximately $8.1 million. For the three months ended ~~March 31,~~June 30, 2017, the consolidated operating expense ratio decreased 8020 basis points to ~~15.7%~~16.3%.

Income Taxes

Consolidated income tax expense decreased by $2.2 million, to an expense of $1.5 million for the three months ended June 30, 2017. The year over year change primarily results from the prior year reassessment done by the Property and Casualty segment of the tax rate used to measure several temporary differences, which increased the deferred tax rate from 20% to 39%, resulting in an increase to the 2016 deferred tax expense of $2.6 million.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Operating Revenues

Consolidated premiums earned, net for the six months ended June 30, 2017 decreased by $42.4 million, or 2.9%, to $1,425.2 million when compared to the six months ended June 30, 2016. This decrease primarily reflects lower premiums in the Managed Care segment by $45.7 million mainly due to lower membership in the segment’s Medicaid and Commercial businesses.

Net Realized Investment Gains

Consolidated net realized investment gains are the result of sales of debt and equity securities classified as available for sale, following our asset/liability management and tax planning strategies. The net realized gains for the period ended June 30, 2016 were partially offset by $1.4 million other-than-temporary impairments related to certain equity investments.

Other Income, Net

The $1.6 million decrease in consolidated other income reflects the collection of interest charged for late payment related to the current Medicaid contract during the six months ended June 30, 2016.

Claims Incurred

Consolidated claims incurred decreased by $16.6 million, or 1.3%, to $1,232.2 million during the six months ended June 30, 2017, mostly due to lower claims in the Managed Care segment. The decrease in Managed Care claims primarily reflects lower claims incurred in the segment’s Commercial and Medicaid businesses primarily driven by lower enrollment, better claim experience in the Commercial business, offset in part by higher pharmacy claims trends in the Medicare and Medicaid businesses, and enhanced benefits in the Medicare 2017 offerings. The consolidated loss ratio increased by 140 basis points to 86.5%.

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Operating Expenses

Consolidated operating expenses during the six months ended June 30, 2017 decreased by $14.5 million, or 5.9%, to $229.6 million as compared to the operating expenses during the six months ended June 30, 2016. The lower operating expenses and expense ratio are mostly the result of the decrease in the HIP Fee of $21.6 million due to the 2017 moratorium offset by increase in general operating expenses totaling approximately $6.7 million. For the six months ended June 30, 2017, the consolidated operating expense ratio decreased 50 basis points to 16.0%.

Income Taxes

Consolidated income taxes decreased by ~~$8.4~~$10.6 million, to a net benefit of ~~$6.7~~$5.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2017. The year over year change in income taxes primarily results from a loss before taxes incurred in the 2017 period ~~incurred~~ in the Managed Care segment.

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Managed Care Operating Results

	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
(dollar amounts in millions)	2017			2016			2017			2016			2017			2016
Operating revenues:
Medical premiums earned, net:
Commercial	$	205.1		$	215.5		$	203.3		$	215.0		$	408.4		$	430.5
Medicare		257.7			261.0			266.6			273.1			524.3			534.0
Medicaid		177.7			202.2			191.8			181.2			369.5			383.4
Medical premiums earned, net		640.5			678.7			661.7			669.3			1,302.2			1,347.9
Administrative service fees		5.6			6.3			5.8			5.8			11.4			12.1
Net investment income		3.9			3.5			4.1			4.1			8.0			7.6
Total operating revenues		650.0			688.5			671.6			679.2			1,321.6			1,367.6
Medical operating costs:
Medical claims incurred		587.3			596.3			579.2			590.2			1,166.5			1,186.5
Medical operating expenses		81.3			92.8			89.5			92.8			170.8			185.5
Total medical operating costs		668.6			689.1			668.7			683.0			1,337.3			1,372.0
Medical operating loss	$	(18.6	)	$	(0.6	)
Medical operating income (loss)							$	2.9		$	(3.8	)	$	(15.7	)	$	(4.4	)
Additional data:
Member months enrollment:
Commercial:
Fully-insured		1,013,205			1,096,282			1,001,638			1,063,422			2,014,843			2,159,704
Self-funded		507,167			543,026			501,500			540,221			1,008,667			1,083,247
Total Commercial		1,520,372			1,639,308
Medicare		363,727			364,427
Medicaid		1,173,273			1,221,892
Total Commercial member months								1,503,138			1,603,643			3,023,510			3,242,951

