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 SeptemberJune 30, 20172021


or


☐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 CorporationTRIPLE-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) 749-4949Securities 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, $1.00 par valueGTSNew 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 the 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'sissuer’s classes of common stock, as of the latest practicable date.

Title of each class
Outstanding at June 30, 2021
 
Outstanding at September 30, 2017
Common Stock, Class A, $1.00 par value950,968
Common Stock Class B, $1.00 par value22,951,13923,796,037





Triple-S Management Corporation


FORM 10-Q


For the Quarter Ended SeptemberJune 30, 20172021


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 Operations3328
Cautionary Statement Regarding Forward-Looking Information
3328
Overview
3328
Recent Developments
3429
Recent Accounting Standards
3932
Managed Care Membership
3932
Consolidated Operating Results
4033
Managed Care Operating Results
4335
Life Insurance Operating Results
4638
Property and Casualty Insurance Operating Results
4740
Liquidity and Capital Resources
4941
Item 3.
Quantitative and Qualitative Disclosures about Market Risk5143
Item 4.
Controls and Procedures5143
Part II – Other Information
5344
Item 1.  Legal Proceedings
44
Item 1A.  Risk Factors
Item 1.Legal Proceedings5344
Item 1A.
Risk Factors
53
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds5444
Item 3.
Defaults Upon Senior Securities5444
Item 4.
Mine Safety Disclosures5444
Item 5.  Other Information
44
Item 6.  Exhibits
Item 5.Other Information5445
SIGNATURES
Item 6.Exhibits54
SIGNATURES 5546


2
Table of Contents

Part I –-  Financial Information

Item 1.  Financial Statements

Triple-S Management Corporation
Condensed Consolidated Interim Balance Sheets (Unaudited)
(dollar amounts in thousands, except share data)information)


 
September 30,
2017
  
December 31,
2016
  
June 30,
2021
  
December 31,
2020
 
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 $1,288,691  $1,342,465 
Fixed-maturities held-to-maturity, at amortized cost  1,866   1,867 
Equity investments, at fair value  523,430   404,328 
Other invested assets, at net asset value  117,767   114,905 
Policy loans  9,260   8,564   10,422   10,459 
Cash and cash equivalents  269,942   103,428   174,390   110,989 
Total investments and cash  1,738,736   1,536,820   2,116,566   1,985,013 
Premiums and other receivables, net  930,972   286,365   484,617   488,840 
Deferred policy acquisition costs and value of business acquired  201,467   194,787   252,064   248,325 
Property and equipment, net  73,609   66,369   136,146   131,974 
Deferred tax asset  66,969   57,768   107,942   119,534 
Goodwill  25,397   25,397   28,614   28,614 
Other assets  49,642   51,493   99,513   86,118 
Total assets $3,086,792  $2,218,999  $3,225,462  $3,088,418 
Liabilities and Stockholders' Equity        
Liabilities and Stockholders’ Equity        
Claim liabilities $1,108,698  $487,943  $809,548  $787,102 
Liability for future policy benefits  336,518   321,232   430,950   414,997 
Unearned premiums  165,819   79,310   97,221   97,481 
Policyholder deposits  177,265   179,382   213,300   206,109 
Liability to Federal Employees' Health Benefits and Federal Employees' Programs  46,742   34,370 
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs  45,665   45,109 
Accounts payable and accrued liabilities  273,656   169,449   382,116   332,699 
Deferred tax liability  21,902   18,850   14,249   15,046 
Short-term borrowings  45,000   30,000 
Long-term borrowings  32,870   35,085   50,583   52,751 
Liability for pension benefits  26,592   30,892   132,077   139,611 
Total liabilities  2,190,062   1,356,513   2,220,709   2,120,905 
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, $1 par value. Authorized 100,000,000 shares; issued and outstanding 23,796,037 and 23,430,292 shares at June 30, 2021 and December 31, 2020, respectively
  23,796   23,430 
Additional paid-in capital  55,060   65,592   60,484   57,399 
Retained earnings  761,179   730,904   944,091   897,221 
Accumulated other comprehensive income  57,268   42,395 
Total Triple-S Management Corporation stockholders' equity  897,409   863,163 
Accumulated other comprehensive loss, net  (22,892)  (9,820)
Total Triple-S Management Corporation stockholders’ equity  1,005,479   968,230 
Non-controlling interest in consolidated subsidiary  (679)  (677)  (726)  (717)
Total stockholders' equity  896,730   862,486 
Total liabilities and stockholders' equity $3,086,792  $2,218,999 
Total stockholders’ equity  1,004,753   967,513 
Total liabilities and stockholders’ equity $3,225,462  $3,088,418 


SeeThe accompanying notes toare an integral part of these unaudited condensed consolidated interim financial statements.

3
Table of Contents

Triple-S Management Corporation
Condensed Consolidated Interim Statements of Earnings (Unaudited)
(dollar in thousands, except per share information)

 
Three months ended
June 30,
  
Six months ended
June 30,
 
  2021  2020  2021  2020 
Revenues            
Premiums earned, net $987,880  $858,535  $1,996,316  $1,734,432 
Administrative service fees  2,676   2,809   5,441   5,003 
Net investment income  14,960   13,815   28,606   28,126 
Other operating revenues  1,817   303   4,593   4,342 
Total operating revenues  1,007,333   875,462   2,034,956   1,771,903 
Net realized investment gains (losses)  2,514   (221)  2,731   (687)
Net unrealized investment gains (losses) on equity investments  12,743   28,338   21,295   (28,468)
Other income, net  4,851   801   7,962   4,406 
Total revenues  1,027,441   904,380   2,066,944   1,747,154 
Benefits and expenses                
Claims incurred, net of reinsurance  844,064   653,087   1,694,622   1,367,609 
Operating expenses  151,253   178,659   302,354   340,860 
Total operating costs  995,317   831,746   1,996,976   1,708,469 
Interest expense  2,217   1,864   4,209   3,717 
Total benefits and expenses  997,534   833,610   2,001,185   1,712,186 
Income before taxes  29,907   70,770   65,759   34,968 
Income tax expense  6,353   27,181   18,898   17,531 
Net income  23,554   43,589   46,861   17,437 
Net loss attributable to non-controlling interest  6   10   9   17 
Net income attributable to Triple-S Management Corporation $23,560  $43,599  $46,870  $17,454 
Earnings per share attributable to Triple-S Management Corporation                
Basic net income per share $1.00  $1.88  $2.01  $0.75 
Diluted net income per share $1.00  $1.87  $1.99  $0.75 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

4
Table of Contents

Triple-S Management Corporation
Condensed Consolidated Interim Statements of Comprehensive Income (Unaudited)
(dollar in thousands)

 
Three months ended
June 30,
  
Six months ended
June 30,
 
  2021  2020  2021  2020 
Net income $23,554  $43,589  $46,861  $17,437 
Other comprehensive income (loss), net of tax:                
Net unrealized change in fair value of available-for-sale securities, net of taxes  2,263   11,401   (14,290)  27,280 
Defined benefit pension plan:                
Actuarial loss, net  609   153   1,218   306 
Total other comprehensive income (loss), net of tax  2,872   11,554   (13,072)  27,586 
Comprehensive income  26,426   55,143   33,789   45,023 
Comprehensive loss attributable to non-controlling interest  6   10   9   17 
Comprehensive income attributable to Triple-S Management Corporation $26,432  $55,153  $33,798  $45,040 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

5
Table of Contents

Triple-S Management Corporation
Condensed Consolidated Interim Statements of Stockholders’ Equity (Unaudited)
(dollar in thousands)

  
Class A
Common
Stock
  
Class B
Common
Stock
  
Additional
Paid-in
Capital
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income (Loss)
  
Triple-S
Management
Corporation
Stockholders’
Equity
  
Non-controlling
Interest in
Consolidated
Subsidiary
  
Total
Stockholders’
Equity
 
Balance, December 31, 2020
 $0  $23,430  $57,399  $897,221  $(9,820) $968,230  $(717) $967,513 
Share-based compensation  0   250   932   0   0   1,182   0   1,182 
Comprehensive income (loss)  0   0   0   23,310   (15,944)  7,366   (3)  7,363 
Balance, March 31, 2021 $0  $23,680  $58,331  $920,531  $(25,764) $976,778  $(720) $976,058 
Share-based compensation  0   137   2,614   0   0   2,751   0   2,751 
Repurchase and retirement of common stock  0   (21)  (461)  0   0   (482)  0   (482)
Comprehensive income (loss)  0   0   0   23,560   2,872   26,432   (6)  26,426 
Balance, June 30, 2021 $0  $23,796  $60,484  $944,091  $(22,892) $1,005,479  $(726) $1,004,753 
                                 
Balance, December 31, 2019
 $0  $23,800  $60,504  $830,198  $29,363  $943,865  $(693) $943,172 
Share-based compensation  0   590   1,769   0   0   2,359   0   2,359 
Repurchase and retirement of common stock  0   (584)  (8,511)  0   0   (9,095)  0   (9,095)
Comprehensive (loss) income  0   0   0   (26,145)  16,032   (10,113)  (7)  (10,120)
Cumulative effect adjustment due to implementation of ASU 2016-01  0   0   0   (166)  0   (166)  0   (166)
Balance, March 31, 2020 $0  $23,806  $53,762  $803,887  $45,395  $926,850  $(700) $926,150 
Share-based compensation  0   7   4,228   0   0   4,235   0   4,235 
Repurchase and retirement of common stock  0   (375)  (5,618)  0   0   (5,993)  0   (5,993)
Comprehensive income (loss)  0   0   0   43,599   11,554   55,153   (10)  55,143 
Balance, June 30, 2020 $0  $23,438  $52,372  $847,486  $56,949  $980,245  $(710) $979,535 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

6
Table of Contents

Triple-S Management Corporation
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
(dollar in thousands)

  
Six months ended
June 30,
 
  2021  2020 
Cash flows from operating activities:      
Net income $46,861  $17,437 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  7,113   7,744 
Net amortization of investments  1,550   1,270 
Provision for doubtful receivables  1,476   5,658 
Deferred tax expense (benefit)  13,100   (4,976)
Net realized investment (gains) losses on sale of securities  (2,731)  687 
Net unrealized (gains) losses on equity investments  (21,295)  28,468 
Interest credited to policyholder deposits  3,259   3,160 
Share-based compensation  3,933   6,594 
Loss on disposition of property and equipment  0   154 
(Increase) decrease in assets:        
Premium and other receivables, net  2,233   22,359 
Deferred policy acquisition costs and value of business acquired  (2,677)  (5,588)
Deferred taxes  42   (91)
Other assets  (14,705)  (35,348)
Increase (decrease) in liabilities:        
Claim liabilities  22,446   15,956 
Liability for future policy benefits  15,953   10,188 
Unearned premiums  (260)  (3,845)
Liability to Federal Employees’ Health Benefits and Federal Employees’ Programs  556   11,403 
Accounts payable and accrued liabilities  (1,897)  89,052 
Net cash provided by operating activities  74,957   170,282 

(Continued)

7
Table of Contents
Triple-S Management Corporation
Condensed Consolidated Interim Statements of EarningsCash Flows (Unaudited)
(dollar amounts in thousands, except per share data)thousands)


  
Three months ended
September 30,
  
Nine months ended
September 30,
 
  2017  2016  2017  2016 
Revenues:            
Premiums earned, net $714,325  $721,187  $2,139,489  $2,188,770 
Administrative service fees  3,391   4,146   12,318   13,749 
Net investment income  12,395   12,337   37,109   36,570 
Other operating revenues  941   871   3,027   2,598 
Total operating revenues  731,052   738,541   2,191,943   2,241,687 
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 
Other income, net  3,409   734   6,521   5,468 
Total revenues  738,214   744,651   2,206,607   2,254,109 
Benefits and expenses:                
Claims incurred  583,625   629,169   1,815,785   1,877,950 
Operating expenses  119,145   123,406   348,811   367,498 
Total operating costs  702,770   752,575   2,164,596   2,245,448 
Interest expense  1,709   1,893   5,116   5,729 
Total benefits and expenses  704,479   754,468   2,169,712   2,251,177 
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 
Less: Net loss attributable to non-controlling interest  1   3   2   6 
Net income (loss) attributable to Triple-S Management Corporation $21,912  $(1,941) $30,275  $5,395 
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 
  
Six months ended
June 30,
 
  2021  2020 
       
Cash flows from investing activities:      
Proceeds from investments sold or matured:      
Securities available-for-sale:      
Fixed-maturities sold $113,336  $66,316 
Fixed-maturities matured/called  14,554   18,752 
Securities held-to-maturity:        
Fixed-maturities matured/called  0   339 
Equity investments sold  76,348   72,775 
Other invested assets sold  14,855   11,814 
Other invested assets matured  210   0 
Acquisition of investments:        
Securities available for sale:        
Fixed-maturities  (102,356)  (91,930)
Securities held to maturity:        
Fixed-maturities  0   (340)
Equity investments  (172,177)  (160,104)
Other invested assets  (8,407)  (20,799)
Increase in other investments  (706)  (2,400)
Net change in policy loans  37   (97)
Net capital expenditures  (11,200)  (45,927)
Capital contribution on equity method investees  0   (4,933)
Net cash used in investing activities  (75,506)  (156,534)
Cash flows from financing activities:        
Change in outstanding checks in excess of bank balances  47,264   34,024 
Proceeds from (repayments of) short-term borrowings  15,000   (39,000)
Proceeds from long-term borrowings  0   30,841 
Repayments of long-term borrowings  (2,246)  (1,618)
Repurchase and retirement of common stock  0   (14,982)
Proceeds from policyholder deposits  9,516   16,421 
Surrenders of policyholder deposits  (5,584)  (8,200)
Net cash provided by financing activities  63,950   17,486 
Net increase in cash and cash equivalents  63,401   31,234 
Cash and cash equivalents:        
Beginning of period  110,989   109,837 
End of period $174,390  $141,071 


See accompanying notes to unaudited condensed consolidated interim financial statements.


