10-Q

United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2005

OR

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

For the transition period from                      to                     

COMMISSION FILE NUMBER: 0-49762

Triple-S Management Corporation

(Exact name of registrant as specified in its charter)

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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, 2005
Common Stock, $40.00 par value	8,904

Triple-S Management Corporation

FORM 10-Q

For the Quarter Ended June 30, 2005

Table of Contents

	PAGE
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004	3
Consolidated Statements of Operations for the three months and six months ended June 30, 2005 and 2004	4
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the six months ended June 30, 2005 and 2004	5
Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004	6
Notes to Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	38
Item 4. Controls and Procedures	38
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3. Defaults Upon Senior Securities	41
Item 4. Submission of Matters to a Vote of Security Holders	41
Item 5. Other Information	42
Item 6. Exhibits	43
SIGNATURES	44
EX-3.1 BY-LAWS OF TRIPLE-S MANAGEMENT CORPORATION
EX-10.1 EMPLOYMENT CONTRACT WITH FRANCISCO JOGLAR-PESQUERA, MD
EX-31.1 SECTION 302 CERTIFICATION OF THE PRESIDENT AND CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE VP OF FINANCE AND CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE PRESIDENT AND CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE VP OF FINANCE AND 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,
	2005		2004
ASSETS
Investments and cash:
Securities held for trading, at fair value:
Fixed maturities	$	46,786		72,423
Equity securities		81,590		86,596
Securities available for sale, at fair value:
Fixed maturities		461,119		444,637
Equity securities		52,793		59,186
Securities held to maturity, at amortized cost:
Fixed maturities		22,193		14,280
Cash and cash equivalents		35,036		35,115
Total investments and cash		699,517		712,237
Premiums and other receivables, net		122,051		113,323
Deferred policy acquisition costs		18,773		18,712
Property and equipment, net		33,020		32,364
Other assets		51,583		43,021
Total assets	$	924,944		919,657
LIABILITIES AND STOCKHOLDERS’ EQUITY
Claim liabilities:
Claims processed and incomplete	$	143,999		137,282
Unreported losses		142,022		127,324
Unpaid loss-adjustment expenses		14,676		14,719
Total claim liabilities		300,697		279,325
Unearned premiums		82,882		84,583
Annuity contracts		37,281		34,071
Liability to Federal Employees Health Benefits Program		6,806		9,791
Accounts payable and accrued liabilities		100,904		100,388
Short-term borrowings		—		1,700
Income tax payable		—		1,827
Net deferred tax liability		—		1,969
Additional minimum pension liability		9,999		8,840
Long-term borrowings		92,547		95,730
Total liabilities		631,116		618,224
Stockholders’ equity:
Common stock, $40 par value. Authorized 12,500 shares; issued and outstanding 8,904 at June 30, 2005 and December 31, 2004		356		356
Additional paid-in capital		150,408		150,408
Retained earnings		133,732		134,531
Accumulated other comprehensive income		9,332		16,138
Total stockholders’ equity		293,828		301,433
Total liabilities and stockholders’ equity	$	924,944		919,657

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, 2005 and 2004

(Dollar amounts in thousands, except per share data)

	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
REVENUE:
Premiums earned, net	$	339,618			322,896			673,007			641,542
Amounts attributable to self-funded arrangements		52,439			46,045			104,354			89,083
Less amounts attributable to claims under self-funded arrangements		(49,302	)		(42,485	)		(97,842	)		(83,067	)
		342,755			326,456			679,519			647,558
Net investment income		7,217			6,393			14,281			12,975
Net realized investment gains		1,363			1,365			4,677			2,748
Net unrealized investment loss on trading securities		(634	)		(3,252	)		(6,427	)		(1,433	)
Other income, net		(142	)		1,120			490			1,686
Total revenue		350,559			332,082			692,540			663,534
BENEFITS AND EXPENSES:
Claims incurred		297,901			286,246			600,824			561,994
Operating expenses, net of reimbursement for services		45,453			42,635			89,219			82,473
Interest expense		1,856			931			3,644			1,832
Total benefits and expenses		345,210			329,812			693,687			646,299
Income (loss) before taxes		5,349			2,270			(1,147	)		17,235
INCOME TAX EXPENSE (BENEFIT):
Current		758			1,248			1,979			4,546
Deferred		183			(457	)		(2,327	)		54
Total income taxes		941			791			(348	)		4,600
Net income	$	4,408			1,479			(799	)		12,635
Basic net income per share	$	495			166			(90	)		1,411

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, 2005 and 2004

(Dollar amounts in thousands, except per share data)

	2005			2004
BALANCE AT JANUARY 1	$	301,433			254,255
Stock redemption		—			(5	)
Comprehensive income:
Net income		(799	)		12,635
Net unrealized change in investment securities		(6,983	)		(6,555	)
Net change in fair value of cash flow hedges		177			373
Total comprehensive income (loss)		(7,605	)		6,453
BALANCE AT JUNE 30	$	293,828			260,703

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, 2005 and 2004

(Dollar amounts in thousands, except per share data)

	Six months ended
	June 30,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Premiums collected	$	664,493			631,773
Cash paid to suppliers and employees		(96,566	)		(84,127	)
Claims, losses and benefits paid		(578,955	)		(529,526	)
Interest received		14,322			13,487
Income taxes paid		(6,482	)		(40,638	)
Proceeds from trading securities sold or matured:
Fixed maturities sold		57,795			31,611
Equity securities		14,021			15,526
Acquisitions of investments in trading portfolio:
Fixed maturities		(32,144	)		(33,686	)
Equity securities		(11,784	)		(27,048	)
Interest paid		(3,064	)		(1,362	)
Expense reimbursement from Medicare		6,986			7,547
Net cash provided by (used in) operating activities		28,622			(16,443	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold or matured:
Securities available for sale:
Fixed maturities sold		1,172			21,464
Fixed maturities matured		7,920			46,441
Equity securities		2,670			1,476
Securities held to maturity:
Fixed maturities matured		594			2,762
Acquisitions of investments:
Securities available for sale:
Fixed maturities		(26,796	)		(55,415	)
Equity securities		(2,822	)		(1,024	)
Securities held to maturity:
Fixed maturities		(8,494	)		(2,612	)
Capital expenditures		(3,143	)		(1,676	)
Proceeds from sale of property and equipment		—			6
Net cash (used in) provided by investing activities		(28,899	)		11,422
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in outstanding checks in excess of bank balances		2,451			9,512
Payments of short-term borrowings		(77,285	)		(6,200	)
Proceeds from short-term borrowings		75,585			6,200
Payments of long-term borrowings		(3,183	)		(1,688	)
Redemption of common stock		—			(5	)
Proceeds from annuity contracts		5,740			7,975
Surrenders of annuity contracts		(3,110	)		(2,265	)
Net cash provided by financing activities		198			13,529
Net (decrease) increase in cash and cash equivalents		(79	)		8,508
Cash and cash equivalents at beginning of the period		35,115			48,280
Cash and cash equivalents at end of the period	$	35,036			56,788

See accompanying notes to unaudited consolidated financial statements.

6

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2005

(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, 2004, 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, 2004.

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, 2005 are not necessarily indicative of the results for the full year.

(2) Segment Information

The following tables summarize the operations by major operating segment for the three months and six months ended June 30, 2005 and 2004:

7

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(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, 2005
Premiums earned, net	$	190,138			124,197			21,102			4,181		339,618
Amounts attributable to self-funded arrangements		52,439			—			—			—		52,439
Less: Amounts attributable to claims under self-funded arrangements		(49,302	)		—			—			—		(49,302	)
Intersegment premiums earned/service revenues		1,029			—			—			11,439		12,468
		194,304			124,197			21,102			15,620		355,223
Net investment income		3,410			749			2,180			761		7,100
Realized gain (loss) on sale of securities		1,445			—			(105	)		23		1,363
Unrealized gain (loss) on trading securities		(740	)		—			16			90		(634	)
Other		(79	)		(6	)		(168	)		58		(195	)
Total revenue	$	198,340			124,940			23,025			16,552		362,857
Net income (loss)	$	5,276			(4,280	)		2,944			432		4,372
Claims incurred	$	164,320			120,823			10,247			2,511		297,901
Operating expenses	$	25,899			9,722			9,108			13,290		58,019
Depreciation expense, included in operating expenses	$	858			—			90			20		968
Interest expense	$	1,114			232			—			300		1,646
Income tax expense (benefit)	$	1,731			(1,557	)		726			19		919

* 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, 2005
(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 revenue	$	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.

