UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

AMENDMENT NO. 1

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from      to

Commission File Number: 0-49762

TRIPLE-S MANAGEMENT CORPORATION

(Exact name of registrant as specified in its charter)

Puerto Rico (State or other jurisdiction of incorporation or organization)	66-0555678 (I.R.S. Employer Identification No.)
1441 F.D. Roosevelt Avenue San Juan, Puerto Rico (Address of principal executive offices)	00920 (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)

     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   þ    No   o

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

Title of each class	Outstanding at June 30, 2002
Common Stock, $40.00 par value	9,611

TABLE OF CONTENTS

Part I — FINANCIAL INFORMATION
Item 1. Financial Statements
	Consolidated Balance Sheets
	Consolidated Statements of Operations (Unaudited)
	Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Unaudited)
	Consolidated Statements of Cash Flows (Unaudited)
	Notes to Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Part II — OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submissions of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES

TRIPLE-S MANAGEMENT CORPORATION

Quarterly Report on Form 10-Q/A for the Quarter Ended June 30, 2002
Table of Contents

		PAGE
PART I –	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of June 30, 2002 and December 31 2001		3
	Consolidated Statements of Operations for the three months and six months ended June 30, 2002 and 2001		4
	Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the three months and six months ended June 30, 2002 and 2001		5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		44
PART II –	OTHER INFORMATION
Item 1.	Legal Proceedings		43
Item 4.	Submissions of Matters to a Vote of Security Holders		43
Item 5.	Other Information		45
Item 6.	Exhibits and Reports on Form 8-K		46
SIGNATURES			47

2

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar amounts in thousands)

			(Unaudited)
			June 30,		December 31,
			2002		2001
ASSETS
Investments and cash:
	Securities held for trading, at fair value:
		Fixed maturities	$	36,329		38,107
		Equity securities		45,814		50,743
	Securities available for sale, at fair value:
		Fixed maturities		311,154		286,505
		Equity securities		40,301		37,829
	Securities held to maturity, at amortized cost:
		Fixed maturities		2,388		3,779
	Cash and cash equivalents			80,026		80,970
Total investments and cash				516,012		497,933
Premiums and other receivables, net				93,230		74,872
Deferred policy acquisition costs				11,480		9,550
Property and equipment, net				37,744		39,090
Other assets				31,602		34,613
Total assets			$	690,068		656,058
LIABILITIES AND STOCKHOLDERS’ EQUITY
Claim liabilities:
	Claims processed and incomplete, and future policy benefits		$	123,076		114,599
	Unreported losses			107,584		103,240
	Unpaid loss-adjustment expenses			12,825		11,601
Total claim liabilities				243,485		229,440
Unearned premiums				61,241		58,306
Individual retirement annuities				14,186		17,426
Liability to Federal Employees Health Benefits Program				7,781		12,130
Accounts payable and accrued liabilities				102,667		97,078
Loans payable to bank				53,717		55,650
Total liabilities				483,077		470,030
Stockholders’ equity:
	Common stock, $40 par value. Authorized 12,500 shares; issued and outstanding 9,611 and 9,714 at June 30, 2002 and December 31, 2001, respectively			384		389
	Additional paid-in capital			150,406		150,405
	Operating reserve			29,968		14,250
	Accumulated other comprehensive income – net unrealized gain on securities available for sale			26,233		20,984
Total stockholders’ equity				206,991		186,028
Total liabilities and stockholders’ equity			$	690,068		656,058

See accompanying notes to unaudited consolidated financial statements.

3

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
For the three months and six months ended June 30, 2002 and 2001
(Dollar amounts in thousands)

		Three months ended June 30,						Six months ended June 30,
		2002			2001			2002			2001
REVENUES:
	Premiums earned, net	$	308,478			275,902			618,320			554,366
	Amounts attributable to self-funded arrangements		37,427			33,034			72,265			66,337
	Less amounts attributable to claims under self-funded arrangements		(36,379	)		(30,821	)		(68,837	)		(63,008	)
			309,526			278,115			621,748			557,695
	Net investment income		6,359			6,362			12,349			12,560
	Net realized investment gains (losses)		6			1,571			(150	)		2,380
	Net unrealized investment gain (loss) on trading securities		(5,662	)		(838	)		(5,377	)		(3,124	)
	Other income, net		211			4,484			424			4,532
Total revenue			310,440			289,694			628,994			574,043
BENEFITS AND EXPENSES:
	Claims incurred		260,878			249,420			532,651			493,555
	Operating expenses, net of reimbursement for services		38,642			32,967			77,353			66,943
	Interest expense		872			1,435			1,991			3,047
Total benefits and expenses			300,392			283,822			611,995			563,545
Income before taxes			10,048			5,872			16,999			10,498
INCOME TAX EXPENSE:
	Current		318			203			517			491
	Deferred		463			114			764			286
Total income taxes			781			317			1,281			777
Net income		$	9,267			5,555			15,718			9,721
Basic net income per share as if the Company operated as a for-profit organization		$	0.79			0.40			1.37			0.73
Basic net income per share as if Triple-S, Inc. operated as a not-for-profit organization		$	0.30			0.27			0.59			0.54

See accompanying notes to unaudited consolidated financial statements.

4

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity and
Comprehensive Income (Unaudited)
For the three months
and six months ended June 30, 2002 and 2001
(Dollar amounts in thousands)

				2002			2001
BALANCE AT APRIL 1				$	189,547			170,679
Stock redemption					(1	)		—
	Comprehensive income:
		Net income			9,267			5,555
		Net unrealized change in investment securities			8,178			902
			Total comprehensive income		17,445			6,457
BALANCE AT JUNE 30				$	206,991			177,136
BALANCE AT JANUARY 1				$	186,028			159,693
Stock redemption					(4	)		1
	Comprehensive income:
		Net income			15,718			9,721
		Net unrealized change in investment securities			5,249			7,721
			Total comprehensive income		20,967			17,442
BALANCE AT JUNE 30				$	206,991			177,136

See accompanying notes to unaudited consolidated financial statements.

5

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
For the six months ended June 30, 2002 and 2001
(Dollar amounts in thousands)

			Six months ended June 30,
			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Premiums collected			$	600,770			538,515
Cash paid to suppliers and employees				(72,893	)		(63,821	)
Claims losses and benefits paid				(518,601	)		(495,396	)
Interest received				11,331			13,396
Proceeds from trading securities sold or matured:
	Fixed securities sold			76,122			12,609
	Equity securities			9,609			11,148
Acquisitions of investments in trading portfolio:
	Fixed maturities			(74,557	)		(14,979	)
	Equity securities			(10,137	)		(13,187	)
Interest paid				(1,320	)		(2,285	)
Expense reimbursement from Medicare				5,982			6,017
Contingency reserve funds from FEHBP				—			4,226
Net cash provided by (used in) operating activities				26,306			(3,757	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold or matured:
	Securities available for sale:
		Fixed maturities sold		15,597			626
		Fixed maturities matured		57,392			54,877
		Equity securities		2,642			3,104
	Securities held to maturity:
		Fixed maturities matured		1,433			—
Acquisitions of investments:
	Securities available for sale:
		Fixed maturities		(96,264	)		(70,733	)
	Capital expenditures			(3,250	)		(2,851	)
	Proceeds from sale of property and equipment			922			339
Net cash used in investing activities				(21,528	)		(14,638	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in outstanding checks in excess of bank balances				(151	)		7,491
Payments of long term debt				(1,933	)		(1,183	)
Redemption of common stocks				(4	)		1
Proceeds from individual retirement annuities				791			1,254
Surrenders of individual retirement annuities				(4,425	)		(2,153	)
Net cash provided by (used in) financing activities				(5,722	)		5,410
Net decrease in cash and cash equivalents				(944	)		(12,985	)
Cash and cash equivalents at beginning of the period				80,970			33,566
Cash and cash equivalents at end of the period			$	80,026			20,581

See accompanying notes to unaudited consolidated financial statements.

6

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

(1) Basis of Presentation

The accompanying consolidated interim financial statements prepared by Triple-S Management Corporation and its subsidiaries (the Corporation) are unaudited, except for the balance sheet information as of December 31, 2001, which is derived from the Corporation’s audited consolidated financial statements, pursuant to the rules and regulations of the United States Securities and Exchange Commission. Accordingly, the 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 for complete financial statements. These consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Corporation’s Form 10-A for the year ended December 31, 2001.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of such consolidated interim financial statements have been included. The results of operations for the six months ended June 30, 2002 are not necessarily indicative of the results for the full year.

Certain prior period amounts have been reclassified to conform to the current period presentation.

(2) Segment Information

The following tables summarize the operations by major operating segment for the three months and six months ended June 30, 2002 and 2001:

7

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

		Operating Segment
		Health			Health
		Insurance			Insurance			Property			Life and
		Commercial			Reform			and Casualty			Disability
		Program			Program			Insurance			Insurance			Other*		Total
THREE MONTHS ENDED JUNE 30, 2002
Premiums earned, net		$	167,296			123,079			14,364			3,845			—		308,584
Amounts attributable to self-funded arrangements			37,321			—			—			—			—		37,321
Less: Amounts attributable to claims under self-funded arrangements			(36,379	)		—			—			—			—		(36,379	)
Intersegment premiums earned/service revenues			684			—			—			—			12,691		13,375
			168,922			123,079			14,364			3,845			12,691		322,901
Net investment income			2,759			1,297			1,656			571			—		6,283
Realized gain (loss) on sale of securities			113			(170	)		71			(8	)		—		6
Unrealized loss on trading securities			(4,442	)		(387	)		(833	)		—			—		(5,662	)
Other			62			(8	)		30			29			—		113
	Total revenues	$	167,414			123,811			15,288			4,437			12,691		323,641
Underwriting income (loss)		$	8,612			(1,097	)		936			1,249			354		10,054
Net income (loss)		$	6,898			(555	)		1,411			1,523			207		9,484
Claims incurred		$	137,558			113,711			8,287			1,322			—		260,878
Operating expenses		$	22,752			10,465			5,141			1,274			12,337		51,969
Depreciation expense, included in operating expenses		$	1,739			—			117			14			—		1,870
Interest expense		$	206			190			—			173			—		569
Income taxes		$	—			—			449			145			147		741