4
8
Table of Contents

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 

See accompanying notes to unaudited condensed consolidated financial statements.
5
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 

See accompanying notes to unaudited condensed consolidated financial statements.
6
Triple-S Management Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
(dollar amounts in thousands)

  
Nine months ended
September 30,
 
  2017  2016 
Cash flows from operating activities:      
Net income $30,273   5,389 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  9,835   10,617 
Net amortization of investments  7,396   6,181 
Additions to the allowance for doubtful receivables  2,043   2,498 
Deferred tax benefit  (9,993)  (4,026)
Net realized investment gain on sale of securities  (8,143)  (6,954)
Interest credited to policyholder deposits  3,151   3,091 
Share-based compensation  1,651   1,931 
(Increase) decrease in assets:        
Premium and other receivables, net  (646,650)  (53,816)
Deferred policy acquisition costs and value of business acquired  (7,139)  (5,250)
Deferred taxes  (218)  (2,384)
Other assets  2,976   (15,598)
Increase in liabilities:        
Claim liabilities  620,755   19,612 
Liability for future policy benefits  15,286   25,874 
Unearned premiums  86,509   79,806 
Liability to Federal Employees' Health Benefits and Federal Employees' Programs  12,372   7,779 
Accounts payable and accrued liabilities  71,745   8,261 
Net cash provided by operating activities  191,849   83,011 
(Continued)
Triple-S Management Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
(dollar amounts in thousands)

  
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.
8
Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)(Unaudited)

(1)1.Basis of Presentation


The accompanying condensed consolidated interim financial statements prepared by Triple-S Management Corporation (Triple-S, TSM, the Company, the Corporation, we, us or our) 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.  Thesestatement 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’sCompany’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.


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 ninesix months ended SeptemberJune 30, 20172021 are not necessarily indicative of the results for the full year ending December 31, 2017.2021.


(2)2.RecentSignificant Accounting StandardsPolicies


Recently Adopted Accounting Standards
On August 28, 2017,2018, the Financial Accounting StandardStandards Board (FASB) issued Derivatives and Hedging (Topic 815): Targeted Improvementsguidance for Compensation – Retirement Benefits – Defined Benefit Plans – General which addresses changes to Accountingthe disclosure requirement for Hedging Activities, which finalizes Proposed Accounting Standard Update (ASU) No. 2016-310 of the same name, and aims to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activitiesdefined benefit plans. The amendments in its financial statements. The purpose of this guidance ismodify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.  Specifically, the guidance removes certain disclosure requirements, including the amounts of accumulated other comprehensive income expected to better alignbe recognized as components of net periodic benefit cost over the next fiscal year, related-party disclosures concerning the amount of future annual benefits covered by an entity’s risk management activitiesinsurance and financial reporting for hedging relationships through changes to bothannuity contracts and significant transactions between the designationemployer and measurement guidance for qualifying hedging relationshipsrelated-parties and the presentation of hedge results. To satisfy that objective,plan, and adds other disclosures including the amendments expandweighted-average interest crediting rates for cash balance plans and refine hedge accountingother plans with promised interest crediting rates, and an explanation for both non-financialthe reasons for significant gains and financial risk components, and align the recognition and presentation of the effects of the hedging instrument and the hedged itemlosses related to changes in the financial statements.  Additionally,benefit obligation for the amendments (1) permit hedge accounting for risk components in hedging relationships involving non-financial risk and interest rate risk; (2) changeperiod.   The Company adopted 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, arestandard 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, theJanuary 1, 2021.  The adoption of this guidance shoulddid not have a material impact on the presentation and disclosures of the Company’s consolidated result of operations.financial statements.

On July 13, 2017,December 18, 2019, the FASB issued guidance which finalizes Proposed ASU No. 2016-370,Accounting Standard Update (ASU) 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. Also, the amendments simplify the accounting for income taxes by requiring the following: (1) that an entity recognize a franchise tax that is partially based on income in accordance with Topic 740 and addresses narrow issues identifiedaccount for any incremental amount incurred as a resultnon-income-based tax; (2) that an entity evaluate when a step-up in the tax basis of Goodwill should be considered part of the complexity associated with applying U.S. GAAP for certain financial instruments with characteristicsbusiness combination in which the book goodwill was originally recognized and when it should instead be considered a separate transaction; and (3) that an entity reflect the effect of liabilities and equity.  Part I of the ASU addresses the complexity of accounting for certain financial instruments with down round features (i.e., features of certain equity-linked instruments (or embedded features) that resultan enacted change in tax laws or rates in the strike price being reduced on the basis of the pricing of future equity offerings), in response to stakeholders who, among 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 contentannual effective tax rate computation in the Codificationinterim period that results fromincluded 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, areenactment date. The Company adopted the standard 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, theJanuary 1, 2021. The adoption of this guidance shoulddid not have a material impact on the presentationresults of the Company’s consolidated result of operations.financial statements.
 
On January 16, 2020, the FASB issued guidance to clarify the interaction between the accounting standards on recognition and measurement of financial instruments in Topic 321: Investments – Equity Securities, the one on equity method investments in Topic 323: Investments – Equity Method and Joint Ventures, and forward contracts and purchased options in Topic 815: Derivatives and Hedging. The amendments clarify that upon an increase or decrease in level of ownership or degree of influence, a company should remeasure the interest held in the investee to take into account observable transactions immediately before applying or discontinuing the equity method of accounting under Topic 323. The guidance also clarifies that an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchase option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option. The Company adopted the standard effective January 1, 2021. The adoption of this guidance did not have a material impact on the results of the Company’s consolidated financial statements.

9
Table of Contents

Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)(Unaudited)

Future Adoptions of Accounting Standards
 
On May 10, 2017,January 7, 2021, the FASB issued guidanceASU 2021-01: Reference Rate Reform (Topic 848): Scope Refinement – to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applyingclarify the scope of the recent reference reform guidance in Topic 718, Compensation-Stock Compensation,848. This ASU refines the scope of Topic 848 and clarifies that certain optional expedients and exceptions therein for contract modifications and hedge accounting apply to a changecontracts that are affected by the discounting transition. Specifically, modifications related to reference rate reform would not be considered an event that requires reassessment of previous accounting conclusions. The ASU also amends the expedients and exceptions in Topic 848 to capture the termsincremental consequences of the scope clarification and conditions of a share-based payment award.to tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments in this update affect any entity that changes the terms or conditions of a share-based payment award.  This guidance indicates an entity should account for the effects of a modification unless the following criteria are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity or liability instrument is the same as the classification of the original award immediately before the original award is modified. For all companies, these amendments, which should be applied on a prospective basis,ASU are effective immediately for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  We areall entities. The Company is currently evaluating the impact the adoption of this guidance may have on the Company's consolidated financial statements.

On March 10, 2017, the FASB issued guidance to improve the presentation of defined benefit costs in the income statement.  In particular, the guidance requiresprocess of identifying its LIBOR-based contracts that an employer report the service cost component in the same line item(s) as other compensation costs arising from services renderedwill be affected by the pertinent employeesphase-out of LIBOR and expects to use the optional expedients provided in this ASU.
Other than the accounting pronouncements disclosed above, there were no other new accounting pronouncements issued during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost componentthree 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 notsix months ended June 30, 2021 that could have a material impact on the presentation of the Company’s consolidated result of operations.financial position, operating results or financials statement disclosures.

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

10
Table of Contents

Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)(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)3.Investment in Securities


The amortized cost for debt securities and cost for equity securities,alternative investments, gross unrealized gains gross unrealizedand losses, and estimated fair value for available-for-sale and held-to-maturitythe Company’s investments in securities by major security type and class of security at Septemberas of June 30, 20172021 and December 31, 2016,2020, 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 
  June 30, 2021 
  
Amortized
cost
  
Gross
unrealized
gains
  
Gross
unrealized
losses
  
Estimated
fair value
 
             
 Fixed-maturities available-for-sale            
Obligations of government-sponsored enterprises $21,320  $417  $(38) $21,699 
U.S. Treasury securities and obligations of U.S. government instrumentalities  103,958   6,038   0   109,996 
Municipal securities  615,133   44,147   (618)  658,662 
Corporate bonds  177,610   25,427   (55)  202,982 
Residential mortgage-backed securities  275,611   14,224   (817)  289,018 
Collateralized mortgage obligations  5,829   505   0   6,334 
Total fixed-maturities available-for-sale $1,199,461  $90,758  $(1,528) $1,288,691 

 December 31, 2020 
  
Amortized
cost
  
Gross
unrealized
gains
  
Gross
unrealized
losses
  
Estimated
fair value
 
             
Fixed-maturities available-for-sale            
Obligations of government-sponsored enterprises $24,496  $665  $(9) $25,152 
U.S. Treasury securities and obligations of U.S. government instrumentalities  103,694   7,993   0   111,687 
Municipal securities  646,961   54,067   0   701,028 
Corporate bonds  189,516   30,280   0   219,796 
Residential mortgage-backed securities  249,801   21,487   (57)  271,231 
Collateralized mortgage obligations  12,954   638   (21)  13,571 
Total fixed-maturities available-for-sale $1,227,422  $115,130  $(87) $1,342,465 

11
Table of Contents

Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(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 
 June 30, 2021 
  
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 $613  $164  $0  $777 
Residential mortgage-backed securities  164   9   0   173 
Certificates of deposit  1,089   0   0   1,089 
Total fixed-maturities held-to-maturity $1,866  $173  $0  $2,039 


 September 30, 2017  December 31, 2020 
 
Amortized
cost
  
Gross
unrealized
gains
  
Gross
unrealized
losses
  
Estimated
fair value
  
Amortized
cost
  
Gross
unrealized
gains
  
Gross
unrealized
losses
  
Estimated
fair value
 
Securities held to maturity:            
Fixed-maturities held-to-maturity            
U.S. Treasury securities and obligations of U.S. government instrumentalities $618  $164  $-  $782  $614  $201  $0  $815 
Residential mortgage-backed securities  191   2   -   193   164   17   0   181 
Certificates of deposit  2,030   -   -   2,030   1,089   0   0   1,089 
Total $2,839  $166  $-  $3,005 
Total fixed-maturities held-to-maturity $1,867  $218  $0  $2,085 

 June 30, 2021 
 
Amortized
cost
  
Gross
unrealized
gains
  
Gross
unrealized
losses
  
Estimated
fair value
 
             
Other invested assets - Alternative investments $107,658  $14,066  $(3,957) $117,767 

 December 31, 2020 
  
Amortized
cost
  
Gross
unrealized
gains
  
Gross
unrealized
losses
  
Estimated
fair value
 
             
Other invested assets - Alternative investments $112,171  $6,119  $(3,385) $114,905 

12
Table of Contents

Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)(Unaudited)
  December 31, 2016 
  
Amortized
cost
  
Gross
unrealized
gains
  
Gross
unrealized
losses
  
Estimated
fair value
 
Securities held to maturity:            
U.S. Treasury securities and obligations of U.S. government instrumentalities $619  $158  $-  $777 
Residential mortgage-backed securities  191   18   -   209 
Certificates of deposit  2,026   -   -   2,026 
Total $2,836  $176  $-  $3,012 


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 SeptemberJune 30, 20172021 and December 31, 20162020 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 
 June 30, 2021 
  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                           
Obligations of government-sponsored enterprises $4,094  $(38)  4  $0  $0   0  $4,094  $(38)  4 
Municipal securities  63,123   (618)  15   0   0   0   63,123   (618)  15 
Corporate bonds  3,945   (55)  1   0   0   0   3,945   (55)  1 
Residential mortgage-backed securities  58,807   (817)  19   0   0   0   58,807   (817)  19 
Total fixed-maturities available-for-sale $129,969  $(1,528)  39  $0  $0   0  $129,969  $(1,528)  39 
Other invested assets - Alternative investments $6,771  $(388)  4  $18,284  $(3,569)  7  $25,055  $(3,957)  11 

 December 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                           
Obligations of government-sponsored enterprises $1,539  $(9)  1  $0  $0   0  $1,539  $(9)  1 
Residential mortgage-backed securities  3,624   (57)  1   0   0   0   3,624   (57)  1 
Collateralized mortgage obligations  6,060   (21)  2   0   0   0   6,060   (21)  2 
Total fixed-maturities available-for-sale $11,223  $(87)  4  $0  $0   0  $11,223  $(87)  4 
Other invested assets - Alternative investments $12,584  $(808)  4  $16,396  $(2,577)  6  $28,980  $(3,385)  10 
13
Table of Contents
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
  December 31, 2016 
  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 

The CorporationCompany reviews the investmentavailable-for-sale and other invested assets portfolios under the Corporation’sCompany’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 impairmentsallowances for credit losses may be recorded in future periods.  The CorporationCompany 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 Instrumentalitiesgovernment-sponsored enterprises and Municipal Securities:securities:  The unrealized losses on the Corporation’s investments in U.S. Government Instrumentalities and Municipal Securitiesof 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, they have investment-grade ratings. The Company does not consider these positions have investment grade ratings. Becauseinvestments to be credit-impaired because of several factors: the decline in fair value is attributable to changes in interest rates and not credit quality; because the CorporationCompany does not intend to sell the investments and it is not more likely than not that the CorporationCompany will not be required to sell the investments before recovery of their amortized cost basis, which may be at maturity; and because the CorporationCompany expects to collect all contractual cash flows, these investments are not considered other-than-temporarily impaired.flows.