9

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(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, 2005
Premiums earned, net	$	374,438			247,337			43,198			8,034			673,007
Amounts attributable to self-funded arrangements		104,354			—			—			—			104,354
Less: Amounts attributable to claims under self-funded arrangements		(97,842	)		—			—			—			(97,842	)
Intersegment premiums earned/service revenues		2,105			—			—			25,077			27,182
		383,055			247,337			43,198			33,111			706,701
Net investment income		6,823			1,490			4,285			1,472			14,070
Realized gain (loss) on sale of securities		3,548			(25	)		1,071			83			4,677
Unrealized loss on trading securities		(5,546	)		—			(777	)		(104	)		(6,427	)
Other		109			(11	)		170			120			388
Total revenue	$	387,989			248,791			47,947			34,682			719,409
Net income (loss)	$	(1,527	)		(5,191	)		5,602			87			(1,029	)
Claims incurred	$	337,149			236,911			21,620			5,144			600,824
Operating expenses	$	50,139			18,636			19,449			28,677			116,901
Depreciation expense, included in operating expenses	$	1,683			—			197			59			1,939
Interest expense	$	2,172			436			—			579			3,187
Income tax expense (benefit)	$	56			(2,001	)		1,276			195			(474	)

* 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, 2005
(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 revenue	$	368,770			240,718			46,231		33,369			689,088
Net income	$	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.

11

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(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, 2005
Segment assets	$	454,872			75,019			289,079			93,554			912,524
Significant noncash item:
Net change in unrealized gain on securities available for sale	$	(5,142	)		(324	)		(957	)		(568	)		(6,991	)
AS OF DECEMBER 31, 2004
Segment assets	$	443,710			84,627			282,393			90,713			901,443
Significant noncash item:
Net change in unrealized gain on securities available for sale	$	523			(151	)		867			(156	)		1,083
Net change in minimum pension liability		313			—			(60	)		(314	)		(61	)

12

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(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,
	2005			2004			2005			2004
TOTAL REVENUE
Total revenues for reportable segments	$	346,305			328,151			684,727			655,719
Total revenues for other segments		16,552			17,058			34,682			33,369
		362,857			345,209			719,409			689,088
Elimination of intersegment earned premiums		(1,029	)		(1,077	)		(2,105	)		(1,981	)
Elimination of intersegment service revenues		(11,439	)		(12,316	)		(25,077	)		(23,853	)
Unallocated amount — revenues from external sources		170			266			313			280
		(12,298	)		(13,127	)		(26,869	)		(25,554	)
Consolidated total revenue	$	350,559			332,082			692,540			663,534
NET INCOME
Net income (loss) for reportable segments	$	3,940			2,042			(1,116	)		13,061
Net income (loss) for other segments		432			(502	)		87			(263	)
		4,372			1,540			(1,029	)		12,798
Elimination of TSM charges:
Rent expense		1,617			1,310			3,241			2,883
Interest expense		300			158			556			317
		1,917			1,468			3,797			3,200
Unallocated amounts related to TSM:
General and administrative expenses		(1,519	)		(1,391	)		(2,741	)		(2,726	)
Income tax expense		(22	)		71			(126	)		38
Interest expense		(510	)		(475	)		(1,013	)		(955	)
Other revenues from external sources		170			266			313			280
		(1,881	)		(1,529	)		(3,567	)		(3,363	)
Consolidated net income	$	4,408			1,479			(799	)		12,635

13

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS

	Three months ended June 30, 2005
	Segment					Consolidated
	Totals		Adjustments *			Totals
Claims incurred	$	297,901		—			297,901
Operating expenses		58,019		(12,566	)		45,453
Depreciation expense		968		272			1,240
Interest expense		1,646		210			1,856
Income tax expense		919		22			941

	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 expense (benefit)		862		(71	)		791

	Six months ended June 30, 2005
	Segment						Consolidated
	Totals			Adjustments *			Totals
Claims incurred	$	600,824			—			600,824
Operating expenses		116,901			(27,682	)		89,219
Depreciation expense		1,939			549			2,488
Interest expense		3,187			457			3,644
Income tax expense (benefit)		(474	)		126			(348	)

	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 (benefit)		4,638		(38	)		4,600

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

14

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

RECONCILIATION OF REPORTABLE SEGMENT TOTALS WITH FINANCIAL STATEMENTS

	June 30,			December 31,
	2005			2004
ASSETS
Total assets for reportable segments	$	818,970			810,730
Total assets for other segments		93,554			90,713
		912,524			901,443
Elimination entries — intersegment receivables and others		(27,931	)		(21,717	)
Unallocated amounts related to TSM:
Parent cash, cash equivalents and investments		12,014			12,236
Parent net property and equipment		25,213			25,577
Parent other assets		3,124			2,118
		40,351			39,931
Consolidated assets	$	924,944			919,657

OTHER SIGNIFICANT ITEMS

	As of June 30, 2005
	Segment					Consolidated
	Totals			Adjustments *		Totals
Significant noncash item — net change in unrealized gain on securities available for sale	$	(6,991	)		8		(6,983	)

	As of December 31, 2004
	Segment					Consolidated
	Totals			Adjustments *		Totals
Significant noncash items:
Net change in unrealized gain on securities available for sale	$	1,083			18		1,101
Net change in minimum pension liability		(61	)		58		(3	)

15

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands)
(Unaudited)

(3) Investment in Securities

The amortized cost for debt securities and equity securities, gross unrealized gains, 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, 2005 and December 31, 2004, were as follows:

	June 30, 2005 (Unaudited)
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Trading securities:
Fixed maturities	$	45,993		1,024		(231	)		46,786
Equity securities		75,283		9,346		(3,039	)		81,590
	$	121,276		10,370		(3,270	)		128,376

	June 30, 2005 (Unaudited)
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Securities available for sale:
Fixed maturities	$	461,974		1,791		(2,646	)		461,119
Equity securities		34,794		18,444		(445	)		52,793
	$	496,768		20,235		(3,091	)		513,912

	June 30, 2005 (Unaudited)
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Securities held to maturity:
Fixed maturities	$	22,193		295		(200	)		22,288

	December 31, 2004
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Trading securities:
Fixed maturities	$	70,668		2,045		(290	)		72,423
Equity securities		74,824		13,496		(1,724	)		86,596
	$	145,492		15,541		(2,014	)		159,019

16

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

	December 31, 2004
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Securities available for sale:
Fixed maturities	$	444,135		2,659		(2,157	)		444,637
Equity securities		34,309		24,913		(36	)		59,186
	$	478,444		27,572		(2,193	)		503,823

	December 31, 2004
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated fair
	cost		gains		losses			value
Securities held to maturity:
Fixed maturities	$	14,280		247		(24	)		14,503

Investment in securities at June 30, 2005 are mostly comprised of U.S. Treasury securities and obligations of U.S. government instrumentalities (54.8%), mortgage backed and collateralized mortgage obligations that are U.S. agency-backed (5.2%), obligations of the government of Puerto Rico and its instrumentalities (9.2%) and obligations of states and political subdivisions (0.1%). The remaining 30.7% 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. During the six-month period ended June 30, 2005 the Corporation recognized an other than temporary impairment amounting to $1,036 on one of its equity securities classified as available for sale.

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, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

(4) Premiums and Other Receivables

Premiums and other receivables as of June 30, 2005 and December 31, 2004 were as follows:

	(Unaudited)
	June 30,		December 31,
	2005		2004
Premiums	$	51,141		45,451
Self-funded group receivables		22,471		17,717
FEHBP		9,371		9,346
Accrued interest		5,072		5,080
Reinsurance recoverable on paid losses		29,999		30,496
Other		14,921		16,406
		132,975		124,496
Less allowance for doubtful receivables:
Premiums		6,585		6,456
Other		4,339		4,717
		10,924		11,173
Total premiums and other receivables	$	122,051		113,323

(5) Claim Liabilities

The activity in the total claim liabilities for the three months ended June 30, 2005 and 2004 is as follows:

	(Unaudited)
	Three months ended June 30,
	2005			2004
Claim liabilities at beginning of period	$	304,632			260,922
Reinsurance recoverable on claim liabilities		(25,285	)		(21,463	)
Net claim liabilities at beginning of period		279,347			239,459
Incurred claims and loss-adjustment expenses:
Current period insured events		295,216			278,354
Prior period insured events		2,685			7,892
Total		297,901			286,246
Payments of losses and loss-adjustment expenses:
Current period insured events		277,796			214,788
Prior period insured events		25,352			52,134
Total		303,148			266,922
Net claim liabilities at end of period		274,100			258,783
Reinsurance recoverable on claim liabilities		26,597			21,605
Claim liabilities at end of period	$	300,697			280,388

18

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

The activity in the total claim liabilities for the six months ended June 30, 2005 and 2004 is as follows:

	(Unaudited)
	Six months ended June 30,
	2005			2004
Claim liabilities at beginning of period	$	279,325			247,920
Reinsurance recoverable on claim liabilities		(26,555	)		(19,357	)
Net claim liabilities at beginning of period		252,770			228,563
Incurred claims and loss-adjustment expenses:
Current period insured events		592,733			559,107
Prior period insured events		8,091			2,887
Total		600,824			561,994
Payments of losses and loss-adjustment expenses:
Current period insured events		415,147			354,857
Prior period insured events		164,347			176,917
Total		579,494			531,774
Net claim liabilities at end of period		274,100			258,783
Reinsurance recoverable on claim liabilities		26,597			21,605
Claim liabilities at end of period	$	300,697			280,388

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 amount in the incurred claims and loss-adjustment expenses for prior period insured events for the three months and six months ended June 30, 2005 and 2004 is due to an unfavorable development of the claim liabilities attributed to higher than expected cost per service and 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	$	22,049			(5,825	)		(86	)		16,138
Net current period change		(6,983	)		—			177			(6,806	)
BALANCE AT JUNE 30	$	15,066			(5,825	)		91			9,332

(7) Income Taxes

Under Puerto Rico income tax law, the Corporation is not allowed to file consolidated tax returns with its subsidiaries.