Medicare member months								363,257			351,108			726,984			715,535

Medicaid member months								1,169,090			1,206,345			2,342,363			2,428,237
Total member months		3,057,372			3,225,627			3,035,485			3,161,096			6,092,857			6,386,723
Medical loss ratio		91.7	%		87.9	%		87.5	%		88.2	%		89.6	%		88.0	%
Operating expense ratio		12.6	%		13.5	%		13.4	%		13.7	%		13.0	%		13.6	%

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

Medical Operating Revenues

Medical premiums earned for the three months ended ~~March 31,~~June 30, 2017 decreased by ~~$38.2~~$7.6 million, or ~~5.6%~~1.1%, to ~~$640.5~~$661.7 million when compared to the medical premiums earned during the three months ended ~~March 31,~~June 30, 2016. This decrease is principally the result of the following:

~~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~~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.

~~Medical premiums generated~~ by the Commercial business decreased by ~~$10.4~~$11.7 million, or ~~4.8%~~5.4%, to ~~$205.1~~$203.3 million. This fluctuation primarily reflects lower fully-insured member enrollment during the quarter of approximately ~~83,000~~61,800 member months and ~~$3.5~~$3.6 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~~

Premiums earned by the Medicare business decreased by ~~$3.3~~$6.5 million, or ~~1.3%~~2.4%, to ~~$257.7~~$266.6 million, primarily reflecting a lower risk score revenue adjustment in 2017 by $17.5 million, 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.~~rates; offset in part by an increase in member month enrollment of approximately 12,000 lives.

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Premiums earned by the Medicaid business amounted to $191.8 million, $10.6 million, or 5.8% higher than the same period last year. Increase primarily reflects the $14.6 million profit sharing accrual that decreased premiums during the 2016 period and the $11.6 million premium collection related to our compliance with the contract’s incentive metrics. These increases were partially offset by lower fully-insured member months enrollment by approximately 37,000 lives, the 4% decrease in the average premium rates that went into effect July 1, 2016, and $2.6 million related to the suspension of the HIP fee pass-through as a result of the 2017 moratorium.

Medical Claims Incurred

Medical claims incurred during the three months ended ~~March 31,~~June 30, 2017 decreased by ~~$9.0~~$11.0 million, or ~~1.5%~~1.9%, to ~~$587.3~~$579.2 million when compared to the three months ended ~~March 31,~~June 30, 2016. The medical loss ratio (MLR) of the segment ~~increased 380~~decreased 70 basis points during the 2017 period, to ~~91.7%~~87.5%. This fluctuation is primarily attributed to the net effect of the following:

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 Commercial business decreased by ~~$7.6~~$28.2 million, or ~~4.3%~~14.7%, during the 2017 period mostly driven by lower enrollment. The MLR, at ~~83.5%~~80.6%, was 70860 basis point ~~higher~~lower than the same ~~month~~quarter last year. Adjusting for the effect of prior period reserve developments, the Commercial MLR would have been ~~83.3%~~83.1%, ~~240~~450 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 Medicare business increased by ~~$7.0~~$5.9 million, or ~~3.0%~~2.5%, during the 2017 period and its MLR increased by ~~390~~430 basis points, to ~~94.0%~~90.9%. 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%~~94.3% this quarter, about ~~280~~300 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.

The medical claims incurred in the Medicaid business increased by $11.3 million, or 7.0%, during the 2017 period and its MLR increased by 100 basis points, to 90.3%. Adjusting for the effect of prior period reserve developments in 2017 and 2016, as well as for the impact of the profit sharing accrual and this year’s quality incentive premiums, the Medicaid MLR would have been approximately 96.0% this quarter, about 580 basis points higher than 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.