Obligations
13
Table of the Commonwealth of Puerto RicoContents

Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share 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.    share information)

(Unaudited)

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

Residential mortgage-backed securities: The unrealized losses on these investments were mostly caused by fluctuations in interest rates and credit spreads. The contractual cash flows of these securities are guaranteed by a U.S. government-sponsored enterprise. Any loss in these securities is determined according to the seniority level of each tranche, with the least senior, typically the unrated residual tranche, taking any initial loss. The investment grade credit rating of our securities reflects the seniority of the securities that the Company owns. The Company does not consider these investments to be credit-impaired because of several factors: the decline in fair value is attributable to changes in interest rates and not credit quality; the Company does not intend to sell the investments and it is 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 at maturity; and because the Company expects to collect all contractual cash flows, these investments are not considered other-than-temporarily impaired.
14
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
Residential Mortgage-Backed Securities and Collateralized Mortgage Obligations: 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 SeptemberJune 30, 2017, investments in mutual funds and2021, alternative investments with unrealized losses arewere not considered other-than-temporarily impairedcredit-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.conditions.


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

 September 30, 2017  June 30, 2021 
 
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  $52,773  $53,720 
Due after one year through five years  306,564   309,836   566,110   602,331 
Due after five years through ten years  154,246   160,637   171,147   180,602 
Due after ten years  553,737   593,015   127,991   156,686 
Residential mortgage-backed securities  21,012   20,946   275,611   289,018 
Collateralized mortgage obligations  23,769   23,717   5,829   6,334 
 $1,075,036  $1,123,990  $1,199,461  $1,288,691 
Securities held to maturity:        
Fixed-maturities held-to-maturity        
Due in one year or less $2,030  $2,030  $1,089  $1,089 
Due after ten years  618   782 
Due after five years through ten years  613   777 
Residential mortgage-backed securities  191   193   164   173 
 $2,839  $3,005  $1,866  $2,039 


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 $220,696 and $227,890 (fair value of $236,233 and $250,088) at June 30, 2021 and December 31, 2020, respectively were pledged with the Federal Home Loan Bank of New York (FHLBNY) to secure short-term borrowings.

15
14
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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(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
June 30,
  
Six months ended
June 30,
 
  2021  2020  2021  2020 
Realized gains (losses)            
Fixed-maturity securities            
Fixed-maturities available-for-sale:            
Gross gains $80  $777  $90  $1,551 
Gross losses  (621)  0   (966)  (6)
Total fixed-maturity securities  (541)  777   (876)  1,545 
Equity investments                
Gross gains  1,383   60   1,883   990 
Gross losses  (16)  (1,158)  (419)  (2,770)
Gross losses from impaired securities  0   0   0   (678)
Total equity investments  1,367   (1,098)  1,464   (2,458)
Other invested assets                
Gross gains  1,688   100   2,143   226 
Total other invested assets  1,688   100   2,143   226 
Net realized gains (losses) on securities $2,514  $(221) $2,731  $(687)


  
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 

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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(Unaudited)

The gross losses from impaired securities during the six months ended June 30, 2020 are related to an equity method investment held by the Company.
 
Three months ended
June 30,
  
Six months ended
June 30,
 
  2021  2020  2021  2020 
Changes in net unrealized (losses) gains:            
Recognized in accumulated other comprehensive income (loss):            
Fixed-maturities available-for-sale $(3,087) $20,482  $(25,813) $40,238 
Other invested assets  6,404   (4,766)  7,375   (4,198)
  $3,317  $15,716  $(18,438) $36,040 
Not recognized in the consolidated financial statements:                
Fixed-maturities held-to-maturity $7  $(2) $(45) $70 

The change in deferred tax liabilityasset (liability) on unrealized gains (losses) recognized in accumulated other comprehensive income Accumulated Other Comprehensive Income during the nine six months ended SeptemberJune 30, 20172021 and 2016 2020 was $4,503$3,290 and $14,328($7,205), respectively.


As of SeptemberJune 30, 20172021 and December 31, 2016, no2020, 0 individual investment in securities exceeded 10% of stockholders’ equity.

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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)(Unaudited)

(4)5.Premiums and Other Receivables, Net


Premiums and other receivables, netOther Receivables, Net were as follows:


 
September 30,
2017
  
December 31,
2016
  
June 30,
2021
  
December 31,
2020
 
Premium $126,200  $91,528  $157,606  $106,322 
Self-funded group receivables  51,198   57,728   26,395   26,412 
FEHBP  13,892   14,321   13,120   12,830 
Agent balances  33,743   25,495   34,996   31,509 
Accrued interest  11,636   13,668   10,171   10,418 
Reinsurance recoverable  656,625   58,295   165,236   216,314 
Other  73,788   62,637   128,917   135,774 
  967,082   323,672   536,441   539,579 
Less allowance for doubtful receivables:                
Premium  27,135   27,320   37,293   37,231 
Other  8,975   9,987   14,531   13,508 
  36,110   37,307   51,824   50,739 
Total premium and other receivables, net $930,972  $286,365  $484,617  $488,840 


As of SeptemberJune 30, 20172021 and December 31, 2016,2020, the Company had premiums and other receivables of $87,765$79,211 and $57,750,$53,397, respectively, from the Government of Puerto Rico, including its agencies, municipalities and public corporations.  The related allowance for doubtful receivables as of SeptemberJune 30, 20172021 and December 31, 20162020 were $17,299$24,563 and $18,812,$23,752, respectively.


Reinsurance recoverable as of SeptemberJune 30, 20172021 and December 31, 2020 includes approximately $604,000$124,877 and $172,021, respectively, 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.
17
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)


(5)6.Fair Value Measurements


Our condensed consolidated balance sheetsConsolidated Balance Sheets include the following financial instruments: securities available for sale,fixed-maturities 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.are considered Level 2 financial instruments.  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 20162020 Annual Report on Form 10-K.


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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(Unaudited)

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


  September 30, 2017 
  Level 1  Level 2  Level 3  Total 
Securities available for sale:            
Fixed maturity securities            
Obligations of government-sponsored enterprises $-  $3,374  $-  $3,374 
U.S. Treasury securities and obligations of U.S government instrumentalities  72,327   -   -   72,327 
Obligations of the Commonwealth of Puerto Rico and its instrumentalities  -   8,083   -   8,083 
Municipal securities  -   732,371   -   732,371 
Corporate bonds  -   263,172   -   263,172 
Residential agency mortgage-backed securities  -   20,946   -   20,946 
Collateralized mortgage obligations  -   23,717   -   23,717 
Total fixed maturities  72,327   1,051,663   -   1,123,990 
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 
  June 30, 2021 
  Level 1  Level 2  Level 3  Total 
             
Fixed-maturities available-for-sale            
Obligations of government-sponsored enterprises $0  $21,699  $0  $21,699 
U.S. Treasury securities and obligations of U.S. government instrumentalities  109,996   0   0   109,996 
Municipal securities  0   658,662   0   658,662 
Corporate bonds  0   202,982   0   202,982 
Residential agency mortgage-backed securities  0   289,018   0   289,018 
Collateralized mortgage obligations  0   6,334   0   6,334 
Total fixed-maturities available-for-sale $109,996  $1,178,695  $0  $1,288,691 
Equity investments $275,539  $242,692  $5,199  $523,430 


  December 31, 2020 
  Level 1  Level 2  Level 3  Total 
             
Fixed-maturities available-for-sale            
Obligations of government-sponsored enterprises $0  $25,152  $0  $25,152 
U.S. Treasury securities and obligations of U.S. government instrumentalities  111,687   0   0   111,687 
Municipal securities  0   701,028   0   701,028 
Corporate bonds  0   219,796   0   219,796 
Residential agency mortgage-backed securities  0   271,231   0   271,231 
Collateralized mortgage obligations  0   13,571   0   13,571 
Total fixed-maturities available-for-sale $111,687  $1,230,778  $0  $1,342,465 
Equity investments $220,118  $179,108  $5,102  $404,328 

Certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy.  The fair value amount presented in this tableof investment securities is intendedestimated based on quoted market prices for those or similar investments.  Additional information pertinent to facilitate the reconciliation of theestimated fair value hierarchy to the amounts presentedof investment in the statement of financial position.securities is included in Note 3.

  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 

18
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
There were no0 transfers in and/or out of Level 3 and between Levels 1 and 2 during the three months and ninesix months ended SeptemberJune 30, 20172021 and 2016.  Level 3 securities are partnerships measured at fair value using the net asset value affected by changes in the fair market value of the investments held in these partnerships.year ended December 31, 2020.

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 is estimated that the underlying assets of the funds will be liquidated in the next 5 to 12 years. The fair values of the investments in this class have been estimated using the net asset value of the Company’s ownership interest in the partnerships. Total unfunded capital commitments for these positions as of September 30, 2017 amounted to $113,181.
19
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 
20
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
(6)Claim Liabilities


A reconciliation of the beginning and ending balances of claim liabilitiesassets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30 is as follows:

  
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 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

  
Three months ended
  Six months ended 
  June 30, 2021  June 30, 2021 
Beginning Balance $5,142  $5,102 
Unrealized gain in other accumulated comprehensive income  57   97 
Balance as of June 30, $5,199  $5,199 

  
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 

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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(Unaudited)

7.Claim Liabilities

The tables below present a reconciliation of the beginning and ending balances of Claim Liabilities during the six months ended June 30:

  
Six months ended
June 30, 2021
 
  
Managed
Care
  
Other
Business
Segments *
  Consolidated 
          
Claim liabilities at beginning of period $445,655  $341,447  $787,102 
Reinsurance recoverable on claim liabilities  0   (138,816)  (138,816)
Net claim liabilities at beginning of period  445,655   202,631   648,286 
Claims incurred            
Current period insured events  1,647,480   59,924   1,707,404 
Prior period insured events  (32,204)  (1,991)  (34,195)
Total  1,615,276   57,933   1,673,209 
Payments of losses and loss-adjustment expenses            
Current period insured events  1,294,829   24,750   1,319,579 
Prior period insured events  221,548   49,554   271,102 
Total  1,516,377   74,304   1,590,681 
Net claim liabilities at end of period  544,554   186,260   730,814 
Reinsurance recoverable on claim liabilities  0   78,734   78,734 
Claim liabilities at end of period $544,554  $264,994  $809,548 

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


19
Claim liabilities as
Table of September 30, 2017 include approximately $618,000 of PropertyContents

Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and Casualty gross losses related to the impact of Hurricanes Irma and Maria in September 2017.share information)

(Unaudited)
As a result of differences between

 
Six months ended
June 30, 2020
 
  
Managed
Care
  
Other
Business
Segments *
  Consolidated 
          
          
Claim liabilities at beginning of period $341,277  $367,981  $709,258 
Reinsurance recoverable on claim liabilities  0   (137,017)  (137,017)
Net claim liabilities at beginning of period  341,277   230,964   572,241 
Claims incurred            
Current period insured events  1,308,194   58,559   1,366,753 
Prior period insured events  (3,392)  (9,821)  (13,213)
Total  1,304,802   48,738   1,353,540 
Payments of losses and loss-adjustment expenses            
Current period insured events  1,039,871   23,660   1,063,531 
Prior period insured events  257,073   27,952   285,025 
Total  1,296,944   51,612   1,348,556 
Net claim liabilities at end of period  349,135   228,090   577,225 
Reinsurance recoverable on claim liabilities  0   147,989   147,989 
Claim liabilities at end of period $349,135  $376,079  $725,214 

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


The actual amounts andof claims incurred in connection with insured events occurring in a prior period typically differ from estimates of insured eventssuch claims made in the prior years, the amountsperiod.  Amounts included as incurred claims for prior period insured events differ from anticipated claims incurred.
21
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 periodprior-period insured events for the three months and ninesix months ended SeptemberJune 30, 20172021 and 2016 are2020 were primarily due primarily to better than expected utilization trends.  Reinsurance recoverable on unpaid claims is reported as premiumPremium and other receivables, netOther Receivables, Net in the accompanying condensed consolidated financial statements.



The claims incurred disclosed in thisthe table above exclude the portion of the change in the liability for future policy benefits expense, which amountedamounting to $7,112 $10,767 and $20,746 $21,413 during the three months and ninesix months ended SeptemberJune 30, 2017, respectively.  The change in the liability for future policy benefits2021, respectively, and $4,746 and $14,069 during the three months and ninesix months ended SeptemberJune 30, 2016 amounted to $7,136 and $20,540, respectively.2020, respectively, which is included within the consolidated Claims Incurred.


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.
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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)(Unaudited)
Excess


The following is information about incurred and paid claims development, net of Loss Reinsurance:reinsurance, as of June 30, 2021, as well as cumulative claim frequency. Additional information presented includes total incurred-but-not-reported liabilities plus expected development on reported claims which is included within the net incurred claims amounts.


Incurred Year 
Total of IBNR Liabilities Plus Expected
Development on Reported Claims
 
2020  129,300 
2021  352,651 

·8.
Casualty excess of loss contract.  This treaty provides reinsurance for losses up to $12,000, subject to a retention of $225.Short-Term Borrowings


·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, theThe Company has several short-term facilities available to address timing differences between cash receipts and disbursements, consisting of collateralized advances from FHLBNY and a Personal Lines Catastrophe excessrevolving credit facility.

In August 2019, TSS and TSV became members of loss contract thatthe FHLBNY, which provides protection from lossesaccess to collateralized advances.  The borrowing capacity of TSS and TSV is up to $125,000, subject to a $5,000 retention, a Commercial Catastrophe excess30% of loss contract up to $135,000, subject to a $10,000 retention, and a Property Catastrophe excesstheir admitted assets as disclosed in the most recent filing with the Commissioner 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 retentionInsurance but is further reduced to $10,000constrained 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.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)
(8)Long-Term Borrowings

A summary of the borrowings entered 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 incollateral held at the principal amountFHLBNY (see Note 3). As of $20,150June 30, 2021 and (iii) Term Loan C inDecember 31, 2020, the principal amount of $4,116.  Term Loan Aborrowing capacity was used to refinance theapproximately $193,732 and $200,338, respectively. The outstanding balance as of the previous $41,000 secured loan payable with the same commercial bank in Puerto Rico.  Proceeds from Term Loans BJune 30, 2021 and C were received on January 11, 2017December 31, 2020 was $45,000 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.$30,000, respectively. 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 anaverage interest rate of LIBOR plus 220 basis pointsthe outstanding balances was 0.34% and contained certain financial0.33% as of June 30, 2021 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.December 31, 2020, respectively.