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 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

19

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

consolidated statements of earnings in the period that includes the enactment date. Quarterly income taxes are calculated using the effective tax rate determined based on the income forecasted for the full fiscal year.

(8) Pension Plan

The components of net periodic benefit cost for the three months and six months ended June 30, 2005 and 2004 were as follows:

	(Unaudited)						(Unaudited)
	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
Components of net periodic benefit cost:
Service cost	$	1,187			1,035			2,330			2,070
Interest cost		1,038			929			2,068			1,858
Expected return on assets		(868	)		(626	)		(1,711	)		(1,252	)
Amortization of prior service cost		12			12			24			24
Amortization of actuarial loss		505			401			995			802
Net periodic benefit cost	$	1,874			1,751			3,706			3,502

Employer contributions

The Corporation disclosed in its audited consolidated financial statements for the year ended December 31, 2004 that it expected to contribute $7,900 to its pension program in 2005. As of June 30, 2005, no contributions have been made. The Corporation currently anticipates contributing approximately $7,900 to fund the pension program in 2005.

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

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

The following table sets forth the computation of basic net income (loss) per share for the three months and six months ended June 30, 2005 and 2004:

	(Unaudited)				(Unaudited)
	Three months ended				Six months ended
	June 30,				June 30,
	2005		2004		2005			2004
Numerator for basic earnings per share:
Net income (loss) available to stockholders	$	4,408		1,479		(799	)		12,635
Denominator for basic earnings per share:
Weighted average of outstanding common shares		8,904		8,905		8,904			8,954
Basic net income (loss) per share	$	495		166		(90	)		1,411

20

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

(10) Contingencies

(a)	As of June 30, 2005, 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 (the Commissioner of Insurance) against Triple-S, Inc. (TSI) and TSM alleging the illegality of the repurchase and subsequent sale of 1,582 shares of TSI’s common stock due to the fact that the ultimate purchasers of said shares were selected on an improper and selective basis by the Corporation in violation of the Puerto Rico Insurance Code. The plaintiffs alleged that they were illegally excluded from participation in the sale of shares by TSI due to the illegally selective nature of the sale of shares and that, consequently the sale of shares should be eliminated.
	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. TSI contested such orders through an administrative and judicial review process. 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 issued a pronouncement providing further clarification of the content and effect of the order. This order also required that all corporate decisions undertaken by TSI through the vote of its stockholders of record, be ratified in a stockholders’ meeting or in a subsequent referendum. In November 2000, TSM, as the sole stockholder of TSI, ratified all such decisions. Furthermore, on November 19, 2000, TSM held a special stockholders’ meeting, where a ratification of these decisions was undertaken except for the resolution related to the approval of the reorganization of TSI and its subsidiaries. This resolution did not reach the two thirds majority required by the order because the number of shares that were present and represented at the meeting was below such amount (total shares present and represented in the stockholders’ meeting was 64%). As stipulated in the order, TSM began the process to conduct a referendum among its stockholders in order to ratify such resolution. The process was later suspended because upon further review of the scope of the order, the Commissioner of Insurance issued an opinion in a letter dated January 8, 2002 which indicated that the ratification of the corporate reorganization was not required.
	In another letter dated March 14, 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 December 6, 1996 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. Such petition was opposed by TSI and by the Commissioner of Insurance.
	Pursuant to that review, on September 24, 2002, the Puerto Rico Circuit 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. The Puerto Rico Circuit Court of Appeals based its decision on administrative and procedural issues directed at the Commissioner of Insurance. The Commissioner of Insurance filed a motion of reconsideration with the Puerto Rico Circuit Court of Appeals on October 11, 2002. TSI and TSM also filed a motion of reconsideration.

21

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

	On October 25, 2002, the Puerto Rico Circuit Court of Appeals dismissed the Commissioner of Insurance’s Motion for Reconsideration and ordered the plaintiffs to reply to TSI’s and TSM’s Motion of Reconsideration.
	On May 18, 2003, the Puerto Rico Circuit Court of Appeals granted TSI’s and TSM’s Motion of Reconsideration. The Puerto Rico Circuit Court of Appeals held that the Commissioner of Insurance had the authority to waive the celebration of a referendum to ratify TSI’s reorganization and that therefore the reorganization of TSI, inasmuch as the 1,582 shares annulled were not decisive, was approved by the stockholders.
	On June 26, 2003, the two stockholders presented a writ of certiorari before the Supreme Court of Puerto Rico. TSI and TSM filed a motion opposing the issuance of the writ. The writ was issued by the Supreme Court on August 22, 2003, when it ordered the Puerto Rico Circuit Court of Appeals to transmit 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 of Puerto Rico. It is the opinion of management that the corporate reorganization as approved is in full force and effect.
(c)	On September 4, 2003, José Sánchez and others filed a putative class action complaint against the Corporation, 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 ownership 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. On March 4, 2005 the Court issued an Opinion and Order. In this Opinion and Order, of the twelve counts included in the complaint, eight counts were dismissed for failing to assert an actionable injury; six of them for lack of standing and two for failing to plead with sufficient particularity in compliance with the Rules. All shareholder allegations, including those described above, were dismissed in the Opinion and Order. The remaining four counts were found standing, in a limited way, in the Opinion and Order. Finally, the Court ordered that by March 24, 2005 one of the counts left standing be replead to conform to the Rules and that by March 28, 2005 a proposed schedule for discovery and other submissions be filed. The count was amended and accepted by the Court, the discovery schedule was submitted and the parties are conducting discovery. This case is still pending before the United States District Court for the District of Puerto Rico.
(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 Puerto Rico 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 United States 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 counterclaim and filed several motions to dismiss

22

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

	this claim. On February 18, 2005 the plaintiffs informed their intention to amend the complaint and the Court granted then 45 days to do so and 90 days to defendants to file the corresponding motion to dismiss. On May 9, 2005 the plaintiffs filed the amended complaint and defendants are preparing the corresponding motions to dismiss this amended complaint. The plaintiffs amended the complaint to allege similar causes of action dismissed by the United States District Court for the District of Puerto Rico in the Sánchez case.
(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 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 they allege have resulted in a loss of their 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 the 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.
	Management believes that TSI was brought to this litigation for the sole reason of being associated with the BCBSA. However, 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, President of the Colegio de Médicos y Cirujanos de Puerto Rico, and Andrés Meléndez, MD, as plaintiffs against TSI. Later Marissel Velázquez, MD voluntarily dismissed her complaint against TSI.
	TSI, along with the other defendants, moved to dismiss the complaint under multiple grounds, including but not limited to arbitration and applicability of the McCarran Ferguson Act.
(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 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

23

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

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 the 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 plaintiffs 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. TSI, along with the other defendants, moved to dismiss the complaint under multiple grounds, including but not limited to arbitration and applicability of the McCarran Ferguson Act.

