UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~(Mark~~(Mark One)

☑	☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2020

☐	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934~~

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

For the transition period fromto

COMMISSION FILE NUMBER: 001-33865

~~Triple-S Management Corporation~~TRIPLE-S MANAGEMENT CORPORATION

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

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

(787) 749-4949

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

~~(787) 749-4949~~Securities registered pursuant to Section 12(b) of the Act:

~~(Registrant’s telephone number, including area code)~~

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock Class B, $1.00 par value	GTS	New York Stock Exchange (NYSE)

~~Not applicable~~

~~(Former name, former address and former fiscal year, if changed since last report)~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

☑ Yes ☐ No

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

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

Emerging growth company ☐

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 classes of common stock, as of the latest practicable date.

Title of each class		Outstanding at ~~September 30, 2017~~March 31, 2020
~~Common Stock Class A, $1.00 par value~~		~~950,968~~
Common Stock Class B, $1.00 par value		~~22,951,139~~23,806,013

Table of Contents

Triple-S Management Corporation

FORM 10-Q

For the Quarter Ended ~~September 30, 2017~~March 31, 2020

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	3328

		Cautionary Statement Regarding Forward-Looking Information		3328
		Overview		3328
		Recent Developments		3429
		Recent Accounting Standards		3931
		Managed Care Membership		3932
		Consolidated Operating Results		4033
		Managed Care Operating Results		4334
		Life Insurance Operating Results		4636
		Property and Casualty Insurance Operating Results		4737
		Liquidity and Capital Resources		4938

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5139

	Item 4.	Controls and Procedures	5139

Part II – Other Information			5340

	Item 1.	Legal Proceedings	5340

	Item 1A.	Risk Factors	5340

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5441

	Item 3.	Defaults Upon Senior Securities	5441

	Item 4.	Mine Safety Disclosures	5441

	Item 5.	Other Information	5441

	Item 6.	Exhibits	5442

SIGNATURES			5543

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, 2020			December 31, 2019
	September 30, 2017			December 31, 2016
Assets
Investments and cash:
Securities available for sale, at fair value:
Fixed maturities	$	1,123,990		$	1,151,643
Equity securities		332,705			270,349
Securities held to maturity, at amortized cost:
Fixed maturities		2,839			2,836
Fixed maturities available for sale, at fair value							$	1,251,031		$	1,242,883
Fixed maturities held to maturity, at amortized cost								1,859			1,860
Equity investments, at fair value								299,016			287,525
Other invested assets, at net asset value								103,118			100,508
Policy loans		9,260			8,564			11,102			10,861
Cash and cash equivalents		269,942			103,428			104,580			109,837
Total investments and cash		1,738,736			1,536,820			1,770,706			1,753,474
Premiums and other receivables, net		930,972			286,365			644,984			567,692
Deferred policy acquisition costs and value of business acquired		201,467			194,787			237,171			234,885
Property and equipment, net		73,609			66,369			89,367			88,588
Deferred tax asset		66,969			57,768			81,337			77,294
Goodwill		25,397			25,397			28,614			28,599
Other assets		49,642			51,493			136,015			68,294
Total assets	$	3,086,792		$	2,218,999		$	2,988,194		$	2,818,826
Liabilities and Stockholders' Equity
Liabilities and Stockholders’ Equity
Claim liabilities	$	1,108,698		$	487,943		$	730,818		$	709,258
Liability for future policy benefits		336,518			321,232			392,923			386,017
Unearned premiums		165,819			79,310			90,259			93,301
Policyholder deposits		177,265			179,382			196,905			189,120
Liability to Federal Employees' Health Benefits and Federal Employees' Programs		46,742			34,370
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs								55,260			47,781
Accounts payable and accrued liabilities		273,656			169,449			452,823			325,761
Deferred tax liability		21,902			18,850			6,031			10,257
Short-term borrowings								78,000			54,000
Long-term borrowings		32,870			35,085			24,897			25,694
Liability for pension benefits		26,592			30,892			34,128			34,465
Total liabilities		2,190,062			1,356,513			2,062,044			1,875,654
Stockholders’ equity:
Triple-S Management Corporation stockholders' equity
Common stock Class A, $1 par value. Authorized 100,000,000 shares; issued and outstanding 950,968 at September 30, 2017 and December 31, 2016, respectively		951			951
Common stock Class B, $1 par value. Authorized 100,000,000 shares; issued and outstanding 22,951,139 and 23,321,163 shares at September 30, 2017 and December 31, 2016, respectively		22,951			23,321
Triple-S Management Corporation stockholders’ equity
Common stock Class B, $1 par value. Authorized 100,000,000 shares; issued and outstanding 23,806,013 and 23,799,633 shares at March 31, 2020 and December 31, 2019, respectively								23,806			23,800
Additional paid-in capital		55,060			65,592			53,762			60,504
Retained earnings		761,179			730,904			803,887			830,198
Accumulated other comprehensive income		57,268			42,395			45,395			29,363
Total Triple-S Management Corporation stockholders' equity		897,409			863,163
Total Triple-S Management Corporation stockholders’ equity								926,850			943,865
Non-controlling interest in consolidated subsidiary		(679	)		(677	)		(700	)		(693	)
Total stockholders' equity		896,730			862,486
Total liabilities and stockholders' equity	$	3,086,792		$	2,218,999
Total stockholders’ equity								926,150			943,172
Total liabilities and stockholders’ equity							$	2,988,194		$	2,818,826

See accompanying notes to unaudited condensed consolidated financial statements.

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Triple-S Management Corporation

Condensed Consolidated Statements of Earnings (Unaudited)

(dollar amounts in thousands, except per share data)

	Three months ended September 30,					Nine months ended September 30,					Three months ended March 31,
	2017		2016			2017		2016			2020			2019
Revenues:
Premiums earned, net	$	714,325	$	721,187		$	2,139,489	$	2,188,770		$	875,897		$	768,002
Administrative service fees		3,391		4,146			12,318		13,749			2,194			2,632
Net investment income		12,395		12,337			37,109		36,570			14,311			15,376
Other operating revenues		941		871			3,027		2,598			4,039			1,577
Total operating revenues		731,052		738,541			2,191,943		2,241,687			896,441			787,587
Net realized investment gains (losses):
Total other-than-temporary impairment losses on securities		-		-			-		(1,434	)
Net realized gains, excluding other-than-temporary impairment losses on securities		3,753		5,376			8,143		8,388
Net realized investment gains on sale of securities		3,753		5,376			8,143		6,954
Net realized investment (losses) gains												(466	)		1,315
Net unrealized investment (losses) gains on equity investments												(56,806	)		19,669
Other income, net		3,409		734			6,521		5,468			3,605			1,169
Total revenues		738,214		744,651			2,206,607		2,254,109			842,774			809,740
Benefits and expenses:
Claims incurred		583,625		629,169			1,815,785		1,877,950			714,522			623,190
Operating expenses		119,145		123,406			348,811		367,498			162,201			132,663
Total operating costs		702,770		752,575			2,164,596		2,245,448			876,723			755,853
Interest expense		1,709		1,893			5,116		5,729			1,853			1,788
Total benefits and expenses		704,479		754,468			2,169,712		2,251,177			878,576			757,641
Income (loss) before taxes		33,735		(9,817	)		36,895		2,932
Income tax expense (benefit)		11,824		(7,873	)		6,622		(2,457	)
Net income (loss)		21,911		(1,944	)		30,273		5,389
(Loss) income before taxes												(35,802	)		52,099
Income tax (benefit) expense												(9,650	)		17,316
Net (loss) income												(26,152	)		34,783
Less: Net loss attributable to non-controlling interest		1		3			2		6			7			3
Net income (loss) attributable to Triple-S Management Corporation	$	21,912	$	(1,941	)	$	30,275	$	5,395
Net (loss) income attributable to Triple-S Management Corporation											$	(26,145	)	$	34,786
Earnings per share attributable to Triple-S Management Corporation
Basic net income (loss) per share	$	0.91	$	(0.08	)	$	1.25	$	0.22
Diluted net income (loss) per share	$	0.91	$	(0.08	)	$	1.25	$	0.22
Basic net (loss) income per share											$	(1.12	)	$	1.53
Diluted net (loss) income per share											$	(1.12	)	$	1.52

See accompanying notes to unaudited condensed consolidated financial statements.

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Triple-S Management Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(dollar amounts in thousands)

Three months ended
September 30,

Nine months ended
September 30,

2017 2016 2017 2016
Net income (loss) $ 21,911 $ (1,944 ) $ 30,273 $ 5,389
Other comprehensive (loss) income, net of tax:
Net unrealized change in fair value of available for sale securities, net of taxes 1,851 (1,884 ) 14,719 33,523
Defined benefit pension plan:
Actuarial loss, net 48 525 154 1,754
Prior service credit, net - (59 ) - (209 )
Total other comprehensive income (loss), net of tax 1,899 (1,418 ) 14,873 35,068
Comprehensive income (loss) 23,810 (3,362 ) 45,146 40,457
Comprehensive income attributable to non-controlling interest 1 3 2 6
Comprehensive income (loss) attributable to Triple-S Management Corporation $ 23,811 $ (3,359 ) $ 45,148 $ 40,463

	Three months ended March 31,
	2020			2019
Net (loss) income	$	(26,152	)	$	34,783
Other comprehensive income, net of tax:
Net unrealized change in fair value of available for sale securities, net of taxes		15,879			13,441
Defined benefit pension plan:
Actuarial gain, net		153			56
Total other comprehensive income, net of tax		16,032			13,497
Comprehensive (loss) income		(10,120	)		48,280
Comprehensive loss attributable to non-controlling interest		7			3
Comprehensive (loss) income attributable to Triple-S Management Corporation	$	(10,113	)	$	48,283

See accompanying notes to unaudited condensed consolidated financial statements.

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Triple-S Management Corporation

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(dollar amounts in thousands)

2017 2016
Balance at January 1 $ 863,163 $ 847,526
Share-based compensation 1,651 2,266
Stock issued upon the exercise of stock options - 55
Repurchase and retirement of common stock (12,553 ) (21,427 )
Comprehensive income 45,148 40,463
Total Triple-S Management Corporation stockholders' equity 897,409 868,883
Non-controlling interest in consolidated subsidiary (679 ) (676 )
Balance at September 30 $ 896,730 $ 868,207

	Class A Common Stock		Class B Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income		Triple-S Management Corporation Stockholders’ Equity			Non-controlling Interest in Consolidated Subsidiary			Total Stockholders’ Equity

Balance, December 31, 2019	$	-	$	23,800		$	60,504		$	830,198		$	29,363	$	943,865		$	(693	)	$	943,172
Share-based compensation		-		590			1,769			-			-		2,359			-			2,359
Repurchase and retirement of common stock		-		(584	)		(8,511	)		-			-		(9,095	)		-			(9,095	)
Comprehensive (loss) income		-		-			-			(26,145	)		16,032		(10,113	)		(7	)		(10,120	)
Cummulative effect adjustment due to implementation of ASU 2016-13		-		-			-			(166	)		-		(166	)		-			(166	)
Balance, March 31, 2020	$	-	$	23,806		$	53,762		$	803,887		$	45,395	$	926,850		$	(700	)	$	926,150

	Class A Common Stock		Class B Common Stock			Additional Paid-in Capital				Retained Earnings		Accumulated Other Comprehensive Income		Triple-S Management Corporation Stockholders’ Equity			Non-controlling Interest in Consolidated Subsidiary			Total Stockholders’ Equity

Balance, December 31, 2018	$	951	$	21,980		$	34,021			$	761,970	$	3,062	$	821,984		$	(676	)	$	821,308
Share-based compensation		-		177			1,409				-		-		1,586			-			1,586
Repurchase and retirement of common stock		-		(1	)		(15	)			-		-		(16	)		-			(16	)
Comprehensive income (loss)		-		-			-				34,786		13,497		48,283			(3	)		48,280
Balance, March 31, 2019	$	951	$	22,156		$	35,415		��	$	796,756	$	16,559	$	871,837		$	(679	)	$	871,158

See accompanying notes to unaudited condensed consolidated financial statements.

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Triple-S Management Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(~~dollar~~Dollar amounts in thousands)

	Nine months ended September 30,						Three months ended March 31,
	2017			2016			2020			2019
Cash flows from operating activities:
Net income	$	30,273			5,389
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income							$	(26,152	)	$	34,783
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		9,835			10,617			3,907			3,505
Net amortization of investments		7,396			6,181			676			316
Additions to the allowance for doubtful receivables		2,043			2,498			949			9,236
Deferred tax benefit		(9,993	)		(4,026	)
Net realized investment gain on sale of securities		(8,143	)		(6,954	)
Deferred tax (benefit) expense								(12,268	)		14,932
Net realized investment losses (gains) on sale of securities								466			(1,315	)
Net unrealized losses (gains) on equity investments								56,806			(19,669	)
Interest credited to policyholder deposits		3,151			3,091			1,561			1,386
Share-based compensation		1,651			1,931			2,359			1,586
(Increase) decrease in assets:
Premium and other receivables, net		(646,650	)		(53,816	)		(58,059	)		(41,002	)
Deferred policy acquisition costs and value of business acquired		(7,139	)		(5,250	)		(2,737	)		(4,503	)
Deferred taxes		(218	)		(2,384	)		(88	)		27
Other assets		2,976			(15,598	)		(62,034	)		(2,023	)
Increase in liabilities:
Increase (decrease) in liabilities:
Claim liabilities		620,755			19,612			21,560			(58,825	)
Liability for future policy benefits		15,286			25,874			6,906			6,231
Unearned premiums		86,509			79,806			(3,042	)		(2,279	)
Liability to Federal Employees' Health Benefits and Federal Employees' Programs		12,372			7,779			7,479			3,937
Accounts payable and accrued liabilities		71,745			8,261			68,229			(16,223	)
Net cash provided by operating activities		191,849			83,011
Net cash provided by (used in) operating activities								6,518			(69,900	)

~~(Continued)~~

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Triple-S Management Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(~~dollar~~Dollar amounts in thousands)

	Three months ended March 31,
	2020			2019

Cash flows from investing activities:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold	$	43,425		$	164,997
Fixed maturities matured/called		11,099			12,267
Securities held to maturity:
Fixed maturities matured/called		81			1,154
Equity investments sold		21,107			23,123
Other invested assets sold		8,524			373
Acquisition of investments:
Securities available for sale:
Fixed maturities		(42,822	)		(166,626	)
Securities held to maturity:
Fixed maturities		(80	)		(539	)
Equity investments		(102,733	)		(9,139	)
Other invested assets		(10,438	)		(8,546	)
Increase in other investments		(4,086	)		(535	)
Net change in policy loans		(241	)		(309	)
Net capital expenditures		(4,587	)		(2,968	)
Capital contribution on equity method investees		(4,933	)		-
Net cash (used in) provided by investing activities		(85,684	)		13,252
Cash flows from financing activities:
Change in outstanding checks in excess of bank balances		53,485			36,682
Net change in short-term borrowings		24,000			-
Repayments of long-term borrowings		(810	)		(808	)
Repurchase and retirement of common stock		(8,989	)		(1	)
Proceeds from policyholder deposits		10,296			3,607
Surrenders of policyholder deposits		(4,073	)		(4,560	)
Net cash provided by financing activities		73,909			34,920
Net decrease in cash and cash equivalents		(5,257	)		(21,728	)
Cash and cash equivalents:
Beginning of period		109,837			117,544
End of period	$	104,580		$	95,816

Nine months ended
September 30,

2017 2016
Cash flows from investing activities:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold $ 287,223 $ 227,631
Fixed maturities matured/called 15,503 32,308
Equity securities sold 38,318 67,054
Securities held to maturity:
Fixed maturities matured/called 1,546 1,220
Acquisition of investments:
Securities available for sale:
Fixed maturities (260,538 ) (258,378 )
Equity securities (75,507 ) (153,399 )
Securities held to maturity:
Fixed maturities (1,550 ) (1,124 )
Increase in other investments (2,207 ) (1,939 )
Net change in policy loans (696 ) (471 )
Net capital expenditures (15,949 ) (3,517 )
Net cash used in investing activities (13,857 ) (90,615 )
Cash flows from financing activities:
Change in outstanding checks in excess of bank balances 8,371 (1,035 )
Repayments of long-term borrowings (2,028 ) (1,230 )
Repurchase and retirement of common stock (12,553 ) (21,371 )
Proceeds from policyholder deposits 12,130 12,488
Surrenders of policyholder deposits (17,398 ) (13,543 )
Net cash used in financing activities (11,478 ) (24,691 )
Net increase (decrease) in cash and cash equivalents 166,514 (32,295 )
Cash and cash equivalents:
Beginning of period 103,428 197,818
End of period $ 269,942 $ 165,523

See accompanying notes to unaudited condensed consolidated financial statements.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(dollar amounts in thousands, except per share data)

~~(unaudited)~~(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 United States of America (GAAP or U.S. GAAP) for complete financial ~~statements presentation. These~~statement presentation pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, these condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the ~~Corporation’s~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

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 nine months~~ ended ~~September 30, 2017~~March 31, 2020 are not necessarily indicative of the results for the full year ending December 31, ~~2017.~~2020.

(2)	~~Recent~~Significant Accounting ~~Standards~~Policies

Investments

~~On August 28, 2017,~~

Fixed maturities

Investment in debt securities at March 31, 2020 and December 31, 2019 consists mainly of obligations of government-sponsored enterprises, U.S. Treasury securities and obligations of U.S. government instrumentalities, municipal securities, corporate bonds, residential mortgage-backed securities, and collateralized mortgage obligations. The Company classifies its debt securities in one of two categories: available-for-sale or held-to-maturity. Securities classified as held-to-maturity are those securities in which the ~~Financial Accounting Standard Board (FASB) issued,~~ ~~Derivatives~~Company has the ability and ~~Hedging (Topic 815): Targeted Improvements~~intent to ~~Accounting~~hold until maturity. All other securities not included in held-to-maturity are classified as available-for-sale.

Available-for-sale securities are recorded at fair value. The fair values of debt securities (both available-for-sale and held-to-maturity investments) are based on quoted market prices for ~~Hedging Activities~~, ~~which finalizes Proposed~~ ~~Accounting Standard Update (ASU~~) ~~No. 2016-310~~those or similar investments at the reporting date. Held-to-maturity debt securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums and discounts, respectively. Unrealized holding gains and losses, net of the ~~same name,~~related tax effect, on available-for-sale securities are excluded from earnings and ~~aims~~are reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are included in earnings and are determined on a specific identification basis.

Transfers of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains or losses associated with transfers of securities from held-to-maturity to ~~improve~~available-for-sale are recorded as a separate component of other comprehensive income. The unrealized holding gains or losses included in the ~~financial reporting~~separate component of ~~hedging relationships~~other comprehensive income for securities transferred from available-for-sale to ~~better portray~~held-to-maturity, are maintained and amortized into earnings over the ~~economic results~~remaining life of the security as an ~~entity’s risk management activities~~adjustment to yield in ~~its financial statements. The purpose~~a manner consistent with the amortization or accretion of ~~this guidance~~premium or discount on the associated security.

