10-Q

United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(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, 2004

OR

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

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

(787) 749-4949
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

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. þ Yes o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

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

Title of each class	Outstanding at June 30, 2004
Common Stock, $40.00 par value	8,906

TRIPLE-S MANAGEMENT CORPORATION

FORM 10-Q

For the Quarter Ended June 30, 2004

Table of Contents

		PAGE
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003		3
	Consolidated Statements of Operations for the three months and six months ended June 30, 2004 and 2003		4
	Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the six months ended June 30, 2004 and 2003		5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		36
Item 4.	Controls and Procedures		36
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		36
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		38
Item 3.	Defaults Upon Senior Securities		38
Item 4.	Submissions of Matters to a Vote of Security Holders		38
Item 5.	Other Information		40
Item 6.	Exhibits and Reports on Form 8-K		41
SIGNATURES			42
EX-3(ii) BY-LAWS OF TRIPLE-S MANAGEMENT CORPORATION, AS AMENDED (ENGLISH TRANSLATION)
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

2

Part I – Financial Information

Item 1. Financial Statements

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar amounts in thousands, except per share data)

	(Unaudited)
	June 30,		December 31,
	2004		2003
ASSETS
Investments and cash:
Securities held for trading, at fair value:
Fixed maturities	$	68,818		68,681
Equity securities		80,385		66,824
Securities available for sale, at fair value:
Fixed maturities		389,606		407,530
Equity securities		54,581		56,040
Securities held to maturity, at amortized cost:
Fixed maturities		4,784		4,941
Cash and cash equivalents		56,788		48,280
Total investments and cash		654,962		652,296
Premiums and other receivables, net		104,822		93,491
Deferred policy acquisition costs		17,461		16,671
Property and equipment, net		33,127		34,212
Other assets		43,814		37,953
Total assets	$	854,186		834,623
LIABILITIES AND STOCKHOLDERS’ EQUITY
Claim liabilities:
Claims processed and incomplete	$	134,699		121,015
Unreported losses		130,972		112,449
Unpaid loss-adjustment expenses		14,717		14,456
Total claim liabilities		280,388		247,920
Unearned premiums		78,792		78,704
Individual retirement annuities		32,841		26,661
Liability to Federal Employees Health Benefits Program		4,315		7,471
Accounts payable and accrued liabilities		100,231		88,342
Income tax payable		—		32,222
Net deferred tax liability		1,448		1,892
Additional minimum pension liability		10,081		10,081
Short-term borrowings		38,700		38,700
Loans payable to bank		46,687		48,375
Total liabilities		593,483		580,368
Stockholders’ equity:
Common stock, $40 par value. Authorized 12,500 shares; issued and outstanding 8,906 at June 30, 2004 and 9,030 at December 31, 2003		356		361
Additional paid-in capital		150,407		150,407
Retained earnings		101,363		88,728
Accumulated other comprehensive income		8,577		14,759
Total stockholders’ equity		260,703		254,255
Total liabilities and stockholders’ equity	$	854,186		834,623

See accompanying notes to unaudited consolidated financial statements.

3

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Consolidated Statements of Earnings (Unaudited)

For the three months and six months ended June 30, 2004 and 2003

(Dollar amounts in thousands, except per share data)

	Three months ended						Six months ended
	June 30,						June 30,
	2004			2003			2004			2003
REVENUES:
Premiums earned, net	$	322,896			313,789			641,542			629,345
Amounts attributable to self-funded arrangements		46,045			40,181			89,083			80,184
Less amounts attributable to claims under self-funded arrangements		(42,485	)		(37,191	)		(83,067	)		(74,550	)
		326,456			316,779			647,558			634,979
Net investment income		6,393			6,286			12,975			12,384
Net realized investment gains		1,365			6,644			2,748			3,621
Net unrealized investment gain (loss) on trading securities		(3,252	)		7,276			(1,433	)		9,368
Other income, net		1,120			1,524			1,686			2,374
Total revenue		332,082			338,509			663,534			662,726
BENEFITS AND EXPENSES:
Claims incurred		286,246			259,172			561,994			530,003
Operating expenses, net of reimbursement for services		42,635			39,917			82,473			78,407
Interest expense		931			765			1,832			1,468
Total benefits and expenses		329,812			299,854			646,299			609,878
Income before taxes		2,270			38,655			17,235			52,848
INCOME TAX EXPENSE (BENEFIT):
Current		1,248			63,909			4,546			64,286
Deferred		(457	)		(1,968	)		54			(1,629	)
Total income taxes		791			61,941			4,600			62,657
Net income (loss)	$	1,479			(23,286	)		12,635			(9,809	)
Basic net income (loss) per share	$	166			(2,514	)		1,411			(1,055	)

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 six months

ended June 30, 2004 and 2003

(Dollar amounts in thousands, except per share data)

	2004			2003
BALANCE AT JANUARY 1	$	254,255			231,664
Stock redemption		(5	)		(4	)
Comprehensive income:
Net income (loss)		12,635			(9,809	)
Net unrealized change in investment securities		(6,555	)		(4,581	)
Net change in minimum pension liability		—			2,715
Net change in fair value of cash flow hedges		373			(537	)
Total comprehensive income		6,453			(12,212	)
BALANCE AT JUNE 30	$	260,703			219,448

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, 2004 and 2003

(Dollar amounts in thousands, except per share data)

	Six months ended
	June 30,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Premiums collected	$	631,773			614,467
Cash paid to suppliers and employees		(84,127	)		(82,367	)
Claims, losses and benefits paid		(529,526	)		(526,488	)
Interest received		13,487			12,561
Income taxes paid		(40,638	)		(1,308	)
Proceeds from trading securities sold or matured:
Fixed maturities sold		31,611			31,148
Equity securities		15,526			10,512
Acquisitions of investments in trading portfolio:
Fixed maturities		(33,686	)		(49,452	)
Equity securities		(27,048	)		(11,217	)
Interest paid		(1,362	)		(785	)
Expense reimbursement from Medicare		7,547			6,270
Contingency reserve funds from FEHBP		—			13,023
Net cash (used in) provided by operating activities		(16,443	)		16,364
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold		21,464			42,555
Fixed maturities matured		46,441			124,619
Equity securities		1,476			9,675
Securities held to maturity:
Fixed maturities matured		2,762			150
Acquisitions of investments:
Securities available for sale:
Fixed maturities		(55,415	)		(193,820	)
Equity securities		(1,024	)		(4,010	)
Securities held to maturity:
Fixed maturities		(2,612	)		—
Capital expenditures		(1,676	)		(2,525	)
Proceeds from sale of property and equipment		6			45
Net cash provided by (used in) investing activities		11,422			(23,311	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in outstanding checks in excess of bank balances		9,512			666
Payments of long term debt		(1,688	)		(683	)
Redemption of common stock		(5	)		(4	)
Proceeds from individual retirement annuities		7,975			5,716
Surrenders of individual retirement annuities		(2,265	)		(1,088	)
Net cash provided by financing activities		13,529			4,607
Net increase (decrease) in cash and cash equivalents		8,508			(2,340	)
Cash and cash equivalents at beginning of the period		48,280			82,776
Cash and cash equivalents at end of the period	$	56,788			80,436

See accompanying notes to unaudited consolidated financial statements.

6

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2004

(Dollar amounts in thousands, except per share data)

(Unaudited)

(1) Basis of Presentation

The accompanying consolidated interim financial statements prepared by Triple-S Management Corporation (TSM) and its subsidiaries (the Corporation) are unaudited, except for the balance sheet information as of December 31, 2003, 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. 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 Annual Report on Form 10-K for the year ended December 31, 2003.

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 three months and six months ended June 30, 2004 are not necessarily indicative of the results for the full year.

(2) Segment Information

Separate disclosure of information about operating segments is required for any operating segment that meets any of the quantitative thresholds determined by FASB Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information” (SFAS No. 131). In determining whether information about segments is required for a particular year, the evaluation should be based on comparability between years. Thus, information would be required in the current period - even if immaterial pursuant to the provisions of SFAS No. 131 - - if a segment has been significant in the immediate preceding period and is expected to be significant in the future. Based on the requirements of SFAS No. 131, the only reportable segments for TSM are: the Health Insurance - Commercial, the Health Insurance - Healthcare Reform and the Property and Casualty Insurance segments. The Life and Disability Insurance Segment is not presented as a reportable segment in the 2004 periods since it did not meet any of the quantitative thresholds in the years 2003 and 2002 and is not expected to meet them in the year 2004. The segment information for the 2003 periods was restated to present the results of operations and financial position of the Life and Disability operating segment within the other non-reportable operating segments of the Corporation.

The following tables summarize the operations by major operating segment for the three months and six months ended June 30, 2004 and 2003:

7

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

	Operating Segments
	Health			Health
	Insurance			Insurance			Property
	Commercial			Reform			and Casualty
	Program			Program			Insurance			Other *			Total
THREE MONTHS ENDED JUNE 30, 2004
Premiums earned, net	$	179,017			119,601			20,209			4,069			322,896
Amounts attributable to self-funded arrangements		46,045			—			—			—			46,045
Less: Amounts attributable to claims under self-funded arrangements		(42,485	)		—			—			—			(42,485	)
Intersegment premiums earned/service revenues		1,077			—			—			12,316			13,393
		183,654			119,601			20,209			16,385			339,849
Net investment income		3,025			768			1,834			680			6,307
Realized gain (loss) on sale of securities		1,494			(83	)		(14	)		(32	)		1,365
Unrealized loss on trading securities		(3,158	)		—			(24	)		(70	)		(3,252	)
Other		142			(7	)		710			95			940
Total revenues	$	185,157			120,279			22,715			17,058			345,209
Net income (loss)	$	(130	)		727			1,445			(502	)		1,540
Claims incurred	$	162,616			109,605			10,501			3,524			286,246
Operating expenses	$	22,619			9,050			10,719			13,559			55,947
Depreciation expense, included in operating expenses	$	934			—			121			28			1,083
Interest expense	$	286			80			—			248			614
Income tax expense (benefit)	$	(234	)		817			50			229			862

* Includes segments which are not required to be reported separately. These segments include the life and disability insurance segment, the data processing services organization as well as the third party administrator of health insurance services.

8

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

	Operating Segments
	Health			Health
	Insurance			Insurance			Property
	Commercial			Reform			and Casualty
	Program			Program			Insurance		Other *			Total
THREE MONTHS ENDED JUNE 30, 2003
Premiums earned, net	$	168,478			122,852			18,254		4,205			313,789
Amounts attributable to self-funded arrangements		40,181			—			—		—			40,181
Less: Amounts attributable to claims under self-funded arrangements		(37,191	)		—			—		—			(37,191	)
Intersegment premiums earned/service revenues		551			—			—		11,027			11,578
		172,019			122,852			18,254		15,232			328,357
Net investment income		2,654			1,279			1,700		557			6,190
Realized gain on sale of securities		4,737			189			620		448			5,994
Unrealized gain (loss) on trading securities		5,028			1,385			956		(93	)		7,276
Other		77			(8	)		1,391		(98	)		1,362
Total revenues	$	184,515			125,697			22,921		16,046			349,179
Net income	$	19,435			3,505			2,899		1,918			27,757
Claims incurred	$	138,164			108,786			10,645		1,577			259,172
Operating expenses	$	21,861			8,428			8,966		12,301			51,556
Depreciation expense, included in operating expenses	$	1,054			—			66		31			1,151
Interest expense	$	168			104			—		158			430
Income tax expense	$	4,887			4,874			411		92			10,264

* Includes segments which are not required to be reported separately. These segments include the life and disability insurance segment, the data processing services organization as well as the third party administrator of health insurance services.

9

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

	Operating Segments
	Health			Health
	Insurance			Insurance			Property
	Commercial			Reform			and Casualty
	Program			Program			Insurance		Other *			Total
SIX MONTHS ENDED JUNE 30, 2004
Premiums earned, net	$	353,522			238,999			40,992		8,029			641,542
Amounts attributable to self-funded arrangements		89,083			—			—		—			89,083
Less: Amounts attributable to claims under self-funded arrangements		(83,067	)		—			—		—			(83,067	)
Intersegment premiums earned/service revenues		1,981			—			—		23,853			25,834
		361,519			238,999			40,992		31,882			673,392
Net investment income		6,170			1,608			3,688		1,338			12,804
Realized gain (loss) on sale of securities		2,643			128			21		(44	)		2,748
Unrealized gain (loss) on trading securities		(1,756	)		—			258		65			(1,433	)
Other		194			(17	)		1,272		128			1,577
Total revenues	$	368,770			240,718			46,231		33,369			689,088
Net income (loss)	$	5,917			2,371			4,773		(263	)		12,798
Claims incurred	$	315,856			218,820			21,128		6,190			561,994
Operating expenses	$	44,613			17,802			19,428		26,621			108,464
Depreciation expense, included in operating expenses	$	1,903			—			242		56			2,201
Interest expense	$	575			149			—		470			1,194
Income tax expense	$	1,809			1,576			902		351			4,638

* Includes segments which are not required to be reported separately. These segments include the life and disability insurance segment, the data processing services organization as well as the third party administrator of health insurance services.

10

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

	Operating Segments
	Health			Health
	Insurance			Insurance			Property
	Commercial			Reform			and Casualty
	Program			Program			Insurance		Other *			Total
SIX MONTHS ENDED JUNE 30, 2003
Premiums earned, net	$	343,983			238,647			37,307		9,408			629,345
Amounts attributable to self-funded arrangements		80,184			—			—		—			80,184
Less: Amounts attributable to claims under self-funded arrangements		(74,550	)		—			—		—			(74,550	)
Intersegment premiums earned/service revenues		1,246			—			—		22,143			23,389
		350,863			238,647			37,307		31,551			658,368
Net investment income		5,273			2,553			3,344		1,080			12,250
Realized gain (loss) on sale of securities		2,434			(109	)		195		451			2,971
Unrealized gain (loss) on trading securities		6,578			1,622			1,261		(93	)		9,368
Other		109			(15	)		2,097		(55	)		2,136
Total revenues	$	365,257			242,698			44,204		32,934			685,093
Net income	$	24,289			7,920			5,466		3,819			41,494
Claims incurred	$	292,721			212,953			20,455		3,874			530,003
Operating expenses	$	43,020			16,746			17,485		24,517			101,768
Depreciation expense, included in operating expenses	$	2,034			—			202		60			2,296
Interest expense	$	340			205			—		314			859
Income tax expense	$	4,887			4,874			798		410			10,969

* Includes segments which are not required to be reported separately. These segments include the life and disability insurance segment, the data processing services organization as well as the third party administrator of health insurance services.