24

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
June 30, 2005
(Dollar amounts in thousands, except per share data)
(Unaudited)

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

A reconciliation of net income to net cash provided by (used in) operating activities is as follows:

	(Unaudited)
	Six months ended
	June 30,
	2005			2004
Net income (loss)	$	(799	)		12,635
Adjustments to reconcile net income to net cash provided by (used in) operating expenses:
Depreciation and amortization		2,488			2,761
Amortization of investment discounts		321			586
Accretion in value of securities		(288	)		(214	)
Increase (decrease) in provision for doubtful receivables		(249	)		909
Increase (decrease) in net deferred taxes		(2,327	)		53
Gain on sale of securities		(4,677	)		(2,748	)
Unrealized loss of trading securities		6,427			1,433
Proceeds from trading securities sold:
Fixed maturities		57,795			31,611
Equity securities		14,021			15,526
Acquisition of securities in trading portfolio:
Fixed maturities		(32,144	)		(33,686	)
Equity securities		(11,784	)		(27,048	)
Loss on sale of property and equipment		(1	)		(6	)
(Increase) decrease in assets:
Premiums receivable		(10,469	)		(11,111	)
Accrued interest receivable		8			140
Reinsurance receivable		497			(1,606	)
Other receivables		1,996			337
Deferred policy acquisition costs		(61	)		(790	)
Prepaid income tax		(2,676	)		(3,869	)
Other assets		(4,233	)		(1,982	)
Increase (decrease) in liabilities:
Claims processed and incomplete		6,717			13,684
Unreported losses		14,698			18,523
Unpaid loss-adjustment expenses		(43	)		261
Unearned premiums		(1,701	)		88
Annuity contracts		580			470
Liability to FEHBP		(2,985	)		(3,156	)
Accounts payable and accrued liabilities		(662	)		2,978
Income tax payable		(1,827	)		(32,222	)
Net cash provided by (used in) operating activities	$	28,622			(16,443	)

25

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, 2005. 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, 2004.

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 condition indicated in these forward-looking statements. The factors that could cause actual results to differ from those in the forward-looking statements are discussed throughout this form. 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);

• 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

All Reform contracts were to expire on June 30, 2005. The Reform contracts renewal negotiation process was scheduled to begin during the month of February 2005. However, during that month TSI was notified of the government of Puerto Rico’s (the government) interest in extending the contracts until December 31, 2005 or June 30, 2006. During the month of April 2005, the government announced that each contract would be will be extended for a period of twelve (12) months, with an option to cancel on December 31, 2005. The exercise of the option to cancel on December 2005 will be determined by October 2005. The negotiation of the terms of the contracts’ extension commenced during the month of April 2005. TSI has agreed to this request and has submitted proposals with modified contract terms, including premiums. As of today, the premiums rates for the month of August 2005 were negotiated, obtaining an increase of 5.6%. The premiums rates to be in effect for the period from September 1, 2005 to June 30, 2006 are still in the process of negotiation, based on new terms and coverage required by ASES.

Adoption of Accounting Standard

SFAS No. 153, Exchanges of Nonmonetary Assets, an Amendment of APB Opinion No. 29, was issued in December 2004. This statement amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The Corporation is required to adopt SFAS No. 153 on January 1, 2006. The adoption of SFAS No. 153 is not expected to have an impact on the Corporation’s financial statements.

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)	2005			2004			2005			2004
Consolidated earned premiums, net and fee revenue	$	342,755			326,456			679,519			647,558
Consolidated claims incurred	$	297,901			286,246			600,824			561,994
Consolidated operating expenses		45,453			42,635			89,219			82,473
Consolidated operating costs	$	343,354			328,881			690,043			644,467
Consolidated loss ratio		86.9	%		87.7	%		88.4	%		86.8	%
Consolidated expense ratio		13.3	%		13.1	%		13.1	%		12.7	%
Consolidated combined ratio		100.2	%		100.7	%		101.5	%		99.5	%
Consolidated net investment income	$	7,217			6,393			14,281			12,975
Consolidated realized gain on sale of securities		1,363			1,365			4,677			2,748
Consolidated unrealized loss on trading securities		(634	)		(3,252	)		(6,427	)		(1,433	)
Total consolidated net investment income	$	7,946			4,506			12,531			14,290
Consolidated income tax (benefit) expense	$	941			791			(348	)		4,600

Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004

Consolidated earned premiums, net and fee revenue for the three months ended June 30, 2005 presented an increase of $16.3 million, or 5.0%, when compared to the consolidated earned premiums, net and fee revenue for the three months ended June 30, 2004. This fluctuation is attributed to the following:

• The earned premiums, net and fee revenue corresponding to the Health Insurance – Commercial segment increased by $10.7 million, or 5.8%, during the period. This increase is attributed to an increase in average enrollment together with increases in premium rates during the period.

• The earned premiums net of the Health Insurance – Healthcare Reform segment presented an increase of $4.6 million, or 3.8% during this period. The fluctuation in the earned premiums, net of this segment is attributed to an increase in premium rates effective July 1, 2004.

• The earned premiums, net of the Property and Casualty Insurance segment increased by $893 thousand, or 4.4%, during this period. This increase is mostly reflected in the premiums written for the commercial multiperil line of business, net of a decrease in the premiums written for the dwelling business and an increase in premiums ceded.

Consolidated claims incurred for the three months ended June 30, 2005 increased by $11.7 million, or 4.1%, when compared to the claims incurred for the three months ended June 30, 2004. This fluctuation is mostly due to the increase in the claims incurred of the Health Insurance – Healthcare Reform segment during the three months ended June 30, 2005. The claims incurred for this particular segment during the 2005 period presented an increase of $11.2 million, or 10.2%, when compared to the 2004 period which results mostly from higher utilization trends and costs experienced during the period, particularly in the risks assumed by the segment.

The consolidated loss ratio reflected a decrease of 0.8 percentage points during the 2005 period. This fluctuation is mainly due to a decrease in the loss ratio of the Health Insurance – Commercial segment of

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3.9 percentage points, net of an increase in the loss ratio of the Health Insurance – Healthcare Reform segment of 5.7 percentage points.

Consolidated operating expenses for the three months ended June 30, 2005 increased by $2.8 million, or 6.6%, when compared to the operating expenses for the three months ended June 30, 2004. The increase in the consolidated operating expenses is mainly attributed to expenses amounting to $3.2 million related to the launching of the new Medicare Advantage program by the Health Insurance – Commercial segment. The consolidated expense ratio increased by 0.2 percentage points during the same period.

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 unrealized loss on trading securities is related to investments held by the segments in equity securities and corporate bonds. The unrealized loss of $634 thousand experienced during the 2005 period is mostly attributed to losses in the portfolios held by the segments in equity securities and is attributed to the net effect of the following:

• During the 2005 period the Corporation sold certain investments with unrealized gains within the equity securities portfolios. This caused the realization of such gains thus reducing the unrealized gain of the portfolios.

• The equity securities portfolios are designed to replicate the Standard & Poor’s 500 Index, the Russell 1000 Growth Index and the Russell 1000 Value Index. These indexes experienced positive returns in the 2005 period.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

Consolidated earned premiums, net and fee revenue for the six months ended June 30, 2005 increased by $32.0 million or 4.9% 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 $21.5 million, or 6.0%, 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 corresponding to the Health Insurance – Healthcare Reform segment increased by $8.3 million, or 3.5%, during this period. This increase is the net result of an increase in premium rates effective July 1, 2004 and a reduction in the average membership of the segment.

• The earned premiums, net of the Property and Casualty Insurance segment increased by $2.2 million, or 5.4%, during this period. This increase is mostly reflected in the premiums written for the commercial multiperil, auto physical damage and commercial auto liability lines of business, net of a decrease in the premiums written for the dwelling business and an increase in premiums ceded.

Consolidated claims incurred for the six months ended June 30, 2005 reflected an increase of $38.8 million, or 6.9%, when compared to the claims incurred for the six months ended June 30, 2004. The consolidated loss ratio reflected an increase of 1.6 percentage points during this period. This fluctuation is due to the following:

• During the 2005 period the claims incurred for the Health Insurance –Healthcare Reform segment increased by $18.1 million, or 8.3%. This fluctuation results mostly from higher utilization trends, particularly in risks assumed by the segment. Also, the claims incurred by the segment in the 2005 period were increased by an unfavorable development of the unreported losses reserve estimated as of the end of the year 2004.

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• The claims incurred for the Health Insurance – Commercial segment increased by $21.3 million, or 6.7%, during the 2005 period. This fluctuation is attributed to an increase in utilization trends and costs. Also, a year to date recast of the segment’s reserves as of December 31, 2004 reflected an unfavorable development that was considered in the claims incurred during the six months ended June 30, 2005.

The consolidated operating expenses presented an increase of $6.7 million, or 8.2%, during the 2005 period. This fluctuation is mostly due to the segments’ increased volume of business during this period and to expenses amounting to $4.9 million related to the launching of the new Medicare Advantage program by the Health Insurance – Commercial segment. The consolidated expense ratio for the six months ended June 30, 2005 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 turnover of the trading and available-for-sale securities.

The unrealized loss on trading securities is related to investments held by segments in equity securities and corporate bonds. The unrealized loss experienced during the 2005 period is mostly attributed to losses in the portfolios held by segments in equity securities that replicate the Standard & Poor’s 500 Index, the Russell 1000 Growth Index and the Russell 1000 Value Index. These Indexes experienced negative returns in 2005. In addition, during the second quarter of 2005, the Corporation sold certain investments with unrealized gains within the equity securities portfolio. This caused the realization of such gains, thus reducing the unrealized gain of the portfolios.