•
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 250 basis points and contains certain financial and non-financial covenants that are customary for this type of facility. This line of credit matured on June 30, 2021 and was renewed for an additional year.  There was 0 outstanding balance as of June 30, 2021.
24
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 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 certain financial and non-financial covenants that are customary for this type of facility.  As of September 30, 2017, there is no outstanding balance in this line of credit.


(9)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
June 30,
  
Six months ended
June 30,
 
 2017  2016  2017  2016  2021  2020  2021  2020 
Components of net periodic benefit cost:                        
Service cost $-  $779  $-  $2,907 
Interest cost  1,652   1,874   5,248   6,575  $1,375  $1,540  $2,750  $3,080 
Expected return on assets  (2,021)  (1,928)  (6,419)  (6,908)  (1,100)  (2,209)  (2,200)  (4,418)
Amortization of prior service benefit  -   (96)  -   (342)
Amortization of actuarial loss  79   863   251   2,877   975   244   1,950   488 
Settlement loss  580   -   1,211   -   1,000   356   2,000   712 
Net periodic benefit cost $290  $1,492  $291  $5,109 
Net periodic benefit cost (income) $2,250  $(69) $4,500  $(138)


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 CorporationCompany disclosed in its audited consolidated financial statements for the year ended December 31, 20162020 that it expected to contribute $4,000$10,000 to the pension program in 2017.2021.  As of SeptemberJune 30, 20172021, the CorporationCompany has contributed $4,000$10,000 to the pension program.

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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)(Unaudited)

(10)10.Stock Repurchase ProgramReinsurance


Triple-S Propiedad, Inc. (TSP) uses facultative reinsurance, pro rata, and excess of loss reinsurance treaties to manage its exposure to losses, including those from catastrophe events. TSP has geographic exposure to catastrophe losses from hurricanes and earthquakes. The Company repurchases shares through open-market purchasesincidence and severity of Class B shares only, in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, under repurchase programs authorized by the Board of Directors.catastrophes are inherently unpredictable.

In August 2017 the Company’s Board of Directors authorized a $30,000 repurchase program of its Class B common stock.  During
Under these treaties, TSP ceded premiums written were $14,471 and $14,310 for the three months ended SeptemberJune 30, 2017,2021 and 2020, respectively, and $29,454 and $30,717 for the Company repurchasedsix months ended June 30, 2021 and retired2020, respectively. (Refunded) ceded incurred losses and loss adjustment expenses during the three months and six months ended June 30, 2021 and 2020 were $(323) and $1,565, respectively, and $(267) and $39,956, respectively. The ceded incurred losses and loss adjustment expenses for the six months ended June 30, 2020 include $40,000 related to earthquake losses ceded under thiscatastrophe reinsurance.

Principal reinsurance agreements are as follows:
Casualty excess of loss treaty provides reinsurance for losses up to $20,000, subject to a retention of $225.
Medical malpractice excess of loss treaty provides reinsurance for losses up to $3,000, subject to a retention of $150.
Property reinsurance treaty includes proportional cessions and a per risk excess of loss contract limiting losses to $400 in $30,000 risks.
Catastrophe protection is purchased limiting losses to $5,000 per event with losses up to approximately $811,450 in a $816,450 event.


All principal reinsurance contracts are for a period of one year and are subject to modifications and negotiations in each renewal. TSP’s current property and catastrophe reinsurance program 539,034 shares at an averagewas renewed effective April 1, 2021 for a twelve-month period ending March 31, 2022. Other contracts that expired on January 1, 2021 were renewed.

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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share price of $23.51, for an aggregate cost of $12,553.and share information)

(Unaudited)
(11)Comprehensive Income
11.Comprehensive Income (Loss)


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

 
Three months ended
September 30,
  
Nine months ended
September 30,
  
Three months ended
June 30,
  
Six months ended
June 30,
 
 2017  2016  2017  2016  2021  2020  2021  2020 
        
Net Unrealized Gain on Securities Beginning Balance $75,239  $97,885  $62,371  $62,478 
Other comprehensive income before reclassifications  4,853   2,417   21,233   40,233 
Amounts reclassified from accumulated other comprehensive income  (3,002)  (4,301)  (6,514)  (6,710)
Net Unrealized Gain on Securities            
Beginning Balance $75,136  $73,709  $91,689  $57,830 
Other comprehensive income (loss) before reclassifications  4,274   10,681   (12,105)  26,730 
Amounts reclassified from accumulated other comprehensive (loss) income  (2,011)  720   (2,185)  550 
Net current period change  1,851   (1,884)  14,719   33,523   2,263   11,401   (14,290)  27,280 
Ending Balance  77,090   96,001   77,090   96,001   77,399   85,110   77,399   85,110 
Liability for Pension Benefits Beginning Balance  (19,870)  (35,776)  (19,976)  (36,855)
Liability for Pension Benefits                
Beginning Balance  (100,900)  (28,314)  (101,509)  (28,467)
Amounts reclassified from accumulated other comprehensive income  48   466   154   1,545   609   153   1,218   306 
Ending Balance  (19,822)  (35,310)  (19,822)  (35,310)  (100,291)  (28,161)  (100,291)  (28,161)
Accumulated Other Comprehensive Income Beginning Balance  55,369   62,109   42,395   25,623 
Other comprehensive income before reclassifications  4,853   2,417   21,233   40,233 
Amounts reclassified from accumulated other comprehensive income  (2,954)  (3,835)  (6,360)  (5,165)
Accumulated Other Comprehensive Income                
Beginning Balance  (25,764)  45,395   (9,820)  29,363 
Other comprehensive income (loss) before reclassifications  4,274   10,681   (12,105)  26,730 
Amounts reclassified from accumulated other comprehensive (loss) income  (1,402)  873   (967)  856 
Net current period change  1,899   (1,418)  14,873   35,068   2,872   11,554   (13,072)  27,586 
Ending Balance $57,268  $60,691  $57,268  $60,691  $(22,892) $56,949  $(22,892) $56,949 


(12)12.Share-Based Compensation


Share-based compensation expense recorded during the three months ended June 30, 2021and nine months ended September 30, 20172020 was $1,481$2,751 and $1,651,$4,235, respectively. Share-based compensation expense (benefit) recorded during the three months and ninesix months ended SeptemberJune 30, 20162021 and 2020 was ($383)$3,933 and $1,931,$6,594, respectively. The benefitDuring the three and six months ended June 30, 2021, 20,823 shares were repurchased and retired as the result of non-cash tax withholdings upon vesting of shares. During the six months ended June 30, 2020, 6,882 shares were repurchased and retired as the result of non-cash tax withholdings upon vesting of shares. There were 0 non-cash tax withholdings during the three months ended SeptemberJune 30, 2016 results from 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 2016.2020.

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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)(Unaudited)

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

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

 
Three months ended
September 30,
  
Nine months ended
September 30,
  
Three months ended
June 30,
  
Six months ended
June 30,
 
 2017  2016  2017  2016  2021  2020  2021  2020 
Numerator for earnings per share:                        
Net income (loss) attributable to TSM available to stockholders $21,912  $(1,941) $30,275  $5,395 
Net income attributable to TSM available to stockholders $23,560  $43,599  $46,870  $17,454 
Denominator for basic earnings per share:                                
Weighted average of common shares  24,142,192   24,386,076   24,177,344   24,534,647   23,478,867   23,193,626   23,355,965   23,287,787 
Effect of dilutive securities  65,830   -   54,364   70,632   120,111   77,677   160,331   85,198 
Denominator for diluted earnings per share  24,208,022   24,386,076   24,231,708   24,605,279   23,598,978   23,271,303   23,516,296   23,372,985 
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 income per share attributable to TSM $1.00  $1.88  $2.01  $0.75 
Diluted net income per share attributable to TSM $1.00  $1.87  $1.99  $0.75 
No dilutive securities have been included in the diluted earnings per share calculation for the three months ended September 30, 2016 due to our reporting of a net loss for 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 require the Company to comply with corrective action plans or changes in our practices.

We are involved in various legal actions arising in the ordinary course of business. We are also defendants in various other litigations and proceedings, some of which are described below.  Where the Company believes that a loss is both probable and estimable, such amounts have been recorded.  Although we believe our estimates of such losses are reasonable, these estimates could change as a result of further developments in these matters. In other cases, it is at least reasonably possible that the Company may incur a loss related to one or more of the mentioned pending lawsuits or investigations, but the Company is unable to estimate the range of possible loss which may be ultimately realized, either individually or in the aggregate, upon their resolution.  The outcome of legal proceedings is inherently uncertain and pending matters for which accruals have not been established have not progressed sufficiently to enable us to estimate a range of possible loss, if any.  Given the inherent unpredictability of these matters, it is possible that an adverse outcome in one or more of these matters could have a material 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.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(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.
Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(unaudited)

(15)14.Segment Information

The operations of the CorporationCompany are conducted principally through three3 reportable business segments: Managed Care, Life Insurance, and Property and Casualty Insurance.  The CorporationCompany 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,Premiums Earned, Net, Administrative Service Fees and revenues derived from other segments.Net Investment Income. Operating costs include claims incurredClaims Incurred and operating expenses.Operating Expenses.  The CorporationCompany calculates operating income or loss as operating revenues less operating costs.


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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar in thousands, except per share and share information)
(Unaudited)

The following tables summarize the operations by reportable segment:segment for the three months and six months ended June 30, 2021 and 2020:

 
Three months ended
September 30,
  
Nine months ended
September 30,
  
Three months ended
June 30,
  
Six months ended
June 30,
 
 2017  2016  2017  2016  2021  2020  2021  2020 
Operating revenues:                        
Managed Care:                        
Premiums earned, net $653,734  $660,660  $1,955,246  $2,007,972  $909,229  $788,773  $1,840,659  $1,598,059 
Administrative service fees  3,391   4,146   12,318   13,749   2,676   2,809   5,441   5,003 
Intersegment premiums/service fees  1,781   1,384   4,946   4,521   899   1,076   1,721   2,719 
Net investment income  4,097   3,628   12,135   11,215   5,890   4,690   11,000   9,698 
Total managed care  663,003   669,818   1,984,645   2,037,457 
Total Managed Care  918,694   797,348   1,858,821   1,615,479 
Life Insurance:                                
Premiums earned, net  40,845   38,729   121,001   116,286   53,479   47,523   105,389   93,709 
Intersegment premiums  107   212   409   551   586   545   1,175   1,036 
Net investment income  6,070   6,355   18,487   18,681   6,658   6,795   13,066   13,725 
Total life insurance  47,022   45,296   139,897   135,518 
Total Life Insurance  60,723   54,863   119,630   108,470 
Property and Casualty Insurance:                                
Premiums earned, net  19,746   21,798   62,962   64,512   25,172   22,239   50,268   42,664 
Intersegment premiums  153   153   460   460   154   154   307   307 
Net investment income  2,106   2,358   6,164   6,612   2,247   2,323   4,278   4,448 
Total property and casualty insurance  22,005   24,309   69,586   71,584 
Total Property and Casualty Insurance  27,573   24,716   54,853   47,419 
Other segments: *                                
Intersegment service revenues  2,796   2,502   6,641   7,664   4,218   2,007   7,449   5,042 
Operating revenues from external sources  976   878   3,130   2,693   1,817   303   4,593   4,342 
Total other segments  3,772   3,380   9,771   10,357   6,035   2,310   12,042   9,384 
Total business segments  735,802   742,803   2,203,899   2,254,916   1,013,025   879,237   2,045,346   1,780,752 
TSM operating revenues from external sources  87   7   220   12   165   7   262   255 
Elimination of intersegment premiums/service fees  (2,041)  (1,749)  (5,535)  (5,532)  (1,639)  (1,775)  (3,203)  (4,062)
Elimination of intersegment service revenues  (2,796)  (2,502)  (6,641)  (7,664)  (4,218)  (2,007)  (7,449)  (5,042)
Other intersegment eliminations  -   (18)  -   (45)
Consolidated operating revenues $731,052  $738,541  $2,191,943  $2,241,687  $1,007,333  $875,462  $2,034,956  $1,771,903 


*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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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(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
June 30,
  
Six months ended
June 30,
 
  2021  2020  2021  2020 
Operating income (loss):            
Managed Care $7,210  $29,322  $25,964  $43,489 
Life Insurance  6,378   9,457   12,181   14,506 
Property and Casualty Insurance  1,947   6,777   5,788   6,535 
Other segments *  (2,334)  (2,409)  (4,432)  (2,913)
Total business segments  13,201   43,147   39,501   61,617 
TSM operating revenues from external sources  165   7   262   255 
TSM unallocated operating expenses  (3,753)  (1,841)  (6,589)  (3,244)
Elimination of TSM intersegment charges  2,403   2,403   4,806   4,806 
Consolidated operating income  12,016   43,716   37,980   63,434 
Consolidated net realized investment gains (losses)  2,514   (221)  2,731   (687)
Consolidated net unrealized investment gains (losses) on equity investments  12,743   28,338   21,295   (28,468)
Consolidated interest expense  (2,217)  (1,864)  (4,209)  (3,717)
Consolidated other income, net  4,851   801   7,962   4,406 
Consolidated income before taxes $29,907  $70,770  $65,759  $34,968 
                 
Depreciation and amortization expense:                
Managed Care $2,440  $2,930  $4,792  $5,976 
Life Insurance  318   308   645   580 
Property and Casualty Insurance  74   91   144   203 
Other segments*  351   352   702   673 
Total business segments  3,183   3,681   6,283   7,432 
TSM depreciation expense  411   156   830   312 
Consolidated depreciation and amortization expense $3,594  $3,837  $7,113  $7,744 

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

  
June 30,
2021
  
December 31,
2020
 
Assets:      
Managed Care $1,478,811  $1,319,389 
Life Insurance  1,095,606   1,051,819 
Property and Casualty Insurance  529,690   583,404 
Other segments *  38,692   34,020 
Total business segments  3,142,799   2,988,632 
Unallocated amounts related to TSM:        
Cash, cash equivalents, and investments  17,369   16,489 
Property and equipment, net  73,088   68,678 
Other assets  92,919   88,684 
   183,376   173,851 
Elimination entries-intersegment receivables and others  (100,713)  (74,065)
Consolidated total assets $3,225,462  $3,088,418 

Triple-S Management Corporation
Notes to Condensed Consolidated Financial Statements
(dollar amounts in thousands, except per share data)
(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 

*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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Triple-S Management Corporation
Notes to Condensed Consolidated Interim Financial Statements
(dollar amounts in thousands, except per share data)and share information)
(unaudited)(Unaudited)

(16)15.Subsequent Events


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


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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”,“Corporation,” the “Company”, “TSM”, “we”,“Company,” “TSM,” “we,” “our,” and “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 ninesix months ended SeptemberJune 30, 2017.2021.  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, 20162020 and the MD&A included therein, and our unaudited condensed consolidated interim financial statements and accompanying notes as of and for the three months and ninesix months ended SeptemberJune 30, 20172021 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 anyno 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 areTriple-S is a health services company and one of the most significanttop players in the managed care industry in Puerto Rico and have over 55health care industry. With more than 60 years of experience, in this industry.we are the premier health care brand and serve more people through the most attractive provider networks on the island. We have the exclusive right to use the Blue Cross and Blue Shield (BCBS) name and mark throughout Puerto Rico, the U.S. Virgin Islands (USVI), Costa Rica, the British Virgin Islands (BVI) and Anguilla, and we offer a broad portfolio of managed care and related products in the Commercial, MedicaidMedicare Advantage and Medicare AdvantageMedicaid 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, (aa government of Puerto Rico-fundedRico 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), (Medicaid or the Government health plan).