11

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

	Operating Segments
	Health			Health
	Insurance			Insurance			Property
	Commercial			Reform			and Casualty
	Program			Program			Insurance			Other *			Total
AS OF JUNE 30, 2004
Segment assets	$	416,724			77,703			252,337			82,435			829,199
Significant noncash item - net change in unrealized gain on securities available for sale	$	(3,708	)		(908	)		(1,283	)		(569	)		(6,468	)
AS OF DECEMBER 31, 2003
Segment assets	$	407,031			86,535			239,478			74,530			807,574
Significant noncash item:
Net change in unrealized gain on securities available for sale	$	(5,226	)		—			(527	)		220			(5,533	)
Net change in minimum pension liability		2,385			—			(23	)		(55	)		2,307

* Includes segments which are not required to be reported separately. These segments include the life and disability insurance segment, the data processing services organization as well as the third party administrator of health insurance services.

12

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

RECONCILIATION OF REPORTABLE SEGMENT TOTALS
WITH FINANCIAL STATEMENTS

	Three months ended						Six months ended
	June 30,						June 30,
	2004			2003			2004			2003
TOTAL REVENUES
Total revenues for reportable segments	$	328,151			333,133			655,719			652,159
Total revenues for other segments		17,058			16,046			33,369			32,934
		345,209			349,179			689,088			685,093
Elimination of intersegment earned premiums		(1,077	)		(551	)		(1,981	)		(1,246	)
Elimination of intersegment service revenues		(12,316	)		(11,027	)		(23,853	)		(22,143	)
Unallocated amount - revenues from external sources		266			908			280			1,022
		(13,127	)		(10,670	)		(25,554	)		(22,367	)
Consolidated total revenues	$	332,082			338,509			663,534			662,726
NET INCOME
Net income for reportable segments	$	2,042			25,839			13,061			37,675
Net income (loss) for other segments		(502	)		1,918			(263	)		3,819
		1,540			27,757			12,798			41,494
Elimination of TSM charges:
Rent expense		1,310			1,487			2,883			3,051
Interest expense		158			168			317			340
		1,468			1,655			3,200			3,391
Unallocated amounts related to TSM:
General and administrative expenses		(1,391	)		(1,426	)		(2,726	)		(3,079	)
Income tax expense		71			(51,677	)		38			(51,688	)
Interest expense		(475	)		(503	)		(955	)		(949	)
Other revenues from external sources		266			908			280			1,022
		(1,529	)		(52,698	)		(3,363	)		(54,694	)
Consolidated net income (loss)	$	1,479			(23,286	)		12,635			(9,809	)

13

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS

	Three months ended June 30, 2004
	Segment					Consolidated
	Totals		Adjustments *			Totals
Claims incurred	$	286,246		—			286,246
Operating expenses		55,947		(13,312	)		42,635
Depreciation expense		1,083		281			1,364
Interest expense		614		317			931
Income tax benefit		862		(71	)		791

	Three months ended June 30, 2003
	Segment					Consolidated
	Totals		Adjustments *			Totals
Claims incurred	$	259,172		—			259,172
Operating expenses		51,556		(11,639	)		39,917
Depreciation expense		1,151		278			1,429
Interest expense		430		335			765
Income tax expense		10,264		51,677			61,941

	Six months ended June 30, 2004
	Segment					Consolidated
	Totals		Adjustments *			Totals
Claims incurred	$	561,994		—			561,994
Operating expenses		108,464		(25,991	)		82,473
Depreciation expense		2,201		560			2,761
Interest expense		1,194		638			1,832
Income tax expense		4,638		(38	)		4,600

	Six months ended June 30, 2003
	Segment					Consolidated
	Totals		Adjustments *			Totals
Claims incurred	$	530,003		—			530,003
Operating expenses		101,768		(23,361	)		78,407
Depreciation expense		2,296		556			2,852
Interest expense		859		609			1,468
Income tax expense		10,969		51,688			62,657

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

14

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS

	June 30,			December 31,
	2004			2003
ASSETS
Total assets for reportable segments	$	746,764			733,044
Total assets for other segments		82,435			74,530
		829,199			807,574
Elimination entries - intersegment receivables and others		(13,180	)		(9,565	)
Unallocated amounts related to TSM:
Parent cash, cash equivalents and investments		10,426			9,665
Parent net property and equipment		26,113			26,656
Parent other assets		1,628			293
		38,167			36,614
Consolidated assets	$	854,186			834,623

OTHER SIGNIFICANT ITEMS

	As of June 30, 2004
	Segment						Consolidated
	Totals			Adjustments *			Totals
Significant noncash item — net change in unrealized gain on securities available for sale	$	(6,468	)		(87	)		(6,555	)

	As of December 31, 2003
	Segment						Consolidated
	Totals			Adjustments *			Totals
Significant noncash items:
Net change in unrealized gain on securities available for sale	$	(5,533	)		(489	)		(6,022	)
Net change in minimum pension liability		2,307			(15	)		2,292

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

15

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands)
(Unaudited)

(3) Investment in Securities

The Corporation’s investment in securities at June 30, 2004 and December 31, 2003, consist of the following:

	(Unaudited)
	June 30,		December 31,
	2004		2003
Trading securities, at fair value	$	149,203		135,505
Available for sale, at fair value		444,187		463,570
Held to maturity, at amortized cost		4,784		4,941
Total investments	$	598,174		604,016

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, 2004 and December 31, 2003, were as follows:

	June 30, 2004 (Unaudited)
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Trading securities:
Fixed maturities	$	68,588		1,071		(841	)		68,818
Equity securities		71,563		10,515		(1,693	)		80,385
	$	140,151		11,586		(2,534	)		149,203

	June 30, 2004 (Unaudited)
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Securities available for sale:
Fixed maturities	$	392,921		1,872		(5,187	)		389,606
Equity securities		34,409		20,369		(197	)		54,581
	$	427,330		22,241		(5,384	)		444,187
	June 30, 2004 (Unaudited)
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Securities held to maturity:
Fixed maturities	$	4,784		175		(46	)		4,913

16

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

	December 31, 2003
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Trading securities:
Fixed maturities	$	66,919		2,264		(502	)		68,681
Equity securities		58,101		9,823		(1,100	)		66,824
	$	125,020		12,087		(1,602	)		135,505

	December 31, 2003
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Securities available for sale:
Fixed maturities	$	405,547		3,931		(1,948	)		407,530
Equity securities		33,877		22,203		(40	)		56,040
	$	439,424		26,134		(1,988	)		463,570
	December 31, 2003
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Securities held to maturity:
Fixed maturities	$	4,941		118		(5	)		5,054

Investment in securities at June 30, 2004 are mostly comprised of U.S. Treasury securities and obligations of U.S. government instrumentalities (52.1%), mortgage backed and collateralized mortgage obligations that are U.S. agency-backed (6.8%), obligations of the government of Puerto Rico and its instrumentalities (9.8%) and obligations of states and political subdivisions (0.4%). The remaining 30.9% of the investment portfolio is comprised of corporate debt, equity securities and mutual funds.

The Corporation regularly monitors the difference between the cost and estimated fair value of investments. For investments with a fair value below cost, the process includes evaluating the length of time and the extent to which cost exceeds fair value, the prospects and financial condition of the issuer, and the Corporation’s intent and ability to retain the investment to allow for recovery in fair value, among other factors. This process is not exact and further requires consideration of risks such as credit and interest rate risks. Consequently, if an investment’s cost exceeds its fair value solely due to changes in interest rates, impairment may not be appropriate. If after monitoring and analyzing, the Corporation determines that a decline in the estimated fair value of any available for sale or held to maturity security below cost is other than temporary, the carrying amount of the security is reduced to its fair value. The impairment is charged to operations and a new cost basis for the security is established. No impairments were identified nor recognized by the Corporation during the six-month period ended June 30, 2004.

The unrealized losses on investments were mainly caused by interest rate increases. Because the Corporation has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

17

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

(4) Premiums and Other Receivables

Premiums and other receivables as of June 30, 2004 and December 31, 2003 were as follows:

	(Unaudited)
	June 30,		December 31,
	2004		2003
Premiums	$	41,266		37,936
Self-funded group receivables		22,345		15,790
FEHBP		9,058		7,832
Accrued interest		4,958		5,098
Reinsurance recoverable on paid losses		23,673		22,067
Other		13,446		13,783
		114,746		102,506
Less allowance for doubtful receivables:
Premiums		5,369		4,300
Other		4,555		4,715
		9,924		9,015
Total premiums and other receivables	$	104,822		93,491

(5) Claim Liabilities

The activity in the total claim liabilities for the three months ended June 30, 2004 and 2003 is as follows:

	(Unaudited)
	Three months ended June 30,
	2004			2003
Claim liabilities at beginning of period	$	260,922			258,651
Reinsurance recoverable on claim liabilities		(21,463	)		(14,717	)
Net claim liabilities at beginning of period		239,459			243,934
Incurred claims and loss-adjustment expenses:
Current period insured events		278,354			264,153
Prior period insured events		7,892			(4,981	)
Total		286,246			259,172
Payments of losses and loss-adjustment expenses:
Current period insured events		214,788			238,178
Prior period insured events		52,134			33,727
Total		266,922			271,905
Net claim liabilities at end of period		258,783			231,201
Reinsurance recoverable on claim liabilities		21,605			16,896
Claim liabilities at end of period	$	280,388			248,097

18

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

The activity in the total claim liabilities for the six months ended June 30, 2004 and 2003 is as follows:

	(Unaudited)
	Six months ended June 30,
	2004			2003
Claim liabilities at beginning of period	$	247,920			244,582
Reinsurance recoverable on claim liabilities		(19,357	)		(13,589	)
Net claim liabilities at beginning of period		228,563			230,993
Incurred claims and loss-adjustment expenses:
Current period insured events		559,107			546,333
Prior period insured events		2,887			(16,330	)
Total		561,994			530,003
Payments of losses and loss-adjustment expenses:
Current period insured events		354,857			371,999
Prior period insured events		176,917			157,796
Total		531,774			529,795
Net claim liabilities at end of period		258,783			231,201
Reinsurance recoverable on claim liabilities		21,605			16,896
Claim liabilities at end of period	$	280,388			248,097

As a result of changes in estimates of insured events in prior periods, the amounts included as incurred claims for prior period insured events differ from anticipated claims incurred. The amounts in the incurred claims and loss-adjustment expenses for prior period insured events for the three months and six months ended June 30, 2004 are due to an unfavorable development of the claim liabilities attributed to higher than expected cost per service and utilization trends. The credits in the incurred claims and loss-adjustment expenses for prior periods insured events for the three months and six months ended June 30, 2003 are due to a favorable development of the claim liabilities attributed to better than expected utilization trends.

(6) Comprehensive Income

The accumulated balances for each classification of comprehensive income are as follows:

	(Unaudited)
										Accumulated
	Unrealized			Minimum						other
	gains on			pension			Cash flow			comprehensive
	securities			liability			hedges			income
BALANCE AT JANUARY 1	$	20,948			(5,822	)		(367	)		14,759
Net current period change		(6,555	)		—			373			(6,182	)
BALANCE AT JUNE 30	$	14,393			(5,822	)		6			8,577

(7) Income Taxes

Under Puerto Rico income tax law, the Corporation is not allowed to file consolidated tax returns with its subsidiaries. Triple-S, Inc. (TSI), a wholly owned subsidiary of TSM, was exempt through January 1, 2003 from Puerto Rico income taxes under a ruling issued by the Puerto Rico Treasury Department (PRTD).

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax

19

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of earnings in the period that includes the enactment date. Quarterly income taxes are estimated based on the income forecasted for the full fiscal year.

Under a resolution passed by the Puerto Rico House of Representatives (House of Representatives), during 2002 and 2003 the Banking and Insurance Committee of the House of Representatives conducted an investigation of TSI’s tax treatment under the PRTD ruling that granted TSI’s tax exempt status. A similar investigation was approved by the Puerto Rico Senate. In addition, the PRTD conducted an audit of TSI’s compliance with the requirements of the tax ruling. All three investigations on the tax exemption were concluded in 2003. The PRTD concluded its investigations with no findings of non-compliance. The House of Representatives and the Puerto Rico Senate concluded their investigations by recommending and providing for the termination of the tax exemption solely on account of TSI’s for-profit status and the fact that no other for-profit health insurer in Puerto Rico enjoys a tax exemption under section 1101(6) of the Puerto Rico Internal Revenue Code of 1994, as amended (the P.R. Code). The Corporation was notified on June 18, 2003 by the PRTD that the ruling recognizing TSI’s tax exemption was terminated effective December 31, 2002. The termination of the ruling was in accordance with a new public policy set by the PRTD pursuant to which tax exemptions under Section 1101(6) of the P.R. Code will not apply to corporations organized as for-profit, which is TSI’s case.

On July 31, 2003, TSM and TSI executed a closing agreement with the PRTD. In general, the terms of the closing agreement established the termination of TSI’s tax exemption effective December 31, 2002. Accordingly, effective January 1, 2003 TSI is subject to Puerto Rico income taxes as an other-than-life insurance entity, as defined in the P.R. Code. As a result, TSI recorded during the second quarter of the year 2003, $11,480 and ($1,719) of current and deferred income tax expense (benefit), respectively, corresponding to the six month period ended June 30, 2003. TSI did not record any income tax expense during the first quarter of the year 2003 since the termination of the income tax ruling was not notified until the second quarter of that year.

The closing agreement also stipulates that TSM will pay taxes on TSI’s accumulated statutory net income, in accordance with the income recognition methodology applied by the Secretary of the Treasury in the closing agreement and the ruling mentioned above. This tax ruling established the following methodology for TSM to determine its tax liability:

• TSI’s accumulated statutory net income while operating under the tax exemption, amounting to $132,763, was deemed distributed to TSM.

• For tax purposes, TSM recognized the exempt accumulated statutory net income as gross income. On this amount, TSM recognized an income tax liability amounting to $51,774, which was determined by applying a tax rate of 39% to the exempt accumulated statutory net income deemed distributed to TSM. During the second quarter of the year 2003, TSM recorded this income tax liability within the current income tax expense presented in the consolidated statements of earnings. Of this tax $37,000 was paid on July 31, 2003, the date of the closing agreement, and $14,774 was paid on April 15, 2004.