The consolidated income tax expense for the six months period ended June 30, 2005 decreased by $4.9 million when compared to the same period of the prior year. This decrease is mostly due to a decrease in the taxable income when comparing the six months ended June 30, 2005 with the corresponding 2004 period.

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Health Insurance — Commercial Program Operating Results

	Three months ended						Six months ended
	June 30,						June 30,
(dollar amounts in thousands)	2005			2004			2005			2004
Average enrollment:
Corporate accounts		306,787			301,786			307,481			302,845
Self-funded employers		152,838			139,994			152,076			136,376
Individual accounts		85,593			84,779			85,139			84,707
Federal employees		49,227			52,440			49,690			52,828
Local government employees		36,276			42,811			36,419			42,882
Total enrollment		630,721			621,810			630,805			619,638
Earned premiums	$	190,907			179,820			375,964			355,011
Amounts attributable to self-funded arrangements		52,699			46,319			104,933			89,575
Less: Amounts attributable to claims under self-funded arrangements		(49,302	)		(42,485	)		(97,842	)		(83,067	)
Earned premiums and fee revenue	$	194,304			183,654			383,055			361,519
Claims incurred	$	164,320			162,616			337,149			315,856
Operating expenses		25,899			22,619			50,139			44,613
Total underwriting costs	$	190,219			185,235			387,288			360,469
Underwriting income (loss)	$	4,085			(1,581	)		(4,233	)		1,050
Loss ratio		84.6	%		88.5	%		88.0	%		87.4	%
Expense ratio		13.3	%		12.3	%		13.1	%		12.3	%
Combined ratio		97.9	%		100.9	%		101.1	%		99.7	%

Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004

Earned premiums and fee revenue for the three months ended June 30, 2005 increased by $10.7 million, or 5.8%, when compared to the earned premiums and fee revenue for the three months ended June 30, 2004. This increase in earned premiums and fee revenue is the result of the following:

• In the 2005 period, average enrollment of self-funded groups and rated corporate accounts businesses presented an increase of 12,844 members, or 9.2%, and 5,001, or 1.7%, respectively, that is mostly attributed to new groups acquired during late 2004 and throughout 2005. This increase was offset by a decrease in average enrollment in the Local government employees and Federal employees of 6,535, or 15.3%, and 3,213, or 6.1%, respectively.

• On average, the segment increased premium rates by approximately 3.0% during the 2005 period, particularly in the corporate accounts business.

Claims incurred in the 2005 period presented an increase of $1.7 million, or 1.0%, when compared to the same period in 2004 that is attributed to the segment’s increased volume of business. The loss ratio decreased by 3.9 percentage points, from 88.5% in the 2004 period to 84.6% in the 2005 period. The fluctuation in the loss ratio is attributed to an unusual increase in claims trends experienced by the segment in the second quarter of 2004, particularly in the cost per service of prescription drug coverage and in the utilization of surgical procedures. This increased claims trends was not experienced in the 2005 period.

Operating expenses for the three months ended June 30, 2005 increased by $3.3 million, or 14.5%, when compared to the three months ended June 30, 2004. The segment’s expense ratio increased 1.0 percentage points in the same period. These fluctuations are primarily attributed to approximately $3.2 million of expenses related to the launching of the new Medicare Advantage program as well as to the normal inflationary effect on operating costs.

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Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

Earned premiums and fee revenue for the six months ended June 30, 2005 reflects an increase of $21.5 million, or 6.0%, when compared to the earned premiums and fee revenue for the six months ended June 30, 2004. This increase is the result of the following:

• Average enrollment for the six months ended June 30, 2005 increased by 11,167 members, or 1.8%, when compared to the enrollment as of the same period of 2004. The increase in average enrollment is mostly reflected in self-funded employers and corporate accounts businesses, which membership increased by 15,700 members, or 11.5%, and 4,636 members, or 1.5%, during this period, respectively. The increase in average enrollment is mostly attributed to new groups acquired during late 2004 and throughout 2005. In addition, the segment sustained a renewal retention rate of 95% in the 2005 period. The average enrollment of the Local government employees and Federal employees businesses, on the other hand, reflect a decrease in membership of 6,463, or 15.1%, and 3,138, or 5.9%, during this period, respectively.

• On average, this segment increased premiums rates in corporate accounts groups by approximately 3.3% during the 2005 period.

Claims incurred during the six months ended June 30, 2005 increased by $21.3 million, or 6.7%, when compared to the same period in 2004 that is mostly attributed to the segment’s increased volume of business. The segment’s loss ratio for the six months ended June 30, 2005 increased by 0.6 percentage points when compared to the loss ratio for the six months ended June 30, 2004. This fluctuation is attributed to an increase in utilization trends and costs, particularly in the prescription drug coverage, emergency room and hospital in-patient services. Due to this increase in trends and costs, the segment’s actuarial experience trend increased from 2.5% in the 2004 period to 6.1% in the 2005 period.

The operating expenses for the six months ended June 30, 2005 reflect an increase of $5.5 million, or 12.4%, when compared to the 2004 period. This increase is due to expenses of $4.9 million related to the launching of the new Medicare Advantage program and to the normal inflationary effect on operating costs. The expense ratio for the six months ended June 30, 2005 experienced an increase of 0.8 percentage points compared to the six months ended June 30, 2004.

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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)	2005			2004			2005			2004
Average enrollment:
North area		235,680			234,238			233,843			233,789
Metro-north area		220,129			218,401			218,205			218,701
Southwest area		163,498			165,603			163,235			165,725
		619,307			618,242			615,283			618,215
Earned premiums	$	124,197			119,601			247,337			238,999
Claims incurred	$	120,823			109,605			236,911			218,820
Operating expenses		9,722			9,050			18,636			17,802
Total underwriting costs	$	130,545			118,655			255,547			236,622
Underwriting income (loss)	$	(6,348	)		946			(8,210	)		2,377
Loss ratio		97.3	%		91.6	%		95.8	%		91.6	%
Expense ratio		7.8	%		7.6	%		7.5	%		7.4	%
Combined ratio		105.1	%		99.2	%		103.3	%		99.0	%

Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004

Earned premiums for the three months ended June 30, 2005 increased by $4.6 million, or 3.8%, when compared to the earned premiums for the same period of last year. This increase is mostly the result of higher premium rates. Premium rates were increased by approximately 4.4% during the Healthcare Reform contract renegotiation process for the twelve-month period ended June 30, 2005. This increase was effective on July 1, 2004.

Claims incurred during the three months ended June 30, 2005 presented an increase of $11.2 million, or 10.2%, when compared to the 2004 period. The loss ratio presented an increase of 5.7 percentage points when comparing the same 2005 and 2004 periods. The fluctuation results mostly from higher utilization trends and costs experienced during the three months ended June 30, 2005, particularly in the risks assumed by the segment, such as cardiovascular services, dialysis and obstetrics, among others.

Increase in operating expenses and expense ratio were due to normal inflationary effect in operational costs.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

Earned premiums of the Healthcare Reform segment for the six months ended June 30, 2005 increased by $8.3 million, or 3.5%, when compared to the same period of 2004. This increase is the result of the net effect of the following:

• Premium rates were increased by approximately 4.4% during the Healthcare Reform contract renegotiation process for the twelve-month period ended on June 30, 2005.

• The average monthly enrollment for this segment decreased by 2,932 members, or 0.5%, when comparing the average enrollment for the six months ended June 30, 2005 with the average enrollment for the six months ended June 30, 2004. This decrease is attributed to the continuous review and screening performed by the government over the persons eligible to participate in the Healthcare Reform program.

Claims incurred during the six months ended June 30, 2005 increased by $18.1 million, or 8.3%, when compared to the six months ended June 30, 2004. The loss ratio increased by 4.2 percentage points when comparing the 2005 period with the 2004 period. This fluctuation results mostly from higher utilization

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trends and costs experienced during the 2005 period, particularly in risks assumed by the segment such as cardiovascular services, dialysis and obstetrics, among others. In addition, the 2005 period includes the effect of an unfavorable development of the 2004 year-end reserve estimate of approximately $4.2 million, which has the effect of increasing the period’s loss ratio by approximately 1.7 percentage points.