Medical Operating Expenses

Medical operating expenses for the three months ended June 30, 2017 decreased by $3.3 million, or 3.6%, to $89.5 million when compared to the three months ended June 30, 2016. The operating expense ratio decreased by 30 basis points to 13.4% in 2017. The lower operating expenses and expense ratio are mostly the result of the decrease in the HIP Fee of $10.7 million due to the 2017 moratorium offset by increase in personnel costs, general operating expenses of totaling approximately $6.9 million.

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Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Medical Operating Revenues

Medical premiums earned for the six months ended June 30, 2017 decreased by $45.7 million, or 3.4%, to $1,302.2 million when compared to the medical premiums earned during the six months ended June 30, 2016. This decrease is principally the result of the following:

Premiums earned by the Commercial business decreased by $22.1 million, or 5.1%, to $408.4 million. This fluctuation primarily reflects lower fully-insured enrollment during the year of approximately 144,900 member months and $7.2 million related to the suspension of the HIP fee pass-through; offset by an increase in average premium rates of approximately 5%.

Premiums earned by the Medicaid business decreased by $13.9 million, or 3.6% to $369.5 million. Decrease primarily reflects lower fully-insured member months enrollment by approximately 85,900 lives, and the 4.0% decrease in average premium rates that went into effect July 1, 2016. Also contributing to the lower premiums during this period was a $5.3 million related to the suspension of the HIP fee pass-through as a result of the 2017 moratorium. Decreases are partially offset by the impact of the profit sharing accrual in the 2016 period that decreased premiums by $10.6 million and by the $11.6 million premium collection related to our compliance with the contract’s quality incentive metrics.

Premiums earned by the Medicare business decreased by $9.7 million, or 1.8%, to $524.3 million. Decrease primarily reflects lower risk score revenue by $20.9 million as well as lower average premium rates due to a reduction in the 2017 Medicare reimbursement rates. These decreases were partially offset by an increase in member month enrollment of approximately 11,000 lives.

Medical Claims Incurred

Medical claims incurred during the six months ended June 30, 2017 decreased by $20.0 million, or 1.7%, to $1,166.5 million when compared to the six months ended June 30, 2016. The MLR of the segment increased 160 basis points during the 2017 period, to 89.6%. This fluctuation is primarily attributed to the net effect of the following:

The medical claims incurred of the Commercial business decreased by $35.8 million, or 9.6%, during the 2017 period mostly driven by lower enrollment. The MLR, at 82.1%, was 390 basis point lower than the same period last year. Adjusting for the effect of prior period reserve developments, the Commercial MLR would have been 82.8%, 390 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 in the Medicaid business increased by $3.0 million, or 0.9%, during the 2017 period and its MLR increased by 420 basis points, to 93.9%. Adjusting for the effect of prior period reserve developments in 2017 and 2016, as well as for the impact of the profit sharing accrual and this year’s quality incentive premiums, the Medicaid MLR would have been approximately 95.4% this quarter, about 620 basis points higher than 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 increased by $12.9 million, or 2.7%, during the 2017 period and its MLR increased by 410 basis points, to 92.4%. 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 94.1% this quarter, about 210 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.

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Medical Operating Expenses

Medical operating expenses for the ~~three~~six months ended ~~March 31,~~June 30, 2017 decreased by ~~$11.5~~$14.7 million, or ~~12.4 %,~~7.9%, to ~~$81.3~~$170.8 million when compared to the ~~three~~six months ended ~~March 31,~~June 30, 2016. The operating expense ratio decreased by 9060 basis points to ~~12.6%~~13.0% in 2017. The lower operating expenses and expense ratio are mostly the result of the decrease in the HIP Fee of ~~$10.7~~$21.6 million due to the 2017 moratorium ~~as well as lower personnel costs.~~offset by increase in general operating expenses of totaling approximately $6.7 million.