20

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

(8) Pension Plan

The components of net periodic benefit cost for the three months ended June 30, 2004 and 2003 were as follows:

	(Unaudited)
	Three months ended June 30,
	2004			2003
Components of net periodic benefit cost:
Service cost	$	1,035			908
Interest cost		929			944
Expected return on assets		(626	)		(623	)
Amortization of prior service cost		12			12
Amortization of actuarial loss		401			392
Settlement loss		—			1,101
Net periodic benefit cost	$	1,751			2,734

The components of net periodic benefit cost for the six months ended June 30, 2004 and 2003 were as follows:

	(Unaudited)
	Six months ended June 30,
	2004			2003
Components of net periodic benefit cost:
Service cost	$	2,070			1,816
Interest cost		1,858			1,888
Expected return on assets		(1,252	)		(1,246	)
Amortization of prior service cost		24			24
Amortization of actuarial loss		802			784
Settlement loss		—			2,202
Net periodic benefit cost	$	3,502			5,468

Employer contributions

The Corporation disclosed in its audited consolidated financial statements for the year ended December 31, 2003 that it expected to contribute $5,500 to its pension program in 2004. As of June 30, 2004, no contributions have been made. The Corporation currently anticipates contributing $5,500 to fund its pension program in 2004.

(9) Net Income Available to Stockholders and Net Income per Share

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

The Corporation has not declared or distributed dividends on its common stock.

21

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

The following table sets forth the computation of basic net income per share for the three months and six months ended June 30, 2004 and 2003:

	(Unaudited)
	Three months ended June 30,
	2004		2003
Numerator for basic earnings per share:
Net income (loss) available to stockholders	$	1,479		(23,286	)
Denominator for basic earnings per share:
Weighted average of outstanding common shares		8,905		9,264
Basic net income (loss) per share	$	166		(2,514	)

	(Unaudited)
	Six months ended June 30,
	2004		2003
Numerator for basic earnings per share:
Net income (loss) available to stockholders	$	12,635		(9,809	)
Denominator for basic earnings per share:
Weighted average of outstanding common shares		8,954		9,300
Basic net income (loss) per share	$	1,411		(1,055	)

(10) Contingencies

(a)	As of June 30, 2004, the Corporation is defendant in various lawsuits arising in the ordinary course of business. Management believes, based on the opinion of its legal counsel, that the aggregate liabilities, if any, arising from such actions would not have a material adverse effect on the consolidated financial position and results of operations of the Corporation.
(b)	Drs. Carlyle Benavent and Ibrahim Pérez (the plaintiffs) caused the initiation of an administrative proceeding before the Puerto Rico Insurance Commissioner against TSI and TSM alleging the illegality of the repurchase and subsequent sale of 1,582 shares of TSI’s common stock. The plaintiffs further alleged that the ultimate purchasers of said shares were selected on an improper and selective basis by the Corporation and that they (the plaintiffs) were illegally excluded from participation in the sale of shares, all in violation of the Puerto Rico Insurance Code and that, consequently, the sale of shares should be annulled.
	On December 1996, the Commissioner of Insurance issued an order to annul the sale of the 1,582 shares that TSI had repurchased from the estate of deceased stockholders. Consequently, the sale of 1,582 shares was cancelled and the purchase price was returned to each former stockholder. In the year 2000, the Commissioner of Insurance further ordered that all corporate decisions undertaken by TSI through the vote of its stockholders on record, be ratified in a stockholders’ meeting or in a subsequent referendum.
	In March 2002, the Commissioner of Insurance stated that the ratification of the corporate reorganization was not required and that TSI had complied with the Commissioner’s order of October 1999 related to the corporate reorganization. Thereafter, the plaintiffs filed a petition for review of the Commissioner’s determination before the Puerto Rico Circuit Court of Appeals.

22

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

	On October 2002, the Court of Appeals issued an order requiring the Commissioner of Insurance to order a meeting of stockholders to ratify TSI’s corporate reorganization and the change of name of TSI from “Seguros de Servicio de Salud de Puerto Rico, Inc.” to “Triple-S, Inc.”. TSI and TSM’s filed motions of reconsideration. The Puerto Rico’s Circuit Court of Appeals granted said motions on May 18, 2003. The Circuit Court held that the Commissioner of Insurance had the authority to waive the requirement that a referendum be held to ratify TSI’s reorganization and that therefore the reorganization of TSI was approved by the stockholders, inasmuch as the votes pertaining to the 1,582 shares annulled were not decisive.
	On June 26, 2003, the two stockholders presented a writ of certiorari before Puerto Rico’s Supreme Court. The writ was issued by the Supreme Court on August 22, 2003 when it ordered the Circuit Court of Appeals to forward the record of the case. On December 1, 2003, the plaintiffs filed a motion submitting their case on the basis of their original petition. TSI and TSM filed its brief on December 30, 2003, while the Commissioner of Insurance, in turn, filed a separate brief on December 31, 2003. On June 24, 2004 the Supreme Court ordered the plaintiffs to file a brief in support of their allegations. The case is still pending before the Supreme Court.
(c)	On September 4, 2003, José Sánchez and others filed a putative class action complaint against the Corporation, some present and former directors of TSM and TSI, and others, in the United States District Court for the District of Puerto Rico, alleging violations under the Racketeer Influenced and Corrupt Organizations Act, better known as the RICO Act. The suit, among other allegations, alleges a scheme to defraud the plaintiffs by acquiring control of TSI through illegally capitalizing TSI and later converting it to a for-profit corporation and depriving the stockholders of their rights. The plaintiffs base their later allegations on the supposed decisions of TSI’s Board of Directors and stockholders, allegedly made in 1979, to operate with certain restrictions in order to turn TSI into a charitable corporation, basically forever. While this case is still in the very early preliminary stages and has not been certified as a class action, a Motion to Dismiss has been filed by the defendants. On March 15, 2004, plaintiffs filed a response to this motion. On April 30, 2004, defendants filed a Reply in Support of Motion to Dismiss.
(d)	On April 24, 2002, Octavio Jordán, Agripino Lugo, Ramón Vidal, and others filed a suit against TSM, TSI and others in the Court of First Instance for San Juan, Superior section, alleging, among other things, violations by the defendants of provisions of the Insurance Code, anti-monopolistic practices, unfair business practices and damages in the amount of $12.0 million. They also requested that TSM sell shares to them. After a preliminary 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. The defendants, including TSM and TSI answered the complaint, filed a counter-claim and filed several motions to dismiss this claim. The case has recently been reassigned to a new judge.
(e)	On May 22, 2003 a putative class action suit was filed by Kenneth A. Thomas, M.D. and Michael Kutell, M.D., on behalf of themselves and all other similarly situated and the Connecticut State Medical Society against the Blue Cross and Blue Shield Association (BCBSA) and multiple other insurance companies, including TSI. The case is pending before the U.S. District Court for the Southern District of Florida, Miami District.
	The individual Plaintiffs bring this action on behalf of themselves and a class of similarly situated physicians seeking redress for alleged illegal acts of the defendants which are alleged to have resulted in a loss of plaintiff’s property and a detriment to their business, and for declaratory and

23

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

	injunctive relief to end those practices and prevent further losses. Plaintiffs alleged that the defendants, on their own and as part of a common scheme, systematically deny, delay and diminish the payments due to doctors so that they are not paid in a timely manner for the covered, medically necessary services they render.
	The class action complaint alleges that TSI’s health care plans are the agents of BCBSA licensed entities, and as such have committed the acts alleged above and acted within the scope of their agency, with the consent, permission, authorization and knowledge of the others, and in furtherance of both their interest and the interests of other defendants.
	On June 18, 2004, the Plaintiffs moved to amend the complaint to include the Colegio de Médicos Cirujanos de Puerto Rico (a compulsory association grouping all physicians in Puerto Rico), Marissel Velázquez, MD, and Andrés Meléndez, MD, as plaintiffs against TSI.
	TSI, pursuant to the advice of legal counsel, will move for the dismissal of the complaint against TSI.
(f)	On December 8, 2003 a putative class action was filed by Jeffrey Solomon, MD, and Orlando Armstrong, MD, on behalf of themselves and all other similarly situated and the American Podiatric Medical Association, Florida Chiropractic Association, California Podiatric Medical Association, Florida Podiatric Medical Association, Texas Podiatric Medical Association, and Independent Chiropractic Physicians, against the Blue Cross Blue Shield Association (BCBSA) and multiple other insurance companies, including TSI, all members of the BCBSA. The case is still pending before the United States District Court for the Southern District of Florida, Miami District.
	The individual Plaintiffs bring this action on behalf of themselves and a class of similarly situated physicians seeking redress for alleged illegal acts of the defendants which are alleged to have resulted in a loss of Plaintiff’s property and a detriment to their business, and for declaratory and injunctive relief to end those practices and prevent further losses. Plaintiffs alleged that the defendants, on their own and as part of a common scheme, systematically deny, delay and diminish the payment due to the doctors so that they are not paid in a timely manner for the covered, medically necessary services they render.
	The class action complaint alleges that TSI’s health care plans are the agents of BCBSA licensed entities, and as such have committed the acts alleged above and acted within the scope of their agency, with the consent, permission, authorization and knowledge of the others, and in furtherance of both their interest and the interests of other defendants.
	On June 25, 2004, the Plaintiff amended the complaint but the allegations against TSI did not vary.
	Management believes that TSI was made a party to this litigation for the sole reason that TSI is associated with the BCBSA. Therefore, TSI, pursuant to the advice of legal counsel, will move for the dismissal of the complaint against TSI.

24

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2004
(Dollar amounts in thousands, except per share data)
(Unaudited)

(11) Reconciliation of Net Income (Loss) to Net Cash (Used in) Provided by Operating Activities

A reconciliation of net income to net cash provided by operating activities is as follows:

	(Unaudited)
	Six months ended
	June 30,
	2004			2003
Net income (loss)	$	12,635			(9,809	)
Adjustments to reconcile net income to net cash (used in) provided by operating expenses:
Depreciation and amortization		2,761			2,852
Amortization of investments discounts		586			692
Accretion in value of securities		(214	)		(741	)
Increase in provision for doubtful receivables		909			682
Increase (decrease) in net deferred taxes		53			(1,604	)
Gain on sale of securities		(2,748	)		(3,621	)
Unrealized gain (loss) of trading securities		1,433			(9,368	)
Proceeds from trading securities sold:
Fixed maturities		31,611			31,148
Equity securities		15,526			10,512
Acquisition of securities in trading portfolio:
Fixed maturities		(33,686	)		(49,452	)
Equity securities		(27,048	)		(11,217	)
Loss on sale of property and equipment		(6	)		(45	)
(Increase) decrease in assets:
Premiums receivable		(11,111	)		(18,342	)
Accrued interest receivable		140			226
Reinsurance receivable		(1,606	)		(2,477	)
Other receivables		337			(2,816	)
Deferred policy acquisition costs		(790	)		(1,615	)
Prepaid income tax		(3,869	)		—
Other assets		(1,982	)		(1,352	)
Increase (decrease) in liabilities:
Claims processed and incomplete		13,684			(5,552	)
Unreported losses		18,523			8,131
Unpaid loss-adjustment expenses		261			936
Unearned premiums		88			3,567
Individual retirement annuities		470			683
Liability to FEHBP		(3,156	)		9,763
Accounts payable and accrued liabilities		2,978			2,230
Income tax payable		(32,222	)		62,953
Net cash (used in) provided by operating activities	$	(16,443	)		16,364

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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 Quarterly Report on Form 10-Q 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 three months and six months ended June 30, 2004. Therefore, the following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K filed with the United States Securities and Exchange Commission as of and for the year ended December 31, 2003.

Cautionary Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q and other publicly available documents of the Corporation may include statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, among other things: statements concerning 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, future 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 insurance products and services are offered through the following TSM wholly-owned 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;

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

• 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 other wholly-owned subsidiaries: Interactive Systems, Inc. (ISI) and Triple-C, Inc. (TCI). ISI provides data processing services to TSM and its subsidiaries. TCI is currently engaged as the third-party administrator in the administration of the Corporation’s Healthcare Reform segment. It also provides healthcare advisory services and other health-related services to TSI and other third parties.

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Recent Developments

Healthcare Reform Segment

The premium rates of the Government Healthcare Reform contracts were renegotiated effective July 1, 2004 for a twelve-month period ending on June 30, 2005. As a result of this renegotiation, the premium rates of the Health Insurance – Healthcare Reform segment were increased by approximately 4.4%.

Adoption of Accounting Standard

The Financial Accounting Standards Board (the FASB) issued Statement of Financial Accounting Standard (SFAS) No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. This statement also includes required disclosures for financial instruments within its scope. For the Corporation, this statement was effective for instruments entered in or modified after May 31, 2003 and otherwise was effective January 1, 2004, except for mandatorily redeemable financial instruments. For certain mandatorily redeemable financial instruments, the statement will be effective for the Corporation on January 1, 2005. The effective date has been deferred indefinitely for certain other types of mandatorily redeemable financial instruments. The Corporation currently does not have any financial instruments within the scope of this statement.

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 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. Operating expenses comprise general, selling, commission, 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 computed as claims incurred divided by the premiums earned, net and fee revenue. The expense ratio is computed as 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. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting loss.

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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 ended						Six months ended
	June 30,						June 30,
(dollar amounts in thousands)	2004			2003			2004			2003
Consolidated earned premiums, net and fee revenue	$	326,456			316,779			647,558			634,979
Consolidated claims incurred	$	286,246			259,172			561,994			530,003
Consolidated operating expenses		42,635			39,917			82,473			78,407
Consolidated operating costs	$	328,881			299,089			644,467			608,410
Consolidated loss ratio		87.7	%		81.8	%		86.8	%		83.5	%
Consolidated expense ratio		13.1	%		12.6	%		12.7	%		12.3	%
Consolidated combined ratio		100.7	%		94.4	%		99.5	%		95.8	%
Net investment income	$	6,393			6,286			12,975			12,384
Realized gain on sale of securities		1,365			6,644			2,748			3,621
Unrealized gain (loss) on trading securities		(3,252	)		7,276			(1,433	)		9,368
Total consolidated net investment income	$	4,506			20,206			14,290			25,373
Consolidated income tax expense (benefit)	$	791			61,941			4,600			62,657
Consolidated net income (loss)	$	1,479			(23,286	)		12,635			(9,809	)

Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003

Consolidated earned premiums, net and fee revenue for the three months ended June 30, 2004 increased by $9.7 million or 3.1% when compared to the consolidated earned premiums, net and fee revenue for the same period of last year. This increase is mostly due to the following:

• The earned premiums, net and fee revenue corresponding to the Health Insurance – Commercial segment increased by $11.1 million or 6.5% during this period. An increase in the average enrollment together with increases in premium rates account for the segment’s fluctuation in earned premiums and fee revenue for the period.