If a fixed maturity security is ~~to better align~~in an ~~entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships~~unrealized loss position and the ~~presentation~~Company does not have the intent to sell the fixed maturity security, or it is more likely than not that the Company will not have to sell the fixed maturity security before recovery of ~~hedge results. To satisfy that objective,~~its amortized cost basis, the ~~amendments expand and refine hedge accounting for both non-financial and financial risk components, and align the recognition and presentation~~credit component of the ~~effects of the hedging instrument and the hedged item~~impairment, if any, is recorded as an allowance for credit losses with an offsetting entry in the financial statements. Additionally, the amendments (1) permit hedge accounting for risk components in hedging relationships involving non-financial risk and interest rate risk; (2) change the guidance for designating fair value hedges of interest rate risk and for measuring the change in fair value of the hedged item in fair value hedges of interest rate risk; (3) continue to allow an entity to exclude option premiums and forward points from the assessment of hedge effectiveness, and (4) permit an entity to exclude the portion of the change in fair value of a currency swap that is attributable to a cross-currency basis spread from the assessment of hedge effectiveness. For public companies, these amendments, which should be applied on a prospective basis, are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Since we currently do not have these types of financial instruments, the adoption of this guidance should not have a material impact on the presentation of the Company’s consolidated ~~result~~statements of ~~operations.~~

~~On July 13, 2017,~~earnings and the ~~FASB issued guidance which finalizes Proposed ASU No. 2016-370, and addresses narrow issues identified as a result~~non-credit component of the ~~complexity associated with applying U.S. GAAP~~impairment is recognized in other comprehensive income. Furthermore, unrealized losses entirely caused by non-credit related factors related to fixed maturity securities for ~~certain financial instruments with characteristics of liabilities and equity. Part I of~~which the ~~ASU addresses~~Company expects to fully recover the ~~complexity of accounting for certain financial instruments with down round features (i.e., features of certain equity-linked instruments (or embedded features) that result~~amortized cost basis continue to be recognized in ~~the strike price being reduced on the basis of the pricing of future equity offerings), in response to stakeholders who, among~~accumulated other things, expressed concern that current accounting guidance creates cost and complexity for entities that issue financial instruments (e.g., warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II addresses the difficulty of navigating ~~Topic 480~~, ~~Distinguishing Liabilities from Equity~~, because of the existence of pending content in the Codification that results from the indefinite deferral of accounting requirements concerning mandatorily redeemable financial instruments of certain non-public entities and certain mandatorily redeemable non-controlling interests. For public companies, these amendments, which should be applied on a prospective basis, are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Since we currently do not have these types of financial instruments, the adoption of this guidance should not have a material impact on the presentation of the Company’s consolidated result of operations.comprehensive income.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(Unaudited)

If a fixed maturity security is in an unrealized loss position and the Company has the intent to sell the fixed maturity security, or it is more likely than not that the Company will have to sell the fixed maturity security before recovery of its amortized cost basis, the Company will write off any previously recognized allowance for credit losses and will decrease the amortized cost basis of the security. If the allowance has been fully written off and the fair value is less than its amortized cost basis, the amortized cost basis is written down and an impairment loss is recognized in the Company’s consolidated statements of earnings. As of March 31, 2020, no allowance for credit losses was recorded in the consolidated financial statements.

The credit component of the impairment is determined by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed maturity security. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed maturity security at the date of acquisition. If in subsequent periods, there is an increase in the projected future cash flows of the fixed maturity security, part or all of the allowance for credit losses may be reversed.

To determine whether an impairment is credit or non-credit related, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity of the impairment, market conditions, changes in the security’s rating, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.

Premiums and discounts are amortized or accreted over the life of the related held-to-maturity or available-for-sale security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned.

The Company regularly invests in mortgaged-backed securities and other securities subject to prepayment and call risk. Significant changes in prevailing interest rates may adversely affect the timing and amount of cash flows on such securities. In addition, the amortization of market premium and accretion of market discount for mortgaged-backed securities is based on historical experience and estimates of future payment speeds on the underlying mortgage loans. Actual prepayment speeds may differ from original estimates and may result in material adjustments to amortization or accretion recorded in future periods.

Equity investments

Investment in equity securities at March 31, 2020 and December 31, 2019 consists of mutual funds whose underlying assets are comprised of domestic equity securities, international equity securities and higher risk fixed income instruments. Equity investments are recorded at fair value. The fair values of equity investments are mainly based on quoted market prices for those or similar investments at the reporting date. For a specific equity investment, the fair value is estimated using the net asset value (NAV) of the Company’s ownership interest in the partnership. Unrealized holding gains and losses on equity investments are included in earnings. Realized gains and losses from the sale of equity investments are included in earnings and are determined on a specific identification basis.

Other invested assets

Other invested assets at March 31, 2020 and December 31, 2019 consist mainly of alternative investments in partnerships that invest in several private debt 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 (NAV) of the Company’s ownership interest in the partnerships. Total unfunded capital commitments for these positions as of March 31, 2020 amounted to $67,588. The remaining average commitments period is approximately three years.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

(Unaudited)

Health Insurance Providers Fee

The Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act mandates an annual Health Insurance Providers Fee (HIP Fee). The annual HIP Fee becomes payable to the U.S. Treasury once the entity provides health insurance for any U.S. health risk each applicable calendar year. The initial estimated annual fee is accrued as of January 1, with a corresponding deferred cost that is amortized over 12 months on a straight-line basis. The fee payment is due on September 30 of each year. The deferred cost is included within the other asset line item and the accrued fee is included within the accounts payable and accrued liabilities line item in the accompanying condensed consolidated balance sheets. The fee is presented within operating expenses in the accompanying condensed consolidated statements of earnings. The HIP Fee was waived for all health insurance providers during the year ended December 31, 2019. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 and the Further Consolidated Appropriations Act of 2020, signed into law on December 20, 2019, repealed the HIP Fee effective calendar years beginning after December 31, 2020. As of March 31, 2020, the HIP Fee deferred cost amounted to $48,974 and the accrued HIP Fee amounted to $65,300. As of December 31, 2019, 0 balance was deferred or accrued for the HIP Fee.

Recently Adopted Accounting Standards

On ~~May 10, 2017,~~June 16, 2016, the ~~FASB~~Financial Accounting Standards Board (FASB) issued guidance to provide ~~clarity~~financial statement users with more decision-useful information about the expected credit losses on financial instruments and ~~reduce both (1) diversity~~other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in ~~practice~~current U.S. GAAP with a methodology that reflects expected credit losses and ~~(2) cost and complexity when applying the guidance in Topic 718,~~ ~~Compensation-Stock Compensation, to a change in the terms and conditions~~requires consideration of a ~~share-based payment award.~~broader range of reasonable and supportable information to inform credit loss estimates. In addition, on April 25, 2019, the FASB issued Accounting Standard Update (ASU) 2019-04: Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this update ~~affect any entity that~~represent changes to clarify, correct errors in or improve the ~~terms or conditions~~codification. Such amendments should make the codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. Within the clarifications was the FASB’s intent to include all reinsurance recoverables within the scope of ~~a share-based payment award. This guidance indicates an entity should account for~~ASU 2016-13 (Topic 326). For public companies, the ~~effects of a modification unless the following criteria are met: (1) t~~he 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 inputsimprovements related to ~~the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before~~ASU 2016-13 (Topic 326) 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,~~ASU 2016-01 (Topic 825) are effective for fiscal years beginning after December 15, ~~2017,~~2019, including interim periods within those fiscal years. ~~We are currently evaluating~~The Company adopted the ~~impact~~standard effective January 1, 2020 and recognized $166, net of deferred tax asset, as a cumulative effect adjustment to the opening balance of retained earnings on the adoption ~~of this guidance may have~~date. In addition, the Company implemented control processes and procedures, as necessary, based 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 separatelychanges resulting 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.new standard.

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 Company adopted the ~~impact the~~standard effective January 1, 2020. Upon adoption of this ~~guidance may have on~~standard, if the ~~Company's consolidated financial statements.~~carrying amount of any of the reporting units exceeds its fair value, the Company would be required to record an impairment charge for the difference up to the amount of the goodwill.

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~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

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

~~(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 September 30, 2017 and December 31, 2016, were as follows:

September 30, 2017

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair value

Securities available for sale:
Fixed maturities:
Obligations of government- sponsored enterprises $ 3,349 $ 25 $ - $ 3,374
U.S. Treasury securities and obligations of U.S. government instrumentalities 72,349 54 (76 ) 72,327
Obligations of the Commonwealth of Puerto Rico and its instrumentalities 8,000 83 - 8,083
Municipal securities 699,770 32,950 (349 ) 732,371
Corporate bonds 246,787 16,411 (26 ) 263,172
Residential mortgage-backed securities 21,012 30 (96 ) 20,946
Collateralized mortgage obligations 23,769 31 (83 ) 23,717
Total fixed maturities 1,075,036 49,584 (630 ) 1,123,990
Equity securities:
Mutual funds 251,208 47,213 (293 ) 298,128
Alternative investments 34,331 519 (273 ) 34,577
Total equity securities 285,539 47,732 (566 ) 332,705
Total $ 1,360,575 $ 97,316 $ (1,196 ) $ 1,456,695

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(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

September 30, 2017

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 $ 618 $ 164 $ - $ 782
Residential mortgage-backed securities 191 2 - 193
Certificates of deposit 2,030 - - 2,030
Total $ 2,839 $ 166 $ - $ 3,005

On August 27, 2018, the FASB issued guidance for Fair Value Measurement – Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement. This update focuses on improving the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each entity’s financial statements. Specifically, certain disclosure requirements are removed (the amount of, and reasons for, transfer between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; the valuation processes for Level 3 fair value measurements) while certain other disclosures are modified and added (changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements). The amendments regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent period in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. For public companies, these amendments will be applied for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the standard effective January 1, 2020. The adoption of this guidance did not have a material impact on the presentation and disclosures of the Company’s consolidated financial statements.

On August 29, 2018, the FASB issued guidance for Intangibles – Goodwill and Other – Internal-Use Software. Guidance addresses customers’ accounting for implemented costs incurred in a cloud computing arrangement that is a service contract and aims to reduce complexity in the accounting for costs of implementing a cloud computing service arrangement. The amendments require a customer in a hosting arrangement that is a service contract to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Additionally, it requires the customer to expense the capitalized implementation costs over the term of the hosting arrangement. For public companies, these amendments will be applied on a prospective basis, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the standard effective January 1, 2020. The adoption of this guidance did not have a material impact on the results of the Company’s consolidated financial statements.

Future Adoptions of Accounting Standards

On March 12, 2020, the FASB issued ASU 2020-04: Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU was issued to provide optional guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments, which are elective and apply to all entities, provide expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate that is expected to be discontinued due to reference rate reform. Because the guidance is intended to assist stakeholders during the global market-wide reference rate transition period, it is in effect for a limited time, from March 12, 2020 through December 31, 2022. The Company is in the process of evaluating the contracts that are affected by the reference reform rate to determine the impact if we elect any of the expedients provided by this ASU.

Other than the accounting pronouncements disclosed above, there were no other new accounting pronouncements issued during the three months ended March 31, 2020 that could have a material impact on the Company’s financial position, operating results or financials statement disclosures.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(Unaudited)

(3)	Investment in Securities

The amortized cost for debt securities and cost for alternative investments, gross unrealized gains, gross unrealized losses, and estimated fair value for the Company’s investments in securities by major security type and class of security at March 31, 2020 and December 31, 2019, were as follows:

	March 31, 2020
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value

Fixed maturities available for sale
Obligations of government-sponsored enterprises	$	17,203	$	931	$	-		$	18,134
U.S. Treasury securities and obligations of U.S. government instrumentalities		102,441		9,532		-			111,973
Municipal securities		578,130		39,639		(111	)		617,658
Corporate bonds		187,162		21,876		(115	)		208,923
Residential mortgage-backed securities		268,192		17,068		-			285,260
Collateralized mortgage obligations		8,307		776		-			9,083
Total fixed maturities available for sale	$	1,161,435	$	89,822	$	(226	)	$	1,251,031

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Fixed maturities available for sale
Obligations of government- sponsored enterprises	$	17,209	$	477	$	-		$	17,686
U.S. Treasury securities and obligations of U.S. government instrumentalities		102,230		4,779		-			107,009
Municipal securities		595,051		34,735		(22	)		629,764	��
Corporate bonds		187,096		21,721		(74	)		208,743
Residential mortgage-backed securities		262,783		8,073		(320	)		270,536
Collateralized mortgage obligations		8,674		471		-			9,145
Total fixed maturities available for sale	$	1,173,043	$	70,256	$	(416	)	$	1,242,883

	March 31, 2020
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Fixed maturities held to maturity
U.S. Treasury securities and obligations of U.S. government instrumentalities	$	615	$	225	$	-	$	840
Residential mortgage-backed securities		164		6		-		170
Certificates of deposit		1,080		-		-		1,080
Total	$	1,859	$	231	$	-	$	2,090

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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

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

(Unaudited)

	December 31, 2019
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Fixed maturities held to maturity
U.S. Treasury securities and obligations of U.S. government instrumentalities	$	615	$	158	$	-	$	773
Residential mortgage-backed securities		165		1		-		166
Certificates of deposit		1,080		-		-		1,080
Total	$	1,860	$	159	$	-	$	2,019

	March 31, 2020
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value

Other invested assets - Alternative investments	$	99,617	$	4,166	$	(665	)	$	103,118

	December 31, 2019
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value

Other invested assets - Alternative investments	$	97,575	$	3,721	$	(788	)	$	100,508

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 ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 were as follows:

September 30, 2017
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

Securities available for sale:
Fixed maturities
U.S. Treasury securities and obligations of U.S. governmental instrumentalities $ 35,951 $ (76 ) 3 $ - $ - - $ 35,951 $ (76 ) 3
Municipal securities 97,929 (349 ) 14 - - - 97,929 (349 ) 14
Corporate bonds 15,215 (26 ) 3 - - - 15,215 (26 ) 3
Residential mortgage-backed securities 15,462 (96 ) 7 - - - 15,462 (96 ) 7
Collateralized mortgage obligations 17,947 (77 ) 4 657 (6 ) 2 18,604 (83 ) 6
Total fixed maturities 182,504 (624 ) 31 657 (6 ) 2 183,161 (630 ) 33
Equity securities
Mutual funds 20,880 (293 ) 4 - - - 20,880 (293 ) 4
Alternative investments 10,640 (147 ) 9 2,667 (126 ) 1 13,307 (273 ) 10
Total equity securities 31,520 (440 ) 13 2,667 (126 ) 1 34,187 (566 ) 14
Total for securities available for sale $ 214,024 $ (1,064 ) 44 $ 3,324 $ (132 ) 3 $ 217,348 $ (1,196 ) 47

	March 31, 2020
	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
Fixed maturities available for sale
Municipal securities	$	22,885	$	(111	)		3	$	-	$	-			-	$	22,885	$	(111	)		3
Corporate bonds		10,948		(115	)		4		-		-			-		10,948		(115	)		4
Total fixed maturities	$	33,833	$	(226	)		7	$	-	$	-			-	$	33,833	$	(226	)		7
Other invested assets - Alternative investments	$	29,487	$	(605	)		9	$	6,184	$	(60	)		2	$	35,671	$	(665	)		11

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(Unaudited)

December 31, 2016
Less than 12 months 12 months or longer Total

Estimated
Fair Value

Gross
Unrealized
Loss

Number of
Securities

Estimated
Fair Value

Gross
Unrealized
Loss

Number of
Securities

Estimated
Fair Value

Gross
Unrealized
Loss

Number of
Securities

Securities available for sale:
Fixed maturities
Obligations of government- sponsored enterprises $ 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
Obligations of the Commonwealth of Puerto Rico and its instrumentalities 7,758 (68 ) 5 - - - 7,758 (68 ) 5
Municipal securities 84,252 (559 ) 13 - - - 84,252 (559 ) 13
Corporate bonds 105,054 (661 ) 22 - - - 105,054 (661 ) 22
Collateralized mortgage obligations 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
Equity securities-Mutual funds 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

	December 31, 2019
	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
Fixed maturities available for sale
Municipal securities	$	10,656		(22	)		3	$	-	$	-			-	$	10,656	$	(22	)		3
Corporate bonds		5,047		(74	)		1		-		-			-		5,047		(74	)		1
Residential mortgage-backed securities		79,902		(320	)		16		-		-			-		79,902		(320	)		16
Total fixed maturities	$	95,605	$	(416	)		20	$	-	$	-			-	$	95,605	$	(416	)		20
Other invested assets - Alternative investments	$	24,437	$	(605	)		8	$	10,580	$	(183	)		1	$	35,017	$	(788	)		9

The ~~Corporation~~Company reviews the ~~investment~~available for sale and other invested assets portfolios under the ~~Corporation’s~~Company’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~~Company 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 U.S. Government Instrumentalities and~~

Municipal Securities: The unrealized losses ~~on the Corporation’s investments in U.S. Government Instrumentalities and Municipal Securities~~of these 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 ~~positions~~investments have investment grade ratings. Because the decline in fair value is attributable to changes in interest rates and not credit quality; because the ~~Corporation~~Company does not intend to sell the investments and it is not more likely than not that the ~~Corporation~~Company will ~~not~~ be required to sell the investments before recovery of their amortized cost basis, which may be maturity; and because the ~~Corporation~~Company expects to collect all contractual cash flows, these investments are not considered ~~other-than-temporarily~~credit impaired.

~~Obligations of the Commonwealth of Puerto Rico and its Instrumentalities:~~ Our holdings in Puerto Rico municipals consist of escrowed bonds which are backed by U.S. Government securities and therefore have an implicit AA+/Aaa rating. These bonds do not bear Puerto Rico credit risk. As of September 30, 2017, investments in these escrowed bonds were not at an unrealized loss position.

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~~credit impaired.

Alternative investments: As of March 31, 2020, alternative investments with unrealized losses are not considered credit impaired based on current market conditions.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~

(Unaudited)

~~Residential Mortgage-Backed Securities and Collateralized Mortgage Obligations~~: The unrealized losses on investments in residential mortgage-backed securities and collateralized mortgage obligations (“CMOs”) were mostly caused by fluctuations in interest rates and credit spreads. The contractual cash flows of these securities are guaranteed by U.S. government-sponsored enterprises. 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 and Alternative Investments:~~ As of September 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 impairments on mutual funds and alternative investments during the three months and nine months ended September 30, 2017. During the nine months ended September 30, 2016, we recorded an other-than-temporary impairment related to certain mutual funds amounting to $1,434. There were no impairments on mutual funds and alternative investments during the three months ended September 30, 2016.

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

	September 30, 2017				March 31, 2020
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
Securities available for sale:
Fixed maturities available for sale
Due in one year or less	$	15,708	$	15,839	$	15,634	$	15,898
Due after one year through five years		306,564		309,836		462,181		490,314
Due after five years through ten years		154,246		160,637		206,215		223,306
Due after ten years		553,737		593,015		200,906		227,170
Residential mortgage-backed securities		21,012		20,946		268,192		285,260
Collateralized mortgage obligations		23,769		23,717		8,307		9,083
	$	1,075,036	$	1,123,990	$	1,161,435	$	1,251,031
Securities held to maturity:
Fixed maturities held to maturity
Due in one year or less	$	2,030	$	2,030	$	1,080	$	1,080
Due after ten years		618		782		615		840
Residential mortgage-backed securities		191		193		164		170
	$	2,839	$	3,005	$	1,859	$	2,090

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

Investments with an amortized cost of $223,391 and $145,981 and a fair value of $242,176 and $152,916 at March 31, 2020 and December 31, 2019, respectively are pledged with the Federal Home Loan Bank of New York (“FHLBNY”) to secure short-term borrowings.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(Unaudited)

(4)	Realized and Unrealized Gains (Losses)

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

Three months ended
September 30,

Nine months ended
September 30,

2017 2016 2017 2016
Realized gains (losses):
Fixed maturity securities:
Securities available for sale:
Gross gains from sales $ 933 $ 187 $ 1,334 $ 2,060
Gross losses from sales (194 ) (20 ) (830 ) (1,482 )
Total fixed maturity securities 739 167 504 578
Equity securities:
Securities available for sale:
Gross gains from sales 3,014 5,873 7,641 8,985
Gross losses from sales - (664 ) (2 ) (1,175 )
Gross losses from other-than-temporary impairments - - - (1,434 )
Total equity securities 3,014 5,209 7,639 6,376
Net realized gains on securities available for sale $ 3,753 $ 5,376 $ 8,143 $ 6,954

	Three months ended March 31,
	2020			2019

Realized gains (losses)
Fixed maturity securities:
Securities available for sale:
Gross gains	$	774		$	872
Gross losses		(6	)		(318	)
Total debt securities		768			554
Equity investments:
Gross gains		930			1,302
Gross losses		(1,612	)		(637	)
Gross losses from impaired securities		(678	)		-
Total equity securities		(1,360	)		665
Other invested assets:
Gross gains		126			132
Gross losses		-			(36	)
Total other invested assets		126			96
Net realized investment (losses) gains	$	(466	)	$	1,315

Three months ended
September 30,

Nine months ended
September 30,

2017 2016 2017 2016
Changes in net unrealized gains (losses):
Recognized in accumulated other comprehensive income:
Fixed maturities – available for sale $ (1,199 ) $ (5,762 ) $ 1,614 $ 35,566
Equity securities – available for sale 3,605 2,608 17,516 12,285
$ 2,406 $ (3,154 ) $ 19,130 $ 47,851
Not recognized in the consolidated financial statements:
Fixed maturities – held to maturity $ (2 ) $ (14 ) $ (10 ) $ 49

The gross losses from impaired securities during the three months ended March 31, 2020 is related to an equity method investment held by the Company.