Operating expenses presented an increase of $834 thousand, or 4.7%, when comparing the 2005 and 2004 periods. The expense ratio presented an increase during the 2005 period of 0.1 percentage points. This fluctuation 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)	2005			2004			2005			2004
Premiums written:
Commercial multiperil	$	15,691			12,641			28,676			25,521
Dwelling		6,571			7,837			12,792			13,536
Auto physical damage		4,595			4,479			9,589			8,891
Commercial auto liability		3,280			3,125			6,959			6,683
Other liability		2,029			2,473			4,355			4,482
Medical malpractice		1,525			1,529			2,625			2,517
All other		2,354			2,540			4,816			4,246
Total premiums written		36,045			34,624			69,812			65,876
Premiums ceded		(14,590	)		(12,977	)		(29,065	)		(25,730	)
Change in unearned premiums		(353	)		(1,438	)		2,451			846
Net premiums earned	$	21,102			20,209			43,198			40,992
Claims incurred	$	10,247			10,501			21,620			21,128
Operating expenses		9,108			10,719			19,449			19,428
Total underwriting costs	$	19,355			21,220			41,069			40,556
Underwriting income (loss)	$	1,747			(1,011	)		2,129			436
Loss ratio		48.6	%		52.0	%		50.0	%		51.5	%
Expense ratio		43.2	%		53.0	%		45.0	%		47.4	%
Combined ratio		91.7	%		105.0	%		95.1	%		98.9	%

Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004

Total premiums written for the three months period ended June 30, 2005 increased by $1.4 million, or 4.1%, when compared to the three months period ended June 30, 2004. This increase is mostly reflected in the premiums written for commercial multi-peril policies that experienced an increase in premiums of $3.1 million, or 24.1%, but offset by a decrease of $1.3 million, or 16.2%, in dwelling policies. Although the current market continues with strong and aggressive competition for commercial lines, with premium rates at lower levels than prior years, the segment’s focus on business retention and relationships with general agents has resulted in growth of premium volume in package polices. The segment has directed efforts to strengthen relationships with financial institutions in order to increase writings for dwelling policies. The reported decrease in premiums written for this line of business is attributed to policy retention efforts of competitors.

Premiums ceded to reinsurers during the three months ended June 30, 2005 increased by $1.6 million, or 12.4%, when compared to the same period for the prior year. The ratio of premiums ceded to premiums written increased 3.0 percentage points, from 37.5% in the 2004 period to 40.5% in the 2005 period. This fluctuation is attributed to changes in the quota share treaties for personal and commercial lines as well as to an increase in catastrophe coverage. Cessions in premiums for the commercial and personal lines quota share arrangements increased from 37.5% to 42.5% and from 7.5% to 10.0%, respectively, during the first quarter of 2005.

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Claims incurred reflect a reduction of $254 thousand, or 2.4% when compared to the 2004 period. The loss ratio experienced a decrease of 3.4 percentage points during the three months period ended June 30, 2005 as compared to the same period of the prior year. Emphasis on quality underwriting has resulted in better loss experience for this segment.

Operating expenses for the three months ended June 30, 2005 decreased by $1.6 million, or 15.0%, when compared to the operating expenses for the three months ended June 30, 2004. The expense ratio decreased by 9.8 percentage points during this period. The decrease in operating expenses is attributed to the experience refund received from the Compulsory Vehicle Liability Insurance Joint Underwriting Association during the 2005 period. This refund, amounting to $918 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 was received in the 2004 period.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

Total premiums written for the six months period ended June 30, 2005 increased by $3.9 million, or 6.0%, when compared to the six months period ended June 30, 2004. This increase is mostly reflected in the premiums written for the commercial multi-peril and auto physical damage lines of business, which experienced an increase in premiums of $3.2 million, or 12.4%, and $698 thousand, or 7.9%, during this period, respectively. The commercial auto lines of business, including auto physical damage coverage, have been targeted for growth through new business. As previously stated, since 2004 the segment directed efforts with financial institutions to increase writings for dwelling policies. The decrease of $744 thousand, or 5.5%, in the premiums written of the dwelling business in the 2005 period is attributed to policy retention efforts of competitors.

Premiums ceded to reinsurers during the six months period ended June 30, 2005 increased by $3.3 million, or 13.0%, when compared to the same period for the prior year. The ratio of premiums ceded to premiums written reflects an increase of 2.5 percentage points, from 39.1% in the 2004 period to 41.6% in the 2005 period. Cessions in premiums for the commercial and personal lines quota share arrangements increased from 37.5% to 42.5% and from 7.5% to 10.0%, respectively, during the six-month period ended in 2005. In addition, the catastrophe coverage was increased during the 2005 period.

Claims incurred increased by $492 thousand, or 2.3%, that is basically due to the segment’s increased volume of business and a lower loss ratio during the 2005 period. The loss ratio experienced a decrease of 1.5 percentage points during the six months period ended June 30, 2005 as compared to the same period of the prior year. This decrease is mainly attributed to the segment’s focus on quality underwriting to improve loss experience. These efforts have resulted in improved loss ratios particularly in the commercial multi-peril, auto liability and casualty lines of business.

The operating expenses for the six months period ended June 30, 2005 decreased by $21 thousand, or 0.1%, when compared to the operating expenses for the six months period ended June 30, 2004. The expense ratio decreased by 2.4 percentage points during the 2005 period. This decrease in the expense ratio is attributed to the experience refund received from the Compulsory Vehicle Liability Insurance Joint Underwriting Association during the 2005 period. This refund, amounting to $918 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 was 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.

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As of June 30, 2005 and December 31, 2004, the Corporation’s cash and cash equivalents amounted to $35.0 million and $35.1 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 operating and acquisition expenses and proceeds from sales and maturities of investments in the trading portfolio.

Net cash flows provided by (used in) operating activities amounted to $28.6 million and $(16.4) million for the six months ended June 30, 2005 and 2004, respectively, an increase of $45.0 million. This increase in cash flows from operating activities is mainly attributed to the net effect of the following:

• The net proceeds of investments in the trading portfolio increased by $41.5 million for the six months ended June 30, 2005, when compared to the six months ended June 30, 2004.

• The amount of income taxes paid decreased by $34.2 million when comparing the payments made in the 2005 and 2004 periods. The 2004 period includes the payment of the last installment of the $51.8 million income tax liability related to 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 paid during the year 2003 and the second and last installment, amounting to $14.8 million, was paid on April 15, 2004. In addition, on April 15, 2004 TSI paid $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. In the 2005 period, the Corporation paid its regular estimated income tax installments.

• Premiums collected increased by $32.7 million when comparing collections during the six months ended June 30, 2005 with collections for the six months ended June 30, 2004. 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, 2005 reflect an increase of $49.4 million when compared with the six months ended June 30, 2004. 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 payments to suppliers and employees increased by $12.4 million when comparing the amount paid during the 2005 and 2004 periods. This increase is basically attributed to additional commission expense generated from the acquisition of new business and general operating expenses.

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.

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Net cash flows (used in) provided by investing activities amounted to $(28.9) million and $11.4 million for the six months ended June 30, 2005 and 2004, respectively. The decrease in the cash flows from investing activities during this period is attributed to a net increase in the acquisition of investments. During the six months ended June 30, 2005 total acquisition of investments exceeded the proceeds from investments sold or matured by $25.8 million. During the six months ended June 30, 2004 the amount of proceeds from investments sold or matured exceeded investment acquisitions by $13.1 million.

Cash Flows from Financing Activities

Net cash flows provided by financing activities amounted to $198 thousand and $13.5 million for the six months ended June 30, 2005 and 2004, respectively. The decrease of $13.3 million when compared to the same period of the prior year is mainly due to the combined effect of following fluctuations:

• The change in outstanding checks in excess of bank balances reflects a decrease of $7.1 million during the six months ended June 30, 2005 compared to the 2004 period. 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.

• Net proceeds from annuity contracts decreased by $3.1 million during the six month period ended June 30, 2005. This fluctuation is basically due to a decrease in the proceeds received from the fixed deferred annuity product.

• In the 2005 period the payments of short-term borrowings exceeded proceeds from short-term borrowings by $1.7 million. Short-term borrowings are used to address timing differences between cash receipts and disbursements.

• The repayments of long-term debt increased by $1.5 million for the six months period ended June 30, 2005 when compared to the payments made in the 2004 period. This fluctuation is due to an increase in the repayment for one of the credit agreements, which amounted to $2.5 million in 2005 and $1.0 million in 2004.

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, 2005, the Corporation had $227.5 million in available credit on these agreements. There are no short-term borrowings outstanding as of June 30, 2005.

On September 30, 2004 TSI issued and sold $50.0 million of its 6.30% senior unsecured notes due September 2019 (the notes). The notes are unconditionally guaranteed as to payment of principal, premium, if any, and interest by the Corporation. The notes were privately placed to various institutional investors under a note purchase agreement among TSI, the Corporation and the investors. The notes pay interest semiannually beginning on March 2005, until such principal becomes due and payable. The notes contain certain covenants with which TSI and the Corporation have complied with at June 30, 2005.

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, 2005, the two credit agreements have an outstanding balance of $30.0 million and $12.5 million, respectively. These credit agreements contain restrictive covenants, including, but not limited to, the granting of certain liens, limitations on acquisitions and limitations on changes in control. As of June 30, 2005, management believes the Corporation is in compliance with these covenants.