~~Table of Contents~~

Life Insurance Operating Results

	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
(dollar amounts in millions)	2017			2016			2017			2016			2017			2016
Operating revenues:
Premiums earned, net:
Premiums earned	$	41.8		$	39.8		$	41.8		$	39.7		$	83.6		$	79.5
Assumed earned premiums		0.9			1.5			0.5			1.2			1.4			2.7
Ceded premiums earned		(2.2	)		(2.2	)		(2.3	)		(2.1	)		(4.5	)		(4.3	)
Premiums earned, net		40.5			39.1			40.0			38.8			80.5			77.9
Net investment income		6.1			5.9			6.3			6.4			12.4			12.3
Total operating revenues		46.6			45.0			46.3			45.2			92.9			90.2
Operating costs:
Policy benefits and claims incurred		23.7			21.4			21.9			21.9			45.6			43.4
Underwriting and other expenses		19.0			18.0			19.4			18.2			38.4			36.2
Total operating costs		42.7			39.4			41.3			40.1			84.0			79.6
Operating income	$	3.9		$	5.6		$	5.0		$	5.1		$	8.9		$	10.6
Additional data:
Loss ratio		58.5	%		54.7	%		54.8	%		56.4	%		56.6	%		55.7	%
Operating expense ratio		46.9	%		46.0	%		48.5	%		46.9	%		47.7	%		46.5	%

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

Operating Revenues

Premiums earned, net increased by ~~$1.4~~$1.2 million, or ~~3.6%~~3.1% to ~~$40.5~~$40.0 million as the result of premium growth in the segment’s Individual Life and Cancer lines of business, as well as growth in the Costa Rica operations.

Policy Benefits and Claims Incurred

Policy benefits and claims incurred remained at $21.9 million, the same as the 2016 period, despite the higher volume of business during the year. The loss ratio for the period decreased to 54.8% in 2017, or 160 basis points, reflecting the higher volume of premiums during this quarter.

Underwriting and Other Expenses

Increase in underwriting and other expenses of $1.2 million, or 6.6%, to $19.4 million mostly reflects higher commissions following the segment’s premium growth. In addition, the segment has incurred in higher development and marketing expenses related to the expansion of the Costa Rica operations. As a result, the segment’s operating expense ratio increased to 48.5%, or 160 basis points.

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Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Operating Revenues

Premiums earned, net increased by ~~$2.3~~$2.6 million, or ~~10.7%,~~3.3% to ~~$23.7~~$80.5 million as the result of premium growth in the segment’s Individual Life and Cancer lines of business, as well as growth in the Costa Rica operations.

Policy Benefits and Claims Incurred

Policy benefits and claims incurred increased by $2.2 million, or 5.1% to $45.6 million, mostly as the result of the higher volume of business during the year, particularly in the Cancer and Individual Life ~~and Cancer~~ lines of ~~business and higher number of claims paid.~~business. The loss ratio for the period increased to ~~58.5%~~56.6% in 2017, or ~~380~~90 basis points, reflecting the higher volume in the Cancer line of business, which has a higher loss ratio, as well as to a higher claims experience in this particular line of business.

Underwriting and Other Expenses

Increase in underwriting and other expenses of ~~$1.0~~$2.2 million, or ~~5.6%~~6.1%, to ~~$19.0~~$38.4 million mostly reflects higher commissions following the segment’s premium growth mentioned above. In addition, the segment has incurred in higher development and marketing expenses related to the expansion of the Costa Rica operations. As a result, the segment’s operating expense ratio increased to ~~46.9%~~47.7%, 90or 120 basis points.