Our commitment to our valued customers and provider partners, backed by administeringour heritage of excellent care, access and service have positioned Triple-S for continued growth in the provisionhealthcare arena. Our progressive use of technology and clinical data, value-based partnerships with care providers and initial investments in ambulatory and primary care assets are a strong foundation for differentiation and growth through the development of an integrated delivery system over the next several years. We believe continued investment and focus on delivering an excellent healthcare experience and great service, coupled with health benefits in designated service regions in Puerto Rico.  See detailsmanagement programs that improve outcomes and quality of life while reducing the Medicaid contract in Item 1Atotal cost of Part Icare, will separate Triple-S from our competition and strengthen the financial performance of our Annual Report on Form 10-K forbusiness well into the year ended December 31, 2016 under the sub-caption “We are dependent on a small numberfuture.

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We have the exclusive right to use the Blue Cross Blue Shield (BCBS) name and mark throughout Puerto Rico, the U.S. Virgin Islands, Costa Rica, the British Virgin Islands and Anguilla.  As of SeptemberJune 30, 2017,2021, we served approximately 995,0001 million managed care members across all regions ofin Puerto Rico.  For the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, our managed careManaged 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 uslicensees.

Triple-S is also a well-known brand in the life insurance and property and casualty insurance markets, with exclusive use of the Blue Cross and Blue Shield name and mark throughout Puerto Rico, the U.S. Virgin Islands, Costa Rica, the British Virgin Islands, and Anguilla.
a significant share in each. We participate in the life insurance market through our subsidiary Triple-S Vida Inc.(TSV), and in the property and casualty insurance market through our subsidiary, Triple-S Propiedad Inc. (TSP).


Intersegment revenues and expenses are reported on a gross basis in each of the operating segments but eliminated in the consolidated results.  Except as otherwise indicated, the numbersreported balances 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 noteNote 14 of the Condensed Consolidated Financial Statementsunaudited condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q.


Our revenuesrevenue primarily consistconsists of premiums earned, net and administrative service fees.  These revenuesinvestment 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 theirmanagement’s 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;earned net and administrative service fees, multiplied by 100.

Recent Developments

COVID-19

COVID-19 Situation in Puerto Rico

As of July 30, 2021, the Puerto Rico Department of Health reported a cumulative total of 126,158 and 19,329 confirmed (RT-PCR+) and probable (antigen) COVID-19 cases, respectively, and a total of 2,578 confirmed and probable COVID-19-related deaths in Puerto Rico.

Puerto Rico Economy
During the past decade, Puerto Rico has been facing economic and fiscal challenges and its economy has been contracting.  In response to the Commonwealth of Puerto Rico (the “Commonwealth”) fiscal and economic crisis, onwas under a stay-at-home order from March 15, 2020 until June 30, 2016, the U.S. Congress enacted the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”), which, among other things, established a Federally-appointed oversight board (the “Oversight Board”) comprised of seven members with ample powers over the finances of the Commonwealth and its instrumentalities.  PROMESA also established a temporary stay on litigation to enforce rights or remedies related to financial liabilities of the Commonwealth, its instrumentalities and municipalities, which expired on May 1, 2017.  Finally, PROMESA established two separate mechanisms to restructure the debts of the Commonwealth, its public corporations and municipalities.16, 2020.  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 planalso issued several consecutive executive orders establishing COVID-19 related restrictions and the rules for the gradual re-opening of the economy, which were in effect from May 4, 2020 to July 4, 2021.  As of July 5, the Governor delegated all authority to issue guidelines and protocols to address the COVID-19 emergency to the Oversight Board forPuerto Rico Secretary of Health.

Puerto Rico began its reviewCOVID-19 vaccination program in December 2020 and approval.  After certain revisions, a final plan was approved byas of May 12, 2021, all citizens 12 years old and older are eligible to receive the Oversight Board on March 13, 2017, which includes spending reductionsvaccine. The Puerto Rico Department of $25.7 billion. The plan implies larger concessions from bondholders since there would be approximately $8 billion available for debt service paymentsHealth reported as of July 1, 2021 that over 60% of the next 10 years, compared to around $35 billion that is owedeligible population had received the full dose of the COVID-19 vaccine and over that period.  The plan also proposes (i) certain significant changes to70% of the Commonwealth’s healthcare delivery modeleligible population had received at least the first dose.

We have implemented our business continuity and risk mitigation plans and are closely monitoring outbreak developments in order to reduce expensesensure the health and (ii) the eliminationsafety 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 requiredemployees 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.
visitors.

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Economic Impact
On May 3, 2017,
As mentioned below, the Oversight Board filed an order seeking2021 Fiscal Plan (defined below) estimates that, while the protection ofCOVID-19 pandemic and the provisions of Title III of PROMESA for the Commonwealth. Subsequently, the Oversight Board filed Title III petitions with respectmeasures taken in response to the same severely reduced economic activity and caused an unprecedented increase in unemployment in Puerto Rico, Sales Tax Financing Corporation (“COFINA” by its Spanish acronym),pandemic-related federal and local stimulus measures, some of which issued bonds secured by a portion ofare summarized below, have more than offset 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 populationestimated income loss due to the hurricanes, is expected to be certified by the Oversight Board by February 2, 2018.
Under the Managed Care segment, the Company also provides health coverage to certain employees of the Government of Puerto Ricoreduced economic activity and its instrumentalities, including PREPA, which together constitute one of our largest customers 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 constraintscaused a temporary increase in personal income 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.  Althoughnet basis. However, it is still too early to quantifyfully assess the short orultimate medium- and long-term impacts of these storms on Puerto Rico, we believe that the effects will be material and adverse to the financial positionimpact of the Government, PREPApandemic 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 liablelockdown 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”),economy.  See Item 1A.  Risk Factors – Risks Related 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 the Governor 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 47our Business – Our business 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 for Puerto Rico.
On September 17, 2017, the Governor of Puerto Rico issued an executive order declaring a state of emergency for the Commonwealth due to the imminent impact of Hurricane Maria. On September 19, 2017, the United States Department of Health 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 initiatives 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 applicablegeographically concentrated in Puerto Rico and that regulations implementing these changes have yet to be adopted, it is unclear at this time howweakness in the executive order or any regulations required to be promulgated thereunder would affecteconomy 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.
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 Northhas adversely affected 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 businessadversely affect us.’’ included in our Annual Report on Form 10-K for the year ended December 31, 2016.2020.


Hurricanes IrmaFunding and MariaEconomic Relief for Puerto Rico


In early September 2017, Hurricane Irma,The Families First Coronavirus Response Act (FFCRA), enacted on March 18, 2020, makes approximately $182.9 million available for Puerto Rico’s Medicaid Program and increases the percentage of federal government funding for its Medicaid program expenditures from 76% to approximately 82% during the emergency period.  The Coronavirus Aid, Relief, and Economic Security or CARES Act, enacted on March 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, enacted on December 27, 2020, and the American Rescue Plan, enacted on March 11, 2021 include a category 5 Hurricane, passed northseries of direct relief and financial assistance measures for Puerto Rico residents and businesses.  The CARES Act also assigns $2.2 billion to the Government of Puerto Rico causing severe damageto cover necessary expenditures related to COVID-19 and not included in the territory’s 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 – Risks Related to our Business – Pandemics, like the COVID-19 pandemics 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 Companypandemics 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. included on our Annual Report on Form 10-K for the year ended December 31, 2020.


Our PropertyPuerto Rico Economy

The Puerto Rico economy entered a recession in the fourth quarter of fiscal year 2006. Puerto Rico’s gross national product (GNP) contracted (in real terms) every fiscal year between 2007 and Casualty segment, using claims information received2018, with the exception of fiscal year 2012. Pursuant to date and post event catastrophe model estimations, anticipates that gross losses, before reinsurance,the latest Puerto Rico Planning Board (the Planning Board) estimates, dated March 2021, the Commonwealth’s real GNP increased by 1.8% in fiscal year 2019, primarily due to federal disaster recovery spending related to Hurricanes Irma and Maria will approximate $5.0 million and $613.0 million, respectively.  This also hasMaría. The Planning Board estimates, however, that the effect of increasing our reinsurance recoverableCommonwealth’s real GNP decreased by approximately $604.0 million.  We expect3.2% in fiscal year 2020 due primarily to collect such balances from our reinsurers.  The segment’s reinsurance program includes excessthe adverse impact of loss catastrophe coverage for lossesthe COVID-19 pandemic and allocated loss expensesthe measures taken by the government in excessresponse to the same, and that the negative effects of $10.0 million after application of facultative and primary reinsurance.  Hurricane Irma’s net retained losses are estimatedCOVID-19 will continue through the current fiscal year, resulting 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 eventsa contraction in real GNP of approximately $14.0 million.
-2%.

Puerto Rico’s population has also been in decline over the past decade. Estimates by the U.S. Census Bureau indicate the population has decreased by 14.3%, or approximately 530,000 people, from April 1, 2010 to July 1, 2019. The 2021 Fiscal Plan (as defined below) projects that population will continue to steadily decline at an average rate of approximately 1.2% per year, due to a combination of outmigration and economic factors. The weakness of Puerto Rico’s economy has also adversely affected employment. Total average annual employment, as measured by the Puerto Rico Department of Labor and Human Resources (the DLHR) has decreased approximately 20% since 2007. The reduction in total employment began in the fourth quarter of fiscal year 2007, when total employment was 1,244,425, and continued consistently until the first half of fiscal year 2015, after which it mostly stabilized.  According to the most recent data from DLHR, Puerto Rico’s average total employment as of February 2021 was 952,000, a decrease of 13,000 from total employment of 965,000 as of February 2020.  The DLHR also reported an average unemployment rate of approximately 9.2% as of February 2021, up from a 9.0% unemployment rate reported by the DLHR as of February 2020.

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In addition, duringPROMESA and the three months ended SeptemberOversight 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 April 23, 2021 (the 2021 Fiscal Plan). The 2021 Fiscal Plan provides that, while the COVID-19 pandemic and the measures taken in response to the same severely reduced economic activity and caused an unprecedented increase in unemployment in Puerto Rico, pandemic-related federal and local stimulus funding have more than offset the estimated income loss due to reduced economic activity and are estimated to have caused a temporary increase in personal income on a net basis. As a result, the 2021 Fiscal Plan’s economic projections incorporate adjustments for the short-term income effects caused by such stimulus programs. For example, the 2021 Fiscal Plan estimates that real GNP contracted by 3% in fiscal year 2020 but estimates the GNP contraction adjusted for short-term income effects to have been approximately 1.1%. For fiscal years 2021 and 2022, the 2021 Fiscal Plan projects that real GNP will grow 1% and 0.6%, respectively, but projects that growth adjusted for income effects for such years will be approximately 3.8% and 1.5%, respectively.

The 2021 Fiscal Plan projects that, if the fiscal measures and structural reforms contemplated by the plan are not successfully implemented, the Commonwealth will have a pre-contractual debt service deficit starting in fiscal year 2023. It estimates that the fiscal measures could drive approximately $10 billion in savings and extra revenue over fiscal years 2022 through 2026 and that the structural reforms could drive a cumulative 0.90% increase in growth by fiscal year 2051 (equal to approximately $30.7 billion). However, even after the fiscal measures and structural reforms, and before contractual debt service, the 2021 Fiscal Plan projects that there will be an annual deficit starting in fiscal year 2036.

On July 27, 2021, the Oversight Board filed the Sixth Amended Title III Joint Plan of Adjustment for the Commonwealth, et. al. (the Proposed Plan) in the pending debt restructuring proceedings under Title III of PROMESA. The Proposed Plan, which has substantial support from several creditor constituencies but is still subject to confirmation in the Title III proceeding, seeks to restructure approximately $35 billion of debt and other claims against the Commonwealth, PBA and ERS, and more than $50 billion of unfunded pension liabilities. On July 29, 2021, the Title III court approved the disclosure statement for the Proposed Plan. The Oversight Board has proposed that final hearings on confirmation of a plan of adjustment take place in November 2021.