	Three months ended March 31,
	2020		2019

Changes in net unrealized gains (losses):
Recognized in accumulated other comprehensive income:
Fixed maturities – available for sale	$	19,756	$	17,090
Other invested assets		568		573
	$	20,324	$	17,663
Not recognized in the consolidated financial statements:
Fixed maturities – held to maturity	$	72	$	15

The change in deferred tax liability on unrealized gains recognized in accumulated other comprehensive income during the ~~nine~~ three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~ 2019 was ~~$4,503~~$4,065 and $~~14,328~~, $3,534, respectively.

As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016, no~~2019, 0 individual investment in securities exceeded 10% of stockholders’ equity.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(Unaudited)

~~(4)~~(5)

Premiums and Other Receivables, Net

Premiums and other receivables, net were as follows:

	September 30, 2017		December 31, 2016		March 31, 2020		December 31, 2019
Premium	$	126,200	$	91,528	$	215,189	$	188,861
Self-funded group receivables		51,198		57,728		32,899		28,672
FEHBP		13,892		14,321		14,702		13,894
Agent balances		33,743		25,495		34,662		30,784
Accrued interest		11,636		13,668		9,981		11,307
Reinsurance recoverable		656,625		58,295		253,433		239,767
Other		73,788		62,637		133,892		110,952
		967,082		323,672		694,758		624,237
Less allowance for doubtful receivables:
Premium		27,135		27,320		37,309		36,622
Other		8,975		9,987		12,465		19,923
		36,110		37,307		49,774		56,545
Total premium and other receivables, net	$	930,972	$	286,365	$	644,984	$	567,692

As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the Company had premiums and other receivables of ~~$87,765~~$61,458 and ~~$57,750,~~$49,176, respectively, from the Government of Puerto Rico, including its agencies, municipalities and public corporations. The related allowance for doubtful receivables as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 were ~~$17,299~~$19,374 and ~~$18,812,~~$22,091, respectively.

Reinsurance recoverable as of September 30, 2017 includes approximately $604,000 related to the expected catastrophe losses covered by the Property and Casualty segment’s reinsurance program, reflecting the anticipated gross losses related to Hurricanes Irma and Maria in September 2017.

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(Unaudited)

~~(5)~~(6)

Fair Value Measurements

Our condensed consolidated balance sheets include the following financial instruments: securities available for sale, equity investments, policy loans, policyholder deposits, short-term borrowings and long-term borrowings. We consider the carrying amounts of policy loans, policyholder deposits, short-term borrowings 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.~~value. 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~~2019 Annual Report on Form 10-K.

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

	September 30, 2017								March 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Securities available for sale:
Fixed maturity securities

Fixed maturity securities available for sale
Obligations of government-sponsored enterprises	$	-	$	3,374	$	-	$	3,374	$	-	$	18,134	$	-	$	18,134
U.S. Treasury securities and obligations of U.S government instrumentalities		72,327		-		-		72,327		111,973		-		-		111,973
Obligations of the Commonwealth of Puerto Rico and its instrumentalities		-		8,083		-		8,083
Municipal securities		-		732,371		-		732,371		-		617,658		-		617,658
Corporate bonds		-		263,172		-		263,172		-		208,923		-		208,923
Residential agency mortgage-backed securities		-		20,946		-		20,946		-		285,260		-		285,260
Collateralized mortgage obligations		-		23,717		-		23,717		-		9,083		-		9,083
Total fixed maturities		72,327		1,051,663		-		1,123,990	$	111,973	$	1,139,058	$	-	$	1,251,031
Equity securities - Mutual funds		170,566		127,562		-		298,128
Alternative investments - measured at net asset value		-		-		-		34,577
Total	$	242,893	$	1,179,225	$	-	$	1,456,695
Equity investments									$	168,158	$	125,619	$	5,239	$	299,016

	December 31, 2019
	Level 1		Level 2		Level 3		Total

Fixed maturity securities available for sale
Obligations of government-sponsored enterprises	$	-	$	17,686	$	-	$	17,686
U.S. Treasury securities and obligations of U.S government instrumentalities		107,009		-		-		107,009
Municipal securities		-		629,764		-		629,764
Corporate bonds		-		208,743		-		208,743
Residential agency mortgage-backed securities		-		270,536		-		270,536
Collateralized mortgage obligations		-		9,145		-		9,145
Total fixed maturities	$	107,009	$	1,135,874	$	-	$	1,242,883
Equity investments	$	177,136	$	105,180	$	5,209	$	287,525

~~Certain investments that are measured at fair value using~~

There were 0 transfers between Levels 1 and 2 during 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.three months ended March 31, 2020 and year ended December 31, 2019.

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 and alternative investments 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~~Dollar amounts in thousands, except per share data)

~~(unaudited)~~(Unaudited)

~~There were no transfers in and/or out~~

A reconciliation of ~~Level 3~~the beginning and ~~between Levels 1 and 2 during the three months and nine months ended September 30, 2017 and 2016. Level 3 securities are partnerships~~ ending balances of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the ~~net asset value affected by changes in the~~three months ended March 31 is as follows:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three months ended
	March 31, 2020
Balance as of January 1,	$	5,209
Unrealized in other accumulated comprehensive income		30
Balance as of March 31,	$	5,239

The fair ~~market~~ value of ~~the investments held in these partnerships.~~

~~Alternative investments represent investments in partnerships which invest in several private debt and private equity funds.~~ ~~These investments are not redeemable with the funds. Distributions from each fund are received as the underlying investments of the funds are liquidated. It~~investment securities is estimated ~~that~~based on quoted market prices for those or similar investments. Additional information pertinent to the ~~underlying assets of the funds will be liquidated in the next 5 to 12 years. The~~estimated fair ~~values of the investments in this class have been estimated using the net asset~~ value of ~~the Company’s ownership interest~~investment in ~~the partnerships.~~ ~~Total unfunded capital commitments for these positions as of September 30, 2017 amounted to $113,181.~~

~~Table of Contents~~

securities is included in note 3.

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

~~A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on our condensed consolidated balance sheets are as follows:~~

September 30, 2017
Carrying Fair Value
Value Level 1 Level 2 Level 3 Total
Assets:
Policy loans $ 9,260 $ - $ 9,260 $ - $ 9,260

Liabilities:
Policyholder deposits $ 177,265 $ - $ 177,265 $ - $ 177,265
Long-term borrowings:
Loans payable to bank - variable 33,159 - 33,159 - 33,159
Total long-term borrowings 33,159 - 33,159 - 33,159
Total liabilities $ 210,424 $ - $ 210,424 $ - $ 210,424

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

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

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

~~(6)~~(7)

Claim Liabilities

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

	Three months ended March 31, 2020
	Managed Care			Other Business Segments *			Consolidated

Claim liabilities at beginning of period	$	341,277		$	367,981		$	709,258
Reinsurance recoverable on claim liabilities		-			(137,017	)		(137,017	)
Net claim liabilities at beginning of period		341,277			230,964			572,241
Claims incurred
Current period insured events		685,245			33,218			718,463
Prior period insured events		(7,426	)		(5,838	)		(13,264	)
Total		677,819			27,380			705,199
Payments of losses and loss-adjustment expenses
Current period insured events		480,705			9,243			489,948
Prior period insured events		198,410			19,026			217,436
Total		679,115			28,269			707,384
Net claim liabilities at end of period		339,981			230,075			570,056
Reinsurance recoverable on claim liabilities		-			160,762			160,762
Claim liabilities at end of period	$	339,981		$	390,837		$	730,818

Three months ended
September 30, 2017

Nine months ended
September 30, 2017

Managed
Care

Other
Business
Segments *
Consolidated
Managed
Care

Other
Business
Segments *
Consolidated

Claim liabilities at beginning of period $ 371,428 $ 132,812 $ 504,240 $ 349,047 $ 138,896 $ 487,943
Reinsurance recoverable on claim liabilities - (33,368 ) (33,368 ) - (38,998 ) (38,998 )
Net claim liabilities at beginning of period 371,428 99,444 470,872 349,047 99,898 448,945
Claims incurred
Current period insured events 541,648 40,719 582,367 1,724,890 95,227 1,820,117
Prior period insured events (2,463 ) (3,391 ) (5,854 ) (19,158 ) (5,920 ) (25,078 )
Total 539,185 37,328 576,513 1,705,732 89,307 1,795,039
Payments of losses and loss-adjustment expenses
Current period insured events 529,497 15,320 544,817 1,456,098 38,222 1,494,320
Prior period insured events 24,819 5,794 30,613 242,384 35,325 277,709
Total 554,316 21,114 575,430 1,698,482 73,547 1,772,029
Net claim liabilities at end of period 356,297 115,658 471,955 356,297 115,658 471,955
Reinsurance recoverable on claim liabilities - 636,743 636,743 - 636,743 636,743
Claim liabilities at end of period $ 356,297 $ 752,401 $ 1,108,698 $ 356,297 $ 752,401 $ 1,108,698

Three months ended
September 30, 2016

Nine months ended
September 30, 2016

Managed
Care

Other
Business
Segments *
Consolidated
Managed
Care

Other
Business
Segments *
Consolidated

Claim liabilities at beginning of period $ 341,505 $ 140,359 $ 481,864 $ 348,297 $ 143,468 $ 491,765
Reinsurance recoverable on claim liabilities - (38,109 ) (38,109 ) - (40,714 ) (40,714 )
Net claim liabilities at beginning of period 341,505 102,250 443,755 348,297 102,754 451,051
Claims incurred
Current period insured events 588,960 26,166 615,126 1,800,023 78,006 1,878,029
Prior period insured events 9,105 (2,197 ) 6,908 (15,488 ) (5,131 ) (20,619 )
Total 598,065 23,969 622,034 1,784,535 72,875 1,857,410
Payments of losses and loss-adjustment expenses
Current period insured events 553,062 17,049 570,111 1,501,480 38,702 1,540,182
Prior period insured events 16,633 7,095 23,728 261,477 34,852 296,329
Total 569,695 24,144 593,839 1,762,957 73,554 1,836,511
Net claim liabilities at end of period 369,875 102,075 471,950 369,875 102,075 471,950
Reinsurance recoverable on claim liabilities - 39,427 39,427 - 39,427 39,427
Claim liabilities at end of period $ 369,875 $ 141,502 $ 511,377 $ 369,875 $ 141,502 $ 511,377

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

~~Claim liabilities as~~

Table of ~~September 30, 2017 include approximately $618,000 of Property and Casualty gross losses related~~Contents

Triple-S Management Corporation

Notes to ~~the impact of Hurricanes Irma and Maria~~Condensed Consolidated Financial Statements

(Dollar amounts in ~~September 2017.~~thousands, except per share data)

(Unaudited)

	Three months ended March 31, 2019
	Managed Care			Other Business Segments *			Consolidated

Claim liabilities at beginning of period	$	394,226		$	542,563		$	936,789
Reinsurance recoverable on claim liabilities		-			(315,543	)		(315,543	)
Net claim liabilities at beginning of period		394,226			227,020			621,246
Claims incurred
Current period insured events		626,670			28,137			654,807
Prior period insured events		(36,789	)		(3,525	)		(40,314	)
Total		589,881			24,612			614,493
Payments of losses and loss-adjustment expenses
Current period insured events		359,788			7,190			366,978
Prior period insured events		227,036			17,396			244,432
Total		586,824			24,586			611,410
Net claim liabilities at end of period		397,283			227,046			624,329
Reinsurance recoverable on claim liabilities		-			253,635			253,635
Claim liabilities at end of period	$	397,283		$	480,681		$	877,964

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.

~~Table of Contents~~

~~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 ended March 31, 2020 and ~~nine months ended September 30, 2017 and 2016~~2019 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 ~~condensed~~ consolidated financial statements.

The claims incurred disclosed in this table exclude the portion of the change in the liability for future policy benefits expense, which amounted to ~~$7,112~~$9,323 and ~~$20,746~~$8,697 during the three months ended March 31, 2020 and nine months ended September 30, 2017, respectively. The change in the liability for future policy benefits during the three months and nine months ended September 30, 2016 amounted to $7,136 and $20,540,2019, respectively.

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 ~~September 30, 2017.~~

Incurred
Year

Total of IBNR Liabilities Plus Expected
Development on Reported Claims

2015 66,221
2016 20,708
2017 268,792

~~(7)~~

~~Reinsurance Activity~~

TSP has a number of pro rata and excess of loss reinsurance treaties whereby the subsidiary retains for its own account all loss payments for each occurrence that does not exceed the stated amount in the agreements and a catastrophe cover, whereby it protects itself from a loss or disaster of a catastrophic nature.

~~Reinsurance cessions are made on excess of loss and on a proportional basis. Principal reinsurance agreements are as follows:~~

~~Primary Reinsurance:~~

~~Commercial Property quota share contract. This treaty covers a maximum of $30,000 for any one risk. Under this treaty 30% of the risk is ceded to reinsurers. The remaining exposure is covered by a~~ ~~Property Per Risk excess of loss contract~~ ~~that provides reinsurance in excess of $500 up to a maximum of $21,000, or the remaining 70% for any one risk.~~

Builders’ risk quota share and first surplus covering contractors’ risk. This treaty provides protection on a 20/80 quota share basis for the initial $2,500 and a first surplus of $12,500 for a maximum of $14,500 for any one risk.

Surety quota share treaty covering contract and miscellaneous surety bond business. This treaty provides reinsurance of up to $5,000 for contract surety bonds, subject to an aggregate of $10,000 per contractor and $3,000 per miscellaneous surety bond.

~~Facultative reinsurance is obtained when coverage per risk is required.~~

March 31, 2020.

Incurred Year	Total of IBNR Liabilities Plus Expected Development on Reported Claims
2019	$	70,863
2020		204,540

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Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~

~~Excess of Loss Reinsurance:~~

~~Casualty excess of loss contract. This treaty provides reinsurance for losses up to $12,000, subject to a retention of $225.~~

~~Medical malpractice excess of loss. This treaty provides reinsurance for losses up to $3,000, subject to a retention of $150.~~

~~Catastrophe Reinsurance:~~

~~In the event of a Catastrophe, the Company has a~~ ~~Personal Lines Catastrophe excess of loss contract~~ ~~that provides protection from losses up to $125,000, subject to a $5,000 retention, a~~ ~~Commercial Catastrophe excess of loss contract~~ ~~up to $135,000, subject to a $10,000 retention, and a~~ ~~Property Catastrophe excess of loss contract~~ that provides a protection of $285,000 in excess of the Personal and Commercial lines Catastrophe contracts, subject to $200,000 in respect of the ceded portion of the Primary Commercial Lines Quota Share treaty mentioned above. In addition, the above combined $15,000 retention is further reduced to $10,000 by the ~~Clash Cover Property Catastrophe excess of loss contract.The losses would be net of any Facultative reinsurance. Also, the Company purchases personal and commercial~~ ~~Reinstatement Premium Protection contracts~~ ~~to cover the necessity of reinstating the catastrophe program in the event it is activated.~~

~~All principal reinsurance contracts are~~ ~~for a period of one year, on a calendar basis, and are subject to modifications and negotiations in each renewal.~~

23(Unaudited)

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

(8)	~~Long-Term~~Short-term Borrowings

The Company has several short-term facilities available to address timing differences between cash receipts and disbursements, consisting of collateralized advances from FHLBNY and a revolving credit facility.

~~A summary~~

In August 2019, TSS and TSV became members of the ~~borrowings entered~~FHLBNY, which provides access to collateralized advances. The borrowing capacity of TSS and TSV is up to 30% of their admitted assets as disclosed in the most recent filing with the Commissioner of Insurance but is constrained by the ~~Company is as follows:~~

September 30,
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%, fully paid in January 2017. $ - $ 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 2.23% and 1.77% at September 30, 2017 and December 31, 2016, respectively) 9,957 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 4.05% at September 30, 2017). 19,478 -
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 4.55% at September 30, 2017). 3,724 -
Total borrowings 33,159 35,187

Less: unamortized debt issuance costs 289 102
$ 32,870 $ 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~~collateral held at the ~~principal amount~~FHLBNY (see Note 3). As of ~~$20,150~~March 31, 2020, the borrowing capacity is approximately $103,700 for TSS and ~~(iii) Term Loan C in~~$77,300 for TSV. As of December 31, 2019, the ~~principal amount~~borrowing capacity is approximately $82,200 for TSS and $48,900 for TSV. The outstanding balance as of ~~$4,116. Term Loan A was used to refinance~~March 31, 2020 for TSS and TSV is $40,000 and $38,000, respectively. The outstanding balance as of December 31, 2019 for TSS and TSV is $25,000 and $29,000, respectively. The average interest rate of the outstanding balance is 0.88% and 1.79% as of ~~the previous $41,000 secured loan payable with the same commercial bank in Puerto Rico. Proceeds from Term Loans B~~March 31, 2020 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~~ December 2020 ($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.

~~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.

31, 2019, respectively.

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

~~On April 18, 2017, Triple-S Advantage, Inc. (TSA) entered into~~TSA has a $10,000 revolving loan agreement with a commercial bank in Puerto Rico. This line of credit has an interest rate of 30-day LIBOR plus 25 basis points ~~matures on April 17, 2018,~~ and ~~includes~~contains certain financial and non-financial covenants that are customary for this type of facility. AsThis line of ~~September~~credit matures on June 30, ~~2017, there is no~~2020 and has 0 outstanding balance ~~in this line~~as of ~~credit.~~March 31, 2020.

(9)	Pension Plan

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

	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2017			2016			2017			2016			2020			2019
Components of net periodic benefit cost:
Service cost	$	-		$	779		$	-		$	2,907
Interest cost		1,652			1,874			5,248			6,575		$	1,540		$	1,741
Expected return on assets		(2,021	)		(1,928	)		(6,419	)		(6,908	)		(2,209	)		(2,217	)
Amortization of prior service benefit		-			(96	)		-			(342	)
Amortization of actuarial loss		79			863			251			2,877			244			89
Settlement loss		580			-			1,211			-			356			375
Net periodic benefit cost	$	290		$	1,492		$	291		$	5,109		$	(69	)	$	(12	)

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~~Company disclosed in its audited consolidated financial statements for the year ended December 31, ~~2016~~2019 that it expected to contribute ~~$4,000~~$2,000 to the pension program in ~~2017.~~2020. As of ~~September 30, 2017~~March 31, 2020, the ~~Corporation~~Company has ~~contributed $4,000~~0t made contributions to the pension program.

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

(10)	Stock Repurchase ~~Program~~Programs

The Company repurchases shares through ~~open-market purchases of Class B shares only,~~open market transactions, in accordance with Rule 10b-18 ~~under~~of the Securities Exchange Act of 1934, as amended, under repurchase programs authorized by the Board of Directors. Shares purchased under share repurchase programs are retired and returned to authorized and unissued status.

In August 2017 the Company’s Board of Directors authorized a $30,000 repurchase program (2017 $30,000 program) of its Class B common stock. In February 2018 the Company’s Board of Directors authorized a $25,000 expansion of this program. In October 2019 the Company’s Board of Directors authorized an expansion to this repurchase program increasing its remaining balance up to a total of $25,000, effective November 2019. During the three months ended ~~September 30, 2017,~~March 31, 2020, the Company repurchased and retired under this program ~~539,034~~577,447 shares at an average per share price of ~~$23.51,~~$15.57, for an aggregate cost of ~~$12,553.~~$8,989.