~~Table of Contents~~

Property and Casualty Insurance Operating Results

	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
(dollar amounts in millions)	2017			2016
(Dollar amounts in millions)							2017			2016			2017			2016
Operating revenues:
Premiums earned, net:
Premiums written	$	27.4		$	27.6		$	46.4		$	40.9		$	73.8		$	68.5
Premiums ceded		(10.1	)		(10.4	)		(16.6	)		(13.1	)		(26.7	)		(23.5	)
Change in unearned premiums		4.4			4.1			(8.0	)		(6.1	)		(3.6	)		(2.0	)
Premiums earned, net		21.7			21.3			21.8			21.7			43.5			43.0
Net investment income		1.9			1.9			2.1			2.3			4.1			4.3
Total operating revenues		23.6			23.2			23.9			24.0			47.6			47.3
Operating costs:
Claims incurred		10.6			9.7			10.9			10.8			21.5			20.6
Underwriting and other expenses		10.9			11.4			9.3			9.8			20.3			21.2
Total operating costs		21.5			21.1			20.2			20.6			41.8			41.8
Operating income	$	2.1		$	2.1		$	3.7		$	3.4		$	5.8		$	5.5
Additional data:
Loss ratio		48.8	%		45.5	%		50.0	%		49.8	%		49.4	%		47.9	%
Operating expense ratio		50.2	%		53.5	%		42.7	%		45.2	%		46.7	%		49.3	%

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

Operating Revenues

Total premiums written ~~decreased~~increased by ~~$0.2~~$5.5 million, or ~~0.7%~~13.4%, to ~~$27.4~~$46.4 million driven by ~~lower~~higher sales of Commercial ~~package products.~~products, particularly Commercial property products, mainly as a result of the acquisition of a large account during the 2017 period.

The premiums ceded to reinsurers ~~decreased~~increased by ~~$0.3~~$3.5 million, or ~~2.9%~~26.7%, mostly reflecting ~~lower~~higher premiums written in Commercial insurance ~~products.~~products during the three months ended June 30, 2017.

The change in unearned premiums presents an increase of ~~$0.3~~$1.9 million mostly reflecting the segments ~~lower~~higher premiums written in ~~2017 and lower cost.~~2017.

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Claims Incurred

Claims incurred increased by $0.1 million, or 0.9%, to $10.9 million during the three months ended June 30, 2017. The loss ratio increased by 20 basis points, to 50.0% during this period.

Underwriting and Other Expenses

Underwriting and other operating expenses decreased by $0.5 million, or 5.1%, to $9.3 million mostly due to a lower net commission expense during the three months ended June 30, 2017. The operating expense ratio was 42.7%, 250 basis points lower than last year.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Operating Revenues

Total premiums written increased by $5.3 million, or 7.7%, to $73.8 million, driven by higher sales of Commercial property and Commercial liability products, mainly as a result of the acquisition of a large account, as well as to higher sales of Personal package products.

The premiums ceded to reinsurers increased by $3.2 million, or 13.6%, mostly reflecting higher premiums written in Commercial insurance products during the six months ended June 30, 2017.

The change in unearned premiums presents an increase of $1.6 million mostly reflecting the segments higher premiums written in 2017.

Claims Incurred

Claims incurred increased by $0.9 million, or ~~9.3%~~4.4%, to ~~$10.6 million.~~$21.5 million during the six months ended June 30, 2017. The loss ratio increased by ~~330~~150 basis points, to ~~48.8%~~49.4% during this period, primarily as a result of an unfavorable loss experience in the Commercial and Personal Auto lines of business.

Underwriting and Other Expenses

Underwriting and other operating expenses decreased by ~~$0.5~~$0.9 million, or ~~4.4%~~4.2%, to ~~$10.9~~$20.3 million mostly due to lower personnel costs. The operating expense ratio was ~~50.2%~~46.7%, ~~330~~260 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:

	Three months ended March 31,						Six months ended June 30,
(dollar amounts in millions)	2017			2016			2017			2016
Sources (uses) of cash:
Cash provided by operating activities	$	131.0		$	31.3
Net proceeds (purchases) of investment securities		0.4			(108.9	)
Cash provided by (used in) operating activities							$	133.7		$	(10.6	)
Net purchases of investment securities								(43.0	)		(76.3	)
Net capital expenditures		(3.3	)		(1.5	)		(8.7	)		(2.7	)
Proceeds from long-term borrowings		24.3			-			24.3			-
Payments of long-term borrowings		(24.7	)		(0.4	)		(25.5	)		(0.8	)
Proceeds from policyholder deposits		4.1			3.4			8.2			7.9
Surrenders of policyholder deposits		(4.9	)		(2.9	)		(10.5	)		(6.9	)
Repurchase and retirement of common stock		-			(8.0	)		-			(14.6	)
Other		(11.4	)		1.6			(9.4	)		2.3
Net increase (decrease) in cash and cash equivalents	$	115.5		$	(85.4	)	$	69.1		$	(101.7	)