8

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

		Operating Segment
		Health			Health
		Insurance			Insurance			Property			Life and
		Commercial			Reform			and Casualty			Disability
		Program			Program			Insurance			Insurance		Other*		Total
THREE MONTHS ENDED JUNE 30, 2001
Premiums earned, net		$	151,403			109,026			12,050			3,266		—		275,745
Amounts attributable to self-funded arrangements			33,191			—			—			—		—		33,191
Less: Amounts attributable to claims under self-funded arrangements			(30,821	)		—			—			—		—		(30,821	)
Intersegment premiums earned/service revenues			212			—			—			—		2,261		2,473
			153,985			109,026			12,050			3,266		2,261		280,588
Net investment income			2,650			1,156			1,842			620		—		6,268
Realized gain (loss) on sale of securities			1,654			(50	)		(33	)		—		—		1,571
Unrealized gain (loss)on trading securities			(1,200	)		(23	)		385			—		—		(838	)
Other			4,327			(13	)		46			9		—		4,369
	Total revenues	$	161,416			110,096			14,290			3,895		2,261		291,958
Underwriting income (loss)		$	(4,875	)		(25	)		(328	)		752		103		(4,373	)
Net income		$	2,155			692			1,687			1,052		79		5,665
Claims incurred		$	138,393			101,501			8,052			1,474		—		249,420
Operating expenses		$	20,467			7,550			4,326			1,040		2,158		35,541
Depreciation expense, included in operating expenses		$	985			—			109			15		—		1,109
Interest expense		$	400			354			—			239		—		993
Income taxes		$	—			—			225			90		24		339

9

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

		Operating Segment
		Health			Health
		Insurance			Insurance			Property			Life and
		Commercial			Reform			and Casualty			Disability
		Program			Program			Insurance			Insurance		Other*		Total
SIX MONTHS ENDED JUNE 30, 2002
Premiums earned, net		$	332,294			247,526			30,452			7,658		—		617,930
Amounts attributable to self-funded arrangements			72,655			—			—			—		—		72,655
Less: Amounts attributable to claims under self-funded arrangements			(68,837	)		—			—			—		—		(68,837	)
Intersegment premiums earned/service revenues			1,352			—			—			—		24,165		25,517
			337,464			247,526			30,452			7,658		24,165		647,265
Net investment income			5,317			2,485			3,234			1,161		—		12,197
Realized gain (loss) on sale of securities			(61	)		(167	)		16			62		—		(150	)
Unrealized loss on trading securities			(4,056	)		(653	)		(668	)		—		—		(5,377	)
Other			97			(22	)		100			53		—		228
	Total revenues	$	338,761			249,169			33,134			8,934		24,165		654,163
Underwriting income (loss)		$	9,547			(1,633	)		1,097			1,602		770		11,383
Net income		$	10,425			(407	)		3,143			2,287		475		15,923
Claims incurred		$	283,362			229,695			16,088			3,506		—		532,651
Operating expenses		$	44,555			19,464			13,267			2,550		23,395		103,231
Depreciation expense, included in operating expenses		$	2,830			—			240			27		—		3,097
Interest expense		$	419			417			—			395		—		1,231
Income taxes		$	—			—			636			196		295		1,127

10

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

		Operating Segment
		Health			Health
		Insurance			Insurance			Life and
		Commercial			Reform			and Casualty			Disability
		Program			Program			Insurance			Insurance		Other*		Total
SIX MONTHS ENDED JUNE 30, 2001
Premiums earned, net		$	303,449			217,604			27,058			5,941		—		554,052
Amounts attributable to self-funded arrangements			66,651			—			—			—		—		66,651
Less: Amounts attributable to claims under self-funded arrangements			(63,008	)		—			—			—		—		(63,008	)
Intersegment premiums earned/service revenues			423			—			—			—		4,560		4,983
			307,515			217,604			27,058			5,941		4,560		562,678
Net investment income			5,197			2,281			3,648			1,242		—		12,368
Realized gain on sale of securities			2,217			90			38			30		—		2,375
Unrealized loss on trading securities			(2,372	)		(307	)		(445	)		—		—		(3,124	)
Other			4,245			(41	)		115			17		—		4,336
	Total revenues	$	316,802			219,627			30,414			7,230		4,560		578,633
Underwriting income (loss)		$	(6,389	)		1,011			396			1,064		357		(3,561	)
Net income		$	2,036			2,330			3,302			1,733		252		9,653
Claims incurred		$	273,157			201,695			15,880			2,823		—		493,555
Operating expenses		$	40,747			14,898			10,782			2,054		4,203		72,684
Depreciation expense, included in operating expenses		$	2,016			—			217			29		—		2,262
Interest expense		$	863			703			—			482		—		2,048
Income taxes		$	—			—			450			138		105		693

11

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

Balance Sheet Items

	Operating Segment
	Health		Health
	Insurance		Insurance		Property		Life and
	Commercial		Reform		and Casualty		Disability
	Program		Program		Insurance		Insurance		Other*		Total
AS OF JUNE 30, 2002
Segment assets	$	318,087		102,555		187,817		51,081		941		660,481
Significant noncash item — net change in unrealized gain on securities available for sale	$	3,721		376		447		422		—		4,966
AS OF DECEMBER 31, 2001
Segment assets	$	287,893		105,319		179,184		50,410		515		623,321
Significant noncash item — net change in unrealized gain on securities available for sale	$	1,036		1,368		1,091		990		—		4,485

12

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS

		Three months ended June 30,						Six months ended June 30,
		2002			2001			2002			2001
TOTAL REVENUES
Total revenues for reportable segments		$	310,950			289,697			629,998			574,073
Total revenues for other segments			12,691			2,261			24,165			4,560
			323,641			291,958			654,163			578,633
Elimination of intersegment earned premiums			(684	)		(212	)		(1,352	)		(423	)
Elimination of intersegment service revenues			(12,691	)		(2,261	)		(24,165	)		(4,560	)
Unallocated amount — revenues from external sources			174			209			348			393
			(13,201	)		(2,264	)		(25,169	)		(4,590	)
	Consolidated total revenues	$	310,440			289,694			628,994			574,043
PROFIT AND LOSS
UNDERWRITING INCOME
Underwriting income (loss) for reportable segments		$	9,700			(4,476	)		10,613			(3,918	)
Underwriting income for other segments			354			103			770			357
			10,054			(4,373	)		11,383			(3,561	)
Elimination of TSM charge — rent expense			1,546			1,546			3,092			3,092
TSM general and administrative expenses			(1,594	)		(1,445	)		(2,731	)		(2,334	)
			(48	)		101			361			758
	Consolidated underwriting income (loss)	$	10,006			(4,272	)		11,744			(2,803	)
NET INCOME (LOSS)
Net income for reportable segments		$	9,277			5,586			15,448			9,401
Net income for other segments			207			79			475			252
			9,484			5,665			15,923			9,653
Elimination of TSM charges:
	Rent expense		1,546			1,546			3,092			3,092
	Interest expense		206			400			419			863
			1,752			1,946			3,511			3,955
Unallocated amounts related to TSM:
	General and administrative expenses		(1,594	)		(1,445	)		(2,731	)		(2,334	)
	Interest expense		(509	)		(842	)		(1,179	)		(1,862	)
	Other revenues (expenses) from external sources		134			231			194			309
			(1,969	)		(2,056	)		(3,716	)		(3,887	)
	Consolidated net income (loss)	$	9,267			5,555			15,718			9,721

13

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS
OTHER SIGNIFICANT ITEMS

	Three months ended June 30, 2002
	Segment					Consolidated
	Totals		Adjustments*			Totals
Claims incurred	$	260,878		—			260,878
Operating expenses		51,969		(13,327	)		38,642
Depreciation expense		1,870		291			2,161
Interest expense		569		303			872
Income taxes		741		40			781

	Three months ended June 30, 2001
	Segment					Consolidated
	Totals		Adjustments*			Totals
Claims incurred	$	249,420		—			249,420
Operating expenses		35,541		(2,574	)		32,967
Depreciation expense		1,109		336			1,445
Interest expense		993		442			1,435
Income taxes		339		(22	)		317

*     Adjustments represent TSM operations and the elimination of intersegment charges.

14

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS

	Six months ended June 30, 2002
	Segment					Consolidated
	Totals		Adjustments*			Totals
Claims incurred	$	532,651		—			532,651
Operating expenses		103,231		(25,878	)		77,353
Depreciation expense		3,097		576			3,673
Interest expense		1,231		760			1,991
Income taxes		1,127		154			1,281

	Six months ended June 30, 2001
	Segment					Consolidated
	Totals		Adjustments*			Totals
Claims incurred	$	493,555		—			493,555
Operating expenses		72,684		(5,741	)		66,943
Depreciation expense		2,262		672			2,934
Interest expense		2,048		999			3,047
Income taxes		693		84			777

*     Adjustments represent TSM operations and the elimination of intersegment charges.

15

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS

		June 30,			December 31,
		2002			2001
ASSETS
Total assets for reportable segments		$	659,540			622,806
Total assets for other segments			941			515
			660,481			623,321
Elimination entries — intersegment receivables			(8,835	)		(5,677	)
Unallocated amounts:
	Parent cash, cash equivalents and investments		8,681			7,909
	Parent net property and equipment		29,498			30,018
	Parent other assets		243			487
			38,422			38,414
	Consolidated assets	$	690,068			656,058

OTHER SIGNIFICANT ITEMS

	As of June 30, 2002
	Segment				Consolidated
	Totals		Adjustments*		Totals
Significant noncash item — net change in unrealized gain on securities available for sale	$	4,966		253		5,249

	As of December 31, 2001
	Segment				Consolidated
	Totals		Adjustments*		Totals
Significant noncash item — net change in unrealized gain on securities available for sale	$	4,485		139		4,624

*     Adjustments represent TSM operations and the elimination of intersegment charges.