• The earned premiums, net of the Property and Casualty Insurance segment increased by $2.0 million or 10.7% during this period. This increase is mostly reflected in the premiums written for the dwelling, commercial multiperil and auto physical damage lines of business. These lines of business together experienced an increase in premiums of $3.1 million, or 14.2%, during this period.

• The earned premiums, net corresponding to the Health Insurance – Healthcare Reform segment decreased by $3.3 million, or 2.6% during this period. This decrease is the net result of a reduction in the average membership of the segment, an adjustment to the return premiums in the 2003 period and an increase in premium rates effective July 1, 2003.

Consolidated claims incurred for the three months ended June 30, 2004 reflect an increase of $27.1 million, or 10.4%, when compared to the claims incurred for the three months ended June 30, 2003. The consolidated loss ratio reflects an increase of 5.9 percentage points during this period. This fluctuation is due to the following:

• During the 2004 period the Health Insurance – Commercial and the Health Insurance – Healthcare Reform segments experienced higher trends, mainly in the cost per service of pharmacy coverage and in the utilization of surgical procedures when compared to the prior year.

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• In addition, the Health Insurance – Healthcare Reform and the Health Insurance – Commercial segments had lower increases in premium rates during the 2004 period than during the 2003 period.

• During the 2003 period the claims incurred of the Health Insurance – Commercial and the Healthcare Reform segments were affected by the favorable development of their claim liabilities, which were attributed to better than expected utilization trends.

The consolidated expense ratio for the three months ended June 30, 2004 increased by 0.5 percentage points when compared to the consolidated expense ratio for the same period of the prior year.

The consolidated realized gain on sale of securities 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. The realized gain during the second quarter of the year 2003 is mostly due to the sale of common stocks of Popular, Inc., which generated a gain of approximately $6.1 million.

The consolidated unrealized gain (loss) on trading securities is mostly related to investments held by the insurance segments in corporate bonds and equity securities. The consolidated unrealized loss during the 2004 period is mostly attributed to losses in the portfolios held by these segments in corporate debt securities due to the changes in interest rates.

The consolidated income tax expense for the three months period ended June 30, 2004 decreased by $61.2 million when compared to the same period of the prior year. This decrease is due to the effect of the following:

• On June 18, 2003, the Corporation was notified by the Puerto Rico Treasury Department (PRTD) that TSI’s tax exemption was terminated effective December 31, 2002. As a result, since effective January 1, 2003 TSI is subject to Puerto Rico income taxes, the Health Insurance – Commercial and Healthcare Reform segments together recorded in the second quarter of the year 2003 $9.8 million income tax expense for the entire six months period ended June 30, 2003. In 2004, the income tax expense for these segments includes its corresponding three month period.

• On July 31, 2003, TSM and TSI executed a closing agreement with the PRTD that stipulated that the statutory net income accumulated while TSI operated under the tax ruling was deemed distributed to TSM. As a result, TSM recognized an income tax expense of $51.8 million, which was recorded in the second quarter of the year 2003.

Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

The consolidated earned premiums, net and fee revenues for the six months ended June 30, 2004 present an increase of $12.6 million, or 2.0%, when compared to the consolidated earned premiums, net and fee revenues for the same period of the prior year. This increase is mostly due to the following:

• The earned premiums, net and fee revenue corresponding to the Health Insurance – Commercial segment increased by $9.9 million or 2.8% during this period. An increase in the average enrollment together with increases in premium rates account for the segment’s fluctuation in earned premiums and fee revenue for the period.

• The earned premiums, net of the Property and Casualty Insurance segment increased by $3.7 million or 9.9% during this period. This increase is mostly reflected in the premiums written for the dwelling, auto physical damage and other liability lines of business. Together, these lines of business experienced an increase in premiums of $5.0 million, or 22.8%, during this period. Also, the amount of premiums ceded increased by $5.5 million mostly as the result of portfolio transfers made during the first quarter of the year 2003.

The amount of consolidated claims incurred for the six months ended June 30, 2004 reflect an increase of $32.0 million, or 6.0%, when compared to the claims incurred for the six months ended June 30, 2003. The

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consolidated loss ratio reflects an increase of 3.3 percentage points during this period. This fluctuation is due to the following:

• During the second quarter of the 2004 period the Health Insurance –Commercial and the Health Insurance – Healthcare Reform segments experienced higher trends, mainly in the cost per service of pharmacy coverage and in the utilization of surgical procedures when compared to the prior year.

• In addition, the Health Insurance – Healthcare Reform and the Health Insurance – Commercial segments had lower increases in premium rates during the 2004 period.

• During the 2003 period the claims incurred of the Insurance – Health Insurance – Commercial and the Healthcare Reform segments were affected by the favorable development of their claim liabilities, which were attributed to better than expected utilization trends in that particular period.

The consolidated expense ratio for the six months ended June 30, 2004 increased by 0.4 percentage points when compared to the consolidated expense ratio for the same period of the prior year.

The consolidated realized gain on sale of securities 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. The realized gain during the 2003 period is mostly due to the sale of common stocks of Popular, Inc., which generated a gain of approximately $6.1 million.

The consolidated unrealized gain (loss) on trading securities is mostly related to investments held by the insurance segments in corporate bonds and equity securities. The consolidated unrealized loss during the 2004 period is mostly attributed to losses in the portfolios held by these segments in corporate debt securities due to the changes in interest rates.

The consolidated income tax expense for the six months period ended June 30, 2004 decreased by $58.1 million when compared to the same period of the prior year. This decrease is due to the effect of the following:

• On July 31, 2003, TSM and TSI executed a closing agreement with the PRTD that stipulated that the statutory net income accumulated while TSI operated under the tax ruling was deemed distributed to TSM. As a result, TSM recognized an income tax expense of $51.8 million, which was recorded in the second quarter of the year 2003.

• The taxable income decreased during the 2004 period thus, reducing the consolidated income tax expense.

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Health Insurance – Commercial Program Operating Results

	Three months ended						Six months ended
	June 30,						June 30,
(dollar amounts in thousands)	2004			2003			2004			2003
Average enrollment:
Corporate accounts		301,786			300,649			302,845			307,103
Self-funded employers		139,994			129,538			136,376			128,352
Individual accounts		84,779			84,416			84,707			84,010
Federal employees		52,440			54,158			52,828			54,239
Local government employees		42,811			43,447			42,882			43,503
Total enrollment		621,810			612,208			619,638			617,207
Earned premiums	$	179,820			169,010			355,011			345,076
Amounts attributable to self-funded arrangements		46,319			40,200			89,575			80,337
Less: Amounts attributable to claims under self-funded arrangements		(42,485	)		(37,191	)		(83,067	)		(74,550	)
Earned premiums and fee revenue	$	183,654			172,019			361,519			350,863
Claims incurred	$	162,616			138,164			315,856			292,721
Operating expenses		22,619			21,861			44,613			43,020
Total underwriting costs	$	185,235			160,025			360,469			335,741
Underwriting income	$	(1,581	)		11,994			1,050			15,122
Loss ratio		88.5	%		80.3	%		87.4	%		83.4	%
Expense ratio		12.3	%		12.7	%		12.3	%		12.3	%
Combined ratio		100.9	%		93.0	%		99.7	%		95.7	%

Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003

Earned premiums and fee revenue for the three months ended June 30, 2004 reflects an increase of $11.6 million, or 6.8%, when compared to the earned premiums and fee revenue for the three months ended June 30, 2003. This increase is the result of the following:

• Average enrollment as of June 30, 2004 increased by 9,602 members, or 1.6%, when compared to the enrollment as of the same period of 2003. The increase in average enrollment is mostly reflected in Self-funded employers and Corporate Accounts businesses, which membership increased by 10,456 members, or 8.1%, and 1,137, or 0.4%, respectively, during this period. The average enrollment of Federal employees reflects a decrease in membership by 1,718, or 3.2% during this period.

• The segment monitors premium rates, particularly in the rated Corporate Accounts business, ensuring adequate premium rates that cover actual claims trends. Increases in premium rates combined with an increase in Self funded employers have contributed to the increase experienced in the earned premiums and fee revenue for the period.

Claims incurred during the three months ended June 30, 2004 increased by $24.4 million, or 17.7%, when compared to the same period in 2003. In addition, the segment’s loss ratio for the three months ended June 30, 2004 increased by 8.2 percentage points when compared to the loss ratio for the three months ended June 30, 2003. These fluctuations are attributed to an increase in trends during the latter part of the 2004 quarter, particularly in the cost per service of pharmacy coverage and in the utilization of surgical procedures when compared to the same period of the prior year. For this segment, cost containment initiatives have been put in place to maintain cost and utilization trends at levels consistent with pricing and margin objectives. In addition, during the 2003 period the claims incurred were affected by the favorable development of its claim liabilities, which were attributed to better than expected utilization trends in that particular period.

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The operating expenses for the three months ended June 30, 2004 reflect an increase of $758 thousand, or 3.5%, when compared to the three months ended June 30, 2003. This increase is due to the normal inflationary effect in operating costs in addition to increases in the following line items: commissions, access services, data processing and provision for bad debt. The expense ratio for the three months ended June 30, 2004 experienced a decrease of 0.4 percentage points compared to the three months ended June 30, 2003.

Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

Earned premiums and fee revenue for the six months ended June 30, 2004 reflects an increase of $10.7 million, or 3.0%, when compared to the earned premiums and fee revenue for the six months ended June 30, 2003. This increase is the result of the following:

• Average enrollment as of June 30, 2004 increased by 2,431 members, or 0.4%, when compared to the enrollment as for the same period of 2003. The increase in average enrollment is mostly reflected in the Self-funded employers business, which membership increased by 8,024 members, or 6.3%, during this period. The average enrollment of the Corporate Accounts and Federal employees businesses reflects a decrease in membership of 4,258, or 1.4%, and 1,411, or 2.6%, during this period, respectively.

• The segment monitors premium rates, particularly in the rated Corporate Accounts business, ensuring adequate premium rates that cover actual claims trends. Increases in premium rates combined with an increase in the average membership of the self funded employers business, have mitigated the effect of the decrease in average membership of other lines of business in the earned premiums and fee revenue for the period.

Claims incurred during the six months ended June 30, 2004 increased by $23.1 million, or 7.9%, when compared to the same period in 2003. In addition, the segment’s loss ratio for the six months ended June 30, 2004 increased by 4.0 percentage points when compared to the loss ratio for the six months ended June 30, 2003. This increase is attributed to an increase in utilization trends during the latter part of the second quarter of the year 2004, particularly in the cost per service of pharmacy coverage and in the utilization of surgical procedures when compared to the prior year. For this segment, cost containment initiatives have been put in place in order to maintain cost and utilization trends at levels consistent with pricing and margin objectives. In addition, during the 2003 period the claims incurred of the segment were affected by the favorable development of its claim liabilities, which were attributed to better than expected utilization trends in that particular period.

The operating expenses for the six months ended June 30, 2004 reflect an increase of $1,593, or 3.7%, when compared to the operating expenses for the six months ended June 30, 2003. This increase is due to the normal inflationary effect in operating costs in addition to increases in the following line items: commissions, access services, data processing and legal services. The expense ratio for the six months ended June 30, 2004 did not change when compared to the ratio for the six months ended June 30, 2003.

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Health Insurance – Healthcare Reform Program Operating Results

	Three months ended						Six months ended
	June 30,						June 30,
(dollar amounts in thousands)	2004			2003			2004			2003
Average enrollment:
North area		234,238			238,137			233,789			239,510
Metro-north area		218,401			225,727			218,701			227,083
Southwest area		165,603			169,460			165,725			170,207
		618,242			633,324			618,215			636,800
Earned premiums	$	119,601			122,852			238,999			238,647
Claims incurred	$	109,605			108,786			218,820			212,953
Operating expenses		9,050			8,428			17,802			16,74
Total underwriting costs	$	118,655			117,214			236,622			229,699
Underwriting income	$	946			5,638			2,377			8,948
Loss ratio		91.6	%		88.6	%		91.6	%		89.2	%
Expense ratio		7.6	%		6.9	%		7.4	%		7.0	%
Combined ratio		99.2	%		95.4	%		99.0	%		96.3	%

Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003

Earned premiums of the Healthcare Reform segment for the three months ended June 30, 2004 decreased by $3.3 million, or 2.6%, when compared to the same period of last year. This decrease is the result of the net effect of the following:

• The earned premiums for the three months ended June 30, 2003 include an adjustment increasing premiums by approximately $5.8 million. This represents an adjustment to premiums to be returned to the Administración de Seguros de Salud de Puerto Rico (ASES, by its Spanish acronym), which is the government agency that administers the Healthcare Reform. As mentioned in previous filings with the United States Securities and Exchange Commission, the Healthcare Reform contracts include a provision where if the net income for any given contract year exceeds 2.5% of earned premiums, the insurance companies have to return 75.0% of this excess to ASES.

• The average monthly enrollment for this segment decreased by 15,082 insureds, or 2.4%, when comparing the average enrollment for the three months ended June 30, 2004 with the average enrollment for the three months ended June 30, 2003. This decrease is attributed to the continuous review and screening performed by the Government of Puerto Rico over the persons eligible to participate in the Healthcare Reform.

• Premium rates were increased by approximately 4.2% during the Healthcare Reform contract renegotiation process for the twelve-month period ended on June 30, 2004.

Claims incurred during the three months ended June 30, 2004 reflect an increase of $819 thousand, or 0.8%, when compared to the three months ended June 30, 2003. The loss ratio increased by 3.0 percentage points when comparing the 2004 period with the 2003 period. This fluctuation results mostly from higher utilization trends experienced during the three months ended June 30, 2004. In addition, during the 2003 period the claims incurred of the segment were affected by the favorable development of its claim liabilities, which were attributed to better than expected utilization trends in that particular period.