Table of Contents

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

(Unaudited)

(11)	Comprehensive Income

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

													Three months ended
	Three months ended September 30,						Nine months ended September 30,						March 31,
	2017			2016			2017			2016			2020			2019

Net Unrealized Gain on Securities Beginning Balance	$	75,239		$	97,885		$	62,371		$	62,478		$	57,830		$	27,308
Other comprehensive income before reclassifications		4,853			2,417			21,233			40,233			16,049			14,493
Amounts reclassified from accumulated other comprehensive income		(3,002	)		(4,301	)		(6,514	)		(6,710	)		(170	)		(1,052	)
Net current period change		1,851			(1,884	)		14,719			33,523			15,879			13,441
Ending Balance		77,090			96,001			77,090			96,001			73,709			40,749
Liability for Pension Benefits Beginning Balance		(19,870	)		(35,776	)		(19,976	)		(36,855	)		(28,467	)		(24,246	)
Amounts reclassified from accumulated other comprehensive income		48			466			154			1,545			153			56
Ending Balance		(19,822	)		(35,310	)		(19,822	)		(35,310	)		(28,314	)		(24,190	)
Accumulated Other Comprehensive Income Beginning Balance		55,369			62,109			42,395			25,623			29,363			3,062
Other comprehensive income before reclassifications		4,853			2,417			21,233			40,233			16,049			14,493
Amounts reclassified from accumulated other comprehensive income		(2,954	)		(3,835	)		(6,360	)		(5,165	)		(17	)		(996	)
Net current period change		1,899			(1,418	)		14,873			35,068			16,032			13,497
Ending Balance	$	57,268		$	60,691		$	57,268		$	60,691		$	45,395		$	16,559

(12)	Share-Based Compensation

Share-based compensation expense recorded during the three months ended March 31, 2020 and ~~nine months ended September 30, 2017~~2019 was ~~$1,481~~$2,359 and ~~$1,651,~~$1,586, respectively. ~~Share-based compensation expense (benefit) recorded during the three months and nine months ended September 30, 2016 was ($383) and $1,931, respectively. The benefit during~~During the three months ended ~~September 30, 2016 results from~~March 31, 2020 and 2019, 6,882 and 602 shares, respectively, were repurchased and retired as a ~~decrease in the~~ ~~2014 and 2015 grants expected performance shares payouts.~~ ~~There was no cash received from stock option exercises during the nine months ended September 30, 2017 and 2016.~~result of non-cash tax withholdings upon vesting of shares.

Table of Contents

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(Unaudited)

(13)	Net (Loss) Income Available to Stockholders and Net (Loss) Income per Share

The following table sets forth the computation of basic and diluted earnings per share:

										Three months ended March 31,
	Three months ended September 30,					Nine months ended September 30,				2020			2019
	2017		2016			2017		2016
Numerator for earnings per share:
Net income (loss) attributable to TSM available to stockholders	$	21,912	$	(1,941	)	$	30,275	$	5,395
Net (loss) income attributable to TSM available to stockholders										$	(26,145	)	$	34,786
Denominator for basic earnings per share:
Weighted average of common shares		24,142,192		24,386,076			24,177,344		24,534,647		23,381,949			22,757,794
Effect of dilutive securities		65,830		-			54,364		70,632		-			82,480
Denominator for diluted earnings per share		24,208,022		24,386,076			24,231,708		24,605,279		23,381,949			22,840,274
Basic net income (loss) per share attributable to TSM	$	0.91	$	(0.08	)	$	1.25	$	0.22
Diluted net income (loss) per share attributable to TSM	$	0.91	$	(0.08	)	$	1.25	$	0.22
Basic net (loss) income per share attributable to TSM										$	(1.12	)	$	1.53
Diluted net (loss) income per share attributable to TSM										$	(1.12	)	$	1.52

The Company excluded the effect of dilutive securities ~~have been included in the diluted earnings per share calculation for~~during the three months ended ~~September 30, 2016 due to our reporting of a~~March 31, 2020 because their effect would have been anti-dilutive given the net loss ~~for~~attributable to stockholders in the ~~quarter.~~

~~(14)~~

~~Contingencies~~

The following information supplements and amends, as applicable, the disclosures in Note 23 to the Consolidated Financial Statements of the Company’s 2016 Annual Report on Form 10-K. Our business is subject to numerous laws and regulations promulgated by Federal, Puerto Rico, USVI, Costa Rica, BVI, and Anguilla governmental authorities. Compliance with these laws and regulations can be subject to government review and interpretation, as well as regulatory actions unknown and unasserted at this time. The Commissioner of Insurance of Puerto Rico, as well as other Federal, Puerto Rico, USVI, Costa Rica, BVI, and Anguilla government authorities, regularly make inquiries and conduct audits concerning the Company's compliance with such laws and regulations. Penalties associated with violations of these laws and regulations may include significant fines and exclusion from participating in certain publicly funded programs and may requireperiod. If the Company ~~to comply with corrective action plans or changes in our practices.~~

~~We are involved in various legal actions arising in~~had generated income from continuing operations during the ~~ordinary course~~three months ended March 31, 2020, the effect of ~~business. We are also defendants in various other litigations and proceedings, some of which are described below. Where~~restricted stock awards on the ~~Company believes that a loss is both probable and estimable, such amounts~~diluted shares calculation would have been ~~recorded. Although we believe our estimates of such losses are reasonable, these estimates could change as a result of further developments~~an increase in these matters. In other cases, it is at least reasonably possible that the Company may incur a loss related to one or more of the mentioned pending lawsuits or investigations, but the Company is unable to estimate the range of possible loss which may be ultimately realized, either individually or in the aggregate, upon their resolution. The outcome of legal proceedings is inherently uncertain and pending matters for which accruals have not been established have not progressed sufficiently to enable us to estimate a range of possible loss, if any. Given the inherent unpredictability of these matters, it is possible that an adverse outcome in one or more of these matters could have a material effect on the consolidated financial condition, operating results and/or cash flows of the Company.

~~Additionally, we may face various potential litigation claims that have not been asserted to date, including claims from persons purporting to have rights to acquire~~ shares of the Company on favorable terms pursuant to agreements previously entered by our predecessor managed care subsidiary, Seguros de Servicios de Salud de Puerto Rico, Inc. (SSS), with physicians or dentists who joined our provider network to sell such new provider shares of SSS at a future date (Share Acquisition Agreements) or to have inherited such shares notwithstanding applicable transfer and ownership restrictions.84,224 shares.

Table of Contents

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~

~~Claims by Heirs of Former Shareholders~~

The Company and Triple-S Salud, Inc. (TSS) are defending eight individual lawsuits, all filed in state court, from persons who claim to have inherited a total of 113 shares of the Company or one of its predecessors or affiliates (before giving effect to the 3,000-for-one stock split). While each case presents unique facts and allegations, the lawsuits generally allege that the redemption of the shares by the Company pursuant to transfer and ownership restrictions contained in the Company's (or its predecessors' or affiliates') articles of incorporation and bylaws was improper.

In one of these cases, entitled Heirs of Dr. Juan Acevedo, et al, v. Triple-S Management Corporation, et al, filed on March 27, 2008, the Puerto Rico Court of First Instance issued a summary judgement on August 28, 2017 in favor of plaintiff ordering TSS to issue the corresponding shares to the plaintiff. TSS will appeal the Puerto Rico Court of First Instance’s summary judgement and continue to conduct a vigorous defense of this matter.

Management believes these claims are time barred under one or more statutes of limitations and will vigorously defend them on these grounds; however, as a result of the Puerto Rico Supreme Court’s decision to deny the applicability of the statute of limitations contained in the local securities law, some of these claims will likely be litigated on their merits.

~~ASES Audits~~

On July 2, 2014, ASES notified TSS that the results of an audit conducted in connection with the government health plan contract for several periods between October 2005 and September 2013, reflected an overpayment of premiums made to TSS pursuant to prior contracts with ASES in the amount of $7,900. The alleged overpayments were related to duplicated payments or payments made for deceased members, and ASES requested the reimbursement of the alleged overpayment. On January 16, 2015, TSS filed an injunction against ASES under the case Triple-S Salud, Inc. v. Administración de Seguros de Salud de Puerto Rico. TSS contends that ASES’ request for reimbursement has no merits on several grounds, including a 2011 settlement between both parties covering the majority of the amount claimed by ASES, and that ASES, under the terms of the contracts, was responsible for certifying the membership. TSS also amended its claim to include the Puerto Rico Health Department (PRHD), as it asserts the PRHD is an indispensable party for the resolution of this matter and to seek the payment of approximately $5,000, since the premiums paid to TSS should have been higher than what ASES actually paid given the additional risk assumed by TSS. The case was assigned to a Special Commissioner, who on March 17, 2017 issued a report recommending the court to dismiss the complaint in favor of TSS. On May 26, 2017, the court issued a partial judgement dismissing the complaint in favor of TSS with respect to the alleged overpayments for the period between October 2005 and September 2010, which represented approximately $7,400 of the total alleged claim. After this partial dismissal, the only remaining claim pending to be adjudicated is for the alleged overpayments for the 2011-2013 period, which amounts to approximately $500. On July 27, 2017, ASES appealed the court’s partial judgement and on August 25, 2017 TSS filed its opposition to ASES’ appeal. TSS will continue to conduct a vigorous defense of this matter.

28(Unaudited)

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

~~(15)~~(14)

Segment Information

The Company’s operations ~~of the Corporation~~ are conducted principally through ~~three~~3 business segments: Managed Care, Life Insurance, and Property and Casualty Insurance. The ~~Corporation~~Company evaluates performance based primarily on the operating revenues and operating income of each segment. Operating revenues include premiums earned, net, administrative service fees, net investment income, and revenues derived from other segments. Operating costs include claims incurred and operating expenses. The ~~Corporation~~Company calculates operating income or loss as operating revenues less operating costs.

The following tables summarize the operations by reportable ~~segment:~~segment for the three months ended March 31, 2020 and 2019:

													Three months ended March 31,
	Three months ended September 30,						Nine months ended September 30,						2020			2019
	2017			2016			2017			2016
Operating revenues:
Managed Care:
Premiums earned, net	$	653,734		$	660,660		$	1,955,246		$	2,007,972		$	809,286		$	705,050
Administrative service fees		3,391			4,146			12,318			13,749			2,194			2,632
Intersegment premiums/service fees		1,781			1,384			4,946			4,521			1,643			1,484
Net investment income		4,097			3,628			12,135			11,215			5,008			5,878
Total managed care		663,003			669,818			1,984,645			2,037,457			818,131			715,044
Life Insurance:
Premiums earned, net		40,845			38,729			121,001			116,286			46,186			43,722
Intersegment premiums		107			212			409			551			491			478
Net investment income		6,070			6,355			18,487			18,681			6,930			6,560
Total life insurance		47,022			45,296			139,897			135,518			53,607			50,760
Property and Casualty Insurance:
Premiums earned, net		19,746			21,798			62,962			64,512			20,425			19,230
Intersegment premiums		153			153			460			460			153			153
Net investment income		2,106			2,358			6,164			6,612			2,125			2,487
Total property and casualty insurance		22,005			24,309			69,586			71,584			22,703			21,870
Other segments: *
Intersegment service revenues		2,796			2,502			6,641			7,664			2,531			-
Operating revenues from external sources		976			878			3,130			2,693			4,039			1,577
Total other segments		3,772			3,380			9,771			10,357			6,570			1,577
Total business segments		735,802			742,803			2,203,899			2,254,916			901,011			789,251
TSM operating revenues from external sources		87			7			220			12			248			451
Elimination of intersegment premiums/service fees		(2,041	)		(1,749	)		(5,535	)		(5,532	)		(2,287	)		(2,115	)
Elimination of intersegment service revenues		(2,796	)		(2,502	)		(6,641	)		(7,664	)		(2,531	)		-
Other intersegment eliminations		-			(18	)		-			(45	)
Consolidated operating revenues	$	731,052		$	738,541		$	2,191,943		$	2,241,687		$	896,441		$	787,587

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

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Table of Contents

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(Unaudited)

Three months ended
September 30,

Nine months ended
September 30,

2017 2016 2017 2016
Operating income (loss):
Managed care $ 34,819 $ (22,022 ) $ 19,157 $ (26,443 )
Life insurance 4,477 4,247 13,402 14,899
Property and casualty insurance (11,115 ) 4,017 (5,273 ) 9,516
Other segments * 373 (894 ) 517 (1,255 )
Total business segments 28,554 (14,652 ) 27,803 (3,283 )
TSM operating revenues from external sources 87 7 220 12
TSM unallocated operating expenses (2,759 ) (1,771 ) (7,876 ) (7,645 )
Elimination of TSM intersegment charges 2,400 2,382 7,200 7,155
Consolidated operating income 28,282 (14,034 ) 27,347 (3,761 )
Consolidated net realized investment gains 3,753 5,376 8,143 6,954
Consolidated interest expense (1,709 ) (1,893 ) (5,116 ) (5,729 )
Consolidated other income, net 3,409 734 6,521 5,468
Consolidated income (loss) before taxes $ 33,735 $ (9,817 ) $ 36,895 $ 2,932

Depreciation and amortization expense:
Managed care $ 2,567 $ 2,622 $ 7,455 $ 8,395
Life insurance 315 247 913 751
Property and casualty insurance 136 91 388 402
Other segments* 166 160 489 479
Total business segments 3,184 3,120 9,245 10,027
TSM depreciation expense 197 197 590 590
Consolidated depreciation and amortization expense $ 3,381 $ 3,317 $ 9,835 $ 10,617

	Three months ended March 31,
	2020			2019

Operating income (loss):
Managed care	$	14,167		$	22,110
Life insurance		5,049			5,640
Property and casualty insurance		(242	)		3,554
Other segments *		(504	)		(392	)
Total business segments		18,470			30,912
TSM operating revenues from external sources		248			451
TSM unallocated operating expenses		(1,403	)		(2,032	)
Elimination of TSM intersegment charges		2,403			2,403
Consolidated operating income		19,718			31,734
Consolidated net realized investment (losses) gains		(466	)		1,315
Consolidated net unrealized investment (losses) gains on equity investments		(56,806	)		19,669
Consolidated interest expense		(1,853	)		(1,788	)
Consolidated other income, net		3,605			1,169
Consolidated (loss) income before taxes	$	(35,802	)	$	52,099

Depreciation and amortization expense:
Managed care	$	3,046		$	2,757
Life insurance		272			272
Property and casualty insurance		112			94
Other segments*		321			185
Total business segments		3,751			3,308
TSM depreciation expense		156			197
Consolidated depreciation and amortization expense	$	3,907		$	3,505

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

Table of Contents

Triple-S Management Corporation

Notes to Condensed Consolidated Financial Statements

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

~~(unaudited)~~(Unaudited)

September 30,
2017

December 31,
2016

Assets:
Managed care $ 1,141,233 $ 1,013,872
Life insurance 857,598 816,920
Property and casualty insurance 1,006,658 349,159
Other segments * 19,987 26,034
Total business segments 3,025,476 2,205,985
Unallocated amounts related to TSM:
Cash, cash equivalents, and investments 72,884 17,033
Property and equipment, net 22,152 22,380
Other assets 20,208 21,646
115,244 61,059
Elimination entries-intersegment receivables and others (53,928 ) (48,045 )
Consolidated total assets $ 3,086,792 $ 2,218,999

	March 31, 2020			December 31, 2019

Assets:
Managed care	$	1,344,321		$	1,190,538
Life insurance		995,815			981,370
Property and casualty insurance		612,247			592,758
Other segments *		30,582			28,346
Total business segments		2,982,965			2,793,012
Unallocated amounts related to TSM:
Cash, cash equivalents, and investments		24,078			28,167
Property and equipment, net		27,020			25,623
Other assets		46,488			37,176
		97,586			90,966
Elimination entries-intersegment receivables and others		(92,357	)		(65,152	)
Consolidated total assets	$	2,988,194		$	2,818,826

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

~~Table of Contents~~

~~Triple-S Management Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~(unaudited)~~

~~(16)~~(15)

Subsequent Events

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

Table of Contents

Item 2.

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

In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), the “Corporation”, the “Company”, “TSM”, “we”, “us” and “our” refers to Triple-S Management Corporation and its subsidiaries. The MD&A included in this Quarterly Report on Form 10-Q is intended to update the reader on matters affecting the financial condition and results of operations for the three months ~~and nine months~~ ended ~~September 30, 2017.~~March 31, 2020. Therefore, the following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K filed with the United States Securities and Exchange Commission as of and for the year ended December 31, ~~2016~~2019 and the MD&A included therein, and our ~~unaudited~~condensed consolidated financial statements and accompanying notes as of and for the three months ~~and nine months~~ ended ~~September 30, 2017~~March 31, 2020 included in this Quarterly Report on Form 10-Q.

Cautionary Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q and other of our publicly available documents may include statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, among other things: statements concerning our business and our financial condition and results of operations. These statements are not historical, but instead represent our belief regarding future events, any of which, by their nature, are inherently uncertain and outside of our control. These statements may address, among other things, future financial results, strategy for growth, and market position. It is possible that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. The factors that could cause actual results to differ from those in the forward-looking statements are discussed throughout this form. We are ~~not~~ under ~~any~~no obligation to update or alter any forward-looking statement (and expressly disclaims any such obligations), whether as a result of new information, future events or otherwise. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, but are not limited to, the development of the COVID-19 outbreak, rising healthcare costs, business conditions and competition in the different insurance segments, government action and other regulatory issues.

Overview

We are one of the most significant players in the managed care industry in Puerto Rico and have over 5560 years of experience in this industry. We offer a broad portfolio of managed care and related products in the Commercial, Medicaid and Medicare Advantage markets. In the Commercial market, we offer products to corporate accounts, U.S. federal government employees, local government employees, individual accounts and Medicare Supplement. We also participate in the Government of Puerto Rico Health Insurance Plan (a government of Puerto ~~Rico-funded~~Rico and U.S. federal government-funded managed care program for the medically indigent that is similar to the Medicaid program in the U.S.) (Medicaid), by administering the provision of health ~~benefits in designated service regions in Puerto Rico.~~benefits. See details of the Medicaid contract in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 under the sub-caption “We are dependent on a small number of government contracts to generate a significant amount of the revenues of our managed care business.”

We have the exclusive right to use the Blue Cross Blue Shield (BCBS) name and mark throughout Puerto Rico, the U.S. Virgin Islands (USVI), Costa Rica, the British Virgin Islands (BVI) and Anguilla. As of ~~September 30, 2017,~~March 31, 2020, we served approximately ~~995,000~~926,000 managed care members across all regions of Puerto Rico. For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, our ~~managed care~~Managed Care segment represented approximately ~~91% and~~ 92%~~, respectively~~ of our total consolidated premiums earned. We also have significant positions in the life insurance and property and casualty insurance markets.

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

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

Intersegment revenues and expenses are reported on a gross basis in each of the operating segments but eliminated in the consolidated results. Except as otherwise indicated, the numbers for each segment presented in this Quarterly Report on Form 10-Q do not reflect intersegment eliminations. These intersegment revenues and expenses affect the amounts reported on the financial statement line items for each segment but are eliminated in consolidation and do not change net income. See note 14 of the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

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

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

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

Recent Developments

COVID-19

COVID-19 Situation in Puerto Rico

As of May 1, 2020, the Puerto Rico ~~Economy~~

~~During~~Department of Health (PRDH) reported 1,575 positive COVID-19 cases and 94 COVID-19-related deaths in Puerto Rico. The Secretary of Health of Puerto Rico estimated as of April 28, 2020 that approximately 30,000 diagnostic tests have been administered. However, the ~~past decade,~~PRDH has faced challenges in obtaining diagnostic tests as well as in recording and reporting on tests administered outside of the PRDH system and therefore the total number of positive cases in Puerto Rico remains unclear. The PRDH estimates Puerto Rico has ~~been facing economic and fiscal challenges and its economy has been contracting. In response to~~not yet reached the ~~Commonwealth~~peak of contagion.