16

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

(3) Investment in Securities

The Corporation’s investment at June 30, 2002 and December 31, 2001, consist of the following:

		(Unaudited) June 30,		December 31,
		2002		2001
Trading securities, at fair value		$	82,143		88,850
Available for sale, at fair value			351,455		324,334
Held to maturity, at amortized cost			2,388		3,779
	Total premiums and other receivables	$	435,986		416,963

The amortized cost for debt securities and equity securities, gross unrealized gain, gross unrealized losses, and estimated fair value for trading, available for sale and held to maturity securities by major security type and class of security at June 30, 2002 and December 31, 2001, were as follows:

		June 30, 2002 (Unaudited)
				Gross		Gross
		Amortized		unrealized		unrealized			Estimated
		cost		gains		losses			fair value
Trading securities:
	Fixed maturities	$	35,452		900		(23	)		36,329
	Equity securities		48,154		4,580		(6,920	)		45,814
		$	83,606		5,480		(6,943	)		82,143

		June 30, 2002 (Unaudited)
				Gross		Gross
		Amortized		unrealized		unrealized			Estimated
		cost		gains		losses			fair value
Securities available for sale:
	Fixed maturities	$	306,148		5,191		(185	)		311,154
	Equity securities		18,210		22,213		(122	)		40,301
		$	324,358		27,404		(307	)		351,455

17

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

		June 30, 2002 (Unaudited)
				Gross		Gross
		Amortized		unrealized		unrealized			Estimated
		cost		gains		losses			fair value
Securities held to maturity:
	Fixed maturities	$	2,388		—		(50	)		2,338

		December 31, 2001
				Gross		Gross
		Amortized		unrealized		unrealized			Estimated
		cost		gains		losses			fair value
Trading securities:
	Fixed maturities	$	37,313		1,118		(324	)		38,107
	Equity securities		47,623		7,299		(4,179	)		50,743
		$	84,936		8,417		(4,503	)		88,850

		December 31, 2001
				Gross		Gross
		Amortized		unrealized		unrealized			Estimated
		cost		gains		losses			fair value
Securities available for sale:
	Fixed maturities	$	281,833		5,295		(623	)		286,505
	Equity securities		20,857		17,423		(451	)		37,829
		$	302,690		22,718		(1,074	)		324,334

		December 31, 2001
				Gross		Gross
		Amortized		unrealized		unrealized			Estimated
		cost		gains		losses			fair value
Securities held to maturity:
	Fixed maturities	$	3,779		32		(88	)		3,723

Investment in securities at June 30, 2002 are mostly comprised of U.S. Treasury securities and obligations of U.S. government instrumentalities (52.4%), mortgage backed and collateralized mortgage obligations that are U.S. agency-backed (11.5%), obligations of the government of Puerto Rico and its instrumentalities (4.7%) and

18

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

obligations of states and political subdivisions (1.6%). The remaining 29.8% of the investment portfolio is comprised of corporate debt and equity securities.

The Corporation regularly monitors the difference between the costs and estimated fair value of their investments. If a decline in the market value of any available for sale or held to maturity security below cost is deemed to be other than temporary, the carrying amount will be reduced to fair value. If investments experience a decline in value that is deemed to be other than temporary, the security is written down to fair value with a charge to operations and new cost basis for the security is established. No impairment has been noted nor recognized by the Corporation during the three months and six months ended June 30, 2002 and 2001.

(4) Premiums and Other Receivables

Premiums and other receivables as of June 30, 2002 and December 31, 2001 were as follows:

			(Unaudited)
			June 30		December 31,
(dollar amounts in thousands)			2002		2001
Premiums			$	50,825		40,373
Self-funded group receivables				13,385		11,241
FEHBP				10,983		5,379
Accrued interest				4,912		4,833
Reinsurance recoverable on paid losses				14,735		13,371
Other				10,978		11,353
				105,818		86,550
	Less allowance for doubtful receivables			12,588		11,678
		Total premiums and other receivables	$	93,230		74,872

(5) Claim Liabilities

The activity in the total claim liabilities for the three months ended June 30, 2002 and 2001 is as follows:

19

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

			(Unaudited)
			Three months ended June 30,
(dollar amounts in thousands)			2002			2001
Claim liabilities at beginning of the period			$	251,700			184,895
Reinsurance recoverable on claim liabilities				(11,749	)		(10,087	)
		Net claim liabilities at beginning of the period		239,951			174,808
Incurred claims and loss adjustment expenses:
	Current period insured events			258,309			248,597
	Prior period insured events			2,569			823
		Total		260,878			249,420
Payments of losses and loss adjustment expenses:
	Current period insured events			248,766			230,619
	Prior period insured events			19,928			20,434
		Total		268,694			251,053
		Net claim liabilities at end of the period		232,135			173,175
Reinsurance recoverable on claim liabilities				11,350			10,256
Claim liabilities at end of the period			$	243,485			183,431

20

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

The activity in the total claim liabilities for the six months ended June 30, 2002 and 2001 is as follows:

			(Unaudited)
			Six months ended June 30,
(dollar amounts in thousands)			2002			2001
Claim liabilities at beginning of the period			$	229,440			183,231
Reinsurance recoverable on claim liabilities				(10,062	)		(7,636	)
		Net claim liabilities at beginning of the period		219,378			175,595
Incurred claims and loss adjustment expenses:
	Current period insured events			536,325			496,364
	Prior period insured events			(3,674	)		(2,809	)
		Total		532,651			493,555
Payments of losses and loss adjustment expenses:
	Current period insured events			403,151			367,855
	Prior period insured events			116,743			128,120
		Total		519,894			495,975
		Net claim liabilities at end of the period		232,135			173,175
Reinsurance recoverable on claim liabilities				11,350			10,256
Claim liabilities at end of the period			$	243,485			183,431

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

The Corporation presents only basic earnings per share, which amount consists of the net income (loss) that could be available to common stockholders divided by the weighted-average number of common shares outstanding for the period.

The Corporation is a for-profit organization that operates as a not-for-profit organization by virtue of a resolution approved by a majority of the stockholders of the Corporation. As a result, the Corporation does not declare or distribute dividends. This resolution could be amended anytime by the affirmative vote of a majority of the stockholders and thus, dividends could be available for distribution subject to the applicable obligations and responsibilities under the General Corporation Law of Puerto Rico or any contract to which the Corporation is a party.

21

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

In the event that the stockholders of the Corporation decide to operate the Corporation as a for-profit organization and the Board of Directors of the Corporation decides to declare and distribute dividends, the amount of net income (loss) that could be available for distribution would exclude Triple-S, Inc.’s (TSI) net income, due to TSI’s tax-exempt status. TSI’s tax-exempt status was obtained through an income tax ruling issued by the Treasury Department of Puerto Rico and reaffirmed through a letter dated July 3, 2001. For purposes of computing the basic earnings per share presented in the consolidated statement of operations, the Corporation considers the operations of TSI as if TSI operated without the income tax exemption. Under this scenario, in order to determine the net income (loss) that could be available to stockholders, the Corporation estimates the Puerto Rico income taxes that would have otherwise resulted from TSI’s operations and deducts such amount from the results of operations of each period. TSI’s estimate of Puerto Rico income taxes, computed for such purposes, was determined as for an other than life insurance entity, as such term is defined in the Puerto Rico Internal Revenue Code of 1994, as amended. The effective tax rate used was 39% for the three months and six months ended June 30, 2002 and 2001.

The following tables set forth the net income that could be available to stockholders if TSI operated without the tax exemption for the three months and six months ended June 30, 2002 and 2001 (dollar amounts in thousands).

		Three months ended March 30,
		(Unaudited)
		Three months ended June 30,
		2002		2001
Net income for the period		$	9,267		5,555
Less tax effect on TSI operations			1,617		1,620
	Net income available to stockholders	$	7,650		3,935

		(Unaudited)
		Six months ended June 30,
		2002		2001
Net income for the period		$	15,718		9,721
Less tax effect on TSI operations			2,493		2,488
	Net income available to stockholders	$	13,225		7,233

22

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

The following tables set forth the computation of basic earnings per share for the three months and six months ended June 30, 2002 and 2001 (dollar amounts in thousands, except for outstanding shares).

		Three months ended March 31,
		(Unaudited)
		Three months ended June 30,
		2002		2001
Numerator for basic earnings per share:
	Net income available to stockholders	$	7,650		3,935
Denominator for basic earnings per share:
	Weighted average of outstanding common shares		9,626		9,886
Basic net income per share		$	0.79		0.40

		Three months ended March 31,
		(Unaudited)
		Six months ended June 30,
		2002		2001
Numerator for basic earnings per share:
	Net income available to stockholders	$	13,225		7,233
Denominator for basic earnings per share:
	Weighted average of outstanding common shares		9,650		9,886
Basic net income per share		$	1.37		0.73

Should the Corporation decide to preserve the tax exemption granted to TSI, then dividends cannot be declared or distributed from the earnings and profits generated from TSI’s operations. The following tables set forth the resulting net income that would otherwise be available for distribution after excluding the net result of operations of TSI for the three months and six months ended June 30, 2002 and 2001 (dollar amounts in thousands).

23

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2002
(Dollar amounts in thousands)

(Unaudited)

		Three months ended March 31,
		(Unaudited)
		Three months ended June 30,
		2002		2001
Net income for the period		$	9,267		5,555
Less TSI operations			6,343		2,842
	Net income available to stockholders	$	2,924		2,713

		(Unaudited)
		Six months ended June 30,
		2002		2001
Net income for the period		$	15,718		9,721
Less TSI operations			10,018		4,365
	Net income available to stockholders	$	5,700		5,356

The following tables set forth the computation of basic net income per share for the three months and six months June 30, 2002 and 2001 if the Corporation excludes TSI’s results of operations (dollar amounts in thousands, except for outstanding shares):

		Three months ended March 31,
		(Unaudited)
		Three months ended June 30,
		2002		2001
Numerator for basic earnings per share:
	Net income available to stockholders	$	2,924		2,713
Denominator for basic earnings per share:
	Weighted average of outstanding common shares		9,626		9,886
Basic net income per share		$	0.30		0.27

		(Unaudited)
		Six months ended June 30,
		2002		2001
Numerator for basic earnings per share:
	Net income available to stockholders	$	5,700		5,356
Denominator for basic earnings per share:
	Weighted average of outstanding common shares		9,650		9,886
Basic net income per share		$	0.59		0.54

24

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

The Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-Q/A is intended to update the reader on matters affecting the financial condition and results of operations of Triple-S Management Corporation (TSM) and its subsidiaries (the Corporation) for the period from January 1, 2002 to June 30, 2002. Therefore, the following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in the Form 10-A filed with the United States Securities and Exchange Commission as of and for the year ended December 31, 2001.