Cash flow from operating activities increased by ~~$99.7~~$144.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2017 as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2016, principally due to an increase in premium collections of ~~$67.1~~$85.0 million, lower claims paid by ~~$16.5~~$44.0 million ~~and~~, a decrease in cash paid to suppliers and employees of ~~$14.4~~$9.2 million, and lower incomes tax paid by $5.7 million. The higher premium collections follow the collection in advance of the ~~April~~July 2017 Medicare premiums from CMS.

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

During the ~~three~~six months ended ~~March 31,~~June 30, 2017, we received the remaining $24.3 million from a loan with a commercial bank ~~in Puerto Rico~~ related with a credit agreement entered into in December 2016. These proceeds were used ~~during the 2017 period~~ to prepay the outstanding principal amount of $24.0 million of the 6.6% senior unsecured notes. See note 7 to the unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q.

There were no repurchase and retirement of common stock during the ~~three~~six months ended ~~March 31,~~June 30, 2017.

The fluctuation in the Other uses/sources of cash is attributed to changes in the amount of outstanding checks over bank balances.

Net capital expenditures increased by $6.0 million during the six months ended June 30, 2017 as compared to the six months ended June 30, 2016, principally due to initiatives related to information technology in the Managed Care segment.

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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 ~~March 31,~~June 30, 2017, we had $60.0 million of available credit under these facilities. There are no outstanding short-term borrowings under these facilities as of ~~March 31,~~June 30, 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 December 28, 2016, TSM entered into a $35.5 million credit agreement with a commercial bank in Puerto Rico. 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 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 amount plus accrued interest of the 6.6% senior unsecured notes due January 2021 ($24.0 million). Pursuant to the credit agreement, interest is payable on the outstanding balance of 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 (iii) 3.25% over LIBOR for Term Loan C. The loan includes certain financial and non-financial covenants, 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 and dividends. Failure to meet these covenants may trigger the accelerated payment of the outstanding balance. As of ~~March 31,~~June 30, 2017 we are in compliance with these covenants.

On March 11, 2016 TSS entered into a $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 25 basis points, and contains certain financial and non-financial covenants that are customary for this type of facility. As of June 30, 2017, there is no outstanding balance in this line of credit.

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, 2016.

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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, 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, 2016.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, management, under the supervision and with the participation of the chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of the “disclosure controls and procedures” as of the end of this period (as such term is defined under Exchange Act Rule 13a-15(e)) of the Corporation and its subsidiaries. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or 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 chief executive officer and 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~~their evaluation ~~our~~as of June 30, 2017, the Company’s chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective because of the material weakness in our internal control over financial reporting described below. Notwithstanding the material weakness in our internal control over financial reporting as of ~~March 31,~~June 30, 2017, ~~which is~~management has concluded that the ~~end of the period covered by~~consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our ~~disclosure controls~~financial position, results of operations and cash flows for the periods presented.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of “internal control over financial reporting,” as defined under Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s chief executive officer and chief financial officer, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”), and includes those policies and procedures ~~are effective~~that:

·	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

·	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

·	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable ~~level~~possibility that a material misstatement of ~~assurance.~~

~~There were no significant~~the annual or interim financial statements will not be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in ~~our disclosure controls~~conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, under the supervision and ~~procedures, or in factors that could significantly affect internal controls, subsequent to~~with the ~~date~~participation of the chief executive officer and chief financial officer, assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2017 based on criteria described in the “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) on May 14, 2013. Based on that assessment and those criteria, management has concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2017 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in accordance with GAAP due to the material weakness described below.