Property & Casualty Litigation

As of June 30, 2017, the2021, our Property and Casualty segment’s net premium earned havesubsidiary had been impacted by approximately $3.0 million relatedserved in a total of 487 cases relating to reinsurance costs, including estimates for catastrophe reinsurance reinstatement costs for the rest of the year.

Accounts receivableHurricane Maria. Of those, 274 remained open as of SeptemberJune 30, 2017 have increased as compared to December 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.

2021. See Item 1A. Risk Factors—Factors – Risks Related to Ourour Business – “Our failureLarge-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 on how each reportable segment determines its claim liabilities, and the variables considered in the development of this amount, is 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”.2020.


OptumInsight, Inc. Master Service Agreement
31

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).

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
Property 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.Casualty Reinsurance Program


The Agreement contains representationsCompany’s Property and warrantiesCasualty segment completed the renewal of its reinsurance property 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 tocatastrophe program with 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 terminationApril 1, 2021 with a term of twelve-months ending on March 31, 2022.  The reinsurance program provides the segment with a catastrophe loss protection of $811.5 million in excess of $5 million. The cost of entering into the new reinsurance program is at least three (3) years afterestimated to remain similar to the Effective Date. Inexpiring program.

ASES Contract Renewal

The Puerto Rico Health Insurance Administration (ASES by its Spanish acronym) has notified us of its exercise of its right to extend our agreement for the event that TSS terminatesprovision of health coverage to the Agreement for convenience, due to a changemedically indigent 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 duePuerto Rico under the Agreement or (ii) materially breaches certain sections ofPuerto Rico Health Reform Program (similar to Medicaid) for an additional year, from October 1, 2021 to September 30, 2022. The renewal is subject to premium negotiations for the Agreement without curing said breach within the period described in the Agreement.extended term, which are under way.

Recent Accounting Standards


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


Managed Care Membership


 As of September 30,  As of June 30, 
 2017  2016  2021  2020 
Managed care enrollment:      
Managed Care enrollment:      
Commercial 1
  492,498   521,994   418,414   433,471 
Medicare  123,194   113,950   136,490   134,601 
Medicaid  379,199   402,358   445,881   364,157 
Total  994,891   1,038,302   1,000,785   932,229 
Managed care enrollment by funding arrangement:        
Fully-insured  831,170   860,619 
Managed Care enrollment by funding arrangement:        
Fully insured  898,573   823,247 
Self-insured  163,721   177,683   102,212   108,982 
Total  994,891   1,038,302   1,000,785   932,229 


(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’sour consolidated operating results.  Further details of the results of operations of each reportable segment are included in the analysis of operating results for the respective segments.


 
Three months ended
September 30,
  
Nine months ended
September 30,
  Three months ended  Six months ended 
(dollar amounts in millions) 2017  2016  2017  2016 
Revenues:            
 June 30,  June 30, 
(dollar in millions) 2021  2020  2021  2020 
Revenues            
Premiums earned, net $714.3  $721.2  $2,139.5  $2,188.8  $987.9  $858.5  $1,996.3  $1,734.4 
Administrative service fees  3.4   4.2   12.3   13.7   2.6   2.8   5.4   5.0 
Net investment income  12.4   12.3   37.1   36.6   15.0   13.8   28.6   28.1 
Other operating revenues  1.0   0.9   3.0   2.6   1.9   0.4   4.7   4.4 
Total operating revenues  731.1   738.6   2,191.9   2,241.7   1,007.4   875.5   2,035.0   1,771.9 
Net realized investment gains  3.7   5.4   8.1   7.0 
Net realized investment gains (losses)  2.5   (0.2)  2.7   (0.7)
Net unrealized investment gains (losses) on equity investments  12.7   28.3   21.3   (28.5)
Other income, net  3.4   0.7   6.6   5.4   4.9   0.8   8.0   4.4 
Total revenues  738.2   744.7   2,206.6   2,254.1   1,027.5   904.4   2,067.0   1,747.1 
Benefits and expenses:                
Benefits and expenses                
Claims incurred  583.6   629.2   1,815.8   1,878.0   844.0   653.1   1,694.6   1,367.6 
Operating expenses  119.2   123.4   348.8   367.5   151.3   178.7   302.4   340.9 
Total operating expenses  702.8   752.6   2,164.6   2,245.5   995.3   831.8   1,997.0   1,708.5 
Interest expense  1.7   1.9   5.1   5.7   2.2   1.8   4.2   3.7 
Total benefits and expenses  704.5   754.5   2,169.7   2,251.2   997.5   833.6   2,001.2   1,712.2 
Income before taxes  33.7   (9.8)  36.9   2.9   30.0   70.8   65.8   34.9 
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 
Income tax expense  6.4   27.2   18.9   17.5 
Net income attributable to TSM $23.6  $43.6  $46.9  $17.4 


Three Months Ended SeptemberJune 30, 20172021 Compared to Three Months Ended SeptemberJune 30, 20162020


Operating Revenues


Consolidated premiums earned, net for the three months ended September 30, 2017 decreasedincreased by $6.9$129.4 million, or 1.0%15.1%, to $714.3 million when compared to the three months ended September 30, 2016.$987.9 million.  This decreaseincrease primarily reflects lowerhigher premiums in the Managed Care segment by $6.9$120.5 million. The growth in Managed Care premiums reflects higher average premium rates across all lines of business and an increase in Medicaid membership.

Net Unrealized Investment Gains (Losses) on Equity Investments

The $12.7 million mainlyin consolidated net unrealized investment gains on equity investments reflect the impact of changes in equity markets.

Claims Incurred

Consolidated claims incurred increased by $190.9 million, or 29.2%, to $844.0 million, and the consolidated loss ratio increased 930 basis points, to 85.4%, when compared to the prior-year period primarily reflecting a more normalized utilization of Managed Care services compared to the low utilization in the prior-year quarter due to the Medicaid profit sharing accrual recorded duringpandemic, increased benefits in the three months ended September 30, 2016,Medicare product offering in 2021 and the impacteffect of the suspensionelimination of the Health Insurance Providers Fee (HIP fee) pass-through in 2021.

Operating Expenses

Consolidated operating expenses decreased by $27.4 million, or 15.3%, to $151.3 million. The decrease in operating expenses primarily reflects the accrual in the prior year quarter of a contingency reserve related to a legal proceeding in the Managed Care segment amounting to $32.0 million and the elimination in 2021 of the HIP fee pass through and lower Medicare additional risk score revenue.  These decreases were partiallyof $14.9 million offset in part by higher average premium rates 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%personnel costs.  The consolidated operating expense ratio decreased 540 basis points, to 15.3%.

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 by $45.5 million, or 7.2%, 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. The consolidated loss ratio decreased by 550 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%, 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 SeptemberJune 30, 2017.  The year over year change in income taxes2021 decreased by $20.8 million, to $6.4 million, primarily results from an increase in thereflecting lower taxable income from the Managed Care segment, which has a higher effective tax rate than other segments.in 2021.

NineSix Months Ended SeptemberJune 30, 20172021 Compared to NineSix Months Ended SeptemberJune 30, 20162020


Operating Revenues


Consolidated premiums earned, net forincreased by $261.9 million, or 15.1%, to $1,996.3 million during the ninesix months ended SeptemberJune 30, 2017 decreased by $49.3 million, or 2.3%, to $2,139.5 million when compared to the nine months ended September 30, 2016.2021.  This decreaseincrease primarily reflects lowerhigher premiums in the Managed Care segment by $52.8$242.7 million mainly due to lower membershiphigher average premium rates in the segment’sall lines of business and an increase in Medicaid and Commercial businesses,membership.

Net Unrealized Investment Gains (Losses) on Equity Investments

The $21.3 million in consolidated net unrealized investment gains on equity investments reflect the impact of changes in equity markets.

Claims Incurred

Consolidated claims incurred increased by $327.0 million, or 23.9%, to $1,694.6 million, during the suspensionsix months ended June 30, 2021.  The consolidated loss ratio increased 600 basis points, to 84.9%, from the prior-year period, reflecting higher Managed Care claim trends and utilization of services because of COVID-19-related testing and treatments costs, the waiver of medical and payment policies (see Recent Developments – COVID-19 – Measures Impacting our Business included in this quarterly report on Form 10-Q), increased benefits in the 2021 Medicare product and a more normalized utilization of services compared to the low utilization in the prior year due to the pandemic.

Operating Expenses

Consolidated operating expenses decreased by $38.5 million, or 11.3%, to $302.4 million. The decrease in operating expenses primarily reflects the accrual in the prior year quarter of a contingency reserve related to a legal proceeding in the Managed Care segment amounting to $32.0 million and the elimination of the HIP fee pass through and lower Medicare additional risk score revenue.in 2021 of $31.2 million. These decreases were partially offset by higher average premium rates in the Commercial businesspersonnel costs and Medicaid premium collections relatedprofessional fees. The consolidated operating expense ratio decreased 450 basis points, to the Managed Care segment’s compliance with the contracts quality incentive metrics.15.1%.


Other Income NetTaxes


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 received by the Property and Casualty segment, net of special tax, offset in part by a decrease of $1.1 million reflecting the collection of interest charged for late payment related to the prior Medicaid contract during the nine months ended September 30, 2016.

Claims Incurred

Consolidated claims incurred decreased by $62.2$1.4 million, or 3.3%8.0%, to $1,815.8$18.9 million, during the nine months ended September 30, 2017, mostly due to lower claimsprimarily reflecting higher taxable income 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 all of the segment’s businesses driven by lower enrollment in the segment’s Commercial and Medicaid businesses, the estimated decrease in utilization caused by the aforementioned Hurricanes 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.  The consolidated loss ratio decreased by 90 basis points to 84.9%.2021.

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Operating Expenses

Consolidated operating expenses during the nine months ended September 30, 2017 decreased by $18.7 million, or 5.1%, to $348.8 million as compared to the operating expenses during the nine months ended September 30, 2016.  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 $14.4 million.  For the nine months ended September 30, 2017, the consolidated operating expense ratio decreased 50 basis points to 16.2%.

Income Taxes

Consolidated income taxes increased by $9.1 million, to a net expense of $6.6 million for the nine 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 our other segments.
Managed Care Operating Results


 
Three months ended
September 30,
  
Nine months ended
September 30,
  
Three months ended
June 30,
  
Six months ended
June 30,
 
(dollar amounts in millions) 2017  2016  2017  2016 
Operating revenues:            
Medical premiums earned, net:            
Commercial $198.9  $206.3  $607.4  $636.8 
(dollar in millions) 2021  2020  2021  2020 
Operating revenues            
Medical premiums earned, net            
Medicare  264.3   255.3   788.5   789.4  $408.4  $372.4  $810.7  $760.2 
Medicaid  190.9   199.4   560.3   582.8   291.8   221.1   614.5   442.0 
Commercial  209.6   195.8   416.6   396.9 
Medical premiums earned, net  654.1   661.0   1,956.2   2,009.0   909.8   789.3   1,841.8   1,599.1 
Administrative service fees  4.8   5.2   16.3   17.3   3.0   3.4   6.1   6.7 
Net investment income  4.1   3.6   12.1   11.2   5.9   4.7   11.0   9.7 
Total operating revenues  663.0   669.8   1,984.6   2,037.5   918.7   797.4   1,858.9   1,615.5 
Medical operating costs:                
Medical operating costs                
Medical claims incurred  539.2   598.0   1,705.7   1,784.5   803.9   627.0   1,615.3   1,304.8 
Medical operating expenses  89.0   93.8   259.7   279.4   107.6   141.1   217.6   267.2 
Total medical operating costs  628.2   691.8   1,965.4   2,063.9   911.5   768.1   1,832.9   1,572.0 
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 
Medical operating income $7.2  $29.3  $26.0  $43.5 
Additional data                
Member months enrollment                
Medicare  409,012   405,203   817,793   813,110 
Medicaid  1,332,994   1,077,456   2,629,183   2,145,472 
Commercial                
Fully insured  948,839   975,212   1,905,786   1,953,554 
Self-funded  495,616   534,653   1,504,283   1,617,900   298,854   327,030   594,691   657,262 
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 Commercial  1,247,693   1,302,242   2,500,477   2,610,816 
Total member months  2,996,289   3,124,454   9,089,146   9,511,177   2,989,699   2,784,901   5,947,453   5,569,398 
Medical loss ratio  82.4%  90.5%  87.2%  88.8%  88.4%  79.4%  87.7%  81.6%
Operating expense ratio  13.5%  14.1%  13.2%  13.8%  11.8%  17.8%  11.8%  16.6%


Three Months Ended SeptemberJune 30, 20172021 Compared to Three Months Ended SeptemberJune 30, 20162020


Medical Operating RevenuesPremiums Earned, Net


Medical premiums earned for the three months ended September 30, 2017 decreasedincreased by $6.9$120.5 million, or 1.0%15.3%, to $654.1 million when compared to the medical premiums earned during the three months ended September 30, 2016.$909.8 million. This decreaseincrease is principally the result of the following:


Premiums earnedgenerated by the Commercial business decreased by $7.4 million, or 3.6%, to $198.9 million.  This fluctuation primarily reflects lower fully-insured member enrollment during the quarter of approximately 45,400 member months and $3.6 million related to the suspension of the HIP fee pass-through; partially offset by an increase in average premium rates of approximately 4%.

Premiums earned by the MedicareMedicaid business increased by $9.0$70.7 million, or 3.5%32.0%, to $264.3$291.8 million,, primarily reflecting an increase in member month enrollment of approximately 24,000 lives; offset in part by lower additional risk score revenue adjustments in 2017 by $6.1 million,256,000 member months and lowerhigher average premium rates reflecting a reduction infollowing the 2017 Medicare reimbursement rates.
•
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;premium rate increase effective July 2020. These increases were partially offset bythe impact of the new premium rates that were effective July 1st 2017, which increased average premium rates by approximately 9%.