Cautionary Statement Regarding Forward-Looking Information

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

Structure of the Organization

TSM is incorporated under the laws of the Commonwealth of Puerto Rico. It is the holding company of several entities, through which it offers a wide range of insurance products and services. These products and services are offered through the following TSM’s subsidiaries:

• TSI, a health insurance company serving two major segments: the Commercial Program and the Commonwealth of Puerto Rico Healthcare Reform Program (the Healthcare Reform) of the Commonwealth of Puerto Rico.

25

• Seguros Triple-S, Inc. (STS), a property and casualty insurance company.

• Seguros de Vida Triple-S, Inc. (SVTS), a life and disability insurance and annuity products company.

In addition to the insurance subsidiaries mentioned above, TSM has the following subsidiaries: Interactive Systems, Inc. (ISI) and Triple-C, Inc. (TCI). ISI provides data processing services to Triple-S Management Corporation and its subsidiaries (the Corporation). Effective October 1, 2001, TCI was activated and commenced operations as part of a strategic positioning in the health industry to take advantage of new market opportunities. It is currently engaged as the third-party administrator in the administration of the Healthcare Reform business. The Healthcare Reform business was administered through a division of TSI until September 30, 2001. It also provides healthcare advisory services and other health-related services to TSI.

TSM is organized as a for-profit organization that operates as a not-for-profit organization by virtue of a resolution approved by a majority of the stockholders of the Corporation. As a result, TSM does not declare or distribute dividends. This resolution could be amended anytime by the affirmative vote of a majority of the stockholders and thus, dividends could be available for distribution, subject to the applicable obligations and responsibilities under the General Corporations Law of Puerto Rico or any contract to which the Corporation is a party.

In the event the stockholders of the Corporation decide to operate the Corporation as a for-profit organization and the Board of Directors of the Corporation decides to declare and distribute dividends, the amount of net income (loss) that could be available for distribution would exclude TSI’s net income due, to TSI’s tax exempt status. TSI’s tax-exempt status was obtained through an income tax ruling issued by the Treasury Department of Puerto Rico and reaffirmed through a letter dated July 3, 2001. As a result of the above conditions, the portion of the consolidated net income (loss) disclosed in the consolidated financial statements and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form, corresponding to the Health Insurance – Commercial and the Health Insurance – Healthcare Reform segments, is not available for distribution to shareholders.

Recent Developments

In 1994, the Commonwealth of Puerto Rico (the “Commonwealth”) privatized the delivery of services to the medically indigent population in Puerto Rico, by contracting with private health insurance companies instead of providing health services directly to such population. The Commonwealth originally divided the Island into ten geographical areas. Each geographical area was awarded to a health insurer doing business in Puerto Rico through a competitive process requesting proposals from the industry. Prior to June 30, 2002, TSI’s Healthcare Reform segment provided coverage to beneficiaries in the following geographical areas: North, Northwest, Metro-North and Southwest (awarded to TSI effective October 1, 2001). These four areas had a total enrollment of

26

approximately 753,000 beneficiaries, which represented approximately 40.4% of the total eligible beneficiaries of the population.

All Healthcare Reform contracts expired on June 30, 2002. After the expiration of these contracts, the Commonwealth redistributed the geographical areas, merging two of the existing areas with the remaining ones, thus reducing geographical areas to eight. As a result of the reorganization of the geographical areas, the Northwest area (previously administered by TSI) was merged into the West area. In addition, and as a result of the same reorganization, six new municipalities were merged into areas administered by TSI. TSI participated in the bidding process and submitted proposals to renew each of the existing contracts and also to serve additional geographical areas. Commencing on July 1, 2002, TSI was awarded three of the eight geographical areas: North, Metro-North and Southwest. The three areas granted to TSI are expected to have a total enrollment of 688,000 qualified members, which represent approximately 39.2% of the total eligible beneficiaries. The expected enrollment is approximately 5.7% less than the average enrollment as of June 30, 2002. The decrease in enrollment was not significant and premium rates were increased by approximately 6.3%. All Healthcare Reform contracts were negotiated for a term of three years; premium rates, however, are negotiated annually. As of July 1, 2002, three local insurance companies are participating in the Healthcare Reform: TSI, Humana and Medical Card Systems.

Effective January 2002, the Office of the Commissioner of Insurance of Puerto Rico suspended filing requirements of premium rates for certain classes, subdivisions or combinations of insurance in order to promote the economic activity in the insurance industry in Puerto Rico. The classes, subdivisions or combinations of insurance covered by this deregulation are related to commercial property and liability risks.

Smart Solutions Insurance Agency, a wholly-owned subsidiary of SVTS, began operations effective July 2002. This insurance agency was created to distribute the individual insurance products that are to be offered by the life and disability insurance segment.

Adoption of Accounting Standard

Effective January 1, 2002, the Corporation adopted the Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. The adoption of this standard did not have a material impact on the Corporation’s financial position or results of operations.

General Information

Substantially all of the revenues of the Corporation are generated from premiums earned and investment income. Claims incurred include the payment of benefits and losses, mostly to physicians, hospitals and other service providers, and to policyholders. A

27

portion of the claims incurred for each period consists of a management and actuarial estimate of claims incurred but not reported to the segment during the period. Each segment’s results of operations depend largely on their ability to accurately predict and effectively manage these claims. Administrative expenses comprise general, selling, commissions, depreciation and payroll and payroll related expenses.

The Corporation (on a consolidated basis and for each reportable segment), along with most insurance entities, uses the loss ratio, the expense ratio and the combined ratio as measures of performance. The loss ratio is the claims incurred divided by the premiums earned, net and fee revenue. The expense ratio is the operating expenses divided by the premiums earned, net and fee revenue. The combined ratio is the sum of the loss ratio and the expense ratio. These ratios are relative measurements that describe, for every $100 of premiums earned, net and fee revenue, the costs of claims and operating expenses. The combined ratio represents the total cost per $100 of premium production. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting loss.

28

Consolidated Operating Results

The analysis in this section provides an overall view of the consolidated statements of operations and key financial information. 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						Six months
			ended June 30,						ended June 30,
(dollar amounts in thousands)			2002			2001			2002			2001
Consolidated earned premiums, net and fee revenue:
		Health Insurance — Commercial Program	$	168,238			153,773			336,112			307,092
		Health Insurance — Healthcare Reform		123,079			109,026			247,526			217,604
		Property and casualty		14,364			12,050			30,452			27,058
		Life and disability		3,845			3,266			7,658			5,941
				309,526			278,115			621,748			557,695
Consolidated claims incurred			$	260,878			249,420			532,651			493,555
Consolidated operating expenses				38,642			32,967			77,353			66,943
	Consolidated operating costs		$	299,520			282,387			610,004			560,498
Consolidated loss ratio				84.3	%		89.7	%		85.7	%		88.5	%
Consolidated expense ratio				12.5	%		11.9	%		12.4	%		12.0	%
	Consolidated combined ratio			96.8	%		101.5	%		98.1	%		100.5	%
Net investment income			$	6,359			6,362			12,349			12,560
Realized gain (loss) on sale of securities				6			1,571			(150	)		2,380
Unrealized gain (loss) on trading securities				(5,662	)		(838	)		(5,377	)		(3,124	)
	Total consolidated net investment income		$	703			7,095			6,822			11,816
Income tax expense:
		Current	$	318			203			517			491
		Deferred		463			114			764			286
	Total consolidated income tax expense		$	781			317			1,281			777
Consolidated net income (loss) per segment:
		Health Insurance — Commercial Program	$	6,898			2,155			10,425			2,036
		Health Insurance — Healthcare Reform		(555	)		692			(407	)		2,330
		Property and casualty		1,411			1,687			3,143			3,302
		Life and disability		1,523			1,052			2,287			1,733
		Other		(10	)		(31	)		270			320
	Consolidated net income		$	9,267			5,555			15,718			9,721

29

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Consolidated earned premiums, net and fee revenue for the three months ended June 30, 2002 increased by $31.4 million or 11.3% when compared to the consolidated earned premiums, net and fee revenue for the same period of last year. This increase is mostly due to a combined increase of $28.5 million in the earned premiums, net and fee revenue of the Health Insurance – Commercial Program and Health Insurance – Healthcare Reform segments.

• The earned premiums, net and fee revenue corresponding to the Health Insurance – Commercial segment increased by $14.5 million or 9.4% during this period. This increase in premiums for this segment is attributed to the combined effect of increased premium rates and a net increase in total enrollment.

• The earned premiums corresponding to the Health Insurance – Healthcare Reform segment increased by $14.0 million or 12.9% during this period. This increase is the result of increases in membership during the period and a decrease in premium rates due to the exclusion of mental health and substance abuse benefits from the coverage of the Healthcare Reform insurance policy effective October 1, 2001.

• The earned premiums of the remaining segments increased by $2.9 million or 18.9% during this period.

Consolidated claims incurred for the three months ended June 30, 2002 reflect an increase of $11.5 million, or 4.6%, when compared to the claims incurred for the three months ended June 30, 2001. The increase in the consolidated claims incurred is directly related to the Corporation’s increased volume of business. The consolidated loss ratio reflects a decrease of 5.4 percentage points during this period. The decrease in the loss ratio is the result of management’s ability to adjust its pricing strategy to cope with the increase in claims costs and the implementation of several measures for cost containment. The consolidated expense ratio for the three months ended June 30, 2002 has remained similar to the consolidated expense ratio for the same period of the prior year, reflecting an increase of 0.6 percentage points.

The consolidated realized gain on sale of securities of $6 thousand for the three months ended June 30, 2002 is the result of the sound and timely management of the investment portfolio in accordance with corporate investment policies, and from the normal portfolio turnover of the trading and available-for-sale securities. During the three months ended June 30, 2001, the Corporation had a consolidated realized gain of $1.6 million, which was mainly due to the sale of common stocks of Popular Inc. that generated a realized gain of approximately $1.3 million.

The consolidated unrealized loss on trading securities of $5.7 million and $838 thousand for the three months ended June 30, 2002 and 2001, respectively, was the result of investments held by the Health Insurance – Commercial Program, Health Insurance – Healthcare Reform and the Property and Casualty Insurance segments. This unrealized

30

loss is mostly attributed to unrealized losses in the portfolios held by such segments in equity holdings that replicate the performance of the Standard & Poors 500 Index (S&P 500 Index). The Corporation experienced higher consolidated unrealized loss during the three months ended June 30, 2002 than during the three months ended June 30, 2001. This is due to the fact that the S&P 500 Index had a better performance during the second quarter of 2001 than during the second quarter of 2002. The S&P 500 Index experienced a decrease of 13.7% at the end of the second quarter of 2002, while it experienced an increase of 5.5% during at the end of the second quarter of 2001.