Our Operations

The Puerto Rico ~~(the “Commonwealth”~~Governor issued a stay at home order (as amended and extended, the “Order”) ~~fiscal~~on March 15, 2020 requiring the closure of non-essential businesses until May 4, 2020. On May 1, 2020, the Governor further amended and ~~economic crisis, on June 30, 2016,~~extended the ~~U.S. Congress enacted~~Order to provide for 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 financesgradual re-opening of the ~~Commonwealth~~economy through May 25, 2020, provided that the risk of contagion does not increase significantly by then. Our Managed Care business, although considered an essential business excluded from closure in the Order, is operating mostly remotely as a cautionary measure. Our Life and ~~its instrumentalities. PROMESA also established a temporary stay on litigation~~Property & Casualty businesses are among those industries that were allowed to ~~enforce rights or remedies related to financial liabilities~~re-open under the most recent extension of the ~~Commonwealth, its instrumentalities~~Order, subject to compliance with certain safety and ~~municipalities, which expired on~~risk management measures. Accordingly, since May ~~1, 2017. Finally, PROMESA established two separate mechanisms to restructure~~4, 2020, we are in the ~~debts~~process of gradually re-opening these offices.We have implemented our business continuity and risk mitigation plans and are closely monitoring how 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 is a court-supervised debt-adjustment process, which is modeled after Chapter 9 of the U.S. Bankruptcy Code and is codified in Title III of PROMESA.

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 modeloutbreak develops in order to ~~reduce expenses~~ensure the health and ~~(ii)~~safety of our employees and visitors.

Economic Impact

It is too early to assess 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 Oversight Board also required and approved fiscal plans for several government instrumentalities, including the Puerto Rico Aqueduct and Sewer Authority, the Puerto Rico Electric Power Authority (“PREPA”), and the Puerto Rico Highways and Transportation Authority (“PRHTA”), among others.

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~~On May 3, 2017, the Oversight Board filed an order seeking the protection~~ultimate economic impact of the ~~provisions of Title III of PROMESA for~~ pandemic and lockdown. However, the ~~Commonwealth. Subsequently, the Oversight Board filed Title III petitions with respect to the Puerto Rico Sales Tax Financing Corporation (“COFINA”~~2020 Fiscal Plan (as defined below) presented by its Spanish acronym), which issued bonds secured by a portion of the sales and use tax, 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 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 bonds issued by these government instrumentalities will likely be restructured.

On July 14, 2017, the Oversight Board authorized Government Development Bank for Puerto Rico (“GDB”) to pursue the restructuring of its debts under Title VI of PROMESA and conditionally certified GDB’s Restructuring Support Agreement (“RSA”) under the relevant provisions of Title VI. The RSA provides for the organized and consensual restructuring of a substantial portion of GDB’s liabilities, including GDB public bonds, deposit claims by municipalities and certain non-public entities and claims under certain GDB-issued letters of credit and guarantees. In exchange for releasing GDB from liability relating to these claims, the claim-holders will receive new bonds to be issued by a new entity (the “Issuer”). In order to secure and service the new bonds, GDB will transfer to the Issuer its entire municipal loan portfolio, certain real estate assets available for sale, proceeds of certain public entity loans and a certain amount of cash.

Although these entities are the only instrumentalities for which the Oversight Board has sought the restructuring authority provided by Title III of PROMESA or approved a restructuring under Title VI of PROMESA, in the future, the Oversight Board may use the restructuring mechanisms provided by Title III or Title VI of PROMESA for other instrumentalities of the Commonwealth, including its 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 September 30, 2017, the Company had premiums and other receivables of $87.8 million from the Government of Puerto Rico, including its agencies, municipalities and public corporations with a related allowance for doubtful receivables of $17.3 million, see note 3 ~~to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.~~

On September 6, 2017 and September 20, 2017, respectively, Hurricanes Irma and Maria struck Puerto Rico. The extent of the damages from such storms is still currently being evaluated. However, reports indicate that the damages are severe and widespread and that there has been substantial damage to Puerto Rico’s power grid, infrastructure, buildings, residences and other structures. The federal government has approved a major disaster declaration for Puerto Rico, and the Federal Emergency Management Agency (“FEMA”) announced that federal disaster assistance has been made available to the Government of Puerto Rico. FEMA has awarded approximately $500 million in emergency relief assistance to individuals, public corporations and municipalities in the Commonwealth. These federal funds will be an important factor in the recovery of the Commonwealth. On October 31, 2017, due to the devastation caused by the passing of Hurricanes Irma and Maria over the Commonwealth, the Oversight Board requested the Commonwealth, PREPA and several other instrumentalities of the Commonwealth to submit revised fiscal plans to account for the new reality in the wake of the devastation and destruction caused by the hurricanes. The revised fiscal plans, which will need to take into account anticipated expenses and revenues, as well as the anticipated population loss due to the hurricanes, is expected to be certified by the Oversight Board by February 2, 2018.

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~~Under the Managed Care segment, the Company also provides health coverage to certain employees of~~ the Government of Puerto Rico, and ~~its instrumentalities, including PREPA, which together constitute one of our largest customers~~pending approval by number of insured lives. The Government of Puerto Rico and PREPA have been particularly affected by the aftermath of Hurricanes Irma and Maria. Prior to the storms, the Government and PREPA were facing serious fiscal and financial challenges and their inability to access the capital markets has placed serious constraints on their liquidity. After the storms, the Government and PREPA have had to dedicate their remaining liquidity to disaster relief and recovery operations. The Government and PREPA have each announced that they do not have sufficient financial resources to undertake all disaster relief and recovery operations without federal government financial assistance. Moreover, as a result of the storms, the Government’s tax base has been adversely affected due to the massive and long-lasting power outages and water shortages. As a result, at the request of the government of Puerto Rico, Congress approved a relief package that includes over $4.5 billion in loans to improve the Puerto Rico government’s liquidity position in the short-term. Similarly, PREPA’s revenue base has been adversely affected to the extent that it depends on the amounts charged for consumption of electricity. Although it is still too early to quantify the short or long-term impacts of these storms on Puerto Rico, we believe that the effects will be material and adverse to the financial position of the Government, PREPA and our other governmental customers, such as municipalities. As a result, we may face additional credit losses from our receivables from the Government, PREPA, and other governmental entities, such as municipalities, as a result of the constraints on liquidity imposed by the response to the damages caused by the storms.

~~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 insofar as such regulations have not been adopted.

~~On August 30, 2017,~~ the Oversight Board ~~notified~~(as defined below), estimates the ~~Governor~~pandemic will have an economic impact of approximately $5.7 billion between fiscal years 2020 and the Legislative Assembly that the Compliance Certification issued by the Government regarding Act 47 failed to provide the required formal estimate of the law’s fiscal impact. Moreover, the Oversight Board noted that its preliminary analysis leads it to conclude that Act 47 is significantly inconsistent with the Fiscal Plan for Puerto Rico. As a result, the Oversight Board requested that the Government provide a formal estimate of public health care expenditure impacts from implementing the law. Under PROMESA, the Oversight Board has the authority to prevent the effectiveness of a law that does not comply with the Fiscal Plan for Puerto Rico. Once the Government provides the Oversight Board with the requested formal estimate, the Oversight Board would proceed to evaluate whether or not Act 47 is consistent with the Fiscal Plan for2022 in Puerto Rico.

~~On September 17, 2017, the~~The Governor of Puerto Rico ~~issued~~has appointed an ~~executive order declaring a state of emergency for the Commonwealth due~~Economic Task Force to ~~the imminent impact of Hurricane Maria. On September 19, 2017, the United States Department of Health~~advise on economic recovery and Human Services also declared that the Commonwealth was undergoing a state of public health emergency, and authorized certain waivers and modifications for Medicare and Medicaid beneficiaries under the authority of the Social Security Act. In addition, the Office of the Commissioner of Insurance of Puerto Rico (“OCI”), the Puerto Rico Department of Health (“PRDH”), the Puerto Rico Health Insurance Administration (“PRHIA”), and the Centers for Medicare & Medicaid Services (“CMS”), all under the authority vested by state and federal laws, have since issued additional waivers and guidelines addressing preauthorization requirements, referrals, prescription drugs management, providers access, among others, during the extent of the state of emergency declaration. As of the date of this filing, we have implemented a series of initiativesdevelopment.

See Item 1A. Risk Factors – Risks Related to ~~comply with the requirements of these regulators and to guarantee~~ our ~~insured population access to the health services they need. We will continue monitoring these regulatory requirements to assess the impact, if any, on our operations.~~

On September 29, 2017, CMS issued a memorandum addressing the Star Ratings for health plans that have been impacted by the recent natural disasters and have been designated as emergency or major disaster areas by FEMA. As a result of this order, CMS will allow health plans that believe that their operations and/or clinical care has had major issues which will impact the data used for Star Ratings measures to contact CMS to inform of such impacts. CMS will in turn evaluate each case and consider a variety of strategies to address these issues, which can include alternative sampling, modifying timeframes of measurements and reversions to last year’s score if the majority of enrollees are in disaster areas and alternative strategies are not feasible. We are closely monitoring any impacts that may affect our Star Rating measures for 2020 and will address with CMS any issues that we may identify.

On October 12, 2017, President Trump signed an executive order requiring the adoption of regulations changing certain requirements of the Affordable Care Act. Specifically, the executive order would require the implementation of regulations that would exempt certain association plans from complying with Affordable Care Act requirements, easing restrictions on certain short-term health plans and health reimbursement arrangements and limiting hospital and insurance company consolidation while promoting competition and choice. To the extent that certain provisions of the Affordable Care Act are not applicableBusiness – “Our business is geographically concentrated in Puerto Rico and ~~that regulations implementing these changes have yet to be adopted, it is unclear at this time how~~weakness in the ~~executive order or any regulations required to be promulgated thereunder would affect~~economy and the ~~Puerto Rico market.~~

On November 3, 2017, the U.S. House of Representatives approved a bill that would reauthorize the Children’s Health Insurance Program (CHIP) for five years. Under this bill, the Commonwealth is assigned nearly $1,000 million in Medicaid funds. These funds are partfiscal health of the ~~federal funding that the Puerto Rico~~ government uses to finance the Puerto Rico Government’s health insurance program. These funds will extend the funding of the Puerto Rico Government’s health insurance program until early 2019. This bill is now under the consideration of the U.S Senate.

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~~Puerto Rico Government Health Reform Program~~

~~On June 30, 2017, TSS agreed to extend its contract with ASES for the provision of health services in the Metro North~~has adversely impacted 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. Due to the passing of Hurricane Maria through Puerto Rico, ~~the parties have agreed to further extend the term of the contract for an additional period of two months expiring on November 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 willmay continue to pay current PMPM rates until CMS approves new PMPM rates, at which time ASES will pay the cumulative difference between both rates. Upon reaching an agreement on outstanding terms of the 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.’’~~adversely impact us.” included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

~~Hurricanes Irma~~

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Legislative Measures and ~~Maria~~Initiatives

~~In early September 2017, Hurricane Irma,~~The federal and state governments have enacted a ~~category 5 Hurricane, passed north~~number of measures in response to the COVID-19 outbreak and the impact the outbreak has had on the economy, public health, governments, individuals, and businesses. We include summaries of some of those measures below.

Funding and Economic Relief for Puerto Rico

Public Law 116-127, known as the Families First Coronavirus Response Act (FFCRA), enacted on March 18, 2020, makes approximately$182.9 million in additional funds available for Puerto Rico’s Medicaid Program, and increases the percentage of federal government funding for Medicaid program expenditures (Federal Medical Assistance Percentage or FMAP) from 76% to approximately82% during the emergency period. Public Law 116-136, the Coronavirus Aid, Relief, and Economic Security or CARES Act, enacted on March 27, 2020, includes a series of direct relief and financial assistance measures applicable to Puerto Rico residents and businesses. The CARES Act also assigns $2.2 billion to the Government of Puerto Rico ~~causing severe damage~~to cover necessary expenditures related to COVID-19 not included in its budget, among other measures. The Puerto Rico government has earmarked approximately $1 billion for its COVID-19 response.

Measures Impacting our Business

The FFCRA and CARES Act also require health plans and insurers to cover testing for COVID-19 without imposing cost-sharing or prior authorization requirements. On April 16, 2020, the Puerto Rico Government enacted Act number 43, which requires health plans and insurers to cover COVID-19-related diagnostic and treatment services, including hospitalization, without cost-sharing. Our regulators have also issued regulations or circular letters requiring waivers of pre-authorizations for certain services and drugs, requiring temporary coverage of certain out-of-network providers and services, and limiting cost-sharing for certain services.

See Item 1A. Risk Factors – “The COVID-19 pandemic and local, state and federal governments’ response to the northern part of Island. Two weeks later, on September 20, 2017, Hurricane Maria, a category 4 Hurricane, made landfall in Puerto Rico causing catastrophic damage, including Island wide electric power and water outages, as well as damage to Puerto Rico’s communications and transportation infrastructure. The damage caused by Hurricane Maria interrupted the Company’s ability to operate for several days, after which we resumed operations with a reduced schedule and workforce. The Company’s facilities and infrastructure, however, only experienced minor damages. By October 2, 2017, we had resumed our normal schedule of operations with most of our workforce present. As of the date of this filing, the Company’s operations have been fully restored, ~~with the assistance of power from back-up generators,~~ and we continue to provide services to our providers and members, except for certain satellite offices that continue to operate on a reduced schedule due to a lack of electrical power. While the extent of the damages suffered by our providers and customers is currently unknown and will not be known for some time, we continue to monitor our provider and customer base and are taking the necessary steps to counter any adverse effects the Companypandemic may ~~experience.~~

Our Managed Care claim liabilities as of September 30, 2017 has been estimated taking into consideration the impact of these hurricanes in the utilization of services by using our previous experience with similar catastrophic events. Usually in events like these, the utilization of services decreases temporarily until our membership regains full access to providers. Also, these events may cause providers to take longer in submitting claims for services provided, adding additional complexity to the estimates of incurred claims. We seek to determine our claim liabilities, using actuarially sound assumptions, to account for possible anticipatable changes in utilization. Nonetheless, actual experience may differ from our estimate. Furthermore, unforeseen major public health issues following these catastrophic events, such as pandemics and epidemics, like mosquito-borne epidemics (Dengue, Zika, etc.), conditions for which vaccines may not exist, are not effective, or have not been widely administered, could have a material adverse effect on our business, financial condition and results of ~~operations.~~operations” in this Quarterly Report on Form 10-Q.

~~Our~~Puerto Rico Economy

PROMESA and the Oversight Board

The Commonwealth has been enduring a fiscal and economic crisis for over a decade. Such crisis prompted the U.S. Congress to enact the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) in June 2016. PROMESA, among other things, created a federal fiscal oversight board (the “Oversight Board”) with broad powers over the Commonwealth’s fiscal affairs and established two mechanisms for the restructuring of the obligations of the Commonwealth, its instrumentalities and municipalities, contained in Titles III and VI of PROMESA. The Commonwealth and several of its instrumentalities have been in the process of restructuring their debts through the mechanisms provided by PROMESA for some time.

Commonwealth Fiscal Plan and Plan of Adjustment

The Oversight Board has certified several fiscal plans for the Commonwealth since 2017. The most recent fiscal plan for the Commonwealth certified by the Oversight Board is dated May 9, 2019 (the “Commonwealth Fiscal Plan”). The Commonwealth filed its 2020 Fiscal Plan for Oversight Board certification on May 3, 2020 (the “2020 Fiscal Plan”). The 2020 Fiscal Plan, which accounts for the estimated impact of the COVID-19 pandemic estimates that Puerto Rico’s real GNP will contract by 3.6% in fiscal year 2020 and 7.8% in fiscal year 2021. The 2020 Fiscal Plan has not been certified by the Oversight Board and may suffer significant changes before certification.

On February 28, 2020, the Oversight Board filed an amended plan of adjustment for the Commonwealth, the Employees Retirement System of the Government of the Commonwealth and the Puerto Rico Public Buildings Authority in the pending debt restructuring proceedings under Title III of PROMESA (the “Proposed Plan of Adjustment”). While the Proposed Plan of Adjustment has not yet been confirmed by the Title III court, is not supported by the Governor of Puerto Rico in its current form, and may suffer significant changes before confirmation, including changes to reflect the impact of COVID-19, it provides a preliminary framework for the Commonwealth to exit bankruptcy.

Property & Casualty Litigation

As of March 31, 2020, our Property and Casualty ~~segment, using claims information received~~subsidiary had been served in a total of 452 cases relating to date and post event catastrophe model estimations, anticipates that gross losses, before reinsurance, related to Hurricanes Irma and Maria will approximate $5.0 million and $613.0 million, respectively. This also has the effect of increasing our reinsurance recoverable by approximately $604.0 million. We expect to collect such balances from our reinsurers. The segment’s reinsurance program includes excess of loss catastrophe coverage for losses and allocated loss expenses in excess of $10.0 million after application of facultative and primary reinsurance. Hurricane Irma’s net retained losses are estimated in $3.5 million after application of facultative and proportional reinsurance. Hurricane Maria’s net retained losses approximate $10.5 million, including unallocated loss expenses. While the segment’s ultimate losses cannot be determined with certainty at this time, management believes the catastrophe coverage for losses and allocated loss expenses is sufficient to cover anticipated gross losses. During the three months ended September 30, 2017, we have recorded net incurred claims related to these events of approximately $14.0 million.

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In addition, during the three months ended September 30, 2017, the Property and Casualty segment’s net premium earned have been impacted by approximately $3.0 million related to reinsurance costs, including estimates for catastrophe reinsurance reinstatement costs for the rest of the year.

~~Accounts receivable~~Maria. Of those, 361 remained open as of ~~September 30, 2017 have increased as compared to December~~March 31, 2016. This increase is attributed to the aforementioned reinsurance receivable and to the Island wide disruption of the power grid and transportation and communication infrastructure caused by Hurricane Maria. Although we regularly monitor collections of past due balances, during this quarter we have strengthened our Managed Care allowance for doubtful receivables considering not only the aftermath of Hurricane Maria but the economic challenges faced by the Government of Puerto Rico.

The damage caused by Hurricanes Irma and Maria has also materially affected the economy of Puerto Rico and the businesses of many of our customers. All businesses on the island have been affected by the lack of power and potable water, inconsistent access to telecommunications and logistical problems due to affected transportation infrastructure. This, in turn, has adversely affected many businesses that we serve. To the extent that these businesses are unable to recover their losses or are unable to return to normal operations in the near future, their ability to continue as viable businesses may be affected. Further, the damages caused by the hurricanes are expected to accelerate out-migration from the island to the US mainland further increasing the population decline that the Commonwealth has been experiencing during the past years. In the short term out-migration is expected to accelerate, however, the magnitude will depend on the pace of the recovery and reconstruction efforts in the island. All these factors may affect the Puerto Rico economy and result in a reduction of our customer base and erode our revenue base. We expect that Hurricane Maria’s aftermath will have a significant and long-lasting impact on the people and communities the Company serves.

2020. See Item 1A. Risk ~~Factors—~~Factors – Risks Related to ~~Our~~our Business – “~~Our failure~~“Large-scale natural disasters may have a material adverse effect on our business, financial condition and results of operations” and “We face risks related to ~~accurately estimate incurred but not reported claims would affect our reported financial results”, “Our ability to manage our exposure to underwriting risks in our life insurance and property and casualty insurance businesses depends on the availability and cost of reinsurance coverage”, and “If our reinsurers do not pay our claims or do not pay them in a timely manner, we may incur losses”~~ litigation.” included in our Annual Report on Form 10-K for the year ended December 31, ~~2016. Additional information~~2019.

Property and Casualty Reinsurance Program

The Company’s Property and Casualty segment completed the renewal of its reinsurance property and catastrophe program with an effective date of April 1, 2020 with a term of twelve-months ending on ~~how each reportable~~March 31, 2021. The new reinsurance program considers a change in cessions in the Commercial Property quota share agreement from 25% to 20% and provides the segment ~~determines its claim liabilities,~~with a catastrophe loss protection of $809 million in excess of $5 million. The cost of the new reinsurance program is estimated to be approximately $2.0 million more than the expiring program.