As the result of an inspection from the Public Company Accounting Oversight Board, our independent registered public accounting firm requested that we re-evaluate certain internal controls related to the review process of the Managed Care claims paid data input in our incurred but not reported (“IBNR”) actuarial model. As the result of this re-evaluation, management agreed that controls were not appropriately designed to validate that the claims paid information in the lag triangles used in the IBNR actuarial models is reviewed with enough precision to ascertain data is accurately presented by incurred date. This deficiency was determined to be a material weakness as of June 30, 2017. Management has concluded that the Company’s consolidated financial statements as of and for the three months and six months ended June 30, 2017, included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Remediation Plan

The main factor contributing to the material weakness were changes in our actuarial department during 2016. As a consequence, the preventive control over the accuracy of the incurred date component of the Managed Care claims paid data within the claim lags ceased to be fully effective. Although we engage an external actuarial consulting firm to support our claims reserving process, we did not ask them to do detailed testing over the incurred date component in order to ascertain the preciseness of the lag triangles. Even though this control deficiency is considered a material weakness, management has concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Management has designed a remediation plan to correct the material weakness described above and improve the design of internal controls. The remedial activities put in place include the following:

·	After hiring additional personnel in the actuarial department, effective 2017 we reinforced the review process over the accuracy of the claims paid data within the claim lags.

·	In addition we strengthened the claims paid reconciliation process to include the incurred date component within the claim lags on a monthly and historical basis.

We have completed the ~~evaluation referred~~aforementioned activities as of the date of this amendment and believe that we have strengthened the Company’s internal control over financial reporting addressing the identified material weakness. However, control weaknesses are not be considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively. We will continue to ~~above.~~monitor the effectiveness of these remediation measures and we will make any changes to the design of this plan and take such other actions that we deem appropriate given the circumstances.

Changes in Internal Controls Over Financial Reporting

NoOther than as described in the aforementioned remediation plan, 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 ~~March 31,~~June 30, 2017 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

Part II – Other Information

Item 1.

Legal Proceedings

For a description of legal proceedings that have experienced significant developments during this quarter, see note 13 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, 2016.

The 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~~Patient Protection and Affordable Care Act of 2010 as amended by the Health Care and Education Reconciliation Act of 2010 (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 (AHCA), which, if enacted, would amend or repeal significant portions of the ACA. Among other changes, the ~~American Health Care Act~~AHCA 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~~AHCA 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~~AHCA to repeal portions of the ACA.

The ~~American Health Care Act will now be considered by~~U.S. Senate spent several months developing its alternative to the AHCA, culminating in several votes on various substitute amendments during the last week of July 2017. None of the Senate substitutes, including a skinny package that would have repealed coverage mandates but maintained subsidies, were able to pass in the U.S. Senate. While it is uncertain when or if the provisions in the ~~American Health Care Act~~AHCA 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.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

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)10.1	~~Amendments~~Amendment 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~~Extend Contract for the ~~three months ended March 31, 2017 and 2016 has been omitted as~~Provision of Physical & Behavioral Health Services under 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.~~Government Health Plan Program

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.

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

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

4350

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 ☐
	Emerging growth company ☐

	Three months ended March 31,					Three months ended June 30,				Six months ended June 30,
	2017			2016		2017		2016		2017		2016
Numerator for earnings per share:
Net (loss) income attributable to TSM available to stockholders	$	(4,342	)	$	3,456
Net income attributable to TSM available to stockholders						$	12,705	$	3,880	$	8,363	$	7,336
Denominator for basic earnings per share:
Weighted average of common shares		24,143,261			24,587,681		24,246,591		24,624,070		24,195,211		24,609,749
Effect of dilutive securities		-			72,353		36,687		45,364		50,220		58,892
Denominator for diluted earnings per share		24,143,261			24,660,034		24,283,278		24,669,434		24,245,431		24,668,641
Basic net (loss) income per share attributable to TSM	$	(0.18	)	$	0.14
Diluted net (loss) income per share attributable to TSM	$	(0.18	)	$	0.14
Basic net income per share attributable to TSM						$	0.52	$	0.16	$	0.35	$	0.30
Diluted net income per share attributable to TSM						$	0.52	$	0.16	$	0.34	$	0.30