Total consolidated income tax expense for the three months ended June 30, 2002 increased by $464 thousand when compared to consolidated income tax expense for the same period of last year. This increase is mostly due to the following:

• Increase in the deferred income tax expense of $349 thousand during this period. This increase is mostly due to the increase in the deferred income tax expense of the Property and Casualty Insurance segment of $330 thousand during this period. The increase in the deferred income tax expense in the Property and Casualty Insurance segment is due to the increase in the segment’s deferred policy acquisition costs and the contributions to the catastrophe loss reserve trust fund.

• Increase in the current income tax expense of $115 thousand during this period. This increase is mostly due to better results of operations of the Corporation’s taxable entities and to the fact that in the year 2002, the Corporation has a new subsidiary, TCI, which is a taxable entity. Total income tax expense for TCI for the three months ended June 30, 2002 amounts to $70 thousand.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Consolidated earned premiums, net and fee revenue for the six months ended June 30, 2002 increased by $64.1 million, or 11.5%, when compared to the consolidated earned premiums, net and fee revenue for the same period of last year. This increase is mostly due to a combined increase of $59.0 million in the earned premiums, net and fee revenue of the Health Insurance – Commercial Program and Health Insurance – Healthcare Reform segments.

• The earned premiums, net and fee revenue corresponding to the Health Insurance – Commercial segment increased by $29.0 million or 9.5% during this period. This increase in premiums for this segment is attributed to the combined effect of increased premium rates and a net increase in total enrollment.

• The earned premiums corresponding to the Health Insurance – Healthcare Reform segment increased by $30.0 million or 13.8% during this period. This increase is the net result of increases in membership during the period and a decrease in premium rates due to the exclusion of mental health and substance

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	abuse benefits from the coverage of the Healthcare Reform insurance policy effective October 1, 2001.
•	The earned premiums of the remaining segments increased by $5.1 million or 24.2% during this period.

Consolidated claims incurred for the six months ended June 30, 2002 reflect an increase of $39.1 million, or 7.9%, when compared to the claims incurred for the six months ended June 30, 2001. The increase in the consolidated claims incurred is directly related to the Corporation’s increased volume of business. The consolidated loss ratio reflects a decrease of 2.8 percentage points during this period. The decrease in the loss ratio is the result of management’s ability to adjust its pricing strategy to cope with the increase in claims costs and the implementation of several measures for cost containment. The consolidated expense ratio for the six months ended June 30, 2002 has remained similar to the consolidated expense ratio for the same period of the prior year, reflecting an increase of only 0.4 percentage points.

The consolidated realized loss on sale of securities of $150 thousand for the six months ended June 30, 2002 is the result of the sound and timely management of the investment portfolio in accordance with corporate investment policies, and from the normal portfolio turnover of the trading and available-for-sale securities. During the six months ended June 30, 2001, the Corporation had a consolidated realized gain of $2.3 million, which was mainly due to the sale of common stocks of Popular Inc. that generated a realized gain of approximately $1.3 million and also to the normal portfolio turnover of the trading and available-for-sale securities.

The consolidated unrealized loss on trading securities of $5.4 million and $3.1 million for the six months ended June 30, 2002 and 2001, respectively, was the result of investments held by the Health Insurance – Commercial Program, Health Insurance – Healthcare Reform and the Property and Casualty Insurance segments. This unrealized loss is mostly attributed to losses in the portfolios held by such segments in equity holdings that replicate the performance of the Standard & Poors 500 Index (S&P 500 Index). The Corporation experienced higher consolidated unrealized loss during the six months ended June 30, 2002 than during the six months ended June 30, 2001. This is due to the fact that the S&P 500 Index had a better performance during the first six months of 2001 than during the first six months of 2002. The S&P 500 Index experienced a decrease of 13.8% during the first six months of 2002, while it experienced a decrease of 7.3% during the first six months of 2001.

Total consolidated income tax expense for the six months ended June 30, 2002 increased by $504 thousand when compared to consolidated tax expense for the same period of last year. This increase is mostly due to an increase in the deferred income tax expense of $478 thousand during this period. The increase in the deferred income tax expense is mostly due to the increase in the deferred income tax expense of the Property and Casualty Insurance segment of $336 thousand during this period. The increase in the deferred income tax expense of the Property and Casualty Insurance segment is due to the

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increase in the segment’s deferred policy acquisition costs and the contributions to the catastrophe loss reserve trust fund.

Health Insurance – Commercial Program Operating Results

			Three months						Six months
			ended June 30,						ended June 30,
(dollar amounts in thousands)			2002			2001			2002			2001
Enrollment:
	Corporate accounts			313,037			320,647			313,037			320,647
	Self-funded employers			125,098			121,144			125,098			121,144
	Individual accounts			84,058			76,786			84,058			76,786
	Federal employees			55,677			55,847			55,677			55,847
	Local government employees			43,445			41,141			43,445			41,141
		Total enrollment		621,315			615,565			621,315			615,565
	Earned premiums		$	167,980			151,615			333,646			303,872
	Amounts attributable to self-funded arrangements			37,321			33,190			72,655			66,650
	Less: Amounts attributable to claims under self-funded arrangements			(36,379	)		(30,821	)		(68,837	)		(63,008	)
		Earned premiums and fee revenue	$	168,922			153,984			337,464			307,514
Claims incurred			$	137,558			138,393			283,362			273,158
Operating expenses				22,752			20,467			44,555			40,747
		Total underwriting costs	$	160,310			158,860			327,917			313,905
Underwriting income (loss)			$	8,612			(4,876	)		9,547			(6,391	)
Loss ratio				81.4	%		89.9	%		84.0	%		88.8	%
Expense ratio				13.5	%		13.3	%		13.2	%		13.3	%
		Combined ratio		94.9	%		103.2	%		97.2	%		102.1	%
Net investment income			$	2,759			2,650			5,317			5,197
Realized gain (loss) on sale of securities				113			1,635			(61	)		2,217
Unrealized gain (loss) on trading securities				(4,442	)		(1,200	)		(4,056	)		(2,372	)
		Total net investment income	$	(1,570	)		3,085			1,200			5,042
Net income			$	6,898			2,155			10,425			2,036

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Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Earned premiums and fee revenue for the three months ended June 30, 2002 reflect an increase of $14.9 million, or 9.7%, when compared to the three months ended June 30, 2001. This increase is the result of the following:

• Since the last semester of 1999, this segment monitors premium rates, particularly in the rated Corporate Accounts business. Increases in premium rates account for approximately 84.0% of the increase experienced in earned premiums and fee revenue for the period.

• Total enrollment as of June 30, 2002 increased by 5,750 members, or 0.9%, when compared to the enrollment as of the same date of last year. The increase in enrollment is mostly reflected in the Individual Accounts, Self-funded Employers and Local Government Employees membership, which membership increased by 7,272, or 9.5%, 3,954, or 3.3% and 2,304, or 5.6%, during this period, respectively. The enrollment of the Corporate Accounts groups decreased by 7,610 members, or 2.4%, during this period. The net increase in enrollment as of June 30, 2002 compared to the enrollment as of June 30, 2001 represents approximately 16.0% of the increase experienced in the earned premiums and fee revenue for the period.

Claims incurred during the three months ended June 30, 2002 decreased by $835 thousand or 0.6% when compared to the same period in 2001. This decrease is due to a decrease in the loss ratio of 8.5 percentage points during this period. The improvement in the loss ratio is the result of better premium pricing and claims costs containment measures established by the segment throughout the years. As a result of these cost containment initiatives, cost and utilization trends have remained at levels consistent with pricing and margin objectives. During the three months ended June 30, 2002, the utilization trends of the segment were lower than expected, fact that has a direct impact in the loss ratio.

The operating expenses for the three months ended June 30, 2002 reflect an increase of $2.3 million, or 11.2%, when compared to the three months ended June 30, 2001. This increase is due to the increase in the costs incurred in the acquisition of new business, such as marketing and commission expenses, and in payroll and payroll related expenses. The expense ratio for the three months ended June 30, 2002 increased only 0.2 percentage points compared to the three months ended June 30, 2001.

34

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Earned premiums and fee revenues for the six months ended June 30, 2002 reflect an increase of $29.9 million, or 9.7%, when compared to the six months ended June 30, 2001. This increase is the result of the following:

• Since the last semester of 1999, this segment monitors premium rates, particularly in the rated Corporate Accounts business. Increases in premium rates account for approximately 75.0% of the increase experienced in earned premiums and fee revenue for the period.

• Total enrollment as of June 30, 2002 increased by 5,750 members, or 0.9%, when compared to the enrollment as of the same date of last year. The increase in enrollment is mostly reflected in the Individual Accounts, Self-funded Employers and Local Government Employees membership, which membership increased by 7,272, or 9.5%, 3,954, or 3.3% and 2,304, or 5.6%, during this period, respectively. The enrollment of the Corporate Accounts groups decreased by 7,610 members, or 2.4%, during this period. The net increase in enrollment as of June 30, 2002 when compared to the enrollment as of June 30, 2001 represents approximately 25.0% of the increase experienced in the earned premiums and fee revenue for the period.

Claims incurred during the six months ended June 30, 2002 increased by $10.2 million, or 3.7%, when compared to the same period in 2001. This increase is due to the increase in membership, together with a decrease in the loss ratio of 4.8 percentage points during this period. The improvement in the loss ratio is the result of better premium pricing and claims costs containment measures established by the segment throughout the years. As a result of these cost containment initiatives, cost and utilization trends have remained at levels consistent with pricing and margin objectives. In addition, the implementation of pharmacy costs containment programs have maintained pharmacy costs trends at single digit numbers during the six months ended June 30, 2002.

The operating expenses for the six months ended June 30, 2002 reflect an increase of $3.8 million, or 9.3%, when compared to the six months ended June 30, 2001. This increase is due to the increase in the costs incurred in the acquisition of new business, such as marketing and commission expenses, and in payroll and payroll related expenses. The expense ratio for the six months ended June 30, 2002 decreased only 0.1 percentage points compared to the six months ended June 30, 2001.