Recent Seismic Activity

On January 7, 2020, a magnitude 6.4 earthquake struck Puerto Rico, causing island-wide power outages and extensive damage to infrastructure and property in the southwest region of the island. The 6.4 magnitude earthquake was preceded by foreshocks and followed by aftershocks. The 2020 Fiscal Plan estimates total earthquake-related island-wide damages at $1 billion, noting that this figure may increase as inspections continue. Notably, the 2020 Fiscal Plan does not contemplate the damages caused by a 5.4 magnitude earthquake which struck near the south of Puerto Rico on May 2, 2020.

See “Item 1A. Risk Factors—Risks Related to Our Business – Our business is geographically concentrated in Puerto Rico and weakness in the economy and the ~~variables considered in~~fiscal health of the ~~development of this amount, is~~ government has adversely impacted and may continue to adversely impact us”included in our ~~latest~~ Annual Report on Form 10-K ~~under “Item 7.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations―Critical Accounting Estimates”.~~

for the year ended December 31, 2019.

~~OptumInsight, Inc. Master Service Agreement~~

On August 29, 2017, TSS and OptumInsight, Inc. (“Optum”) entered into a Master Services Agreement (the “Agreement”). Pursuant to the terms of the Agreement, Optum will provide healthcare technology and operations services, including information technology, claims processing and application development, to TSS and its affiliates. The Agreement was effective August 31, 2017 (the “Effective Date”) and has an initial term of ten (10) years. TSS has the right to extend the term of the Agreement for two (2) additional one (1) year terms.

Under the terms of the Agreement, Optum will: (i) continue providing services already provided to TSS and its affiliates, (ii) provide new services requested by TSS and (iii) provide services in support of any third party administrator arrangements entered into by TSS or its affiliates, in accordance with the terms of separate statements of work to be entered into by the parties. Pursuant to the Agreement, Optum will provide TSS and its affiliates with certain claims intake, claims processing, claims adjustment and quality assurance services, as well as with a broad range of information technology services such as application development and maintenance, infrastructure management and support, and general service and operations management. Optum will assume responsibility for these operations after a transition period set forth in the Agreement. As part of the services to be provided under the Agreement, TSS expects that certain employees of its data processing services affiliate, Interactive Systems, Inc., will become employees of Optum and certain third-party services agreements entered into by TSS and its affiliates will be assigned to Optum. The Agreement is subject to the approval of the Puerto Rico Health Insurance Administration (“ASES” by its Spanish acronym).

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As compensation for the services provided under the Agreement, TSS expects to pay Optum approximately $260,000,000 during the initial ten (10) year term of the Agreement, based on TSS’ current business levels. This amount may not necessarily be evenly distributed throughout the years of the contract term and may fluctuate as a result of changes in TSS’ business levels. The compensation‘s structure under the Agreement includes a combination of fixed and variable fees which may increase or decrease, as set forth in the Agreement, based on the number of members enrolled under a health care plan offered or administered by TSS. TSS may also pay additional fees to Optum for the development and implementation of additional infrastructure projects. With this Agreement, TSS expects to strengthen its core processes and technological capabilities, while also reducing costs.

The Agreement contains representations and warranties and indemnity, termination and default provisions customary for these types of transactions. The Agreement contains a general liability cap which limits each party’s liability under the Agreement to an amount equal to the greater of (i) $20,000,000 or (ii) the total amount of fees paid by TSS to Optum for the performance of services under the Agreement during the twelve (12) month period prior to the most recent event giving rise to liability. TSS may terminate the Agreement for cause, as such term is defined in the Agreement. TSS may also terminate the Agreement for any reason by providing one hundred eighty (180) days’ prior written notice and paying a negotiated termination fee if the effective date of such termination is at least three (3) years after the Effective Date. In the event that TSS terminates the Agreement for convenience, due to a change in laws, or relating to regulatory approval, TSS shall pay Optum a termination fee that fluctuates between $250,000 and $11,250,000, depending on the circumstances, and pro-rated based on the number of months remaining in the contract year. Optum may terminate the Agreement only if TSS (i) fails to pay Optum any material amounts due under the Agreement or (ii) materially breaches certain sections of the Agreement without curing said breach within the period described in the Agreement.

Recent Accounting Standards

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

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Managed Care Membership

	As of September 30,				As of March 31,
	2017		2016		2020		2019
Managed care enrollment:
Commercial ¹		492,498		521,994		435,013		437,200
Medicare		123,194		113,950		135,710		128,090
Medicaid		379,199		402,358		355,512		355,694
Total		994,891		1,038,302		926,235		920,984
Managed care enrollment by funding arrangement:
Fully-insured		831,170		860,619		816,475		802,307
Self-insured		163,721		177,683		109,760		118,677
Total		994,891		1,038,302		926,235		920,984

⁽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~~Company’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
	Three months ended September 30,					Nine months ended September 30,					March 31,
(dollar amounts in millions)	2017		2016			2017		2016			2020			2019
Revenues:
Premiums earned, net	$	714.3	$	721.2		$	2,139.5	$	2,188.8		$	875.9		$	768.0
Administrative service fees		3.4		4.2			12.3		13.7			2.2			2.6
Net investment income		12.4		12.3			37.1		36.6			14.3			15.4
Other operating revenues		1.0		0.9			3.0		2.6			4.0			1.6
Total operating revenues		731.1		738.6			2,191.9		2,241.7			896.4			787.6
Net realized investment gains		3.7		5.4			8.1		7.0
Net realized investment (losses) gains												(0.5	)		1.3
Net unrealized investment (losses) gains on equity investments												(56.8	)		19.7
Other income, net		3.4		0.7			6.6		5.4			3.6			1.2
Total revenues		738.2		744.7			2,206.6		2,254.1			842.7			809.8
Benefits and expenses:
Claims incurred		583.6		629.2			1,815.8		1,878.0			714.5			623.2
Operating expenses		119.2		123.4			348.8		367.5			162.2			132.7
Total operating expenses		702.8		752.6			2,164.6		2,245.5			876.7			755.9
Interest expense		1.7		1.9			5.1		5.7			1.9			1.8
Total benefits and expenses		704.5		754.5			2,169.7		2,251.2			878.6			757.7
Income before taxes		33.7		(9.8	)		36.9		2.9
Income tax expense (benefit)		11.8		(7.9	)		6.6		(2.5	)
Net income (loss) attributable to TSM	$	21.9	$	(1.9	)	$	30.3	$	5.4
(Loss) income before taxes												(35.9	)		52.1
Income tax (benefit) expense												(9.7	)		17.3
Net (loss) income attributable to TSM											$	(26.2	)	$	34.8

Three Months Ended ~~September 30, 2017~~March 31, 2020 Compared to Three Months Ended ~~September 30, 2016~~March 31, 2019

Operating Revenues

Consolidated premiums earned, net ~~for the three months ended September 30, 2017 decreased~~increased by ~~$6.9~~$107.9 million, or ~~1.0%~~14.0%, to ~~$714.3 million when compared to the three months ended September 30, 2016.~~$875.9 million. This ~~decrease~~increase primarily reflects ~~lower~~higher premiums in the Managed Care segment by ~~$6.9~~$104.3 million. The growth in managed care premiums reflects higher average premiums rates in the Medicare and Medicaid lines of business and an increase in Medicare, Medicaid and Commercial fully-insured member months.

Net unrealized investment (losses) gains on equity investments

The $56.8 million ~~mainly due to the Medicaid profit sharing accrual recorded during the three months ended September 30, 2016,~~in consolidated net unrealized investment losses on equity investments reflects the impact of ~~the suspension of the HIP fee pass through and lower Medicare additional risk score revenue. These decreases were partially offset by higher average premium rates~~changes in ~~the Commercial and Medicaid businesses. With the Medicaid contract extension that was effective July 1, 2017 the average premium rates of this business increased by approximately 9%.~~equity markets.

~~Other Income, Net~~

Consolidated other income increased by $2.7 million during the three months ended September 30, 2017 compared with the three months ended September 30, 2016, mostly due to a special distribution received from the Puerto Rico Joint Underwriting Association (JUA) in the Property and Casualty segment of $2.4 million, net of special tax.

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Claims Incurred

Consolidated claims incurred ~~decreased~~increased by ~~$45.5~~$91.3 million, or ~~7.2%~~14.7%, to $583.6 million during the three months ended September 30, 2017, mostly due to lower claims in the Managed Care segment offset by an increase in claims in the Property and Casualty segment. The decrease in Managed Care claims primarily reflects lower claims incurred across all businesses in the segment driven by the estimated decrease in utilization as a consequence of Hurricanes Irma and Maria as well as favorable fluctuations in the prior period reserve developments in the Commercial and Medicare businesses. The Property and Casualty segment’s estimated net retained losses related to Hurricanes Irma and Maria were approximately $3.5 million and $10.5 million, respectively after the application of reinsurance. $714.5 million. The consolidated loss ratio ~~decreased by 550~~increased 50 basis points, to ~~81.7%.~~

~~Operating Expenses~~

~~Consolidated operating expenses during the three months ended September 30, 2017 decreased by $4.2 million, or 3.4%~~81.6%, to $119.2 million. The lower operating expenses are mostly the result of the decrease in the Health Insurance Providers Fee (HIP fee) of $11.6 million due to the 2017 tax holiday, offset by increase in personnel costs, provision for doubtful receivables and other general operating expenses totaling approximately $7.3 million. For the three months ended September 30, 2017, the consolidated operating expense ratio decreased 40 basis points to 16.6%.

~~Income Taxes~~

Consolidated income tax expense increased by $19.7 million, to an expense of $11.8 million for the three months ended September 30, 2017. The year over year change in income taxes primarily results from an increase in the taxable income from the ~~Managed Care segment, which has a higher effective tax rate than other segments.~~

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Operating Revenues~~

~~Consolidated premiums earned, net for the nine months ended September 30, 2017 decreased by $49.3~~prior-year period, mostly reflecting $5 million or 2.3%, to $2,139.5 million when compared to the nine months ended September 30, 2016. This decrease primarily reflects lower premiums in the Managed Care segment by $52.8 million mainly due to lower membership in the segment’s Medicaid and Commercial businesses, the impact of the suspension of the HIP fee pass through and lower Medicare additional risk score revenue. These decreases were partially offset by higher average premium rates in the Commercial business and Medicaid premium collections related to the Managed Care segment’s compliance with the contracts quality incentive metrics.

~~Other Income, Net~~

Consolidated other income increased by $1.2 million during the period ended September 30, 2017 compared with the period ended September 30, 2016, mostly due to the $2.4 million JUA special distribution receivedestimated earthquake losses recorded by the Property and Casualty segment ~~net~~and increased benefits in our 2020 Medicare product offering. These increases were partially offset by lower Managed Care utilization of ~~special tax, offset~~services during the last two weeks of the quarter as the result of the government enforced lock-down due to the COVID-19 pandemic and the reinstatement of the HIP fee pass-through in ~~part by a decrease of $1.1 million reflecting~~2020.

Following the ~~collection of interest charged for late payment~~government enforced lock-down related to the ~~prior Medicaid contract~~COVID-19 pandemic, we have seen during the ~~nine months ended September 30, 2016.~~

~~Claims Incurred~~

Consolidated claims incurred decreased by $62.2 million, or 3.3%, to $1,815.8 million during the nine months ended September 30, 2017, mostly due to lower claims in the Managed Care segment offset by an increase in claims in the Property and Casualty segment. The decrease in Managed Care claims primarily reflects lower claims incurred in alllast two weeks of ~~the segment’s businesses driven by lower enrollment in the segment’s Commercial and Medicaid businesses, the estimated~~March 2020 a decrease in utilization of Managed Care services as members and providers began to defer non-emergent or elective health services. While this trend has caused, ~~by the aforementioned Hurricanes as well as favorable fluctuations~~and may continue to cause, a short-term decrease in our claim costs, we expect in the ~~prior period reserve developments in~~long-term our claim costs to increase and affect our medical cost trends as the ~~Commercial and Medicare businesses.~~ ~~The Property and Casualty segment’s estimated net retained losses related to Hurricanes Irma and Maria were approximately $3.5 million and $10.5 million, respectively after~~demand for the ~~application of reinsurance.~~ ~~The consolidated loss ratio decreased by 90 basis points to 84.9%.~~deferred non-emergent or elective health services resumes.

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Operating Expenses

Consolidated operating expenses ~~during the nine months ended September 30, 2017 decreased~~increased by ~~$18.7~~$29.5 million, or ~~5.1%~~22.2%, to ~~$348.8 million as compared to the~~$162.2 million. The increase in operating expenses ~~during~~mostly results from the ~~nine months ended September 30, 2016. The lower operating expenses and expense ratio are mostly the result~~reinstatement in 2020 of the ~~decrease in the~~ HIP ~~Fee~~fee of ~~$33.1 million due to the 2017 moratorium offset by increase in personnel costs and other general operating expenses totaling approximately $14.4~~$16.3 million. ~~For the nine months ended September 30, 2017, the~~The consolidated operating expense ratio ~~decreased 50~~increased 130 basis points to ~~16.2%~~18.5%.

Income Taxes

Consolidated income taxes ~~increased~~decreased by ~~$9.1~~$27.0 million, to a ~~net expense~~benefit of ~~$6.6~~$9.7 million for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020. The year over year change in income taxes ~~primarily results~~reflects the loss before taxes, resulting from ~~an increase~~the net unrealized investment losses on equity investments in the ~~taxable income from the~~ 2020 period.

Managed Care ~~segment, which has a higher effective tax rate than our other segments.~~Operating Results

	Three months ended
	March 31,
(dollar amounts in millions)	2020			2019
Operating revenues:
Medical premiums earned, net:
Medicare	$	387.8		$	332.7
Commercial		201.1			198.5
Medicaid		220.9			174.3
Medical premiums earned, net		809.8			705.5
Administrative service fees		3.3			3.7
Net investment income		5.0			5.8
Total operating revenues		818.1			715.0
Medical operating costs:
Medical claims incurred		677.8			589.9
Medical operating expenses		126.1			103.0
Total medical operating costs		803.9			692.9
Medical operating income	$	14.2		$	22.1
Additional data:
Member months enrollment:
Medicare		407,907			383,608
Commercial:
Fully-insured		978,342			953,052
Self-funded		330,232			362,490
Total Commercial		1,308,574			1,315,542
Medicaid		1,068,016			1,029,736
Total member months		2,784,497			2,728,886
Medical loss ratio		83.7	%		83.6	%
Operating expense ratio		15.5	%		14.5	%

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~~Managed Care Operating Results~~

Three months ended
September 30,

Nine months ended
September 30,

(dollar amounts in millions) 2017 2016 2017 2016
Operating revenues:
Medical premiums earned, net:
Commercial $ 198.9 $ 206.3 $ 607.4 $ 636.8
Medicare 264.3 255.3 788.5 789.4
Medicaid 190.9 199.4 560.3 582.8
Medical premiums earned, net 654.1 661.0 1,956.2 2,009.0
Administrative service fees 4.8 5.2 16.3 17.3
Net investment income 4.1 3.6 12.1 11.2
Total operating revenues 663.0 669.8 1,984.6 2,037.5
Medical operating costs:
Medical claims incurred 539.2 598.0 1,705.7 1,784.5
Medical operating expenses 89.0 93.8 259.7 279.4
Total medical operating costs 628.2 691.8 1,965.4 2,063.9
Medical operating income (loss) $ 34.8 $ (22.0 ) $ 19.2 $ (26.4 )
Additional data:
Member months enrollment:
Commercial:
Fully-insured 994,409 1,039,842 3,009,252 3,199,546
Self-funded 495,616 534,653 1,504,283 1,617,900
Total Commercial member months 1,490,025 1,574,495 4,513,535 4,817,446

Medicare member months 368,102 344,167 1,095,086 1,059,702

Medicaid member months 1,138,162 1,205,792 3,480,525 3,634,029
Total member months 2,996,289 3,124,454 9,089,146 9,511,177
Medical loss ratio 82.4 % 90.5 % 87.2 % 88.8 %
Operating expense ratio 13.5 % 14.1 % 13.2 % 13.8 %

Three Months Ended ~~September 30, 2017~~March 31, 2020 Compared to Three Months Ended ~~September 30, 2016~~March 31, 2019

~~Medical~~Managed Care Operating Revenues

~~Medical~~Managed Care premiums earned ~~for the three months ended September 30, 2017 decreased~~increased by ~~$6.9~~$104.3 million, or ~~1.0%~~14.8%, to ~~$654.1 million when compared to the medical premiums earned during the three months ended September 30, 2016.~~$809.8 million. This ~~decrease~~increase is principally the result of the following:

•	Managed Care premiums generated by the Medicare business increased by $55.1 million, or 16.6%, to $387.8 million, primarily reflecting an increase in enrollment of approximately 24,000 member months and higher average premium rates resulting from an increase in the average membership risk score.

Managed Care premiums generated by the Medicaid business increased by $46.6 million, or 26.7% to $220.9 million, primarily reflecting an increase in enrollment of approximately 38,000 member months, higher average premium rates, and the reinstatement of the HIP fee pass-through in 2020.

~~Premiums earned~~

Managed Care premiums generated by the Commercial business ~~decreased~~increased by ~~$7.4~~$2.6 million, or ~~3.6%~~1.3%, to ~~$198.9~~$201.1 million. This fluctuation primarily reflects ~~lower~~an increase of fully-insured ~~member~~ enrollment during the quarter of approximately ~~45,400~~25,000 member months and ~~$3.6 million related to~~ the ~~suspension~~reinstatement of the HIP fee ~~pass-through; partially offset by an increase~~pass-through in ~~average premium rates of approximately 4%.~~

~~Premiums earned by the Medicare business increased by $9.0 million, or 3.5%, to $264.3 million, primarily reflecting an increase in member month enrollment of approximately 24,000 lives;~~2020, offset in part by lower ~~additional risk score revenue adjustments in 2017 by $6.1 million, and lower~~ average premium ~~rates reflecting a reduction in the 2017 Medicare reimbursement~~ rates.

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•

Premiums earned by the Medicaid business amounted to $190.9 million, $8.5 million, or 4.3% lower than the same period last year. Decrease primarily reflects the 2.5% excess profit accrual that increased 2016 premiums by $15.6 million, lower member months enrollment by approximately 67,600 lives, and $2.8 million related to the suspension of the HIP fee pass-through as a result of the 2017 moratorium; partially offset by ~~the impact of the new premium rates that were effective July 1~~^st ~~2017, which increased average premium rates by approximately 9%.~~

~~Medical~~Managed Care Claims Incurred

~~Medical~~Managed Care claims incurred during the three months ended ~~September 30, 2017 decreased~~March 31, 2020 increased by ~~$58.8~~$87.9 million, or ~~9.8%~~14.9%, to ~~$539.2~~$677.8 million when compared to the three months ended ~~September 30, 2016.~~March 31, 2019. The medical loss ratio (MLR) of the segment ~~decreased 810~~increased 10 basis points during the ~~2017~~2020 period, to ~~82.4%~~83.7%. This fluctuation is primarily attributed to the net effect of the following:

The ~~medical~~managed care claims incurred of the Medicare business increased by $52.7 million, or 19.7%, during 2020 and its MLR increased 210 basis point, to 82.7%. The higher MLR mostly reflects improved benefits in the 2020 product offerings. In addition, the 2019 MLR was favorably impacted by prior period reserve development. These increases were partially offset by lower utilization of services during the last two weeks of the quarter as the result of the government enforced lock-down due to the COVID-19 pandemic.

The managed care claims incurred in the Medicaid business increased by $42.0 million, or 26.7%. The MLR remained at 90.3% as the result of the lower utilization related to the COVID-19 lock-down, increase in premiums, reinstatement of the HIP fee pass-through, and the recognition by PRHIA/ASES of member acuity in premiums. These decreases were offset by last year’s favorable prior period reserve development.

The managed care claims incurred of the Commercial business decreased by ~~$34.7~~$6.8 million, or ~~19.3%~~4.2%, during the 2017 period and its MLR, at 73.1%, was 1,430 basis points lower than the same quarter last year. Adjusting for the effect of prior period reserve developments, the Commercial MLR would have been 75.7%, 550 basis points lower than the adjusted MLR for last year. The estimated decrease in utilization related to Hurricanes Irma and Maria accounts for approximately 570 of the 550-basis-points decrease in the adjusted MLR.