Further details regarding the senior unsecured notes and the 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 Annual Report on Form 10-K as of and for the year ended December 31, 2004.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Corporation is exposed to certain market risks that are inherent in the Corporation’s financial instruments, which arise from transactions entered into in the normal course of business. The Corporation 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, 2004. A discussion of the Corporation’s market risk as of December 31, 2004 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, 2005. 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, 2005. 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.

Part II — Other Information

Item 1. Legal Proceedings

(a)

As of June 30, 2005, 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)

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. On February 18, 2005 the plaintiffs informed their intention to amend the complaint and the Court granted then 45 days to do so and 90 days to defendants to file the corresponding motion to dismiss. On May 9, 2005 the plaintiffs filed the amended complaint and defendants are preparing the corresponding motions to dismiss this amended complaint. The plaintiffs amended the complaint to allege similar causes of action dismissed by the United States District Court for the District of Puerto Rico in the Sánchez case. Further descriptions of this case and the Sánchez case are incorporated hereby by reference to Sections (c) and (d) of Item 1 of Part II of the Corporation’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2005 filed on May 13, 2005.

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

Not Applicable

Item 3. Defaults Upon Senior Securities.

Not Applicable

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

A. Annual Meeting

TSM held its 2005 Annual Meeting of Shareholders on April 25, 2005. The Shareholders considered and voted upon the election of five directors and two resolutions. Resolution number three 3 which needed the affirmative vote of two thirds of the issued and outstanding shares and resolutions 4 to 6, which needed the affirmative vote of three-quarters of the issued and outstanding shares for their approval, were not voted, since the number of shares necessary to consider them were not present at the meeting. Therefore, a seventh

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resolution to recess the Annual Meeting and continue it at a later date was put to a vote. The purpose is to obtain the necessary participation of the issued and outstanding shares required for each remaining resolution.

Summaries of said proposals and voting results were as follows:

Election of Directors:

Election of five (5) 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 Puerto Rico General Corporations Law of 1995, as amended. At the Annual Meeting, five directors were elected by ballot, each serving a term of three years; therefore, until April 2007. At the moment of voting, 4,710 shares were present or represented.

All candidates recommended by the Board of Directors were elected. Four directors were required to be physicians or dentists: (1) Arturo R. Córdova-López, MD, received 4,142 votes in favor, (2) José Hawayek-Alemañy, MD, received 4,119 votes in favor, (3) Wilfredo López-Hernández, MD, received 4,103 votes in favor, and (4) Wilmer Rodríguez-Silva, MD, received 4,065 votes in favor. One director was required to be a representative of the community: (1) Admina Soto-Martínez, CPA, received 4,422 votes in favor.

One physician was nominated for the Board of Directors in the Annual Meeting of Shareholders by a shareholder: Héctor O. Fontanet, MD, received 687 votes in favor, therefore he was not elected.

Proposals of the Board of Directors:

Resolution Number 1: was presented by the Board of Directors of TSM to amend Article 5-1 of the By-laws of TSM to establish that the Annual Meeting of Shareholders may take place on the last Sunday of the month of April of each year, or, as an exception, at such other date which is closest to the last Sunday of the month of April as determined by the Board due to any legal requirement applicable to TSM.

In order for this Resolution to be approved, it had to receive the affirmative vote of a majority or more of the issued and outstanding common shares with the right to vote present at the Annual Meeting pursuant to Section A of Article 9-1 of the By-laws of TSM. At the moment of voting, 4,710 shares were present or represented. This Resolution received 94.6% (4,310) votes in favor, 3.1% (142) votes against, and 2.3% (103) abstentions. Therefore, this Resolution received the required votes in favor and it was approved.

Resolution Number 2: was presented by the Board of Directors of TSM to amend Article 9-1 of the By-laws of TSM to harmonize its language with the Articles of Incorporation regarding the amount of issued and outstanding common shares with the right to vote required in order to approve certain amendments to the By-laws.

In order for this Resolution to be approved, it had to receive the affirmative vote of a majority or more of the issued and outstanding common shares with the right to vote present or represented at the Annual Meeting pursuant to Section A of Article 9-1 of the By-laws of TSM. Of 4,711 shares present or represented at the moment of voting, this Resolution received 86.8% (4,040) votes in favor, 12.0% (559) votes against, and 1.2% (56) abstentions. Therefore, this Resolution received the required votes in favor and it was approved.

Proposal Presented at the Annual Meeting of Shareholders:

After the voting of the proposals for which the minimum amount of issued and outstanding shares that are required for their consideration are registered, the Board of Director as detailed in the Proxy Statement

39

presented a resolution to request an adjournment of the Annual Meeting. The Board of Directors will convene the adjourned Annual Meeting at a later date, and shareholders may, on such date, vote on any of the remaining proposals.

Resolution Number 7: was presented by the Board of Directors of TSM to adjourn the Annual Meeting of Shareholders, in order to solicit additional proxies in favor of the proposals were the amount of issued and outstanding shares required to consider and vote for were not registered at the Annual Meeting. The Annual Meeting was adjourned to be continued on a later date notified by the Board of Directors to all the shareholders, which will be before the next Annual Meeting of Shareholders.

In order for this resolution to be approved, it had to receive the affirmative vote of a majority or more of the issued and outstanding common shares with the right to vote present or represented at the Annual Meeting pursuant to Section A of Article 9-1 of the By-laws of TSM. Of the 4,711 shares present and represented at the moment of voting, this Resolution received (95.7%) 4,349 votes in favor, 4.3% (196) votes against, and 0.0% (0) abstentions. Therefore, this Resolution received the required votes in favor and it was approved.

Item 5. Other Information.

(a). On April 25, 2005, the Board of Directors of TSM held a special meeting where it elected the officers of the Board of Directors, which elections were effective immediately. The officers of the Board of Directors are as follows:

Wilmer Rodríguez-Silva, MD, Chairman of the Board of Directors
Mario S Belaval-Ferrer, Vice-Chairman of the Board of Directors
Jesús R. Sánchez-Colón, DMD, Secretary of the Board of Directors
Miguel Nazario-Franco, 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 M. Ruiz-Comas, CPA, President and Chief Executive Officer
Valeriano Alicea-Cruz, MD
José Arturo Álvarez-Gallardo
Arturo R. Córdova-López, MD
Carmen Ana Culpeper-Ramírez
Porfirio E. Díaz-Torres, MD
Manuel Figueroa-Collazo, PhD
José Hawayek-Alemañy, MD
Fernando L. Longo-Rodríguez, MD
Wilfredo López-Hernández, MD
Juan E. Rodríguez Díaz, Esq.
Manuel Suárez-Méndez, PE
Fernando J. Ysern-Borrás, MD

(b). Shareholder’s proposals intended to be presented at the 2006 Annual Meeting of Shareholders must be received by the Corporation’s Secretary, at its executive offices, located at the Sixth Floor of 1441 FD Roosevelt Avenue, San Juan, Puerto Rico 00920, or by mail at PO Box 363628, San Juan, Puerto Rico, 00936-3628, no later than December 1, 2005, for inclusion in the Corporation’s Proxy Statement and Form of Proxy relating to the 2006 Annual Meeting of Shareholders.

Item 6. Exhibits

(a) Exhibits:

Exhibit 3.1 By-laws of Triple-S Management Corporation, as amended (English translation).

Exhibit 10.1 Employment contract with Francisco Joglar-Pesquera, MD (English translation).

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	Exhibit 11 Statement re computation of per share earnings; an exhibit describing the computation of the earnings per share for the three months and six months ended June 30, 2005 and 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 and six months ended June 30, 2005 and 2004 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 filed with the Securities and Exchange Commission the following Current report on Form 8-K.

• Form 8-K dated May 2, 2005, to report that Dr. Manuel A. Marcial-Seoane, an ex-member of the Board of Directors of TSM, notified on September 29, 2004 his intention not to stand for re-election as a member of TSM’s Board of Directors upon the expiration of his term. On April 24, 2005, the Annual Meeting of Shareholders of TSM was held and Dr. Jose Hawayek-Alemañy was elected to serve in the Board of Directors of TSM in the post left vacant by Dr. Marcial-Seoane on that date.

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SIGNATURES

Pursuant to the requirements of the United States Securities 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, 2005	By:	/s/ Ramón M. Ruiz-Comas
		Ramón M. Ruiz-Comas, CPA
		President and Chief Executive Officer

Date: August 12, 2005	By:	/s/ Juan J. Román
		Juan J. Román, CPA
		Vice President of Finance and Chief Financial Officer

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EX-3.1

                                                                     EXHIBIT 3.1

         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
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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
Page 3

                        CHAPTER 5 - SHAREHOLDER MEETINGS

5.1   ANNUAL MEETING

      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 as determined by the Board of Directors from time to time, at the
      place indicated in the Notice of Meeting, at 9:00 am, on the last Sunday
      in April of each year or, as an exception, at such other date which is
      closest to the last Sunday of the month of April as determined by the
      Board due to any legal requirement applicable to the Corporation. 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, who
      have the right to vote at the meeting, 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.