Medical Claims Incurred

Medical claims incurred during the three months ended September 30, 2017 decreased by $58.8 million, or 9.8%, to $539.2 million when compared to the three months ended September 30, 2016.  The medical loss ratio (MLR) of the segment decreased 810 basis points during the 2017 period, to 82.4%.  This fluctuation is primarily attributed to the net effect of the following:

The medical claims incurred of the Commercial business decreased by $34.7 million, or 19.3%, 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 and its MLR decreased by 1,030 basis points, to 83.3%.  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 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 benefits and the improvement in benefits in 2017 products taking advantageelimination of the HIP fee moratorium. 
pass-through in 2021.


•
The medical claims incurredPremiums generated by the Medicare business increased by $36.0 million, or 9.7%, to $408.4 million, primarily due to higher average premium rates resulting from an increase in the Medicaid business decreased by $5.2 million, or 2.9%, duringpremium rate benchmark and average membership risk score. Member months increased slightly compared with 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 1st 2017.prior-year period.


Medical Operating Expenses

Medical operating expenses for the three months ended September 30, 2017 decreased by $4.8 million, or 5.1%, to $89.0 million when compared to the three months ended September 30, 2016.  The operating expense ratio decreased by 60 basis points to 13.5% in 2017.  The lower operating expenses and expense ratio are mostly the result of the decrease in the HIP 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 million.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Medical Operating Revenues

Medical premiums earned for the nine months ended September 30, 2017 decreased by $52.8 million, or 2.6%, to $1,956.2 million when compared to the medical premiums earned during the nine months ended September 30, 2016.  This decrease is principally the result of the following:

Premiums earned by the Commercial business decreased by $29.4 million, or 4.8%, to $607.4 million.  This fluctuation primarily reflects lower fully-insured enrollment during the year of approximately 190,300 member months 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%.

Premiums earned by the Medicare business decreased by $0.9 million, or 0.1%, to $788.5 million, primarily reflecting lower additional risk score revenue by $27.1 million as well as lower average premium rates due to a reduction in the 2017 Medicare reimbursement rates.  These decreases were partially offset by an increase in member months enrollment of approximately 35,400 lives.

•
Premiums earnedgenerated by the MedicaidCommercial business decreasedincreased by $22.5$13.8 million, or 3.9%7.0%, to $560.3 million.$209.6 million, primarily reflecting higher average premium rates. 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 areincrease was partially offset by a $10.1 increase in million premium collections related to our compliance withdecrease of approximately 26,000 fully insured member months and the contract’s quality incentive metrics and the impactelimination of the new premium rates that were effective July 1st 2017, which increased average premium rates by approximately 9%HIP Fee pass-through in 2021.

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.  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.
35

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 basis points, to 89.3%.  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 1st 2017.
Medical Operating ExpensesClaims Incurred


Medical operating expenses for the nine months ended September 30, 2017 decreasedclaims incurred increased by $19.7$176.9 million, or 7.1%28.2%, to $259.7$803.9 million when compared to the ninethree months ended SeptemberJune 30, 2016.2020. The medical loss ratio (MLR) of the segment increased 900 basis points during the 2021 period, to 88.4%.  This fluctuation is principally attributed to the net effect of the following:

•
Claims incurred in the Medicaid business increased by $68.1 million, or 32.9%, during the 2021 period.  The MLR, at 94.3%, was 60 basis points higher than the same period last year. The increase in claims cost is due to higher member months, a more normalized utilization of services compared to the low utilization experienced in the prior-year quarter due to the pandemic, COVID-19-related testing and treatment costs, and the waiver of medical and payment policies. In addition, the 2021 MLR was impacted by the elimination of the HIP fee pass-through in 2021.

•
Claims incurred in the Medicare business increased by $61.6 million, or 21.4%, during the 2021 period and its MLR increased 830 basis points to 85.5%. These increases reflect a more normalized utilization of services compared to the low utilization experienced in the prior-year quarter due to the pandemic, improved benefits in the 2021 product offerings, COVID-19-related testing and treatment costs and the waiver of medical and payment policies, partially offset by favorable prior period reserve development in the 2021 period.

•
Claims incurred in the Commercial business increased by $47.2 million, or 35.7%, during 2021 and its MLR increased 1,810 basis points, to 85.6%.  The higher MLR principally reflects higher claim trends, a more normalized utilization of services compared to the low utilization experienced in the prior-year quarter due to the pandemic, COVID-19-related testing and treatment costs and the elimination of the HIP fee pass-through in 2021.

Medical Operating Expenses

Medical operating expenses decreased by $33.5 million, or 23.7%, to $107.6 million, primarily reflecting the accrual in the prior year quarter of a contingency reserve related to a legal proceeding and the elimination of the HIP fee in 2021, partially offset by higher personnel costs and professional services. The operating expense ratio decreased by 60600 basis points to 13.2%11.8% in 2017.  The lower operating expenses and expense ratio are mostly2021.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Medical Premiums Earned, Net

Medical premiums earned increased by $242.7 million, or 15.2%, to $1,841.8 million. This increase is principally 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.following:

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, netgenerated by the Medicaid business increased by $2.0$172.5 million, or 5.1%39.0%, to $40.9$614.5 million, driven by a $1.6M increaseprimarily reflecting higher average premium rates following two premium rates increases that were effective in assumed reinsurance premiumsMay 2020 and premium’s growth in the segment’s Individual LifeJuly 2020 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 volumeenrollment of assumed reinsurance premiums 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 and other expenses of $0.8 million, or 4.3%, to $19.4 million mostly reflects higher commissions following the segment’s premium growth.approximately 484,000 member months. In addition, following a reconciliation process with ASES this year, we recognized premiums corresponding to prior periods in the segment has incurred in higher development and marketing expenses related tofirst quarter of 2021.  These increases were partially offset by the expansionelimination of the Costa Rica operations.  The segment’s operating expense ratio decreased to 47.4%, or 40 basis points following the higher volume of business during this quarter.HIP fee pass-through in 2021.

•
Premiums generated by the Medicare business increased by $50.5 million, or 6.6%, to $810.7 million, primarily due to higher average premium ratesreflecting an increase in the premium rate benchmark and membership risk score. Member months increased slightly when compared with the prior-year period.

•
Premiums generated by the Commercial business increased by $19.7 million, or 5.0%, to $416.6 million, mainly reflecting higher average premium rates in the 2021 period.  This increase was partially offset by the elimination of the HIP fee pass-through in 2021 and a decrease of approximately 48,000 fully insured member months.

46
36
NineMedical Claims Incurred

Medical claims incurred increased by $310.5 million, or 23.8%, to $1,615.3 million when compared to the six months ended June 30, 2020.  The MLR of the segment increased 610 basis points during 2021, to 87.7%. This fluctuation is principally attributed to the net effect of the following:

Claims incurred in the Medicaid business increased by $150.5 million, or 37.0%, during 2021 and its MLR decreased 130 basis points, to 90.7%. The increase in claim cost is due to higher member months. The lower MLR reflects the premium rates increases and prior period premiums recognized this year, partially offset by COVID-19-related testing and treatment costs, the waiver of medical and payment policies and the elimination of the HIP fee pass-through in 2021.

•
Claims incurred in the Medicare business increased by $92.2 million, or 15.2%, during the 2021 period and its MLR increased 640 basis points, to 86.4%.  The higher MLR reflects a more normalized utilization of services compared to the low utilization experienced in the prior-year period due to the pandemic, improved benefits in the 2021 product offerings, COVID-19-related testing and treatment costs and the waiver of medical and payment policies. These increases were partially offset by favorable prior period reserve development in the 2021 period.

•
Claims incurred in the Commercial business increased by $67.8 million, or 23.4%, during 2021 and its MLR increased 1,290 basis points, to 85.9%. These increases primarily result from higher claim trends, a more normalized utilization of services compared to low utilization in the prior year due to the pandemic, COVID-19-related testing and treatment costs, the waiver of medical and payment policies and the elimination of the HIP fee pass-through in 2021. These increases were partially offset by the lower fully insured membership enrollment.

Medical Operating Expenses

Medical operating expenses decreased by $49.6 million, or 18.6%, to $217.6 million, primarily reflecting the accrual in prior year of a contingency reserve related to a legal proceeding and the elimination of the HIP fee in 2021 offset in part by an increase in personnel costs and professional fees. The operating expense ratio decreased 480 basis points to 11.8% in 2021.

37
Life Insurance Segment Operating Results

 Three months ended  Six months ended 
  June 30,  June 30, 
(dollar in millions) 2021  2020  2021  2020 
Operating revenues:            
Premiums earned, net:            
Premiums earned $56.9  $50.6  $112.1  $99.6 
Ceded premiums earned  (2.9)  (2.5)  (5.6)  (4.8)
Premiums earned, net  54.0   48.1   106.5   94.8 
Net investment income  6.7   6.8   13.1   13.7 
Total operating revenues  60.7   54.9   119.6   108.5 
Operating costs:                
Policy benefits and claims incurred  29.6   20.6   59.0   48.0 
Underwriting and other expenses  24.7   24.8   48.4   46.0 
Total operating costs  54.3   45.4   107.4   94.0 
Operating income $6.4  $9.5  $12.2  $14.5 
Additional data:                
Loss ratio  54.8%  42.8%  55.4%  50.6%
Operating expense ratio  45.7%  51.6%  45.4%  48.5%

Three Months Ended SeptemberJune 30, 20172021 Compared to NineThree Months Ended SeptemberJune 30, 20162020


Operating Revenues


Premiums earned, net increased by $4.6$5.9 million, or 3.9%12.3%, to $121.4$54.0 million, primarily as the result of premium growthhigher sales across all lines of business, particularly in the segment’s Individual Life and Cancer lines of business, as well asbusiness. Last year premium growth inslowed down during the Costa Rica operations.two-month COVID-19 government-enforced lockdown, which severely affected sales and increased policy cancellations.


Policy Benefits and Claims Incurred


Policy benefits and claims incurred increased by $2.9$9.0 million, or 4.4%43.7%, to $68.7$29.6 million, mostlyprimarily as the result of higher actuarial reserves, due to higher persistency during the period, and higher benefits paid driven by the lower volume of business during the year, particularlyclaim submissions in the Cancer and Individual Life lines of business.  Theprior year quarter following the government-enforced lockdown due to COVID-19 pandemic. As a result, the segment’s loss ratio for the period increased to 56.6% in 2017, or 301,200 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.54.8%.


Underwriting and Other Expenses


Increase in underwritingUnderwriting and other expenses of $3.0decreased $0.1 million, or 5.5%0.4%, to $57.8$24.7 million, mostly reflects while the segment’s operating expense ratio decreased 590 basis points, to 45.7%.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Operating Revenues

Premiums earned, net increased by $11.7 million, or 12.3%, to $106.5 million, primarily as the result of increased persistency and new sales across all lines of business, particularly in the Individual Life, Cancer and Group Life lines of business. In addition, during the second quarter of 2020, this segment acquired an insurance portfolio that contributed additional premiums in the Cancer and Group Life lines of business.

38
Policy Benefits and Claims Incurred

Policy benefits and claims incurred increased by $11.0 million, or 22.9%, to $59.0 million, primarily as the result of higher commissionsactuarial reserves, due to higher persistency during the period, and higher benefits paid driven by the lower volume of claim submissions in the prior year quarter following the segment’s premium growth mentioned above.  In addition, the segment has incurred in higher development and marketing expenses relatedgovernment-enforced lockdown due to the expansion of the Costa Rica operations.  COVID-19 pandemic. As a result, the segment’s loss ratio increased 480 basis points, to 55.4%.

Underwriting and Other Expenses

Underwriting and other expenses increased $2.4 million, or 5.2%, to $48.4 million, primarily reflecting an increase in commissions expense resulting from higher sales during the period, offset in part by lower amortization of deferred acquisition costs. The segment’s operating expense ratio increaseddecreased 310 basis points to 47.6%, or 70 basis points.45.4%.


39
Property and Casualty Insurance Operating Results


 
Three months ended
September 30,
  
Nine months ended
September 30,
  
Three months ended
June 30,
  
Six months ended
June 30,
 
(dollar amounts in millions) 2017  2016  2017  2016 
Operating revenues:            
(dollar in millions) 2021  2020  2021  2020 
Operating revenues            
Premiums earned, net:                        
Premiums written $31.0  $32.4  $104.8  $100.9  $41.2  $38.4  $77.8  $71.6 
Premiums ceded  (13.4)  (11.8)  (40.1)  (35.3)  (14.4)  (14.3)  (29.4)  (30.7)
Change in unearned premiums  2.3   1.4   (1.3)  (0.6)  (1.5)  (1.7)  2.2   2.1 
Premiums earned, net  19.9   22.0   63.4   65.0   25.3   22.4   50.6   43.0 
Net investment income  2.1   2.3   6.2   6.6   2.3   2.3   4.3   4.4 
Total operating revenues  22.0   24.3   69.6   71.6   27.6   24.7   54.9   47.4 
Operating costs:                
Operating costs   ��            
Claims incurred  22.0   9.4   43.5   30.0   11.6   6.5   21.1   17.4 
Underwriting and other expenses  11.1   10.9   31.3   32.1   14.0   11.5   28.0   23.5 
Total operating costs  33.1   20.3   74.8   62.1   25.6   18.0   49.1   40.9 
Operating (loss) income $(11.1) $4.0  $(5.2) $9.5 
Operating income $2.0  $6.7  $5.8  $6.5 
Additional data:                                
Loss ratio  110.6%  42.7%  68.6%  46.2%  45.8%  29.0%  41.7%  40.5%
Operating expense ratio  55.8%  49.5%  49.4%  49.4%  55.3%  51.3%  55.3%  54.7%


Three Months Ended SeptemberJune 30, 20172021 Compared to Three Months Ended SeptemberJune 30, 20162020


Operating Revenues


Total premiums written decreasedincreased by $1.4$2.8 million, or 4.3%7.3%, to $31.0$41.2 million, primarily driven by higher premiums in Personal Package, Commercial Auto and Commercial Property products, partially offset by a decrease in Commercial Package products.