Operating expenses for the three months ended June 30, 2004 increased by $622 thousand, or 7.4%, when compared to the operating expenses for the three months ended June 30, 2003. The expense ratio increased by 0.7 percentage points during the same period. This increase is due to the normal inflationary effect in operational costs.

Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

33

Earned premiums for the six months ended June 30, 2004 present an increase of $352 thousand, or 0.1%, when compared to the earned premiums for the six months ended June 30, 2003. This increase is due to the net effect of the following:

• Premium rates were increased by approximately 4.2% during the Healthcare Reform contract renegotiation process for the twelve-month period ended on June 30, 2004.

• In the six months ended June 30, 2003 the segment increased premiums by approximately $5.8 million when adjusting the amount recorded as return premiums to ASES.

• The average monthly enrollment for this segment decreased by 18,585 insureds, or 2.9%, when comparing the average enrollment for the six months ended June 30, 2004 with the average enrollment for the six months ended June 30, 2003. This decrease is attributed to the continuous review and screening performed by the Government of Puerto Rico over the persons eligible to participate in the Healthcare Reform.

Claims incurred during the six months ended June 30, 2004 increased by $5.9 million, or 2.8%, when compared to the claims incurred for the same period of 2003. The loss ratio increased by 2.4 percentage points when comparing the 2004 period with the 2003 period. This fluctuation results mostly from higher utilization trends experienced during the six months ended June 30, 2004. In addition, during the 2003 period the claims incurred of the segment were affected by the favorable development of its claim liabilities, which were attributed to better than expected utilization trends in that particular period.

Operating expenses for the six months ended June 30, 2004 increased by $1.1 million, or 6.3%, when compared to the operating expenses for the six months ended June 30, 2003. The expense ratio increased by 0.4 percentage points during the same period. This increase is due to the normal inflationary effect in operational costs.

Property and Casualty Insurance Operating Results

	Three months ended						Six months ended
	June 30,						June 30,
(dollar amounts in thousands)	2004			2003			2004			2003
Premiums written:
Commercial multiperil	$	12,641			11,590			25,521			25,633
Dwelling		7,837			6,752			13,536			11,505
Auto physical damage		4,479			3,499			8,891			6,993
Commercial auto liability		3,125			2,879			6,683			5,924
Other liability		2,473			2,132			4,482			3,406
Medical malpractice		1,529			1,331			2,517			2,333
All other		2,540			2,692			4,246			4,456
Total premiums written		34,624			30,875			65,876			60,250
Premiums ceded		(12,977	)		(13,750	)		(25,730	)		(20,185	)
Change in unearned premiums		(1,438	)		1,129			846			(2,758	)
Net premiums earned	$	20,209			18,254			40,992			37,307
Claims incurred	$	10,501			10,645			21,128			20,455
Operating expenses		10,719			8,966			19,428			17,485
Total underwriting costs	$	21,220			19,611			40,556			37,940
Underwriting income	$	(1,011	)		(1,357	)		436			(633	)
Loss ratio		52.0	%		58.3	%		51.5	%		54.8	%
Expense ratio		53.0	%		49.1	%		47.4	%		46.9	%
Combined ratio		105.0	%		107.4	%		98.9	%		101.7	%

Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003

Total premiums written for the three months ended June 30, 2004 increased by $3.7 million, or 12.1%, when compared to the three months ended June 30, 2003. This fluctuation is mostly due to an increase in

34

the volume of the premiums written in the dwelling, commercial multi-peril and auto physical damage lines of business, which experienced an increase in premiums of $1.1 million, or 16.1%, $1.1 million, or 9.1%, and $980 thousand, or 28.0%, during this period, respectively. The current market is characterized by strong and aggressive competition with premium rates at levels similar or below those of prior year. Nonetheless, focusing on business retention and relationships with our general agents has provided favorable results for premium writings in the commercial multi-peril business, the segment’s major line business. The strengthening of business partnerships with institutions has contributed to the increase in the writings of the dwelling business. Also, the commercial auto, including auto physical damage coverage, and general liability have been targeted for growth in new business.

Premiums ceded to reinsurers during the three months ended June 30, 2004 decreased by $773 thousand, or 5.6 %, when compared to the same period for the prior year. The ratio of premiums ceded to premiums written reflects a decrease of 7.0 percentage points, from 44.5% for the three months ended June 30, 2003 to 37.5% for the three months ended June 30, 2004. This fluctuation is mainly due the fact that during the second quarter of 2003 the segment recorded an outgoing portfolio transfer covering the builder’s risk treaty which had the effect of increasing premiums ceded for the period.

The decrease in the change in unearned premiums of $2.6 million is primarily due to the effect of the previously described outgoing reinsurance portfolio transfer that was done during the second quarter of the year 2003 and a change in the mix of the business subscribed. The portfolio transfer had the effect of decreasing ceded unearned premiums during the 2003 period by approximately $1.0 million.

Claims incurred reflect a reduction of $144 thousand, or 1.4% when compared to the three months ended June 30, 2003. The loss ratio experienced a decrease of 6.3 percentage points during the three months period ended June 30, 2004 as compared to the same period of the prior year. Emphasis on quality underwriting has resulted in better loss experience, particularly in the segment’s auto liability and casualty lines of business.

The operating expenses for the three months ended June 30, 2004 increased by $1.8 million, or 19.6%, when compared to the operating expenses for the three months ended June 30, 2003. The expense ratio increased by 3.9 percentage points during this period. The fluctuation in the total operating expenses and the expense ratio during this period is mainly due to the following:

• During the second quarter of 2004, the segment recorded a guaranty fund assessment to cover liabilities of insolvent companies. This assessment, which amounted to $871 thousand, was charged to operations during this period.

• During the second quarter of the 2003 period, the segment recorded an experience refund that was received from the Compulsory Vehicle Liability Insurance Joint Underwriting Association. This refund, amounting to $638 thousand, was recorded as a decrease to the operating expenses for the period. No experience refund from the Compulsory Vehicle Liability Insurance Joint Underwriting Association has been received in the 2004 period.

Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

Total premiums written for the six months ended June 30, 2004 increased by $5.6 million, or 9.3%, when compared to the six months period ended June 30, 2003. This fluctuation is mostly due to an increase in the volume of the premiums written for the dwelling, auto physical damage and other liability lines of business, which experienced an increase in premiums of $2.0 million, or 17.7%, $1.9 million, or 27.1%, and $1.1 million, or 31.6%, during this period, respectively. The strengthening of business relationships with financial institutions has resulted in additional growth in the dwelling line of business. Commercial auto, including auto physical damage coverage, as well as the other liability lines of business have been targeted for growth in new business.

Premiums ceded to reinsurers during the six months ended June 30, 2004 increased by $5.5 million, or 27.5%, when compared to the same period for the prior year. The ratio of premiums ceded to premiums

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written reflects an increase of 5.6 percentage points, from 33.5% as of June 30, 2003 to 39.1% as of June 30, 2004. The increase in the premiums ceded to premiums written ratio is due to the following:

• The amount of premiums ceded for the six months ended June 30, 2003 was reduced as a result of the cancellation of the property surplus treaty. This cancellation resulted in a reinsurance portfolio transfer resulting in a net incoming business and a reduction in the amount of premiums ceded.

• During the 2003 period the segment increased its retention in the personal lines quota share treaty from 70% to 95%. In addition, as a result of the increased retention, the segment received an incoming reinsurance portfolio transfer causing a reduction in the premiums ceded for the six months ended June 30, 2003.

• Increased catastrophe reinsurance costs during 2004.

Claims incurred increased by $673 thousand, or 3.3%, when comparing the claims incurred for the six months ended June 30, 2004 to the claims incurred for the same period in 2003. This increase is basically due to the segment’s increased volume of business. The decrease experienced in the loss ratio of 3.3 percentage points during this period is mainly attributed to the segment’s focus on quality underwriting in order to improve loss experience. These efforts have resulted in improved loss ratios particularly in the auto liability and casualty lines of business.

The operating expenses for the six months ended June 30, 2004 increased by $1.9 million, or 11.1%, when compared to the operating expenses for the six months ended June 30, 2003. The expense ratio increased by 0.5 percentage point during this period. The fluctuation in the total operating expenses and the expense ratio during this period is mainly due to the following:

• During the second quarter of 2004, the segment recorded a guaranty fund assessment to cover liabilities of insolvent companies. This assessment, which amounted to $871 thousand, was charged to operations during this period.

• During the second quarter of the 2003 period, the segment recorded an experience refund that was received from the Compulsory Vehicle Liability Insurance Joint Underwriting Association. This refund, amounting to $638 thousand, was recorded as a decrease to the operating expenses for the period. No experience refund from the Compulsory Vehicle Liability Insurance Joint Underwriting Association has been received in the 2004 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, 2004 and December 31, 2003, the Corporation’s cash and cash equivalents amounted to $56.8 million and $48.3 million, respectively. The sources of funds available to meet the requirements 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. In addition, the Corporation monitors its premium rates and its claims incurred to maintain proper cash flows and has the ability to increase premium rates throughout the year in the monthly renewal process.

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, payment of

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operating and acquisition expenses and proceeds from sales and maturities of investments in the trading portfolio.

Net cash flows (used in) provided by operating activities amounted to $(16.4) million and $16.4 million for the six months ended June 30, 2004 and 2003, respectively, a decrease of $32.8 million. This decrease in cash flows from operating activities is mainly attributed to the net effect of the following:

• The amount of income taxes paid increased by $39.3 million when comparing payments made in the 2004 and 2003 periods. The 2004 period includes the payment of the last installment of the $51.8 million income tax liability of the closing agreement with the Puerto Rico Treasury Department upon the termination of TSI’s tax exemption. The first installment of $37.0 million was made on July 31, 2003 and the second and final installment, amounting to $14.8 million, was made on April 15, 2004. In addition, on April 15, 2004 TSI made a payment of $22.1 million corresponding to its income tax liability for the year 2003 and the first installment of the estimated tax corresponding to the year 2004.

• Premiums collected increased by $17.3 million when comparing collections during the six months ended June 30, 2004 with collections for the six months ended June 30, 2003. This increase is mostly related to the increased volume of business and increases in premium rates of the operating segments.

• The amount of claims, losses and benefits paid for the six months ended June 30, 2004 reflect an increase of $3.0 million when compared with the six months ended June 30, 2003. The increase in the amount of claims, losses and benefits paid is mostly the result of the segments’ increased volume of business as well as to increased utilization trends in both Health Insurance segments.

• The net acquisition of investments in the trading portfolio decreased by $5.4 million for the six months ended June 30, 2004, when compared to the six months ended June 30, 2003.

• During the six months ended June 30, 2003 the Corporation collected approximately $13.0 million from the contingency reserve funds of the Federal Employee Health Benefit Plan. The contingency reserve funds payment corresponding to the year 2004 had not been received as of June 30, 2004.

Any 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 sales and maturities of 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 provided by (used in) investing activities amounted to $11.4 million and $(23.3) million for the six months ended June 30, 2004 and 2003, respectively. The increase in the cash flows from investing activities during this period is attributed to a reduction in the amount of investment proceeds that was reinvested. In the six months ended June 30, 2004 the proceeds from investments sold or matured exceeded acquisition of investments by $13.1 million. In the six months ended June 30, 2003 total acquisition of investments exceeded the proceeds from investments sold or matured by $20.8 million.

Cash Flows from Financing Activities

Net cash flows provided by financing activities amounted to $13.5 million and $4.6 million for the six months ended June 30, 2004 and 2003, respectively. The increase of $8.9 million when compared to the same period of the prior year is mainly due to the combined effect of the following:

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• The change in outstanding checks in excess of bank balances reflects an increase of $8.8 million during the six months ended June 30, 2004 compared to the six months ended June 30, 2003. 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.

• The net proceeds from individual retirement annuities were $1.1 million higher during the six months ended June 30, 2004 than during the six months ended June 30, 2003. This fluctuation is basically due to an increase in the proceeds received in the fixed deferred annuity product.

• The payments of long-term debt increased by $1.0 million for the six months period ended June 30, 2004 when compared to the payments made in the 2003 period. This increase is due to a scheduled payment of $1.0 million that was done on one of the credit agreements. Payments for this credit agreement are made annually on or before August 1^st.

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, 2004, the Corporation had $227.5 million in available credit on these agreements. Outstanding short-term borrowings as of June 30, 2004 amount to $38.7 million. The amount due under outstanding short-term borrowings is expected to be paid out of the operating and investing cash flows of the Corporation.

In addition, the Corporation has two credit agreements with a commercial bank, FirstBank Puerto Rico. These credit agreements bear interest rates based on the London Interbank Offered Rate (LIBOR) plus a margin specified by the commercial bank at the time of the agreement. As of June 30, 2004, the two credit agreements have an outstanding balance of $31.7 million and $15.0 million. These credit agreements contain several restrictive covenants, including, but not limited to, restrictions to incur additional indebtedness and the granting of certain liens, limitations on acquisitions and limitations on changes in control. As of June 30, 2004, management believes the Corporation is in compliance with these covenants. Further details regarding these credit agreements are incorporated by reference to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Corporation’s December 31, 2003 of the Corporation’s Annual Report on Form 10-K.

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 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, 2003. A discussion of the Corporation’s market risk as of December 31, 2003 is incorporated by reference to Item 7a of the Corporation’s Annual Report on Form 10-K.

Item 4. Controls and Procedures

The Corporation’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Corporation’s disclosure controls and procedures as of June 30, 2004. Based on that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of June 30, 2004. There were no significant changes in the Corporation’s disclosure controls and procedures, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed the evaluation referred to above.