~~The medical claims incurred of the Medicare business decreased by $18.9 million, or 7.9%, during the 2017 period~~2020 and its MLR decreased ~~by 1,030~~450 basis points, to ~~83.3%~~78.4%. ~~Adjusting for~~The lower MLR mostly reflects the ~~effect~~impact of ~~prior period reserve developments in 2017 and 2016 and moving~~ the ~~additional risk score revenue adjustments~~lower utilization related to ~~their corresponding period,~~ the Medicare MLR would have been approximately 85% this quarter, about 250 basis points lower than last year, primarily reflecting the estimated decrease in utilization caused by Hurricanes Irma and Maria in September 2017; which lowered the adjusted MLR by 580 basis points. The reduction in the adjusted MLR was offset in part by higher trends in Part B drugs, pharmacy benefitsCOVID-19 lock-down and the ~~improvement in benefits in 2017 products taking advantage~~reinstatement of the HIP fee ~~moratorium.~~

pass-through in 2020.

•

The medical claims incurred in the Medicaid business decreased by $5.2 million, or 2.9%, during the 2017 period primarily reflecting lower member months enrollment. The MLR increased by 130 basis points, to 91.0% when compared to the same quarter last year. Adjusting for the effect of prior period reserve developments in 2017 and 2016, as well as for the impact of the 2.5% excess profit accrual and this year’s quality incentive premiums, the Medicaid MLR would have been approximately 90.6% this quarter, about 50 basis points higher than last year. The higher MLR primarily reflects increased pharmacy and outpatient claim trends; offset partially by the estimated decrease in utilization caused by the hurricanes, which lowered the adjusted MLR by 50 points, and the ~~impact of the higher premium rates that were effective July 1~~^st ~~2017.~~

~~Medical~~Managed Care Operating Expenses

~~Medical~~Managed Care operating expenses ~~for the three months ended September 30, 2017 decreased~~increased by ~~$4.8~~$23.1 million, or ~~5.1%~~22.4%, to ~~$89.0 million when compared to the three months ended September 30, 2016.~~$126.1 million. The operating expense ratio ~~decreased~~increased by 60100 basis points to ~~13.5%~~15.5% in ~~2017.~~2020. The ~~lower~~higher operating expenses ~~and expense ratio are~~ mostly result from the ~~result~~reinstatement in 2020 of the ~~decrease in the~~ HIP ~~Fee~~fee of ~~$11.6 million due to the 2017 moratorium offset by increase in personnel costs, provision for doubtful receivables and other general operating expenses totaling approximately $6.8~~$16.3 million.

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~~Nine~~Life Insurance Operating Results

	Three months ended
	March 31,
(dollar amounts in millions)	2020			2019
Operating revenues:
Premiums earned, net:
Premiums earned	$	49.0		$	45.6
Assumed earned premiums		-			0.7
Ceded premiums earned		(2.3	)		(2.1	)
Premiums earned, net		46.7			44.2
Net investment income		6.9			6.6
Total operating revenues		53.6			50.8
Operating costs:
Policy benefits and claims incurred		27.4			26.0
Underwriting and other expenses		21.1			19.2
Total operating costs		48.5			45.2
Operating income	$	5.1		$	5.6
Additional data:
Loss ratio		58.7	%		58.8	%
Operating expense ratio		45.2	%		43.4	%

Three Months Ended ~~September 30, 2017~~March 31, 2020 Compared to ~~Nine~~Three Months Ended ~~September 30, 2016~~March 31, 2019

~~Medical~~ Operating Revenues

~~Medical premiums~~Premiums earned, ~~for the nine months ended September 30, 2017 decreased~~net increased by ~~$52.8~~$2.5 million, or ~~2.6%,~~5.7% to ~~$1,956.2~~$46.7 million ~~when compared to the medical premiums earned during the nine months ended September 30, 2016. This decrease is principally~~as the result of higher sales across all lines of business and improved portfolio retention in the ~~following:~~Individual Life line of business.

Policy Benefits and Claims Incurred

~~Premiums earned~~

Policy benefits and claims incurred increased by ~~the Commercial business decreased by $29.4~~$1.4 million, or ~~4.8%~~5.4%, to ~~$607.4 million. This fluctuation primarily reflects lower fully-insured enrollment during~~$27.4 million, mostly as the ~~year~~result of ~~approximately 190,300 member months~~higher volume of business in 2020 and ~~$10.9 million related to the suspension of the HIP fee pass-through; offset by~~ an increase in ~~average premium rates of approximately 5%~~actuarial reserves. The segment’s loss ratio decreased 10 basis point to 58.7%.

Underwriting and Other Expenses

~~Premiums earned by the Medicare business decreased by $0.9~~Underwriting and other expenses increased $1.9 million, or ~~0.1%~~9.9%, to ~~$788.5~~$21.1 million~~, primarily~~ mostly reflecting ~~lower additional risk score revenue by $27.1 million as well as lower average premium rates due to~~higher commissions expense resulting from the segment’s higher volume of business, a ~~reduction in the 2017 Medicare reimbursement rates. These decreases were partially offset by~~higher amortization of deferred policy acquisition costs, and an increase in ~~member months enrollment of approximately 35,400 lives.~~

•

Premiums earned by the Medicaid business decreased by $22.5 million, or 3.9% to $560.3 million. This decrease primarily reflects lower fully-insured member months enrollment by approximately 153,500 lives, $8.1 million related to the suspension of the HIP fee pass-through as a result of the 2017 moratorium and, the impact of the profit sharing accrual in the 2016 period that increased premiums by $4.6 million. Decreases are partially offset by a $10.1 increase in million premium collections related to our compliance with the contract’s quality incentive metrics and ~~the impact of the new premium rates that were effective July 1~~^st ~~2017, which increased average premium rates by approximately 9%.~~

~~Medical Claims Incurred~~

~~Medical claims incurred during the nine months ended September 30, 2017 decreased by $78.8 million, or 4.4%, to $1,705.7 million when compared to the nine months ended September 30, 2016.~~personnel costs. The ~~MLR of the segment decreased 160 basis points during the 2017 period, to 87.2%. This fluctuation is primarily attributed to the net effect of the following:~~

The medical claims incurred of the Commercial business decreased by $70.5 million, or 12.8%, during the 2017 period and its MLR, at 79.1%, was 730 basis points lower than the same period last year. Adjusting for the effect of prior period reserve developments, the Commercial MLR would have been 80.0%, 490 basis points lower than the adjusted MLR for last year primarily reflecting the estimated decrease in utilization caused by Hurricanes Irma and Maria in September 2017 as well as the ongoing claim trends that are lower than our premium trends following the continuity of our underwriting discipline. The estimated decrease in utilization related to the aforementioned hurricanes account for approximately 190 of the 490-basis-points decrease in the adjusted MLR.

~~The medical claims incurred of the Medicare business decreased by $6.1 million, or 0.9%, during the 2017 period and its MLR decreased by 70~~segment’s operating expense ratio increased 180 basis points to ~~89.3%~~45.2%. Adjusting for the effect of prior period reserve developments in 2017 and 2016 and moving the additional risk score revenue adjustments to their corresponding period, the Medicare MLR would have been approximately 90.4% for the period ended September 30, 2017, which remains consistent to prior years adjusted MLR. The estimated decrease in utilization caused by Hurricanes Irma and Maria mitigated the impact of the higher trends in Part B drugs and pharmacy benefits experienced by this business as well as the improvement of benefits in 2017 products taking advantage of the HIP fee moratorium. The estimated decrease in utilization related to the aforementioned hurricanes lowered by approximately 200 basis points the quarter’s adjusted MLR.

•

The medical claims incurred in the Medicaid business decreased by $2.2 million, or 0.4%, during the 2017 period and its MLR increased by 320 basis points, to 92.9%. Adjusting for the effect of prior period reserve developments in 2017 and 2016, as well as for the impact of the 2.5% excess profit accrual and this year’s quality incentive premiums, the Medicaid MLR would have been approximately 93.3%, about 320 basis points higher than last year. The higher MLR primarily reflects increased pharmacy and outpatient claim trends, partially offset by the estimated decrease in utilization caused by Hurricanes Irma and Maria, which lowered the adjusted MLR by 20 basis points, and ~~the impact of the higher premium rates that were effective July 1~~^st ~~2017.~~

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~~Medical~~Property and Casualty Insurance Operating ~~Expenses~~Results

	Three months ended
	March 31,
(dollar amounts in millions)	2020			2019
Operating revenues:
Premiums earned, net:
Premiums written	$	33.2		$	31.0
Premiums ceded		(16.4	)		(13.4	)
Change in unearned premiums		3.8			1.8
Premiums earned, net		20.6			19.4
Net investment income		2.1			2.5
Total operating revenues		22.7			21.9
Operating costs:
Claims incurred		10.9			8.6
Underwriting and other expenses		12.0			9.7
Total operating costs		22.9			18.3
Operating (loss) income	$	(0.2	)	$	3.6
Additional data:
Loss ratio		52.9	%		44.3	%
Operating expense ratio		58.3	%		50.0	%

~~Medical operating expenses for the nine months ended September 30, 2017 decreased~~Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Operating Revenues

Total premiums written increased by ~~$19.7~~$2.2 million, or 7.1%, to ~~$259.7~~$33.2 million, ~~when compared~~mostly driven by higher premiums particularly in Commercial Package and Commercial Property products.

The premiums ceded to reinsurers increased by $3.0 million, or 22.4%, mostly due to approximately $3.0 million of reinsurance reinstatement premiums following losses recorded after the earthquakes experienced in the southwest region of Puerto Rico in January 2020.

The $2.0 million increase in the change in unearned premiums mostly reflects lower quota share reinsurance cessions.

Claims Incurred

Claims incurred increased by $2.3 million, or 26.7%, to $10.9 million mostly due to the ~~nine months ended September 30, 2016. The operating expense~~recognition of $5.0 million of estimated earthquake losses after the January 2020 event partially offset by better loss experience in the segment’s on-going business. As a result, the loss ratio ~~decreased~~increased by 60860 basis points, to 13.2% in 2017. The lower operating expenses and expense ratio are mostly the result of the decrease in the HIP Fee of $33.1 million due to the 2017 moratorium offset by increase in personnel costs and other general operating expenses totaling approximately $13.4 million.

~~Life Insurance Operating Results~~

Three months ended
September 30,

Nine months ended
September 30,

(dollar amounts in millions) 2017 2016 2017 2016
Operating revenues:
Premiums earned, net:
Premiums earned $ 41.0 $ 40.8 $ 124.6 $ 120.3
Assumed earned premiums 2.0 0.4 3.4 3.1
Ceded premiums earned (2.1 ) (2.3 ) (6.6 ) (6.6 )
Premiums earned, net 40.9 38.9 121.4 116.8
Net investment income 6.1 6.4 18.5 18.7
Total operating revenues 47.0 45.3 139.9 135.5
Operating costs:
Policy benefits and claims incurred 23.1 22.5 68.7 65.8
Underwriting and other expenses 19.4 18.6 57.8 54.8
Total operating costs 42.5 41.1 126.5 120.6
Operating income $ 4.5 $ 4.2 $ 13.4 $ 14.9
Additional data:
Loss ratio 56.5 % 57.8 % 56.6 % 56.3 %
Operating expense ratio 47.4 % 47.8 % 47.6 % 46.9 %

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

~~Operating Revenues~~

Premiums earned, net increased by $2.0 million, or 5.1% to $40.9 million driven by a $1.6M increase in assumed reinsurance premiums and premium’s 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 $0.6 million, or 2.7% to $23.1 million, mainly driven by an increase in assumed claims brought by higher volume of assumed reinsurance premiums~~52.9% during this period. ~~The loss ratio for the period decreased to 56.5% in 2017, or 130 basis points.~~

Underwriting and Other Expenses

~~Increase in underwriting~~Underwriting and other operating expenses ~~of $0.8~~increased by $2.3 million, or ~~4.3%~~23.7%, to ~~$19.4~~$12.0 million mostly ~~reflects~~due to higher net commissions following the segment’s ~~premium growth.~~ ~~In addition, the segment has incurred~~increase in ~~higher development and marketing expenses related to the expansion of the Costa Rica operations.~~premiums written. The ~~segment’s~~ operating expense ratio ~~decreased to 47.4%~~was 58.3%, ~~or 40~~830 basis points ~~following the~~ higher ~~volume of business during this quarter.~~than prior year.

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~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Operating Revenues~~

Premiums earned, net increased by $4.6 million, or 3.9% to $121.4 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 $2.9 million, or 4.4% to $68.7 million, mostly as the result of the higher volume of business during the year, particularly in the Cancer and Individual Life lines of business. The loss ratio for the period increased to 56.6% in 2017, or 30 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 $3.0 million, or 5.5%, to $57.8 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 47.6%, or 70 basis points.

~~Property and Casualty Insurance Operating Results~~

Three months ended
September 30,

Nine months ended
September 30,

(dollar amounts in millions) 2017 2016 2017 2016
Operating revenues:
Premiums earned, net:
Premiums written $ 31.0 $ 32.4 $ 104.8 $ 100.9
Premiums ceded (13.4 ) (11.8 ) (40.1 ) (35.3 )
Change in unearned premiums 2.3 1.4 (1.3 ) (0.6 )
Premiums earned, net 19.9 22.0 63.4 65.0
Net investment income 2.1 2.3 6.2 6.6
Total operating revenues 22.0 24.3 69.6 71.6
Operating costs:
Claims incurred 22.0 9.4 43.5 30.0
Underwriting and other expenses 11.1 10.9 31.3 32.1
Total operating costs 33.1 20.3 74.8 62.1
Operating (loss) income $ (11.1 ) $ 4.0 $ (5.2 ) $ 9.5
Additional data:
Loss ratio 110.6 % 42.7 % 68.6 % 46.2 %
Operating expense ratio 55.8 % 49.5 % 49.4 % 49.4 %

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

~~Operating Revenues~~

Total premiums written decreased by $1.4 million, or 4.3%, to $31.0 million driven by lower sales of Commercial and Medical Malpractice products, mainly as a result of steep competition and current market conditions.

The premiums ceded to reinsurers increased by $1.6 million, or 13.6%, mostly reflecting adjustments related to the catastrophe reinsurance, including estimates for catastrophe reinsurance reinstatement costs for the rest of the year.

~~The change in unearned premiums mostly reflects the segments lower premiums written in 2017.~~

~~Table of Contents~~

~~Claims Incurred~~

Claims incurred increased by $12.6 million, or 134.0%, to $22.0 million during the three months ended September 30, 2017 driven by net losses related to Hurricanes Irma and Maria, as a result, the segment’s loss ratio increased by 6,790 basis points, to 110.6% during this period.

On September 6, 2017, Hurricane Irma passed north of Puerto Rico causing losses to properties and businesses. Two weeks later, on September 20, 2017 Hurricane Maria made landfall and caused extensive damages in Puerto Rico. Estimated net retained losses related to Hurricanes Irma and Maria were approximately $3.5 million and $10.5 million, respectively after the application of reinsurance. Estimated gross losses related to Hurricanes Irma and Maria were $5.0 million and $613.0 million, respectively. While the segment’s ultimate losses cannot be determined with certainty at this time, management believes the catastrophe coverage for losses and allocated loss expenses is sufficient to cover anticipated gross losses.

~~Underwriting and Other Expenses~~

Underwriting and other operating expenses increased by $0.2 million, or 1.8%, to $11.1 million mostly due to lower profit commissions accruals following the losses caused by Hurricanes Irma and Maria during the three months ended September 30, 2017~~. The operating expense ratio was 55.8%, 630 basis points higher than last year mostly driven by the decrease in net premiums earned.~~

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Operating Revenues~~

Total premiums written increased by $3.9 million, or 3.9%, to $104.8 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 $4.8 million, or 13.6%, mostly reflecting higher premiums written in Commercial insurance products during the nine months ended September 30, 2017 as well as adjustments related to the catastrophe reinsurance, including estimates for catastrophe reinsurance reinstatement costs for the rest of the year.

~~The change in unearned premiums mostly reflects the segments higher premiums written in 2017.~~

~~Claims Incurred~~

Claims incurred increased by $13.5 million, or 45.0%, to $43.5 million during the nine months ended September 30, 2017 driven by net losses related to Hurricanes Irma and Maria, as a result the segment’s loss ratio increased by 2,240 basis points, to 68.6% during this period. ~~Estimated gross losses related to Hurricanes Irma and Maria were $5.0 million and $613.0 million, respectively.~~ While the segment’s ultimate losses cannot be determined with certainty at this time, management believes the catastrophe coverage for losses and allocated loss expenses is sufficient to cover anticipated gross losses.

~~Underwriting and Other Expenses~~

~~Underwriting and other operating expenses decreased by $0.8 million, or 2.5%, to $31.3 million mostly due to lower personnel costs and commissions. The operating expense ratio was 49.4% in both periods.~~

~~Table of Contents~~

Liquidity and Capital Resources

Cash Flows

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

	Three months ended
	March 31,
(dollar amounts in millions)	2020			2019
Sources (uses) of cash:
Cash provided by (used in) operating activities	$	6.5		$	(69.9	)
Net (purchases) proceeds of investment securities		(75.9	)		16.5
Net capital expenditures		(4.6	)		(3.0	)
Capital contribution on equity method investees		(4.9	)		-
Payments of long-term borrowings		(0.8	)		(0.8	)
Proceeds from policyholder deposits		10.3			3.6
Surrenders of policyholder deposits		(4.1	)		(4.6	)
Repurchase and retirement of common stock		(9.0	)		-
Net change in short-term borrowings		24.0			-
Other		53.3			36.5
Net decrease in cash and cash equivalents	$	(5.2	)	$	(21.7	)

Nine months ended
September 30,

(dollar amounts in millions) 2017 2016
Sources (uses) of cash:
Cash provided by operating activities $ 191.8 $ 83.0
Net sales (purchases) of investment securities 2.8 (86.6 )
Net capital expenditures (15.9 ) (3.5 )
Proceeds from long-term borrowings 24.3 -
Payments of long-term borrowings (26.3 ) (1.2 )
Proceeds from policyholder deposits 12.1 12.5
Surrender of policyholder deposits (17.4 ) (13.5 )
Repurchase and retirement of common stock (12.6 ) (21.4 )
Other 7.7 (1.6 )
Net increase (decrease) in cash and cash equivalents $ 166.5 $ (32.3 )

~~Cash flow from~~The increase of approximately $76.4 million in net cash provided by operating activities ~~increased by $108.8 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, principally~~is mostly due to higher premium collections and lower ~~claims paid by $64.0 million~~, ~~a decrease in cash paid~~payments to suppliers and employees, ~~of $73.0 million~~, ~~and lower incomes tax~~offset in part by higher claims paid ~~by $5.6 million; offset by a decrease in premium collections of $38.8 million.~~

Net capital expenditures increased by $12.4 million during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, principally due to initiatives related to information technology in the Managed Care segment.

~~During the nine months ended September 30, 2017, we received the remaining $24.3 million~~The net (purchases) proceeds from investments in securities are part our asset/liability management strategy.

The increase in capital contribution reflects capital contributions in exchange for a ~~loan with a commercial bank related with a credit agreement entered into~~participation in ~~December 2016. These proceeds were used 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.~~equity method investees.

In August 2017 the Company’s Board of Directors authorized a $30.0 million repurchase program of its Class B common ~~stock.~~stock and in February 2018 the Company’s Board of Directors authorized a $25.0 million expansion of this program. In October 2019 the Company’s Board of Directors authorized an additional expansion to this program increasing its remaining balance up to a total of $25.0 million, effective November 2019. Repurchases were conducted through open-market purchases of Class B shares only, in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, the Company repurchased and retired ~~539,034 shares of our Class B Common Stock~~under this program 577,447 shares at an average per share price of ~~$23.51,~~$15.57, for an aggregate cost of ~~$12.6~~$9.0 million.