35

Health Insurance – Healthcare Reform Program Operating Results

			Three months						Six months
			ended June 30,						ended June 30,
(dollar amounts in thousands)			2002			2001			2002			2001
Average enrollment:
		North area		251,251			274,681			254,069			269,153
		Northwest area		156,046			166,597			156,335			164,265
		Metro-north area		167,529			177,851			168,458			177,381
		Southwest area		150,355			—			150,836			—
				725,181			619,129			729,698			610,799
Earned premiums			$	123,079			109,026			247,526			217,604
Claims incurred			$	113,711			101,501			229,695			201,695
Operating expenses				10,465			7,550			19,464			14,898
	Total underwriting costs		$	124,176			109,051			249,159			216,593
Underwriting income (loss)			$	(1,097	)		(25	)		(1,633	)		1,011
Loss ratio				92.4	%		93.1	%		92.8	%		92.7	%
Expense ratio				8.5	%		6.9	%		7.9	%		6.8	%
	Combined ratio			100.9	%		100.0	%		100.7	%		99.5	%
Net investment income			$	1,297			1,156			2,485			2,281
Realized gain (loss) on sale of securities				(170	)		(32	)		(167	)		90
Unrealized gain (loss) on trading securities				(387	)		(23	)		(653	)		(307	)
	Total consolidated net investment income		$	740			1,101			1,665			2,064
Net income (loss)			$	(555	)		692			(407	)		2,330

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Earned premiums of the Healthcare Reform segment for the three months ended June 30, 2002 increased by $14.0 million, or 12.9%, when compared to the same period of last year. This increase is the result of the following

• The average enrollment for this segment increased by 106,052 insureds when comparing the average enrollment for the three months ended June 30, 2002 to the three months ended June 30, 2001. This increase is due to the fact that this segment acquired a new area, the Southwest area, effective October 1, 2001, and therefore also acquired the earned premiums for this area.

• Effective October 1, 2001, the Commonwealth excluded mental health and substance abuse benefits from the coverage offered in the policy. Behavioral healthcare and mental healthcare companies now offer these benefits to the Healthcare Reform’s qualified membership. The exclusion of these benefits decreased earned premiums by approximately $9.0 million during the three months ended June 30, 2002.

Claims incurred during the three months ended June 30, 2002 reflect an increase of $12.2 million, or 12.0%, when compared to the three months ended June 30, 2001. This

36

increase is due to the increase in membership, together with the effect of the exclusion of mental health and substance abuse benefits from the coverage of the policy. During the three months ended June 30, 2002, the loss ratio experienced a decrease of 0.7 percentage points.

Operating expenses for the three months ended June 30, 2002, increased by $2.9 million, or 38.6%, when compared to the three months ended June 30, 2001. This increase is due to the segment’s increased volume of business from the acquisition of the Southwest area effective October 1, 2001. The expense ratio increased by 1.6 percentage points when compared to the three months ended June 30, 2001. The increase in the expense ratio is due to the fact that during this period the segment began the enrollment process of the new municipalities acquired effective July 1, 2002 (refer to the Recent Developments section). Therefore, the segment has incurred in expenses related to the enrollment process while earned premiums will not be received until July 2002.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Earned premiums of the Healthcare Reform segment for the six months ended June 30, 2002 increased by $29.9 million, or 13.8%, when compared to the same period of last year. This increase is the result of the following:

• The average enrollment for this segment increased by 118,899 insureds when comparing the average enrollment for the six months ended June 30, 2002 to the six months ended June 30, 2001. This increase is due to the fact that this segment acquired a new area, the Southwest area, effective October 1, 2001, and therefore also acquired the earned premiums for this area.

• Effective October 1, 2001, the Commonwealth excluded mental health and substance abuse benefits from the coverage offered in the policy. Behavioral healthcare and mental healthcare companies now offer these benefits to the Healthcare Reform’s qualified membership. The exclusion of these benefits decreased earned premiums by approximately $18.0 million during the six months ended June 30, 2002.

Claims incurred during the six months ended June 30, 2002 reflect an increase of $28.0 million, or 13.9%, when compared to the six months ended June 30, 2001. This increase is due to the increase in membership, together with the effect of the exclusion of mental health and substance abuse benefits from the coverage of the policy. During the six months ended June 30, 2002, the loss ratio experienced an increase of 0.1 percentage points. The increase in the loss ratio is the result of higher utilization trends during the period.

Operating expenses for the six months ended June 30, 2002, increased by $4.6 million, or 30.6%, when compared to the six months ended June 30, 2001. This increase is due attributed to the segment’s increased volume of business from the acquisition of the Southwest area effective October 1, 2001. The expense ratio increased by 1.1 percentage points when compared to the six months ended June 30, 2001. The increase in the

37

expense ratio is due to the fact that during this period the segment began the enrollment process of the new municipalities acquired effective July 1, 2002 (refer to the Recent Developments section). Therefore, the segment has incurred in expenses related to the enrollment process while earned premiums will not be received until July 2002.

Property and Casualty Insurance Operating Results

				Three months						Six months
				ended June 30,						ended June 30,
(dollar amounts in thousands)				2002			2001			2002			2001
Premiums written:
	Commercial multiperil			$	11,075			9,993			23,484			19,361
	Dwelling				4,409			4,386			8,365			8,756
	Auto physical damage				3,778			2,884			8,019			6,307
	Commercial auto liability				2,253			2,058			4,961			4,226
	Medical malpractice				1,123			970			2,087			1,726
	All other				3,235			2,672			5,581			5,633
		Total premiums written			25,873			22,963			52,497			46,009
	Premiums ceded				(11,560	)		(13,502	)		(16,519	)		(19,528	)
	Change in unearned premiums				51			2,589			(5,526	)		577
			Net premiums earned	$	14,364			12,050			30,452			27,058
Claims incurred				$	8,287			8,052			16,088			15,880
Operating expenses					5,141			4,326			13,267			10,782
			Total underwriting costs	$	13,428			12,378			29,355			26,662
Underwriting income (loss)				$	936			(328	)		1,097			396
Loss ratio					57.7	%		66.8	%		52.8	%		58.7	%
Expense ratio					35.8	%		35.9	%		43.6	%		39.8	%
			Combined ratio		93.5	%		102.7	%		96.4	%		98.5	%
Net investment income				$	1,656			1,842			3,234			3,648
Realized gain (loss) on sale of securities					71			(33	)		16			38
Unrealized gain (loss) on trading securities					(833	)		385			(668	)		(445	)
			Total consolidated net investment income	$	894			2,194			2,582			3,241
Net income				$	1,411			1,687			3,143			3,302

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Total premiums written for the three months ended June 30, 2002 increased by $2.9 million, or 12.7%, when compared to the three months ended June 30, 2001. This increase is reflected in the premiums written for the following lines of business:

• The premiums written for the commercial multiperil line experienced an increase in premiums of $1.1 million, or 10.8%, during this period. This

38

	increase is due to increases in premium rates as a result of the deregulation of the commercial lines. In addition, premium rates for this line were also increased in order to take into consideration the sharp increases in reinsurance costs, particularly in catastrophe related perils.
•	The premiums written for the auto physical damage line increased by $894 thousand, or 31.0%, during this period. This increase is concentrated in the commercial business and is also attributed to the deregulation of premium rates, mostly as a result of the elimination of credits or discounts in the commercial accounts.

Approximately 60.0% of the increase in total premiums written is due to an increase in premium rates. The remaining 40.0% is attributed to an increase in the volume of business.

Premiums ceded to reinsurers during the three months ended June 30, 2002 decreased by $1.9 million, or 14.4%, when compared to the same period for the prior year. This reduction is the result of the following:

• The property and casualty segment has increased its risk retention of the commercial property portfolio. The increased retention, which decreases the amounts of premiums ceded to reinsurers, retains more premiums of this profitable line.

• Catastrophe reinsurance increased by over 40% during this period. This increase is due to recent worldwide catastrophes.

The property and casualty loss ratio experienced a decrease of 9.1 percentage points during the three months ended June 30, 2002 as compared to the same period of the prior year. This decrease is mostly the result of favorable underwriting results of the multiperil line of business (resulting from increases in premium rates as a consequence of deregulation) and increased retention of the segment’s profitable lines of business. In addition, the segment’s medical malpractice line of business experienced an improvement in its loss ratio as a result of premium rate increases of approximately 60% (which were effective during April 2001) and strict adherence to underwriting practices and reinsurance constraints.

The operating expenses for the three months ended June 30, 2002 increased by $815 thousand, or 18.8%, when compared to the operating expenses for the three months ended June 30, 2001. The expense ratio, however, decreased by 0.1 percentage points during this period. The increase in operating expenses is the result of the decrease in reinsurance commission income from the proportional reinsurance treaties and the effect of the reinsurance portfolio transfer, together with an increase in the deferred acquisition costs, which reduce commission expense.

39

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Total premiums written for the six months ended June 30, 2002 increased by $6.5 million, or 14.1%, when compared to the six months ended June 30, 2001. This increase is reflected in the premiums written for the following lines of business:

• The premiums written for the commercial multiperil line experienced an increase in premiums of $4.1 million, or 21.3%, during this period. This increase is due to increases in premium rates as a result of the deregulation of the commercial lines. In addition, premium rates for this line were also increased in order to take into consideration the sharp increases in reinsurance costs, particularly in catastrophe related perils.

• The premiums written for the auto physical damage line increased by $1.7 thousand, or 27.1%, during this period. This increase is concentrated in the commercial business and is also attributed to the deregulation of premium rates, mostly as a result of the elimination of credits or discounts in the commercial accounts.

Approximately 70.0% of the increase in total premiums written is due to an increase in premium rates. The remaining 30.0% is attributed to an increase in the volume of business.

Premiums ceded to reinsurers during the six months ended June 30, 2002 decreased by $3.0 million, or 15.4%, when compared to the same period for the prior year. This reduction is the result of the following situations:

• During the reinsurance contracts renewal process, STS cancelled a commercial quota share treaty. This cancellation propitiated a reinsurance portfolio transfer that resulted in the re-acquisition of the business previously ceded, and accordingly, a reduction in premiums ceded.

• The property and casualty segment has increased its risk retention of the commercial property portfolio. The increased retention, which decreases the amounts of premiums ceded to reinsurers, retains more premiums of this profitable line.

• Catastrophe reinsurance increased by over 40% during this period. This increase is due to recent worldwide catastrophes.