	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016			2017			2016
Operating revenues:
Managed Care:
Premiums earned, net	$	640,147		$	678,380		$	661,365		$	668,932		$	1,301,512		$	1,347,312
Administrative service fees		4,379			5,083			4,548			4,520			8,927			9,603
Intersegment premiums/service fees		1,534			1,485			1,631			1,652			3,165			3,137
Net investment income		3,892			3,480			4,146			4,107			8,038			7,587
Total managed care		649,952			688,428			671,690			679,211			1,321,642			1,367,639
Life Insurance:
Premiums earned, net		40,298			38,966			39,858			38,591			80,156			77,557
Intersegment premiums		191			137			111			202			302			339
Net investment income		6,087			5,914			6,330			6,412			12,417			12,326
Total life insurance		46,576			45,017			46,299			45,205			92,875			90,222
Property and Casualty Insurance:
Premiums earned, net		21,548			21,188			21,668			21,526			43,216			42,714
Intersegment premiums		153			153			154			154			307			307
Net investment income		1,924			1,929			2,134			2,325			4,058			4,254
Total property and casualty insurance		23,625			23,270			23,956			24,005			47,581			47,275
Other segments: *
Intersegment service revenues		1,586			2,545			2,259			2,617			3,845			5,162
Operating revenues from external sources		1,000			856			1,154			959			2,154			1,815
Total other segments		2,586			3,401			3,413			3,576			5,999			6,977
Total business segments		722,739			760,116			745,358			751,997			1,468,097			1,512,113
TSM operating revenues from external sources		78			4			55			1			133			5
Elimination of intersegment premiums/service fees		(1,598	)		(1,775	)		(1,896	)		(2,008	)		(3,494	)		(3,783	)
Elimination of intersegment service revenues		(1,586	)		(2,545	)		(2,259	)		2,518			(3,845	)		(27	)
Other intersegment eliminations		-			(13	)		-			(5,149	)		-			(5,162	)
Consolidated operating revenues	$	719,633		$	755,787		$	741,258		$	747,359		$	1,460,891		$	1,503,146

	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016			2017			2016
Operating income (loss):
Managed care	$	(18,582	)	$	(641	)	$	2,920		$	(3,780	)	$	(15,662	)	$	(4,421	)
Life insurance		3,935			5,598			4,990			5,054			8,925			10,652
Property and casualty insurance		2,067			2,111			3,775			3,388			5,842			5,499
Other segments *		143			(179	)		1			(182	)		144			(361	)
Total business segments		(12,437	)		6,889			11,686			4,480			(751	)		11,369
TSM operating revenues from external sources		78			4			55			1			133			5
TSM unallocated operating expenses		(2,217	)		(3,167	)		(2,900	)		(2,707	)		(5,117	)		(5,874	)
Elimination of TSM intersegment charges		2,400			2,387			2,400			2,386			4,800			4,773
Consolidated operating (loss) income		(12,176	)		6,113
Consolidated operating income (loss)								11,241			4,160			(935	)		10,273
Consolidated net realized investment gains		336			58			4,054			1,520			4,390			1,578
Consolidated interest expense		(1,686	)		(1,882	)		(1,721	)		(1,954	)		(3,407	)		(3,836	)
Consolidated other income, net		2,525			875			587			3,859			3,112			4,734
Consolidated (loss) income before taxes	$	(11,001	)	$	5,164
Consolidated income before taxes							$	14,161		$	7,585		$	3,160		$	12,749

Depreciation and amortization expense:
Managed care	$	2,239		$	2,934		$	2,649		$	2,839		$	4,888		$	5,773
Life insurance		280			255			318			249			598			504
Property and casualty insurance		114			161			138			150			252			311
Other segments*		160			153			163			166			323			319
Total business segments		2,793			3,503			3,268			3,404			6,061			6,907
TSM depreciation expense		197			197			196			196			393			393
Consolidated depreciation and amortization expense	$	2,990		$	3,700		$	3,464		$	3,600		$	6,454		$	7,300

	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