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Part II – Other Information

Item 1. Legal Proceedings

(a)	As of June 30, 2004, the Corporation is a defendant in various lawsuits arising out of the ordinary course of business. Management believes, based on the opinion of legal counsel, that the aggregate liabilities, if any, arising from such actions would not have a material adverse effect on the Corporation’s consolidated financial position or results of operations.
(b)	Drs. Carlyle Benavent and Ibrahim Pérez (the plaintiffs) caused the initiation of an administrative proceeding before the Puerto Rico Insurance Commissioner against TSI and TSM alleging the illegality of the repurchase and subsequent sale of 1,582 shares of TSI’s common stock. The plaintiffs further alleged that the ultimate purchasers of said shares were selected on an improper and selective basis by the Corporation and that they (the plaintiffs) were illegally excluded from participation in the sale of shares, all in violation of the Puerto Rico Insurance Code and that, consequently, the sale of shares should be annulled.
	On December 1996, the Commissioner of Insurance issued an order to annul the sale of the 1,582 shares that TSI had repurchased from the estate of deceased stockholders. Consequently, the sale of 1,582 shares was cancelled and the purchase price was returned to each former stockholder. In the year 2000, the Commissioner of Insurance further ordered that all corporate decisions undertaken by TSI through the vote of its stockholders on record, be ratified in a stockholders’ meeting or in a subsequent referendum.
	In March 2002, the Commissioner of Insurance stated that the ratification of the corporate reorganization was not required and that TSI had complied with the Commissioner’s order of October 1999 related to the corporate reorganization. Thereafter, the plaintiffs filed a petition for review of the Commissioner’s determination before the Puerto Rico Circuit Court of Appeals.
	On October 2002, the Court of Appeals issued an order requiring the Commissioner of Insurance to order a meeting of stockholders to ratify TSI’s corporate reorganization and the change of name of TSI from “Seguros de Servicio de Salud de Puerto Rico, Inc.” to “Triple-S, Inc.”. TSI and TSM’s filed motions of reconsideration. The Puerto Rico’s Circuit Court of Appeals granted said motions on May 18, 2003. The Circuit Court held that the Commissioner of Insurance had the authority to waive the requirement that a referendum be held to ratify TSI’s reorganization and that therefore the reorganization of TSI was approved by the stockholders, inasmuch as the votes pertaining to the 1,582 shares annulled were not decisive.
	On June 26, 2003, the two stockholders presented a writ of certiorari before Puerto Rico’s Supreme Court. The writ was issued by the Supreme Court on August 22, 2003 when it ordered the Circuit Court of Appeals to forward the record of the case. On December 1, 2003, the plaintiffs filed a motion submitting their case on the basis of their original petition. TSI and TSM filed its brief on December 30, 2003, while the Commissioner of Insurance, in turn, filed a separate brief on December 31, 2003. On June 24, 2004 the Supreme Court ordered the plaintiffs to file a brief in support of their allegations. The case is still pending before the Supreme Court.
(c)	On September 4, 2003, José Sánchez and others filed a putative class action complaint against the Corporation, some present and former directors of TSM and TSI, and others, in the United States District Court for the District of Puerto Rico, alleging violations under the Racketeer Influenced and Corrupt Organizations Act, better known as the RICO Act. The suit, among other allegations, alleges a scheme to defraud the plaintiffs by acquiring control of TSI through illegally capitalizing TSI and later converting it to a for-profit corporation and depriving the stockholders of their rights. The plaintiffs base their later allegations on the supposed decisions of TSI’s Board of Directors and stockholders, allegedly made in 1979, to operate with certain restrictions in order to turn TSI into a charitable corporation, basically forever. While this case is still in the very early preliminary stages and has not been certified as a class action, a Motion to Dismiss has been filed by the defendants. On

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	March 15, 2004, plaintiffs filed a response to this motion. On April 30, 2004, defendants filed a Reply in Support of Motion to Dismiss.
(d)	On April 24, 2002, Octavio Jordán, Agripino Lugo, Ramón Vidal, and others filed a suit against TSM, TSI and others in the Court of First Instance for San Juan, Superior section, alleging, among other things, violations by the defendants of provisions of the Insurance Code, anti-monopolistic practices, unfair business practices and damages in the amount of $12.0 million. They also requested that TSM sell shares to them. After a preliminary 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. The defendants, including TSM and TSI answered the complaint, filed a counter-claim and filed several motions to dismiss this claim. The case has recently been reassigned to a new judge.
(e)	On May 22, 2003 a putative class action suit was filed by Kenneth A. Thomas, M.D. and Michael Kutell, M.D., on behalf of themselves and all other similarly situated and the Connecticut State Medical Society against the Blue Cross and Blue Shield Association (BCBSA) and multiple other insurance companies, including TSI. The case is pending before the U.S. District Court for the Southern District of Florida, Miami District.
	The individual Plaintiffs bring this action on behalf of themselves and a class of similarly situated physicians seeking redress for alleged illegal acts of the defendants which are alleged to have resulted in a loss of plaintiff’s property and a detriment to their business, and for declaratory and injunctive relief to end those practices and prevent further losses. Plaintiffs alleged that the defendants, on their own and as part of a common scheme, systematically deny, delay and diminish the payments due to doctors so that they are not paid in a timely manner for the covered, medically necessary services they render.
	The class action complaint alleges that TSI’s health care plans are the agents of BCBSA licensed entities, and as such have committed the acts alleged above and acted within the scope of their agency, with the consent, permission, authorization and knowledge of the others, and in furtherance of both their interest and the interests of other defendants.
	On June 18, 2004, the Plaintiffs moved to amend the complaint to include the Colegio de Médicos Cirujanos de Puerto Rico (a compulsory association grouping all physicians in Puerto Rico), Marissel Velázquez, MD, and Andrés Meléndez, MD, as plaintiffs against TSI.
	TSI, pursuant to the advice of legal counsel, will move for the dismissal of the complaint against TSI.
(f)	On December 8, 2003 a putative class action was filed by Jeffrey Solomon, MD, and Orlando Armstrong, MD, on behalf of themselves and all other similarly situated and the American Podiatric Medical Association, Florida Chiropractic Association, California Podiatric Medical Association, Florida Podiatric Medical Association, Texas Podiatric Medical Association, and Independent Chiropractic Physicians, against the Blue Cross Blue Shield Association (BCBSA) and multiple other insurance companies, including TSI, all members of the BCBSA. The case is still pending before the United States District Court for the Southern District of Florida, Miami District.
	The individual Plaintiffs bring this action on behalf of themselves and a class of similarly situated physicians seeking redress for alleged illegal acts of the defendants which are alleged to have resulted in a loss of Plaintiff’s property and a detriment to their business, and for declaratory and injunctive relief to end those practices and prevent further losses. Plaintiffs alleged that the defendants, on their own and as part of a common scheme, systematically deny, delay and diminish the payment due to the doctors so that they are not paid in a timely manner for the covered, medically necessary services they render.

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The class action complaint alleges that TSI’s health care plans are the agents of BCBSA licensed entities, and as such have committed the acts alleged above and acted within the scope of their agency, with the consent, permission, authorization and knowledge of the others, and in furtherance of both their interest and the interests of other defendants.

On June 25, 2004, the Plaintiff amended the complaint but the allegations against TSI did not vary.

Management believes that TSI was made a party to this litigation for the sole reason that TSI is associated with the BCBSA. Therefore, TSI, pursuant to the advice of legal counsel, will move for the dismissal of the complaint against TSI.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

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

Annual Meeting

The Corporation held its 2004 Annual Meeting on April 25, 2004. The shareholders considered and voted upon the election of eight directors and five resolutions. Summaries of said proposals and voting results were as follows:

Election of Directors:

At the Annual Meeting, shareholders elected by ballot eight (8) directors to serve as members of the Board of Directors for a term of three (3) years. The directors had to be elected by a majority of the affirmative votes of the issued and outstanding shares with the right to vote in the elections for directors that are present or represented by proxy at the Annual Meeting, pursuant to Section A of Article 7-1 of the By-laws of TSM and Article 7.06(C) of the General Corporations Law of 1995, as amended. At the moment of voting, 4,245 shares were present or represented.

All candidates nominated by the Board of Directors were elected. Seven directors were required to be representatives of the community: (1) Ramón Ruiz-Comas, CPA received 3,930 votes in favor, (2) Mr. Mario S Belaval-Ferrer received 3,911 votes in favor, (3) José Davison-Lampón, Esq. received 3,930 votes in favor, (4) Manuel Suárez-Méndez, PE received 3,884 votes in favor, (5) Carmen Ana Culpeper-Ramírez received 3,864 votes in favor, (6) Manuel Figueroa-Collazo, PhD. received 3,937 votes in favor, and (7) Miguel Nazario-Franco received 3,890 votes in favor. One director was required to be a physician or dentist: (1) Fernando J. Ysern Borrás, MD received 3,924 votes in favor.

Proposals of the Board of Directors:

Resolution Number 1: This resolution was presented by the Board of Directors of TSM to amend Article Eighth of the Articles of Incorporation and Article 4-2 of the By-laws of TSM to allow a shareholder to transfer, without consideration, all or part of his/her shares to any other physician or dentist, regardless of the person being a descendant of the Shareholder, and subsequently register said shares in the books of TSM, provided said physician or dentist complies with the twenty-one (21) shares limit requirement.

In order for this Resolution to be approved, it had to receive the affirmative vote of no less than two-thirds (2/3) of the shares issued and outstanding with the right to vote since it is an amendment to the Articles of Incorporation pursuant to Section A of Article Thirteenth of the Articles of Incorporation. At the moment of voting, 4,249 shares were present or represented. This Resolution was not approved, since, of the 8,943 voting shares issued and outstanding, it received 39.8% (3,556) votes in favor, 6.3% (567)

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votes against and 1.1% (94) abstentions.

Resolution Number 2: This resolution was presented by the Board of Directors of TSM to amend Articles 8-1, 8-5, and 8-11 of the Bylaws of TSM to change the time when the Board of Directors shall meet and to modify certain duties of the Chairperson of the Board of Directors, substitute the Executive Committee of the Board of Directors for a Corporate Governance Committee, assign duties and members to the Corporate Governance Committee, and to establish and modify the duties of the other Committees of the Board of Directors.

In order for this Resolution to be approved, it had to receive the affirmative vote of a majority of a majority of the shares issued and outstanding with the right to vote that were present or represented at the Annual Meeting. Of the 4,249 shares present or represented at the moment of voting, this Resolution received 90.3% (3,837) votes in favor, 4.1% (173) votes against and 3.3% (142) abstentions. Therefore, this Resolution received the required votes in favor and was approved.

Proposals of the Shareholders:

Resolution Number 3: This resolution was presented by Leslie H. López-Vélez, DDS, shareholder of TSM, to amend Articles Sixth and Thirteenth, Section A of the Articles of Incorporation, and Articles 4-1 and 9-1 of the By-laws of TSM to reduce the required shares needed in order to approve certain amendments to Article Sixth of the Articles of Incorporation and Article 4-1 of the By-laws from three-fourths (3/4) of the shares issued and outstanding to two-thirds (2/3) of the shares issued and outstanding.

In order for this Resolution to be approved, it had to receive the affirmative vote of no less than three-fourths (3/4) of the shares issued and outstanding with the right to vote since it is an amendment to the Articles of Incorporation and an amendment to the By-laws, pursuant to Section A of Article Thirteenth of the Articles of Incorporation and Section A of Article Nine of the By-laws. At the moment of voting, 4,249 shares were present or represented. This Resolution was not approved, since, of the 8,943 voting shares issued and outstanding, it received 39.8% (3,561) votes in favor, 5.0% (447) votes against and 1.6% (145) abstentions.

Resolution Number 4: This resolution was presented by Guillermo J. Fernández-Marti, MD, shareholder of TSM, to recommend to the Board of Directors of TSM to obtain the National Committee of Quality Assurance’s (NCQA) accreditation within a time frame of no more than six (6) months in compliance with the petition of the Shareholders made at the Annual Meeting of Shareholders held on April 29, 2001.

In order for this Resolution to be approved, it had to receive the affirmative vote of a majority of the shares issued and outstanding with the right to vote that are present and represented at the Annual Meeting. This Resolution was not approved, since, of the 4,249 voting shares present and represented at the moment of voting, it received 32.0% (1,361) votes in favor, 57.8% (2,454) votes against and 5.2% (220) abstentions.

Proposal Presented at the Annual Meeting of Shareholders:

Resolution Number 5: This resolution was presented by Bernardo Puebla-Melón, MD, shareholder of TSM, in order to state that the shareholders of TSM have never requested, accepted, nor feel represented by the people claiming to be their representatives in the Sánchez Case or any other, and that, if procedurally feasible, this resolution be notified to the Court.

In order for this resolution to be approved, it had to receive the affirmative vote of the majority of the shares issued and outstanding with the right to vote present or represented at the Annual Meeting. Of the 4,249 shares present and represented at the moment of voting, this Resolution received 93.7% (3,983) votes in favor, 1.8% (78) votes against and 1.8% (76) abstentions. Therefore, this Resolution received the required votes in favor and it was approved.

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Item 5. Other Information

     On April 26, 2004, the Board of Directors of TSM held a special meeting where it appointed the officers of TSM, which appointment was effective immediately. Said appointments are as follows:

Name:	Office:
Fernando J. Ysern-Borrás, MD	Chairman of the Board of Directors
Wilmer Rodríguez-Silva, MD	Vice-Chairman of the Board of Directors
Jesús R. Sánchez-Colón, DMD	Secretary of the Board of Directors
Arturo R. Córdova-López, MD	Assistant Secretary of the Board of Directors
Vicente J. León-Irizarry, CPA	Treasurer of the Board of Directors
Adamina Soto Martínez, CPA	Assistant Treasurer of the Board of Directors
Ramón Ruiz-Comas, CPA	President and Chief Executive Officer

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

Exhibit 3(ii)	By-Laws of Triple-S Management Corporation, as amended (English translation).
Exhibit 11	Statement re computation of per share earnings; an exhibit describing the computation of the earnings per share for the three months ended March 31, 2004 has been omitted as the detail necessary to determine the computation of earnings per share can be clearly determined from the material contained in Part I of this Quarterly Report on Form 10-Q.
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 ended March 31, 2003 has been omitted as the detail necessary to determine the computation of the loss ratio, expense ratio and combined ratio can be clearly determined from the material contained in Part I of this Quarterly Report on Form 10-Q.
Exhibit 31.1	Certification of the President and Chief Executive Officer required by Rule 13a-14(a)/15d-14(a).
Exhibit 31.2	Certification of the Vice President of Finance and Chief Financial Officer required by Rule 13a-14(a)/15d-14(a).
Exhibit 32.1	Certification of the President and Chief Executive Officer required pursuant to 18 U.S.C Section 1350.
Exhibit 32.2	Certification of the Vice President of Finance and Chief Financial Officer required pursuant to 18 U.S.C Section 1350.

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

(b) Reports on Form 8-K:

The Corporation did not file with the Securities and Exchange Commission any Current Reports on Form 8-K during the second quarter of the year 2004.