The property and casualty loss ratio experienced a decrease of 5.9 percentage points during the six months ended June 30, 2002 as compared to the same period of the prior year. This decrease is mostly the result of favorable underwriting results of the multiperil (resulting from increases in premium rates as a consequence of deregulation) and auto physical damage lines of business. In addition, the segment’s medical malpractice line of business experienced an improvement in its loss ratio as a result of premium rate increases of approximately 60% (which were effective during April 2001) and strict adherence to underwriting practices and reinsurance constraints.

40

The operating expenses for the six months ended June 30, 2002 increased by $2.5 million, or 23.0%, when compared to the operating expenses for the six months ended June 30, 2001. The expense ratio increased by 3.8 percentage points during this period. The increase in operating expenses and the expense ratio is the result of decreasing reinsurance commission income from the proportional reinsurance treaties and the effect of the reinsurance portfolio transfer during the beginning of 2002.

Life and Disability Insurance Operating Results

			Three months						Six months
			ended June 30,						ended June 30,
(dollar amounts in thousands)			2002			2001			2002			2001
Net earned premiums and commission income:
Earned premiums			$	5,366			4,245			10,243			8,105
Earned premiums ceded				(1,660	)		(1,199	)		(2,895	)		(2,465	)
		Net earned premiums		3,706			3,046			7,348			5,640
Commission income on reinsurance				139			220			310			301
	Total		$	3,845			3,266			7,658			5,941
Claims incurred			$	1,322			1,474			3,506			2,823
Operating expenses				1,274			1,040			2,550			2,054
	Total underwriting costs		$	2,596			2,514			6,056			4,877
Underwriting income			$	1,249			752			1,602			1,064
Loss ratio				34.4	%		45.1	%		45.8	%		47.5	%
Expense ratio				33.1	%		31.8	%		33.3	%		34.6	%
	Combined ratio			67.5	%		77.0	%		79.1	%		82.1	%
Net investment income			$	571			620			1,161			1,242
Realized gain (loss) on sale of securities				(8	)		—			62			30
	Total net investment income		$	563			620			1,223			1,272
Net income			$	1,523			1,052			2,287			1,733

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Earned premiums for the three months ended June 30, 2002 increased by $1.1 million, or 26.4%, when compared to the three months ended June 30, 2001. This increase is mostly due to the segment’s increased volume of business during this period. Total certificates in force in the group life and group disability business as of June 30, 2002 increased by 37,632 certificates, or 13.0%, when compared to the same period for last year.

Premiums ceded to reinsurers during the three months ended June 30, 2002 reflect an increase of $461 thousand, or 38.4%, when compared to the same period of the prior year. The ratio of earned premiums ceded to earned premiums was 30.9% and 28.2% for the three months period ended June 30, 2002 and 2001, respectively. The increase of 2.7 percentage points in the earned premiums ceded to earned premiums ratio from one period to another is due to a change in the mix of business subscribed by the segment and

41

each business reinsurance policy. During this period in 2002, the segment subscribed more disability policies than in 2001. The disability insurance business has a higher cession percentage than the life insurance business.

Claims incurred for the three months ended June 30, 2002 decreased by $152 thousand, or 10.3%, when compared to the three months ended June 30, 2001. The segment’s loss ratio reflects a decrease of 10.7 percentage points during the same period. This decrease is due to the following:

• During the three months ended June 30, 2002 and 2001, the segment recorded a release of incurred but not reported claims reserve of approximately $880 thousand and $225 thousand, respectively. This adjustment is the result of a better than expected development of this reserve.

• In addition, during the year 2002, the segment has subscribed more disability policies than during 2001. The disability insurance business has a higher loss ratio than the life insurance business thus, contributing to the segment’s increased loss ratio.

The segment’s expense ratio for the three months ended June 30, 2002 reflects an increase of 1.3 percentage points when compared to the same period of 2001. The increase of the expense ratio is mostly the result of an increase in the commission expense, payroll and payroll related expenses. The increase of these expenses is due to the increase in the volume of business noted during this period.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Earned premiums for the six months ended June 30, 2002 increased by $2.1 million, or 26.4%, when compared to the six months ended June 30, 2001. This increase is mostly due to the segment’s increased volume of business during this period. Total certificates in force in the group life and group disability business as of June 30, 2002 increased by 42,094 certificates, or 15.0%, when compared to the same period for last year.

Premiums ceded to reinsurers during the six months ended June 30, 2002 reflect an increase of $430 thousand, or 17.4%, when compared to the same period of the prior year. The ratio of earned premiums ceded to earned premiums was 28.3% and 30.4% for the six-month period ended June 30, 2002 and 2001, respectively. The decrease of 2.1 percentage points in the earned premiums ceded to earned premiums ratio from one period to another is due to the following:

• During this period, there was a change in the estimated amount of disability premiums ceded to reinsurers. Effective January 2002, the segment estimated that approximately 61% of the premiums earned on the disability business qualified for reinsurance. In previous periods, the disability business reinsurance amount was estimated to be 75% of the disability premiums earned. The effect of this change in ceding percentage represents a decrease of approximately $101 thousand during this period.

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• During the six months ended June 30, 2002, the segment subscribed more disability policies than during the same period of 2001. The disability insurance business has a higher cession percentage than the life insurance business.

Claims incurred for the six months ended June 30, 2002 increased by $683 thousand, or 24.2%, when compared to the six months ended June 30, 2001. The segment’s loss ratio reflects a decrease of 1.7 percentage points during the same period. This decrease is mostly attributed to the effect of the following:

• During the six months ended June 30, 2002 and 2001 the segment recorded a release of the incurred but not reported claims reserve of approximately $880 thousand and $350 thousand, respectively. This adjustment is the result of a better than expected development of this reserve.

• In addition, during the year 2002, the segment has subscribed more disability policies than during 2001. The disability insurance business has a higher loss ratio than the life insurance business, which contributes to the segment’s increased loss ratio.

The segment’s expense ratio for the six months ended June 30, 2002 reflects a decrease of 1.3 percentage points when compared to the same period of 2001. This decrease in the expense ratio is mostly the result of cost containment measures in place, mitigated by an increase in the commission expense, payroll and payroll related expenses. The increase of these expenses is due to the increase in the volume of business noted during this period.

Liquidity and Capital Resources

Cash Flows

The Corporation maintains good liquidity measures due to the quality of its assets, the predictability of its liabilities, and the duration of its contracts. The liquidity of the Corporation is primarily derived from the operating cash flows of its insurance subsidiaries.

As of June 30, 2002 and December 31, 2001, the Corporation’s cash and cash equivalents amounted to $80.0 million and $81.0 million, respectively. The sources of funds considered in meeting the objectives of the Corporation’s operations include: cash provided from operations, maturities and sales of securities classified within the trading and available-for-sale portfolios, securities sold under repurchase agreements, and issuance of long and short-term debt.

Management believes that the Corporation’s net cash flows from operations are expected to sustain the operations for the next year and thereafter, as long as the operations continue showing positive results. The Corporation is continually monitoring premium rates and claims incurred to ascertain the sustainability of its net cash flows from

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operations. In addition the Corporation has the ability to increase premium rates throughout the year in the policies’ renewal process that is performed on a monthly basis.

Cash Flows from Operations

Most of the cash flows from operating activities are generated from the insurance subsidiaries. The basic components of the cash flows from operations are premium collections, claims payments less reinsurance premiums, and payment of operating expenses.

Net cash flows provided by (used in) operating activities amounted to $26.3 million and $(3.7) million for the six months ended June 30, 2002 and 2001, respectively, an increase of $30.0 million. This increase in cash flows provided by operating activities is mainly attributed to the net effect of the following: increase in collections of premiums of $62.3, increase of $23.2 million in the amount of claims losses and benefits paid, and an increase of $9.1 million in the amount of cash paid to suppliers and employees. The increase in premium collections and in the amount of claims losses and benefits paid is mostly the result of the increased volume of business and increased premium rates of the operating segments. The amount of cash paid to suppliers and employees increased as a result of additional expenses generated from the acquisition of new business.

This excess liquidity is available, among other things, to invest in high quality and diversified fixed income securities and, to a lesser degree, to invest in marketable equity securities.

Cash Flows from Investing Activities

The basic components of the cash flows from investing activities are derived from acquisitions and proceeds from investments in the available-for-sale and held-to-maturity portfolios and capital expenditures. The Corporation monitors the duration of its investment portfolio and executes the purchases and sales of these investments with the objective of having adequate funds available to satisfy its maturing liabilities.

Net cash flows used in investing activities amounted to $21.5 million and $14.6 million for the six months ended June 30, 2002 and 2001, respectively. The cash flows used in investing activities during these periods are attributed to the investment of the excess cash generated from the operations. Total acquisition of investments exceeded the proceeds from investments sold or matured by $19.2 million and $12.1 million during the six months ended June 30, 2002 and 2001, respectively.

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Cash Flows from Financing Activities

Net cash flows (used in) provided by financing activities amounted to $(5.7) million and $5.4 million for the six months ended June 30, 2002 and 2001, respectively. The decrease of $11.1 million during this period is mainly due to the combined effect of the following:

• The change in outstanding checks in excess of bank balances reflects a decrease $7.6 million during the six months ended June 30, 2002 compared to the six months ended June 30, 2001. The amount of checks in excess of bank balances represents a timing difference between the issuance of checks and the cash balance in the bank account at one point in time.

• An increase in the amount of surrenders of individual retirement annuities of $2.3 million from the six months ended June 30, 2001 to the six months ended June 30, 2002. In addition, the amount of proceeds from deposits of individual retirement annuities decreased by $463 thousand during the same period. This fluctuation in the individual retirement accounts is attributed to the aggressive competition in the market for this product in Puerto Rico.

• The payments of long-term debt increased from $1.2 million for the six months ended June 30, 2001 to $1.9 million for the six months ended June 30, 2002, an increase of $700 thousand. This increase is due to the scheduled principal payments of one of the credit agreements, whose repayment schedule was restructured effective August 31, 2001.

Financing and Financing Capacity

The Corporation has significant short-term liquidity supporting its businesses. It also has available short-term borrowings from time to time to address timing differences between cash receipts and disbursements. These short-term borrowings are mostly in the form of securities sold under repurchase agreements. As of June 30, 2002, the Corporation had $49 million in available credit under these agreements, although there is no balance due as of that date.