The ~~fluctuation~~net change in short-term borrowings represents the ~~Other uses/sources~~outstanding balance of ~~cash is attributed to changes in the amount of outstanding checks over bank balances.~~

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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~~

The fluctuation in other sources of cash reflects the ~~form~~$53.5 million change in outstanding checks in excess of arrangements to sell securities under repurchase agreements. As of September 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 September 30, 2017.bank balances.

~~On December 21, 2005, we issued~~Financing 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.~~Financing Capacity

~~On December 28, 2016,~~ Long-Term Borrowings

TSM ~~entered into a~~has $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~~a 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 December 2020 ($24.0 million).bank. Pursuant to the credit agreement, interest is payable on the outstanding balance of the Loan at the following annual rate: (i) 1%100 basis points over LIBOR for Term Loan A, (ii) ~~2.75%~~275 basis points over LIBOR for Term Loan B, and, (iii) ~~3.25%~~325 basis points 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,~~negative covenants imposing certain restrictions on the ~~granting of certain liens, limitations on acquisitions and limitations on changes in control and dividends.~~Company’s business. Failure to meet these covenants may trigger the accelerated payment of the outstanding balance. As of ~~September 30, 2017~~March 31, 2020, we are in compliance with these covenants.

~~On March 11, 2016~~ ~~TSS~~ ~~entered into a $30.0 million revolving loan~~

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As detailed above, the three term loans under our credit agreement with a commercial bank in Puerto ~~Rico. This unused line of credit had an~~Rico bear interest rates in relation to 1-month and 3-month LIBOR, a widely used interest rate benchmark.

In July 2017, the Financial Conduct Authority (“FCA”) in the United Kingdom, which regulates LIBOR, announced that it would phase out this benchmark by the end of ~~LIBOR plus 220 basis points and includes certain financial and non-financial covenants that are customary for this type~~2021. In response, the U.S. Federal Reserve convened the Alternative Reference Rates Committee (“ARRC”), a working group comprised of ~~facility. This revolving loan agreement matured~~private market participants, to ensure a transition to a new reference rate.

The ARRC has recommended the use of the Secured Overnight Financing Rate (“SOFR”), which is an index based 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 line~~the cost 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 September 30, 2017,~~borrowing overnight cash collateralized by U.S. Treasury securities. Currently, there is no ~~outstanding balance~~definitive information regarding the future use of SOFR as a widely accepted benchmark or any other replacement rate.

If LIBOR rates are no longer available, we are subject to an alternative benchmark rate, as defined in the credit agreement of our long-term bank loan. At this time we cannot assess the impact, if any, on the interest paid on this loan. Alternatively, the loan could be refinanced by us without prepayment penalties.

We will closely follow any new developments regarding the LIBOR phase out.

For further details, see Note 13, Borrowings, of the Notes to the Consolidated Financial Statements, included in “Item 8, Financial Statements and Supplementary Data”, of our Annual Report on Form 10-K for the year ended December 31, 2019.

Short-Term Facilities

We have several short-term facilities available to address timing differences between cash receipts and disbursements, consisting of collateralized advances from the Federal Home Loan Bank of New York (“FHLBNY”) and a revolving credit facility. See note 8 of the condensed consolidated financial statements included in this ~~line~~Quarterly Report on Form 10-Q for details of ~~credit.~~available short-term facilities.

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.

~~Table of Contents~~

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks that are inherent in our financial instruments, which arise from transactions entered into in the normal course of business. We have exposure to market risk mostly in our investment activities. For purposes of this disclosure, “market risk” is defined as the risk of loss resulting from changes in interest rates and equity prices. No material changes have occurred in our exposure to financial market risks since December 31, ~~2016.~~2019. A discussion of our market risk is incorporated by reference to “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” ofincluded in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

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 ~~mistakes.~~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.

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Based on ~~their~~this evaluation,~~, the Company’s~~ our chief executive officer and chief financial officer have concluded that as of ~~September 30, 2017,~~March 31, 2020, which is the end of the period covered by this Quarterly Report on Form 10-Q, ~~the Company’s~~our disclosure controls and procedures ~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were~~are effective to a reasonable level of assurance.

~~Remediation of Material Weakness~~

~~Management first reported on Form 10-Q for the quarterly period ended June 30, 2017 a material weakness~~There were no significant changes in ~~the Company’s~~our disclosure controls and procedures, or in factors that could significantly affect internal ~~control over financial reporting, related~~controls, subsequent to the ~~review process of~~date the Managed Care claims paid data input in our incurred but not reported (“IBNR”) actuarial model. 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 the 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. A material weakness is a deficiency, or combination of deficiencies, in internal control overchief executive officer and chief financial ~~reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.~~

~~Table of Contents~~

~~During the third quarter of 2017~~, management designed, documented and implemented additional control procedures and enhanced existing control procedures related to the preventive controls over the accuracy of the incurred date component of the Managed Care claims paid data within the claim lags. These procedures include: (a) full incorporation into the process of additional personnel hired in January 2017, (b) strengthening the review process over the accuracy of the claims paid data within the IBNR model, and (c) strengthening the claims paid reconciliation process to include the incurred date component within the IBNR model on a monthly and historical basis.

~~The Company~~officer completed the documentation and testing of the design and operating effectiveness of the controls described above and, as of September 30, 2017, has concluded that the steps taken have remediated the material weakness relatedevaluation referred to ~~the review of the incurred date component of the Managed Care claims paid data within the IBNR model.~~above.

Changes in Internal Controls Over Financial Reporting

~~Other than the control procedures as described above, which were implemented to remediate the material weakness, no~~No changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended ~~September 30, 2017~~March 31, 2020 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~~None of the legal proceedings ~~that have experienced significant developments during this quarter, see~~disclosed in note 1324 to the ~~unaudited condensed consolidated financial statements included in this quarterly report~~Consolidated Financial Statements of the Company’s 2019 Annual Report on Form ~~10-Q.~~10-K had a material development during the three months ended March 31, 2020.

~~Item 1A.~~

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~~.2019.

The following ~~text updates~~risk factor was added during the ~~disclosure~~ three months ended March 31, 2020.

The COVID-19 pandemic and local, state and federal governments’ response to the pandemic may have a material adverse effect on our business, financial condition and results of operations.

On March 11, 2020, the World Health Organization characterized the outbreak of a novel strain of coronavirus (COVID-19) as a global pandemic. In response, the Puerto Rico Governor issueda stay at home order (as amended and extended, the “Order”) on March 15, 2020 requiring the closure of non-essential businesses until May 4, 2020. On May 1, 2020, the Governor further amended and extended the Order to provide for the gradual re-opening of the economy through May 25, 2020, provided that the risk of contagion does not increase significantly by then. Our Managed Care business, although considered an essential business excluded from closure in the Order, is operating mostly remotely as a cautionary measure. Our Life and Property & Casualty businesses are among those industries that were allowed to re-open under the most recent extension of the Order, subject to compliance with certain safety and risk management measures. Accordingly, since May 4, 2020, we are in the process of gradually re-opening these offices.New sales have been or could be affected in all our segments during the lock-down as sales functions have had to be performed remotely given that they are not considered essential under the Order.

At this point it is not possible to reliably estimate the length or severity of this outbreak, the length and effectiveness of government and private sector mitigation measures, and other variables which will determine the ultimate financial impact of the pandemic on the Company. Additionally, the situation is rapidly developing and evolving. We are therefore unable to reliably estimate the ultimate impact of the COVID-19 pandemic on the Company. However, certain risks discussed in our 2019 Annual Report on Form 10-K may increase or materialize. We are closely monitoring the development of the situation to assess its impact on our business. We have experienced a temporary decrease in utilization caused by postponement or cancelation of elective services and medical appointments driven by the Order, which could cause our MLR to temporarily drop. Conversely, the pandemic could result in a material increase in medical claims as COVID-19 cases increases and the return of deferred utilization. Furthermore, COVID-19 related federal and state legislation and regulation may adversely impact our business, financial condition and results of operations. For example, the U.S. and Puerto Rico legislatures have enacted or are contemplating measures requiring health care insurers to cover and/or waive pre-authorization and cost-sharing for COVID-19 related testing, vaccines, treatment or services, which may adversely affect our profitability. See Item 1A. Risk Factors – Risks Related to our Business – “Our inability to contain managed care costs may adversely affect our business and profitability” included in ~~Item 1A of Part I of~~ our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019.

Our Property & Casualty business interruption policies include an exclusion of coverage due to virus or bacteria. However, there are federal and local legislative efforts to retroactively eliminate such exclusions or otherwise require property and casualty insurers to cover COVID-19 losses under their business interruption policies. While we believe this type of legislative measure could be challenged on constitutional and other grounds, if successfully implemented, it would have a material adverse effect on our Property and Casualty Insurance segment. With respect to our Life segment, there is a risk that the ~~sub-caption “The health care reform law~~pandemic result in a higher number of deaths, and ~~the implementation~~therefore a higher number of ~~that law could~~claims for death benefits than assumed in our actuarial models.

See Item 1A. Risk Factors – Risks Related to our Business – “Large-scale natural disasters may have a material adverse effect on our business, financial condition ~~cash flows, or~~and results of ~~operations.~~”operations” included in our Annual Report on Form 10-K for the year ended December 31, 2019.

~~On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities~~Finally, while estimates vary, the COVID-19 pandemic is widely considered to have had and ~~responsibilities under~~continue to have a significant effect on the ~~Patient Protection~~Puerto Rico, U.S. and ~~Affordable Care Act of 2010 as amended~~global economies. Financial market volatility caused by the ~~Health Care~~pandemic has decreased and ~~Education Reconciliation Act~~may further decrease the market value of ~~2010 (ACA) to waive, defer, grant exemptions from, or delay~~our investment portfolios, including those in 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 knownemployees noncontributory pension plan. Furthermore, as the ~~American Health Care Act (AHCA), which, if enacted, would amend~~financial capacity of our customers is adversely affected, we may experience delinquency in premium payments and ultimately a decrease in insured customers in our commercial line of business and premiums earned, net, or ~~repeal significant portions of the ACA. Among~~ other ~~changes, the AHCA would sunset the annual insurance industry assessment as of December 31, 2017, essentially eliminate the individual~~adverse effects. See Item 1A. Risk Factors – Risks Related to our Business – “Our investment portfolios are subject to varying economic and ~~employer mandates by eliminating penalties~~market conditions. See also “The securities and ~~providing retroactive relief for failing to maintain or provide minimum essential coverage,~~credit markets could experience extreme volatility and permit insurers to charge individuals a 30% surcharge on premiums for failing to demonstrate continuous coverage. The 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,disruption.” and ~~changing certain eligibility requirements. On May 4, 2017, the U.S. House of Representatives approved the AHCA to repeal portions of the ACA.~~

The 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“Our business is uncertain when or if the provisions in the 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.

On October 12, 2017, President Trump signed an executive order requiring the implementation of regulations that would exempt certain association plans from complying with Affordable Care Act requirements, easing restrictions on certain short-term health plans and health reimbursement arrangements and limiting hospital and insurance company consolidation while promoting competition and choice. To the extent that certain provisions of the Affordable Care Act are not applicablegeographically concentrated in Puerto Rico and ~~that regulations implementing these changes have yet~~weakness in the economy and the fiscal health of the government has adversely impacted and may continue to adversely impact us.” included in our Annual Report on Form 10-K for the year ended December 31, 2019.

These and other risks, some of which we may be ~~adopted, it is unclear~~unable to identify at this time ~~how~~ due to the ~~executive order or any regulations required to be promulgated thereunder would affect the Puerto Rico market.~~evolving and highly uncertain nature of this event, could adversely impact our business, financial condition and results of operations.

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See Item 1A. Risk Factors – Risks Related to our Business – “Our inability to contain managed care costs may adversely affect our business and profitability” included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Our Property & Casualty business interruption policies include an exclusion of coverage due to virus or bacteria. However, there are federal and local legislative efforts to retroactively eliminate such exclusions or otherwise require property and casualty insurers to cover COVID-19 losses under their business interruption policies. While we believe this type of legislative measure could be challenged on constitutional and other grounds, if successfully implemented, it would have a material adverse effect on our Property and Casualty Insurance segment. With respect to our Life segment, there is a risk that the pandemic result in a higher number of deaths, and therefore higher number of claims for death benefits than assumed in our actuarial models. These and other risks, some of which we may be unable to identify at this time, could adversely impact our business, financial condition and results of operations.

See Item 1A. Risk Factors – Risks Related to our Business – “Large-scale natural disasters may have a material adverse effect on our business, financial condition and results of operations” included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Finally, while estimates vary, the COVID-19 pandemic is widely considered to have had and continue to have a devastating effect on the Puerto Rico, U.S. and global economies. As the financial capacity of our customers is adversely affected, we may experience delinquency in premium payments and ultimately a decrease in insured customers in our commercial line of business and premiums earned, net. See Item 1A. Risk Factors – Risks Related to our Business – “Our investment portfolios are subject to varying economic and market conditions. See also “The securities and credit markets could experience extreme volatility and disruption.” and “Our business is geographically concentrated in Puerto Rico and weakness in the economy and the fiscal health of the government has adversely impacted and may continue to adversely impact us.” included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(Dollar amounts in millions, except per share data)	Total Number of Shares Purchased (1)(2)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (2)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs

January 1, 2020 to January 31, 2020		280,670	$	17.89		279,151	$	10.0
February 1, 2020 to February 29, 2020		-		-		-		10.0
March 1, 2020 to March 31, 2020		303,659		13.39		298,296		6.0

(1) Represents shares repurchased and retired as the result of non-cash tax witholdings upon vesting of shares of participants under the Company’s equity compensation plans. In January and March 2020, 1,519 and 5,363 shares, respectively, were repurchased and retired as the result of non-cash tax witholdings upon vesting of shares.

~~Purchases of Equity Securities by the Issuer~~

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

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

Average
Price
Paid per
Share

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

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

July 1, 2017 to July 31, 2017 - $ - - $ 30.0
August 1, 2017 to August 31, 2017 199,034 23.59 199,034 25.3
September 1, 2017 to September 30, 2017 340,000 23.47 340,000 17.4

¹(2) In August 2017 the Company's Board of Directors authorized a $30.0 million Share Repurchase Program of its Class B common stock. In October 2019 the Company’s Board of Directors authorized an expansion to this repurchase program, effective November 2019, increasing its remaining balance up to a total of $25.0 million.

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

Not applicable.

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Item 6.

Exhibits


Exhibits	Description

10.1*11	~~Amendment to Extend Contract~~Statement re computation of per share earnings; an exhibit describing the computation of the earnings per share for the ~~Provision~~three months ended March 31, 2020 and 2019 has been omitted as the detail necessary to determine the computation of ~~Physical & Behavioral Health Services under~~earnings per share can be clearly determined from the ~~Government Health Plan Program dated as~~material contained in Part I of ~~September 28, 2017, by and between the Administracion de Seguros de Salud de Puerto Rico and Triple-S Salud, Inc.~~

~~10.2*+~~	~~Master Services Agreement, dated as of August 29, 2017, by and between Triple-S Salud, Inc. and OptumInsight, Inc.~~
	this Quarterly Report on Form 10-Q.
31.131.1	Certification of the President and Chief Executive Officer required by Rule 13a-14(a)/15d-14(a).

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

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

32.232.2	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.

+	~~Confidential treatment requested as to certain portions, which portions have been provided separately to the Securities and Exchange Commission.~~

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SIGNATURES

Pursuant to the requirements of the United States Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Triple-S Management Corporation

			Registrant

Date:	~~November 9, 2017~~May 7, 2020	By:	/s/ Roberto García-Rodríguez
			Roberto García-Rodríguez
			President and Chief Executive Officer

Date:	~~November 9, 2017~~May 7, 2020	By:	/s/ Juan J. Román-Jiménez
			Juan J. Román-Jiménez
			Executive Vice President and Chief Financial Officer

	2017			2016
Balance at January 1	$	863,163		$	847,526
Share-based compensation		1,651			2,266
Stock issued upon the exercise of stock options		-			55
Repurchase and retirement of common stock		(12,553	)		(21,427	)
Comprehensive income		45,148			40,463
Total Triple-S Management Corporation stockholders' equity		897,409			868,883
Non-controlling interest in consolidated subsidiary		(679	)		(676	)
Balance at September 30	$	896,730		$	868,207

	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

	September 30, 2017
	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
Assets:
Policy loans	$	9,260	$	-	$	9,260	$	-	$	9,260

Liabilities:
Policyholder deposits	$	177,265	$	-	$	177,265	$	-	$	177,265
Long-term borrowings:
Loans payable to bank - variable		33,159		-		33,159		-		33,159
Total long-term borrowings		33,159		-		33,159		-		33,159
Total liabilities	$	210,424	$	-	$	210,424	$	-	$	210,424

	Three months ended September 30, 2017									Nine months ended September 30, 2017
	Managed Care			Other Business Segments *			Consolidated			Managed Care			Other Business Segments *			Consolidated

Claim liabilities at beginning of period	$	371,428		$	132,812		$	504,240		$	349,047		$	138,896		$	487,943
Reinsurance recoverable on claim liabilities		-			(33,368	)		(33,368	)		-			(38,998	)		(38,998	)
Net claim liabilities at beginning of period		371,428			99,444			470,872			349,047			99,898			448,945
Claims incurred
Current period insured events		541,648			40,719			582,367			1,724,890			95,227			1,820,117
Prior period insured events		(2,463	)		(3,391	)		(5,854	)		(19,158	)		(5,920	)		(25,078	)
Total		539,185			37,328			576,513			1,705,732			89,307			1,795,039
Payments of losses and loss-adjustment expenses
Current period insured events		529,497			15,320			544,817			1,456,098			38,222			1,494,320
Prior period insured events		24,819			5,794			30,613			242,384			35,325			277,709
Total		554,316			21,114			575,430			1,698,482			73,547			1,772,029
Net claim liabilities at end of period		356,297			115,658			471,955			356,297			115,658			471,955
Reinsurance recoverable on claim liabilities		-			636,743			636,743			-			636,743			636,743
Claim liabilities at end of period	$	356,297		$	752,401		$	1,108,698		$	356,297		$	752,401		$	1,108,698

	Three months ended September 30, 2016								Nine months ended September 30, 2016
	Managed Care		Other Business Segments *			Consolidated			Managed Care			Other Business Segments *			Consolidated

Claim liabilities at beginning of period	$	341,505	$	140,359		$	481,864		$	348,297		$	143,468		$	491,765
Reinsurance recoverable on claim liabilities		-		(38,109	)		(38,109	)		-			(40,714	)		(40,714	)
Net claim liabilities at beginning of period		341,505		102,250			443,755			348,297			102,754			451,051
Claims incurred
Current period insured events		588,960		26,166			615,126			1,800,023			78,006			1,878,029
Prior period insured events		9,105		(2,197	)		6,908			(15,488	)		(5,131	)		(20,619	)
Total		598,065		23,969			622,034			1,784,535			72,875			1,857,410
Payments of losses and loss-adjustment expenses
Current period insured events		553,062		17,049			570,111			1,501,480			38,702			1,540,182
Prior period insured events		16,633		7,095			23,728			261,477			34,852			296,329
Total		569,695		24,144			593,839			1,762,957			73,554			1,836,511
Net claim liabilities at end of period		369,875		102,075			471,950			369,875			102,075			471,950
Reinsurance recoverable on claim liabilities		-		39,427			39,427			-			39,427			39,427
Claim liabilities at end of period	$	369,875	$	141,502		$	511,377		$	369,875		$	141,502		$	511,377

Incurred Year	Total of IBNR Liabilities Plus Expected Development on Reported Claims
2015		66,221
2016		20,708
2017		268,792

	September 30, 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%, fully paid in January 2017.	$	-	$	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 2.23% and 1.77% at September 30, 2017 and December 31, 2016, respectively)		9,957		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 4.05% at September 30, 2017).		19,478		-
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 4.55% at September 30, 2017).		3,724		-
Total borrowings		33,159		35,187

Less: unamortized debt issuance costs		289		102
	$	32,870	$	35,085

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

July 1, 2017 to July 31, 2017		-	$	-		-	$	30.0
August 1, 2017 to August 31, 2017		199,034		23.59		199,034		25.3
September 1, 2017 to September 30, 2017		340,000		23.47		340,000		17.4