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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: August 12, 2004	By:	/s/ Ramón M. Ruiz-Comas
		Ramón M. Ruiz-Comas, CPA
		President and
		Chief Executive Officer
Date: August 12, 2004	By:	/s/ Juan J. Román
		Juan J. Román, CPA
		Vice President of Finance
		and Chief Financial Officer

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EX-3.II

Exhibit 3(ii)

This is a fair and accurate English translation of the original
By-laws of Triple-S Management Corporation which are in Spanish

BY-LAWS
OF
TRIPLE-S MANAGEMENT CORPORATION

CHAPTER 1

1-1	The Incorporators of “Triple-S Management Corporation” adopt these By-laws which will regulate the Corporation’s proceedings and will rule the administration of its business.
1-2	The By-laws approved herein shall be submitted to the shareholders, who may adopt, amend or repeal them.

CHAPTER 2 — BOARD OF DIRECTORS

2-1 The Board of Directors is made up of nineteen (19) members.

CHAPTER 3 — CAPITAL IN STOCKS

3-1	The Corporation may issue up to twelve thousand five hundred (12,500) shares of common stock with a par value of Forty Dollars ($40).
3-2	The Corporation will use a circular seal measuring 1-7/8 in diameter with the name “Triple-S Management Corporation” around its circumference.

CHAPTER 4 — ON THE SHARES

The Incorporators declare and agree, and is established in these By-laws, that, the following provisions are established with the purpose of creating, defining, limiting and managing the rights and privileges of the shareholders:

4-1 SALE OF SHARES

A. No person may own more than twenty-one (21) shares, or five percent (5%) or more, of the Corporation’s voting shares issued and outstanding.

By-laws of
Triple-S Management Corporation
Page 2

B.

The sales of shares will be exclusively limited to physicians and dentists. However, organizations such as hospitals, laboratories, and the College of Dental Surgeons of Puerto Rico, who had originally acquired shares of Triple-S, Inc., may continue as stockholders of Triple-S Management Corporation, with all the rights. In addition, the members of the Board of Directors who represent the community will be Shareholders as long as they remain on the Board.

C.

The members of the Board of Directors who represent the community, as long as they remain as members of the Board, will receive one share of the Corporation, free of charge, with the single purpose of qualifying them for the position of Director of the Corporation. Said community representatives shall return the qualifying share that had received when their duties as Directors of the Corporation end.

4-2	The Corporation will have the right of first refusal in the event of a sale, donation, or any other sale or cession of the shares of the Corporation. Any Shareholder who wishes to sell, donate, or in any other way sell or cede his/her shares of the Corporation, must first offer his/her shares to the Corporation in writing. The Corporation shall then purchase said shares from the Shareholder for the same price he/she paid for them. However, in the event that the shares were donated or inherited through a will, or in any other way, to a person who is (1) a descendant of the Shareholder and (2) a physician or a dentist, then said person shall have the right to hold up to a maximum 21 shares.
4-3	SHAREHOLDER LISTING
	The Secretary of the Corporation shall keep, or ensure the keeping of, a complete and exact register, in alphabetical order, of all the shareholders, including their address and, the number of votes each Shareholder holds, in the offices of the Corporation. Said register shall be readily available and during working hours, and shall be available for inspection by any Shareholder, particularly, ten (10) days before a Shareholders Meeting, and when any other shareholder meeting is being held.
	The Corporation’s register will constitute the only acceptable evidence to determine which Shareholders have the right to inspect the Corporation’s Shareholders Register, the books of the Corporation, and to determine which Shareholders have the right to vote in person or by proxy during any meeting or shareholders meeting.

By-laws of
Triple-S Management Corporation
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CHAPTER 5 — SHAREHOLDER MEETINGS

5-1	The Annual Meeting of Shareholders of Triple-S Management Corporation will be held at the Corporation’s main office or at any other place in Puerto Rico determined by the Board of Directors from time to time, as indicated in the Notice of Meeting, at 9:00 am, on the last Sunday in April of each year. The purpose of the Meeting will be to fill any vacancies of the Board of Directors, receive and consider reports from officials regarding the business of the Corporation, and resolve any other matters that are properly submitted for consideration. However, neither the Articles of Incorporation nor the By-laws may be amended unless the Shareholders have been previously notified that among the matters that are being considered at the Meeting are amendments to the Articles of Incorporation and By-laws.
5-2	SPECIAL MEETINGS
	The Chairman of the Board of Directors, a majority of the Board of Directors, or Shareholders who hold 25% of the registered voting shares can call special shareholders meetings to be held at the place and time established by the notice of meeting, and for the purposes expressed therein. The meetings (special shareholders meetings) should be notified no less than ten (10) days or more than thirty (30) days before said meeting. The special meetings must be notified in the same manner as annual meetings.
5-3	NOTICE OF MEETINGS
	The notices for every annual meeting of the Shareholders shall be given to each Shareholder entitled to vote, by delivering the same personally, or by mailing such notice to him, at the address which appears on the records of the Corporation during a period of no less than twenty (20) and no more than sixty (60) days prior to the meeting. Along with this notice, all Shareholders will receive copies of the Corporation and its subsidiaries’ consolidated financial statements. The notice shall indicate the place and the date the meeting will be held, and the matter or matters to be considered during the Meeting.
5-4	NOTICE — Substitute
	If the directors and officers of the Corporation should refrain from calling and celebrating, at its designated time, an Annual Meeting, five Shareholders may call for and celebrate said Meeting as required in these By-laws. In case an officer does not attend said Meeting, one of the Shareholders present may be elected to substitute, provisionally, said officer. Decisions made at the Meeting will be valid, as if made at an Annual Meeting, and will be registered in the corporate books of the Corporation.

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5-5

QUORUM

Notice to attend annual and special meetings will be sent to all shareholders whose names appear in the Corporate Registry, twenty (20) days prior to the meeting date. At the annual or special meetings, a majority of the voting shares issued and outstanding shall constitute a quorum; and if at the appointed time quorum is not reached, the meeting will be postponed for a half hour, after which one third (1/3) of the voting shares issued and outstanding will constitute a quorum. If quorum is not reached, a new Meeting shall be scheduled thirty (30) days hence, where one-third (1/3) of the voting shares issued and outstanding will constitute a quorum. If a quorum is not reached pursuant to the regulation, as many new Meetings as necessary may be scheduled, with the same one-third (1/3) requirement.

CHAPTER 6 — VOTING RIGHT

6-1	Each shareholder shall, at every Meeting, be entitled to as many votes as shares are registered in his name in the books of the Corporation. The shareholder may vote in person or, if absent, by proxy or by certified mail. No vote sent by mail or by proxy will be valid unless issued with the shareholder’s signature, and it is received before the Meeting, for which it is destined, begins. No proxy will be valid after its expiration date.
6-2	ACCUMULATED VOTE — Prohibition
	The accumulative vote, as states in the Puerto Rico Corporate General Law or any other law, regulation or provision, is expressly prohibited.
6-3	Any proxy designated by a registered shareholder must be a shareholder or a participating physician or dentist.

CHAPTER 7 — ELECTIONS

7-1 BOARD OF DIRECTORS — ELECTION

A.	The election of members to the Board of Directors will take place at the duly notified Annual Meeting of Shareholders by ballot. The members elected each year will be those necessary to complete the nineteen (19) Directors.
	The directors will be elected by a majority of votes of the shares issued and outstanding with the right to vote and who are represented in person or by proxy at the Meeting.

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B.	The Board of Directors is divided into three groups, plus the President of the Corporation. The first is made up of five (5) directors, the second group is composed of six (6) directors, and the third group is made up of seven (7) directors. The terms of the groups will be placed at intervals, therefore, the term of the first group of directors will end in the Shareholders Annual Meeting in the year 2005; the term of the second group of directors will end in the Shareholders Annual Meeting in the year 2006 and the term of the third group of directors will end in the Shareholders Annual Meeting in the year 2007.
C.	The term each group member, subsequently elected at the Shareholders Annual Assembly, will occupy at his elected hold office will be three (3) years. Every director will continue with his duties until his/her heir is duly elected and in possession of his office. No Director, except the Corporation’s President, while fulfilling his duties, may be elected for more than three (3) terms or serve for more than nine (9) years. The President of the Corporation, who is also a member of the Board of Directors, is excluded from the before mentioned groups.
D.	In order to achieve uniformity in the composition of the number of directors for each group, as stated herein, in April 2001 a director will be elected for a one year term only, from April 2001 to April 2002. With the sole purpose of following the group intervals, the requirement of three (3) terms or nine (9) years may be obviated in order for a person to serve this single one-year term. In the case of the first members of the Board of Directors, the time computation will take into account the period in which the director fulfilled his duties in Triple-S, Inc. until the fusion with Triple-S Salud.

7-2	DIRECTORS’ REQUIREMENTS
	In order to be a Director in the Corporation, every person must at least meet the following requirements:

A.	Never have declared fraudulent bankruptcy, voluntary or involuntary, nor granted a fraudulent general cession in benefit of creditors.
B.	Should never have been convicted of a crime of moral deprivation.

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C.

Should not be a director or officer of a bank, a savings and loans association, an institution engaged in the business of receiving deposits and lending money in Puerto Rico or any entity or corporation in which any of the institutions referred to herein have a direct or indirect substantial economic interest or the relationship of owner, subsidiary or affiliate or any entity or corporation which owns, directly or indirectly, substantial economic interest in any of the said institutions, except that the person can fulfill his duties as director or officer of a financial holding company or a depository institution with whom an insurance company affiliated to the corporation has a relationship, directly or indirectly, as owner, subsidiary or affiliate.

D.

In the case of directors who are physicians or dentists, they should be active participants in the Subsidiary of Triple-S, Inc., and have been so for at least two (2) years prior to their nomination as directors in the Corporation.

CHAPTER 8 — DIRECTORS

8-1 BOARD OF DIRECTORS — Powers

A.	The Board of Directors will be composed of nineteen (19) members elected by the Shareholders at the meeting, or by the Board of Directors in case of vacancies, and will exercise the corporation’s powers and the management of its business in accordance with the Puerto Rico General Corporations Law, the Articles of Incorporation and By-laws of the Corporation, as well as the guidelines issued by the Shareholders of the Corporation.
B.	The power to manage the Corporation’s affairs may only be exercised when the Directors of the Corporation act as a Board, duly constituted, as a Committee of the Board or by express delegation from the Board.
C.	In order to become a Director of the Corporation, you must be a Shareholder of the Corporation.
D.	The decisions taken by a majority of the Directors present at a meeting of the Board of Directors, where a quorum is constituted, will be considered as acts of the Board of Directors as if those decisions were considered and accepted by all of the Directors of the Board.
E.	Of the nineteen (19) members of the Board of Directors, ten (10) must be representatives of the community and/or subscribers and not medical doctors or dentists.

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F. Board Meetings

1.	The Board must celebrate at least one annual meeting before the Annual Meeting of Shareholders and any regular and special meetings the Board determines to be necessary.
2.	The Board will meet each month, unless special circumstances force the Chairperson of the Board to change it. The Secretary will notify the Directors in writing the date of said meetings.
3.	The Chairperson of the Board of Directors may convene extraordinary meetings of the Board to be held at the place, date, and time established in the notice to the meeting and for the purposes expressed therein.
4.	In addition, the Chairperson of the Board of Directors will have the obligation to convene the Board of Directors when requested by five (5) members of the Board, ten (10) days after such request is made.

G. A majority of the total number of Directors will constitute a quorum.

8-2	VACANCIES IN THE BOARD — Procedure to fill the vacancies
	The vacancies of the Board due to resignation, death, disability which impedes the execution of their functions, or destitution of any director before the expiration of their term, will be filled by the vote of the majority of the Directors present in a Board meeting, convened for these purposes, after the quorum is constituted. The person elected to fill the vacancy will serve the rest of the term of the person who is being substituted and may be reelected for two (2) additional successive terms.
8-3	ACTS OF THE BOARD OF DIRECTORS — Referendum
	Except for a provision stating the contrary in the Articles of Incorporation or the General Corporations Law, any action or agreement required or permitted to be taken in any meeting of the Board of Directors or any of its committees, may be executed without the need of a meeting if all of the members of the Board of Directors or the Committee, as the case may be, approve of it in writing and said written approval or approvals are submitted and incorporated in the minutes of the meetings of the Board of Directors or the Committee.

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8-4	OFFICERS
	The officers will be a Chairperson, a Vice Chairman, a Treasurer, an Assistant Treasurer, a Secretary and an Assistant Secretary. The Board of Directors will elect these officers, which will meet the requirements, will have the powers and duties and will serve during the terms established herein.
8-5	THE CHAIRPERSON OF THE BOARD OF DIRECTORS
	The Chairperson of the Board of Directors will preside over the Shareholders Meetings, the meeting of the Board of Directors, and will assume the duties and responsibilities conferred by the Board of Directors. Among the main duties and responsibilities of the Chairperson are the following:

A.	Represent the Corporation in the name of the Board of Directors in those official acts which he/she will have to attend and will maintain the relationships with the Shareholders of the Corporation and the governmental authorities as part of his/her duties.
B.	Appoint the Directors who are to be members of the Finance Committee, except for its Committee Chair, and the Resolutions and Regulations Committee of the Board of Directors, unless otherwise provided in these By-laws.
C.	Be a member of all of the Committees of the Board of Directors, if he/she complies with the independence criteria adopted and approved by the Board of Directors.
D.	Represent the Corporation at the Shareholders Meetings of the Subsidiary Corporations.
E.	Recommend to the Board of Directors for their consideration, the creation of committees which are not expressly recognized in the By-laws and Regulations, according to the needs of the Corporation.
F.	Inform the Board of Directors about his/her official affairs by virtue of his/her duties and responsibilities.
G.	Assume all other duties and responsibilities that from time to time are conferred by the Board of Directors.
H.	Convene any extraordinary meetings of the Board of Directors that he/she may deem necessary.