In addition, the Corporation has two credit agreements with a commercial bank, FirstBank Puerto Rico. These credit agreements bear interest rates determined by the London Interbank Offered Rate (LIBOR) plus a margin specified by the commercial bank at the time of the agreement. As of June 30, 2002, the two credit agreements have an outstanding balance of $35.5 million and $18.2 million and an average annual interest rate of 4.8% and 3.3%, respectively. These credit agreements contain several restrictive covenants, including, but not limited to, restrictions to incur in additional indebtedness and the granting of certain liens, limitations on acquisitions and limitations on changes in control. As of June 30, 2002, management believes the Corporation is in compliance with these covenants. Further details regarding these credit agreements are incorporated by reference in Item 2. Financial Information of the Corporation’s Form 10-A filed as of December 31, 2001.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Corporation is exposed to certain market risks that are inherent in the Corporation’s financial instruments, which arise from transactions entered into in the normal course of business. The Corporation does not enter into derivative financial instrument transactions to manage or reduce market risk or for speculative purposes, but is subject to market risk on certain of its financial instruments. The Corporation has exposure to market risk mostly in its 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 the Corporation’s exposure to financial market risks since December 31, 2001. A discussion of the Corporation’s market risk as of December 31, 2001 is incorporated by reference in Item 2 of the Corporation’s Form 10-A.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

On April 24, 2002, Octavio Jordan, Agripino Lugo, Ramón Vidal and others filed a suit against TSM, TSI, STS, TCI and others in the Court of First Instance, San Juan Part, alleging, among other things, violations of some provisions of the Insurance Code, anti-monopolistic practices, unfair business practices, and damages in the amount of $12 million dollars. TSM, TSI, STS and TCI have answered the complaint and TSM and TSI filed counterclaims against the plaintiffs in the case. The plaintiffs have filed a motion to dismiss the counterclaims filed by TSM and TSI. This motion is still pending. This case is still in the preliminary stages of litigation. After a review of the complaint, it appears that many of the allegations brought by the plaintiffs have been resolved in favor of TSM and TSI in previous cases brought by the same plaintiffs in the U.S. District Court for the District of Puerto Rico and by most of the plaintiffs in the local courts.

As of June 30, 2002, the Corporation was defendant in various lawsuits arising in the ordinary course of business. In the opinion of management and legal counsel, the ultimate disposition of these matters will not have a material adverse effect on the consolidated financial condition and results of operations of the Corporation.

Item 4. Submissions of Matters to a Vote of Security Holders

TSM held its 2002 annual meeting of shareholders on April 28, 2002 (the Meeting) where new members to TSM’s Board of Directors were elected. The candidates for election at the meeting were Dr. Wilmer Rodríguez-Silva, Dr. Arturo Córdova-López, Dr. Wilfredo López-Hernández, Dr. Manuel A. Marcial-Seoane and Ms. Adamina Soto-Martínez, CPA. Dr. Wilmer Rodríguez-Silva received 4,268 votes in favor, Dr. Arturo Córdova-López received 4,316 votes in favor, Dr. Wilfredo López-Hernández received

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4,292 votes in favor, Dr. Manuel A. Marcial-Seoane received 4,306 votes in favor and Ms. Adamina Soto-Martínez, CPA, received 4,403 votes in favor. All candidates were elected.

In addition the members of the Board of Directors, appointed as of May 1, 2002, Mr. Ramón Ruiz-Comas, CPA, President and Chief Executive Officer (CEO) of the Corporation, to fill the vacancy left by Mr. Miguel Vázquez-Deynes, the former President and CEO of the Corporation, who retired on April 30, 2002.

As a result of these events, as of May 1, 2002 the members of the Board of Directors were as follows:

Dr. Fernando J. Ysern-Borrás, Chairman of the Board
Dr. Wilmer Rodríguez-Silva, Vice-Chairman of the Board
Dr. Jesús Sánchez-Colón, Secretary of the Board
Dr. Arturo Córdova-López, Assistant Secretary of the Board
Mr. Vicente J. León-Irizarry, CPA, Treasurer of the Board
Ms. Sonia Gómez de Torres, CPA, Assistant Treasurer of the Board
Mr. Ramón Ruiz-Comas, CPA, President and Chief Executive Officer
Dr. Fernando L. Longo
Dr. Wilfredo López-Hernández
Dr. Valeriano Alicea-Cruz
Dr. Porfirio E. Díaz-Torres
Mr. José Arturo Alvarez-Gallardo
Mr. José Davison-Lampón, Esq.
Mr. Juan José León-Soto, Esq.
Mr. Mario S. Belaval
Mr. Héctor Ledesma
Mr. Manuel Suárez-Méndez, P.E.
Dr. Manuel A. Marcial-Seoane
Ms. Adamina Soto-Martínez, CPA

In addition to the election of directors, five resolutions were presented to the shareholders for their approval. Summaries of said resolutions and the voting results are as follows:

Resolution 1 – Resolution to ratify the shareholders interest in continuing TSI’s tax treatment as a not-for-profit entity, pursuant to the tax ruling issued by the Secretary of the Treasury of Puerto Rico. The adoption of this resolution required the affirmative vote of the majority of the common stock issued and outstanding present at the Meeting. This Resolution received 3,844 votes in favor, 345 votes against and 75 abstentions. This Resolution received the required votes and it was approved.

Resolution 2 – Resolution to amend Article 8 of the Articles of Incorporation of the Corporation and Article 4-2 of Chapter 4 of the By-Laws of the Corporation in order to allow shareholders to transfer their shares to their spouses or heirs when they are physicians or dentists, without exceeding the established limit of twenty-one (21) shares

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per shareholder. The adoption of this resolution required the affirmative vote of a two third majority of the common stock issued and outstanding. This Resolution received 3,863 votes in favor, 402 votes against and 90 abstentions. This Resolution did not receive the required votes and it was not approved.

Resolution 3 – Resolution to amend Section C of Article 8-11 of Chapter 8 of the By-Laws of the Corporation in order to allow the Chairman of the Finance Committee to be a member of the Audit Committee and to expand the powers of the Audit Committee. The adoption of this resolution required the affirmative vote of the majority of the common stock issued and outstanding present at the Meeting. This Resolution received 4,118 votes in favor, 143 votes against and 64 abstentions. The Resolution received the required votes and it was approved.

Resolution 4 – Resolution to amend Section F of Article 8-11 of Chapter 8 of the By-Laws of the Corporation in order to clarify that the President of the Corporation cannot be a member of the Audit Committee. The adoption of this resolution required the affirmative vote of the majority of the common stock issued and outstanding present at the Meeting. This Resolution received 4,161 votes in favor, 107 votes against and 65 abstentions. The Resolution received the required votes and it was approved.

Resolution 5 – Resolution to analyze the medical malpractice insurance situation in Puerto Rico and inform the results of this analysis to the shareholders and TSI’s participants at least every six months and to present a report of this situation in the next annual meeting of shareholders. The adoption of this resolution required the affirmative vote of the majority of the common stock issued and outstanding present at the Meeting. This Resolution received 4,211 votes in favor, 66 votes against and 63 abstentions. The Resolution received the required votes and it was approved.

Item 5. Other Information

Since the Corporation became a reporting company subject to the reporting requirements of the United States Securities Exchange Act of 1934, as amended, during 2002, the Corporation wishes to inform its shareholders that shareholders’ proposals intended to be presented at the 2003 Annual Meeting of Shareholders must be received by the Corporation’s Secretary, at its principal executive offices, located at the sixth floor of 1441 F.D. Roosevelt Avenue, San Juan, Puerto Rico, 00920, or by mail at the PO Box 363628, San Juan, Puerto Rico, 00936-3628, not later than November 27, 2002 for inclusion in the Corporation’s Proxy Statement and Form of Proxy relating to the 2003 Annual Meeting of Shareholders.

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Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:

Exhibit 3(i)	Articles of incorporation of TSM*
Exhibit 3 (ii)	By-laws of TSM*
Exhibit 10.1	Puerto Rico Health Insurance Contract for the Metro-North Region*
Exhibit 10.2	Puerto Rico Health Insurance Contract for the North Region*
Exhibit 10.3	Puerto Rico Health Insurance Contract for the South-West Region*
Exhibit 10.4	Employment Contract with Mr. Ramón Ruiz-Comas, CPA*
Exhibit 10.5	Employment Contract with Ms. Socorro Rivas, CPA*
Exhibit 11	Statement re computation of per share earnings; an exhibit describing the computation of the earnings per share for the three months and six months ended June 30, 2002 has been omitted as the detail necessary to determine the computation of earnings per share can be clearly determined from the material contained in Part I of this Form 10-Q/A.
Exhibit 12	Statements re computation of ratios; an exhibit describing the computation of the loss ratio, expense ratio and combined ratio for the three months and six months ended June 30, 2002 has been omitted as the detail necessary to determine the computation of earnings per share can be clearly determined from the material contained in Part I of this Form 10-Q/A.

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.

* Previously Filed

(b)    Reports on Form 8-K:

On May 3, 2002, the Corporation filed a Current Report on Form 8-K, which indicated the new members elected to the Board of Directors during the Annual Stockholders’ Meeting held on April 28, 2002. This Current Report also indicated the standing members of the Board of Directors and the designation, effective May 1, 2002, of Mr. Ramón Ruiz-Comas, CPA as the new president and Chief Executive Officer of the Corporation.

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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: December 3, 2002	By:	/s/ Ramón M. Ruiz-Comas Ramón M. Ruiz-Comas President and Chief Executive Officer
Date: December 3, 2002	By:	/s/ Juan J. Román Juan J. Román Vice President of Finance and Chief Financial Officer

CERTIFICATION

      I, Ramón M. Ruiz-Comas, certify that:

1.	I have reviewed this quarterly report on Form 10-Q/A of Triple-S Management Corporation.
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flow of the registrant as of, and for, the periods presented in this quarterly report.

December 3, 2002

/s/ Ramón M. Ruiz-Comas

Ramón M. Ruiz-Comas

President and Chief Executive Officer

CERTIFICATION

      I, Juan J. Román, certify that:

1.	I have reviewed this quarterly report on Form 10-Q/A of Triple-S Management Corporation.
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flow of the registrant as of, and for, the periods presented in this quarterly report.

December 3, 2002

/s/ Juan J. Román

Juan J. Román

Vice-president and Chief Financial Officer

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