Claims Incurred

Claims incurred increased by $5.1 million, or 78.5%, to $11.6 million, primarily resulting from lower sales of Commercial and Medical Malpractice products, mainlylosses in the 2020 period in the segment’s on-going business as a result of steep competitionthe two-month government-enforced lockdown because of the COVID-19 pandemic. As a result, the loss ratio increased 1,680 basis points, to 45.8% during this period.

Underwriting and Other Expenses

Underwriting and other operating expenses increased by $2.5 million, or 21.7%, to $14.0 million primarily due to higher net commission expense following the increase in net premiums earned. The net commission expense for the current market conditions.period is unfavorably impacted by a lower capitalization of deferred acquisition costs. The operating expense ratio was 55.3%, 400 basis points higher than prior year.


Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Operating Revenues

Total premiums written increased by $6.2 million, or 8.7%, to $77.8 million, primarily driven by higher premiums, particularly in Personal Package, Commercial Property, Commercial Auto and Commercial Liability products, partially offset by a decrease in Commercial Package products.

The premiums ceded to reinsurers increaseddecreased by $1.6$1.3 million, or 13.6%4.2%, mostly reflecting adjustments relatedprimarily due to $3.0 million of reinsurance reinstatement premiums in 2020 following the losses recorded after the earthquakes in the southwest region of Puerto Rico in January 2020, offset in part by an increase in the cost of catastrophe reinsurance including estimates for catastrophe reinsurance reinstatement costs for the rest of the year.protection.

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

47
40
Claims Incurred


Claims incurred increased by $12.6$3.7 million, or 134.0%21.3%, to $22.0$21.1 million duringprimarily resulting from lower losses in the three months ended September 30, 2017 driven2020 period because of the COVID-19 pandemic, offset in part by netthe recognition of $5.0 million of earthquake losses related to Hurricanes Irma and Maria, asafter the January 2020 events. As a result, the segment’s loss ratio increased by 6,790120 basis points, to 110.6%41.7% 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$4.5 million, or 1.8%19.1%, to $11.1$28.0 million, mostly due to lower profit commissions accrualsbecause of higher net commission expense following the losses causedincrease in net premiums earned. Current year net commission expense is affected by Hurricanes Irma and Maria during the three months ended September 30, 2017.  a lower capitalization of deferred acquisition costs. The operating expense ratio was 55.8%55.3%, 63060 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 theprior 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.
Liquidity and Capital Resources


Cash Flows


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


 
Nine months ended
September 30,
  
Six months ended
June 30,
 
(dollar amounts in millions) 2017  2016 
(dollar in millions) 2021  2020 
Sources (uses) of cash:            
Cash provided by operating activities $191.8  $83.0  $75.0  $170.3 
Net sales (purchases) of investment securities  2.8   (86.6)
Net purchases of investment securities  (64.3)  (105.6)
Net capital expenditures  (15.9)  (3.5)  (11.2)  (45.9)
Capital contribution on equity method investees  -   (4.9)
Proceeds from long-term borrowings  24.3   -   -   30.8 
Payments of long-term borrowings  (26.3)  (1.2)  (2.2)  (1.6)
Net change in short-term borrowings  15.0   (39.0)
Proceeds from policyholder deposits  12.1   12.5   9.5   16.4 
Surrender of policyholder deposits  (17.4)  (13.5)
Surrenders of policyholder deposits  (5.6)  (8.2)
Repurchase and retirement of common stock  (12.6)  (21.4)  -   (14.9)
Other  7.7   (1.6)  47.2   33.8 
Net increase (decrease) in cash and cash equivalents $166.5  $(32.3)
Net increase in cash and cash equivalents $63.4  $31.2 


Cash flow fromThe decrease of approximately $95.3 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, principallyis mostly due to lowerhigher claims paid in the Managed Care segments, offset in part by $64.0 million, a decrease inhigher premiums collections, and lower income taxes paid, and lower cash paid to suppliers and employeesemployees.

The net purchases of $73.0 million, and lower incomes tax paid by $5.6 million; offset by ainvestments in securities are part of our asset/liability management strategy.

The 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 technologycontribution reflects capital contributions made in the Managed Care segment.2020 period in exchange for a participation in equity method investees.


DuringThe net change in short-term borrowings represents advances of short-term facilities available to address timing differences between cash receipts and disbursements.

The fluctuation in other sources of cash reflects the nine months ended September 30, 2017, we received the remaining $24.3$13.2 million from a loan with a commercialchange in outstanding checks in excess of bank related with a credit agreement entered into 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.balances.


Stock Repurchase Program

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 ninethree months ended September 30, 2017,March 31, 2020, the Company repurchased and retired 539,034 shares of our Class B Common Stockunder 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 program was completed in 2020.

The fluctuation in the Other uses/sources 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 in the form 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.Long-Term Borrowings


On December 21, 2005, we issued and sold $60.0 million of our 6.6% senior unsecured notes originally due December 2020 (the 6.6% notes).  These unsecured notes were paid in full on January 11, 2017.

On December 28, 2016, TSM entered into ahas $35.5 million credit agreement (the Loan) with a commercial bank in Puerto Rico.  The agreement consists of three term loans: (i) Term Loan A in the principal amount of $11.2 million, (ii) Term Loan B in the principal amount of $20.2 million, and (iii) Term Loan C in the principal amount of $4.1 million.  Term Loan A matures in October 2023 while the Term Loans B and C mature in January 2024.  Term Loan A was used to refinance the previous $41.0 million secured loan payable with the same commercial bank in Puerto Rico.  Proceeds from Term Loans B and C were received on January 11, 2017 and were used to prepay the outstanding principal amount plus accrued interest of the 6.6% senior unsecured notes due December 2020 ($24.0 million).  Pursuant to the credit agreement, interest is payable on the outstanding balance of the Loan at the following annual rate: (i) 1%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 we areThe Company was in compliance with these covenants.covenants as of June 30, 2021.


On March 11, 2016 TSS entered into a $30.0 million revolving loanAs detailed above, the three term loans under our credit agreement with a commercial bank in Puerto Rico. This unused line of credit had anRico 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 2021. In response, the U.S. Federal Reserve convened the Alternative Reference Rates Committee (ARRC), a working group comprised of 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 the cost of borrowing overnight cash collateralized by U.S. Treasury securities. Currently, there is no definitive information regarding the future use of SOFR as a widely accepted benchmark or any other replacement rate.

If LIBOR plus 220 basis pointsrates are no longer available and includes certain financial and non-financial covenants thatwe have not agreed with the bank on a replacement rate, we are customary forsubject to an alternative benchmark rate, as defined in the credit agreement of our long-term bank loan.  At this typetime we cannot assess the impact, if any, on the interest paid on this loan. We are in regular contact with the lender about this subject, but at this point the bank has not yet determined a course of facility. This revolvingaction. Alternatively, the loan agreement matured on March 11, 2017, and was not renewed.could be refinanced by us without prepayment penalties.


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

On April 18, 2017, TSAJune 19, 2020, TSM entered into a $10.0$31.4 million revolving loan agreementCredit Agreement with a commercial bank in Puerto Rico. This lineThe proceeds were used by the Company to partially finance the acquisition of credita building. The Credit Agreement is guaranteed by a mortgage over the building, a pledge of all collateral related to the building and an assignment of the rents collected for the lease of office space in the building. Approximately 64.25% of the acquired building is currently leased to third parties. The Company is in the process of moving some of its offices currently leased to third parties to the new building and expects to fully occupy the new facilities together with the leased space. Pursuant to the Credit Agreement, interest is payable on the outstanding principal balance of the Loan at an annual rate equal to the Prime Rate. Monthly interest payments commenced on July 1, 2020 and will continue to be paid each month until the principal of the Loan has an interest ratebeen paid in full.

The Company may, at its option and at any time, upon notice as specified in the Credit Agreement, prepay prior to maturity, all, or any part of 30-day LIBOR plus 25 basis points,the Loan upon the payment of a penalty fee of the outstanding principal amount at the time of the prepayment of 3% during the first year, 2% during the second year, 1% during the third year and containsthereafter at par.

The Credit Agreement includes certain customary financial and non-financial covenants, that are customaryincluding negative covenants imposing certain restrictions on the Corporation’s business. The Company was in compliance with these covenants as of June 30, 2021.

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For further details, see Note 13, Borrowings, of the Notes to Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for this typethe year ended December 31, 2020.

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.  AsSee Note 8 of September 30, 2017, there is no outstanding balancethe unaudited condensed consolidated interim financial statements included in this lineQuarterly 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.
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, 2016.2020.  A discussion of our market risk is incorporated by reference to “ItemItem 7A. Quantitative and Qualitative Disclosures about Market Risk” ofRisk included in our Annual Report on Form 10-K for the year ended December 31, 2016.2020.


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,Management, under the supervision and with the participation of the chief executive officerPresident and chief financial officer,Chief Executive Officer and Executive Vice President 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,Management, including the chief executive officerPresident and chief financial officer,Chief Executive Officer and Executive Vice President 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.

Based on theirthis evaluation,, the Company’s chief executive officer our President and chief financial officerChief Executive Officer and Executive Vice President and Chief Financial Officer have concluded that as of SeptemberJune 30, 2017,2021, which is the end of the period covered by this Quarterly Report on Form 10-Q, the Company’sour disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) wereare 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 weaknessThere were no significant changes in the Company’sour disclosure controls and procedures, or in factors that could significantly affect internal control over financial reporting, relatedcontrols, subsequent to the review process ofdate 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 over 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.
During the third quarter of 2017, management designed, documentedPresident and implemented additional control proceduresChief Executive Officer 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,Executive Vice President 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 CompanyChief Financial 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 thanThe Company hired a new Chief Financial Officer, Victor J. Haddock-Morales, replacing Juan J. Román Jiménez, who retired. As the control procedures as described above, which were implemented to remediateCompany’s principal financial officer, Mr. Haddock-Morales, will oversee the material weakness, no changes in ourCompany’s internal control overcontrols and financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended September 30, 2017 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.moving forward.

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Part II – Other Information


Item 1.
Legal Proceedings


For a descriptionNone of the legal proceedings that have experienced significant developments during this quarter, see note 13 todisclosed in Note 25 of the unaudited condensed consolidated financial statements includedConsolidated Financial Statements in this quarterly reportthe Company’s 2020 Annual Report on Form 10-Q.10-K had a material development during the six months ended June 30, 2021.


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, 2016.2020.


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

On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Patient Protection and Affordable Care Act of 2010 as amended by the Health Care and Education Reconciliation Act of 2010 (ACA) to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Further, in January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of legislation that would repeal portions of the ACA. Following the passage of the Budget Resolution, on March 6, 2017, the U.S. House of Representatives introduced legislation known as the American Health Care Act (AHCA), which, if enacted, would amend or repeal significant portions of the ACA. Among other changes, the AHCA would sunset the annual insurance industry assessment as of December 31, 2017, essentially eliminate the individual and employer mandates by eliminating penalties and providing retroactive relief for failing to maintain or provide minimum essential coverage, and permit insurers to charge individuals a 30% surcharge on premiums for failing to demonstrate continuous coverage. The AHCA would also make significant changes to Medicaid by, among other things, making the ACA Medicaid expansion optional for states, repealing the ACA requirement that state Medicaid plans provide the same essential health benefits that are required by plans available through the exchanges, implementing a per capita cap on federal payments to states beginning in fiscal year 2020, and changing certain eligibility requirements.  On May 4, 2017, the U.S. House of Representatives approved the 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 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 applicable in Puerto Rico and that regulations implementing these changes have yet to be adopted, it is unclear at this time how the executive order or any regulations required to be promulgated thereunder would affect the Puerto Rico market.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds


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 
(Dollar amounts in millions, except per share data) 
Total Number
of Shares
Purchased (1)
  
Average
Price
Paid per
Share
  
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Programs
  
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the
Programs
 
             
April 1, 2021 to April 30, 2021  -  $-   -  $- 
May 1, 2021 to May 31, 2021  -   -   -   - 
June 1, 2021 to June 30, 2021  20,823   23.15   -   - 


¹(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 August 2017June 2021, 20,823 shares were repurchased and retired as the Company's Boardresult of Directors authorized a $30.0 million Share Repurchase Programnon-cash tax witholdings upon vesting of its Class B common stock.shares.


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


ExhibitsDescription
  
10.1*
11		Amendment to Extend ContractStatement re computation of per share earnings; an exhibit describing the computation of the earnings per share for the Provisionthree and six months ended June 30, 2021 and 2020 has been omitted as the detail necessary to determine the computation of Physical & Behavioral Health Services underearnings per share can be clearly determined from the Government Health Plan Program dated asmaterial 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.
31.1*
Certification of the President and Chief Executive Officer required by Rule 13a-14(a)/15d-14(a).
31.2*
Certification of the Executive Vice President and Chief Financial Officer required by Rule 13a-14(a)/15d-14(a).
32.1*
Certification of the President and Chief Executive Officer required pursuant to 18 U.S.C Section 1350.
32.2*
Certification of the Executive Vice President and Chief Financial Officer required pursuant to 18 U.S.C Section 1350.

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


** Filed herein.
+
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, 2017August 5, 2021 By:/s/ Roberto García-Rodríguez 
    Roberto García-Rodríguez
    President and Chief Executive Officer
     
Date:November 9, 2017August 5, 2021 By:/s/ JuanVictor J. Román-JiménezHaddock-Morales 
    JuanVictor J. Román-JiménezHaddock-Morales
    Executive Vice President and Chief Financial Officer



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