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8-6	THE VICE CHAIRMAN
	In the absence of the Chairman, or if the Chairman is unable to act as such, the Vice Chairman will assume the duties and faculties of the Chairman.
8-7	THE SECRETARY
	The Secretary will take an oath to loyally carry out the duties of his/her office and will make sure that the minute books of the Corporation are duly maintained and will note or cause to be noted the actions of the Board of Directors and the Shareholders Assemblies and the voting therein. He/she will issue the necessary certificates and will be responsible for the corporate seal. He/she will be responsible for making sure that the registry of all of the shareholders and the Articles of Incorporation, the By-laws and the certified Regulations are safely kept at the principal offices of the Corporation. In addition, he/she will certify the official acts of the Board of Directors.
8-8	THE ASSISTANT SECRETARY
	The Assistant Secretary will assume, in the absence or if the Secretary is unable to perform his/her duties, all of the duties and faculties conferred upon the Secretary.
8-9	THE TREASURER
	The Treasurer will make sure that the securities and the money of the Corporation is duly received and guarded, and that the disbursements are only made according to duly approved and certified resolutions of the Board of Directors. He/she will make sure that the investment policies of the Corporation observe the security, liquidity and yield criteria, in that order. He/she will preside over the Finance Committee of the Board. In addition, the Treasurer will make sure that the accounting books and registers are located in the principal offices of the Corporation. The Corporation’s accounting will follow general accepted accounting principles.
8-10	THE ASSISTANT TREASURER
	The Assistant Treasurer will assume, in the absence or if the Treasurer is unable to perform his/her duties, all of the duties and faculties conferred upon the Treasurer.

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8-11

COMMITTEES

The permanent Committees of the Board of Directors will be classified according to their nature and the importance of their duties, as well as the responsibilities delegated to each Committee, and the impact of its tasks in the operation and results of the Corporation. In compliance with the above, the “Core Committees” will be the Corporate Governance Committee, the Audit Committee, the Nominations Committee, the Compensation Committee, and the Finance Committee.

A.	Corporate Governance Committee
	The Board of Directors shall appoint at least five (5) Directors to this Committee, one of which shall be the Chairperson of the Board, who shall be the Committee’s Chair.
	Each Director that is a member of the Committee shall comply with the independence requirements that have been adopted and approved by the Board of Directors.
	The members of the Committee shall meet at least once a year and as many times as deemed necessary. The decisions of the Corporate Governance Committee shall be by a majority of the Directors present at each meeting.
	The Committee’s main responsibilities will be to:

1. Examine the best practices of good corporate governance and ensure that the Corporation complies with said practices. The corporate governance structure:

a.	Establishes the distribution of the rights and responsibilities among the different constituents of the Corporation: the Board of Directors, Management, Shareholders, and any other constituent.
b.	Sets up the rules and procedures in order to make corporate decisions.

2.	Advise the Boards of Directors of the Corporation and its Subsidiary Corporations, as well as their respective Chairs, about the best practices of corporate governance and the conduct of the Directors.
3.	Provide to the Directors of the Corporation with orientation and educational mechanisms that are relevant and pertinent to their duties and responsibilities in the Corporation.

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B.	Audit Committee
	The Board of Directors shall appoint at least five (5) Directors to this Committee.
	Each Director that is a member of the Committee shall comply with the independence requirements that have been adopted and approved by the Board of Directors.
	The Chair of this Committee shall be appointed by the Directors that are members of the Committee.
	This Committee shall meet at least once every three months and as many times as deemed necessary. The decisions of the Audit Committee shall be by a majority of the Directors present at each meeting.
	The Committee’s main responsibilities will be to:

1.	Review and ensure that the Corporation and its Subsidiary Corporations have an adequate internal control structure to safeguard the assets, generate reliable financial information, and assure the compliance with applicable laws and regulations.
2.	Review the activities performed by the Internal Audit Office of the Corporation.
3.	Appoint or terminate the engagement with the external auditors.
4.	Review the results of the audits performed by the regulatory agencies.
5.	Review the consolidated financial reports of the Corporation to be issued or filed with regulatory agencies.
6.	Review and judge the annual report prepared by the external auditors.
7.	Appoint or terminate the Director of the Internal Audit Office.

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C.	Nominations Committee
	The Board of Directors shall appoint at least seven (7) members of the Board of Directors to this Committee, one of which shall be the Chairperson of the Board.
	Each Director that is a member of the Committee shall comply with the independence requirements that have been adopted and approved by the Board of Directors.
	The Chair of this Committee shall be appointed by the Directors who are members of the Committee.
	The Committee shall meet at least once a year and as many times as deemed necessary. The decisions of the Nominations Committee shall be by a majority of the Directors present at each meeting.
	The Committee’s main responsibilities will be to:

1.	Recommend to the Board of Directors the best qualified candidates that can be members of the Board of Directors and fill any vacancy that arises therein.
2.	Develop and periodically review the qualities that any candidate to be named to the Board of Directors should have.
3.	Recommend to the Board of Directors the best qualified candidates to occupy the position of President of the Corporation.
4.	Evaluate annually, or as often as deemed appropriate, the Directors’ performance pursuant to the criteria and objectives that, from time to time, the Board of Directors establishes.

D.	Compensation Committee
	The Board of Directors shall appoint at least five (5) Directors of the Board of Directors to this Committee.
	Each Director that is a member of the Committee shall comply with the independence requirements that have been adopted and approved by the Board of Directors.

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The Chair of this Committee shall be appointed by the Directors who are members of the Committee.

The Committee shall meet at least once a year and as many times as deemed necessary. The decisions of the Compensation Committee shall be by a majority of the Directors present at each meeting.

The Committee’s main responsibilities will be to:

1.	Develop, recommend, and review the compensation policies for the Executive Officers of the Corporation and its Subsidiary Corporations.
2.	Recommend to the Board of Directors the compensation for the Executive Officers of the Corporation and its Subsidiary Corporations.
3.	Recommend to the Boards of Directors of the Corporation and its Subsidiary Corporations those changes to the compensation levels of the Directors of the Corporation and its Subsidiary Corporations that are deemed necessary.
4.	Develop an annual report regarding the compensation of the Board of Directors and the Executive Officers of the Corporation and its Subsidiary Corporations, pursuant to the applicable laws and regulations.

E.	Finance Committee
	The Chairperson of the Board of Directors shall appoint to this Committee at least four (4) Directors of the Board. In addition to those Directors, the other members of this Committee shall be the Chairperson of the Board, the President of the Corporation, and the Treasurer of the Board, who shall be the Committee’s Chair.
	The Committee shall meet at least once every two months, and as many times as deemed necessary. The decisions of the Finance Committee shall be by a majority of the Directors present at each meeting.

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The Committee’s main responsibilities will be to:

1.	Monitor all the financial activities of the Corporation.
2.	Provide guidance to the Board of Directors in all matters that are related to the finances of the Corporation.
3.	Study all recommended changes to the economic structure of the Corporation.
4.	Evaluate the financial procedures of the Corporation.
5.	Develop the investments policy of the Corporation, and review and recommend amendments to the policy, as deemed necessary.

F.	Resolutions and Regulations Committee
	The Chairperson of the Board of Directors shall appoint at least five (5) Directors of the Board of Directors to this Committee. In addition to those Directors, the other members of this Committee shall be the Chairperson of the Board and the President of the Corporation.
	The Chair of this Committee shall be appointed by the Chairperson of the Board of Directors from among the members of the Committee.
	This Committee shall meet at least once a year, and as many times as deemed necessary. The decisions of the Resolutions and Regulations Committee shall be by a majority of the Directors present at each meeting.
	The Committee’s main responsibilities will be to:

1.	Review the Articles of Incorporation and By-laws of the Corporation, and propose and prepare those resolutions to amend the Articles of Incorporation and By-laws or any other resolution related with other institutional issues.
2.	Evaluate and judge all resolutions that are presented by the Shareholders at the Shareholders Meetings.
3.	Follow up on the status of all resolutions approved by the Shareholders at the Shareholders Meetings.

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G. General Provisions for all Committees

1.	Each of the Committees established by these By-laws shall adopt a Charter in order to govern its actions and to discharge its duties and responsibilities. The Committees shall periodically review their respective Charters, in order to make the necessary changes to achieve its purposes. The Charters, as well as any amendment thereto, shall be approved by the Board of Directors.
2.	All Committees shall keep records of their meetings.
3.	The Chair of each Committee may convene special meetings, as deemed necessary.
4.	The Chairperson of the Board of Directors may, from time to time, request the advice of any of the Committees of the Board, as needed.
5.	The President of the Corporation shall be a member of all Committees, except the Audit Committee and those Committees where he/she does not comply with the independence requirements that have been adopted and approved by the Board of Directors.

H. The Board of Directors or its Chairperson may create any other Committee which they deem necessary for the proper operation of the Corporation’s business.

8-12	DISBURSEMENTS
	The Corporation will not make any disbursement of $25 or more without evidencing such disbursement with a voucher correctly describing the reason for the payment and backed by an endorsed check or receipt signed by the person receiving the payment, or in the name of the same person if the payment is for services or as a refund. The voucher must describe the services performed and detail the expenses by classification.
8-13	INTERESTS OF THE DIRECTORS
	None of the members of the Board of Directors will accept, nor will benefit from any fee, broker’s fee or commission, donation or other emolument in relation to any investment, loan, deposit, purchase, sale, exchange, service or other similar transaction of the Corporation; nor will it have any financial interest in said transactions in any capacity, except in representation and for the benefit of the Corporation and under the previous authority of the Board of Directors.

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	However, travel and representation expenses or expenses incurred as a result of the attendance to the Board of Directors or Committee meetings may be paid to the Directors; as well as for those professional services performed as a medical doctor or dentist to the insurers of Triple-S, Inc., or any other health subsidiary in its capacity as a participating provider of the health insurance plan or plans.
	No ex-director may be part of the Administration of the Corporation or its Subsidiaries nor perform any type of professional services in its capacity as a private citizen or as part of any business, until after three (3) years after the end of his/her term as a member of the Board of Directors.
8-14	CAUSES FOR REMOVAL OF DIRECTORS AND EXECUTIVE OFFICERS NAMED TO THE BOARD OF DIRECTORS
	The following will be considered just cause for the removal of officers:

1.	Act with gross negligence in the performance of his/her duties.
2.	Receive or give a bribe.
3.	Convicted of a felony or grave misdemeanor, which involves depravation by a competent court.
4.	Act immorally or improperly.
5.	Have personal interests incompatible with the interests of the Corporation.
6.	Embezzle or fraudulently or negligently use or dispose of funds of the Corporation.
7.	Improperly use his/her position for personal benefit.
8.	To be absent without any justification for three (3) consecutive ordinary meetings of the Board properly notified or to be absent from six (6) ordinary meetings during the period of one year with or without justification.
9.	Provide confidential or sensitive information of the Corporation without the proper authorization or when it damages the interests of the business.
10.	Lose the Board’s confidence when a minimum of three fourths of the total number of directors which comprise the Board concur in voting for the removal of a director.

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11. Violate in a consistent manner the Articles of Incorporation or the By-laws and Regulations of the Corporation, as well as the General Corporations Law of Puerto Rico and/or the agreements approved in the Shareholders Meeting or by the Board of Directors.

CHAPTER 9 — AMENDMENTS

9-1	AMENDMENTS
	Amendments may be made to the By-laws when the following requirements are complied with and when the proposed amendments have been previously submitted to the Board of Directors and have been included in the notice for the Meeting.

A.	Through a resolution approved by the majority of those shares of the Corporation issued and outstanding with the right to vote which are present at a meeting validly constituted, provided, however, that the Articles 4-1, Section “A”, 6-2 and 7-1, Section “B”, shall only be amended by the affirmative vote of three fourths (3/4) of the Corporation’s voting shares issued and outstanding which are present at a meeting validly constituted.
B.	The approved amendments will be certified by the Chairman and the Secretary, in triplicate, with the seal of the Corporation.
C.	The amendments to the By-laws approved by the shareholders at a meeting or by referendum will be distributed to the shareholders.

CHAPTER 10 — ADMINISTRATION

10-1	NAMING OF THE PRESIDENT OF THE CORPORATION AND HIS/HER FACULTIES
	The Board of Directors will name a President to the Corporation who will be in charge of the general administration, superintendence, and management of the business of the Corporation, subject to the orders and regulations of the Board of Directors, who will fix his salary. The President of the Corporation will assume all other duties and responsibilities that are imposed upon him/her at the Shareholders Assemblies or by the Board of Directors.
10-2	ADMINISTRATION
	The Board will have the faculty to name any other officers that they deem convenient and necessary.

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10-3	BONDS
	The President of the Corporation, as well as any officer or employee that collects, receives, manages or is responsible for or guard funds or securities of the Corporation, will have to give a fidelity bond in the amount set forth by the Board of Directors.
10-4	BUDGET FOR EXPENSES
	The President of the Corporation will prepare each calendar year the budget for the administrative expenses of the Corporation, which will be submitted to the Board of Directors on or before November 15 for their consideration. The Board of Directors will approve the budget on or before December 31, and it will become effective the 1st of January of the next calendar year. In the event that the budget is not approved by the stated date, the corporate operations will continue based on the budget for the previous year until the Board approves a new budget for the administrative expenses of the Corporation. The budget will be available for inspection by the Shareholders at the principal offices of the Corporation, after January 15 of the corresponding year.

By-laws were effective on April 14, 1998.

Revised on December 7, 1998; April 25, 1999; April 30, 2000; April 29, 2001; April 28, 2002; April 27, 2003, April 25, 2004.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ramón M. Ruiz-Comas, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Triple-S Management Corporation;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such internal controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 12, 2004	By:	/s/ Ramón M. Ruiz-Comas
		Ramón M. Ruiz-Comas
		President and
		Chief Executive Officer

45

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Juan J. Román, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Triple-S Management Corporation;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such internal controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
c)

Date: August 12, 2004	By:	/s/ Juan J. Román
		Juan J. Román
		Vice President of Finance
		and Chief Financial Officer

46

EX-32.1

Exhibit 32.1

Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with quarterly report on Form 10-Q of Triple-S Management Corporation (the Corporation) for the period ended June 30, 2004 as filed with the United States Securities and Exchange Commission on the date hereof (the report), I, Ramón M. Ruiz-Comas, President and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1.	The report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2.	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: August 12, 2004	By:	/s/ Ramón M. Ruiz-Comas
		Ramón M. Ruiz-Comas
		President and
		Chief Executive Officer

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EX-32.2

Exhibit 32.2

Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report on Form 10-Q of Triple-S Management Corporation (the Corporation) for the period ended June 30, 2004 as filed with the United States Securities and Exchange Commission on the date hereof (the report), I, Juan José Román, Vice President of Finance and Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1.	The report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2.	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: August 12, 2004	By:	/s/ Juan J. Román
		Juan J. Román
		Vice President of Finance
		and Chief Financial Officer

48