By-laws of
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Page 4

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.

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.



By-laws of
Triple-S Management Corporation
Page 5

                              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.

      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.



By-laws of
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Page 6

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.

      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.



By-laws of
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Page 7

      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.

      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.



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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.

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.



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      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.

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.



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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.

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.



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            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.

      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.

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



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            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.

            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.



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            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.

      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.



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            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.

      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.



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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.

      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.



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                             CHAPTER 9 - AMENDMENTS

9-1   AMENDMENTS

      A.    In order to amend these By-laws, the Board of Directors must
            consider and approve the proposed amendments, then the resolution to
            amend the By-laws must be notified and included in the notice for
            the shareholders' meeting, and, lastly, at said meeting, the
            shareholders must approve the amendments pursuant to the voting
            requirements set forth herein:

            1.    By the affirmative vote of a majority of the issued and
                  outstanding common shares with the right to vote present at a
                  validly constituted meeting of shareholders, except for those
                  cases set forth below.

            2.    By the affirmative vote of three-fourths (3/4) of the issued
                  and outstanding common shares with the right to vote, in the
                  case of Section "A" of Article 4-1 (that no person may hold
                  five percent (5%) or more of the voting common shares of the
                  Corporation), Article 6-2 (that prohibits cumulative voting),
                  and Section "B" of Article 7-1 (that establishes that the
                  Board of Directors will be divided into three staggered
                  groups).

            3.    By the affirmative vote of a majority of the issued and
                  outstanding common shares with the right to vote, in the case
                  of Article 3-1 regarding authorized capital.

            4.    By the affirmative vote of such amount of votes or percentage
                  of votes required by the Articles of Incorporation if the
                  requirements established therein are greater than those
                  established in this Article 9-1 for any particular matter that
                  is contained in the Articles of Incorporation as well as in
                  the By-laws.

      B.    The approved amendments will be certified by the President 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.



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                           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.

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; April 24, 2005.

EX-10.1

                                                                    EXHIBIT 10.1

             THIS IS A FAIR AND ACCURATE ENGLISH TRANSLATION OF THE
            ORIGINAL EMPLOYMENT CONTRACT BY AND BETWEEN DR. FRANCISCO
             JOGLAR PESQUERA AND TRIPLE-S, INC. WHICH IS IN SPANISH

                               EMPLOYMENT CONTRACT

In the city of San Juan, Puerto Rico, today the 1st of July of 2005.

                                     APPEAR

FOR THE FIRST PART: TRIPLE-S, INC., a corporation organized and engaged in
business in conformance with Commonwealth of Puerto Rico laws, represented here
by its Board of Director's Chairman, DR. WLMER RODRIGUEZ SILVA, and by its Chief
Executive Officer, CPA SOCORRO RIVAS RODRIGUEZ, of legal age, married, the
latter a physician by trade, and residing in Guaynabo, Puerto Rico, and the
former an executive residing in San Juan, Puerto Rico, whose authorities and
duties they are repaired to justify as soon as it is required of them.

FOR THE SECOND PART: FRANCISCO JOGLAR PESQUERA, of legal age, married, a
physician by trade and a resident of Rio Piedras, Puerto Rico.

The undersigned, with the intention of entering into an employment contract and
with the legal capacity to execute this document, to that effect, freely and
voluntarily

                                     EXPOSE

FIRST: For purposes of abbreviation and ease in understanding and analyzing this
agreement of intentions, the following terms shall have the meaning stated in
these definitions:

      a.    The "CEO"; The Chief Executive Officer of Triple-S, Inc., CPA
            Socorro Rivas Rodriguez

      b.    The "BOARD"; The Board of Directors of Triple-S, Inc.

      c.    The "PBD"; President of the BOARD, Dr. Wilmer Rodriguez Silva

      d.    The "VMDP"; The Senior Vice-president of the Medical, Dental and
            Professional Matters Division, Dr. Francisco Joglar Pesquera,

      e.    The "CONTRACT"; This Employment Contract.



SECOND: That Triple-S, Inc. is a company dedicated, among other activities, to
providing insurance coverage for the receipt of medical-hospital services
throughout the Commonwealth of Puerto Rico.

THIRD: That the VMDP is a vastly experienced professional in the Medical Field,
having obtained a Doctor of Medicine Degree from the University of Puerto Rico,
interning and specializing in internal medicine and Nephrology at the University
of Puerto Rico School of Medicine's University Hospital. Also, during the last
25 years the VMDP has performed as Professorial Chair at the University of
Puerto Rico, School of Medicine, and as its Dean during the last five and a half
years. He has been practicing in the medical private practice for the past 27
years.

FOURTH: For purposes of establishing the internal relationship between both
contracting parts as herein stated, they agree to the present CONTRACT subject
to the following Clauses and Conditions.

                               GENERAL PROVISIONS

      1.    EXCELLENCE IN PERFORMANCE: Through this CONTRACT, the VMDP is under
            the obligation of dedicating and directing full time, intellect,
            attention, energy, experience and knowledge towards the protection
            of Triple-S, Inc.'s best interests, within the framework of
            excellence his capacity and ability permit.

      2.    OFFICER AND TITLE: The VMDP will carry the Title of Senior
            Vice-president of the Medical, Dental and Professional Matters of
            Triple-S, Inc.

      3.    HIERARCHY: The VMDP will respond directly to Triple-S, Inc.'s CEO,
            and will inform the Board of Directors about Triple-S, Inc.'s
            medical, dental and professional problems.

      4.    FIDUCIARY NORMS AND OBLIGATIONS: The VMDP will be under the
            obligation to conform loyally and fully with all administrative
            guidelines, rules, regulations and norms established by Triple-S,
            Inc., developing and establishing the operational controls necessary
            to protect Triple-S, Inc.'s best interests. The VMDP will be loyal
            to Triple-S, Inc. at all times, and will solemnly recognize the
            obligation represented in his acceptance of the current title.

                               SPECIFIC PROVISIONS

      5.    PRINCIPAL FUNCTIONS. The functions the VMDP will undertake through
            this contract will be all those related to Triple-S, Inc.'s medical,
            dental and professional matters, and he will be the person the CEO
            will turn to in dealing with these medical, dental and professional
            matters. The VMDP's functions



            will invariably be performed in Triple-S, Inc.'s best interests and
            for its protection.

            The VMDP will participate in meetings held by the Professional
            Relations and in the Board of Directors, in the role of Advisor. His
            presence will be required in the meetings held by this committee and
            by the Board of Directors, unless the President of the Committee, or
            the Board, excuse his presence.

      6.    INCIDENTAL OR ACCESSORY FUNCTIONS. The VMDP should also fulfill all
            those functions, tasks and commissions, incidental or accessory,
            which the CEO assigns him from time to time, including his presence
            in other Board Committees.

      7.    ECONOMIC REMUNERATION. The VMDP will be economically remunerated in
            the following manner for the services that, in keeping with this
            CONTRACT, he is under the obligation to fulfill:

            a.    Salary. An annual salary of $175,000.00, equivalent to
                  $14,583.33 a month.

            b.    Christmas Bonus. A Special Christmas bonus equivalent to 5% of
                  his annual salary, plus half a month's salary, plus any bonus
                  Triple-S, Inc. is obligated by law provisions to pay. This
                  Christmas bonus will be paid in conformance to the Triple-S,
                  Inc.'s policies and norms applicable to their management
                  employees, and as modified from time to time.

            c.    Optional Additional Annual Bonus. The Board of Directors can
                  also, at their option, grant an optional additional annual
                  bonus that will be computed by the Board of Directors each
                  year, as is established in the following clause.

            d.    Attached as Attachment A of this contract, the document titled
                  Annual Compensation Statement which provides a detail of the
                  remuneration and marginal benefits. Attachment A is part of
                  this contract.

      8.    COMPUTING THE OPTIONAL ADDITIONAL ANNUAL BONUS. The Optional
            Additional Annual Bonus (AAB) will be determined annually, at the
            Board of Director's option, immediately after Triple-S, Inc.
            receives its financial statements for the pertinent economic year,
            certified by their external auditors. The AAB will be credited to
            the VMDP as soon as the Board has determined it, and according to
            the criteria it establishes for its payment. The Board of Directors
            will compute the AAB at the time it considers the Vice Presidents'
            AABs.



      9.    DEFERRED COMPENSATION. The VMDP will have the power to, from time to
            time, defer payments for any of the before mentioned economic
            remuneration concepts in keeping with his wishes, if and when such
            action is in accordance to the applicable law provisions and to good
            corporate practices.

      10.   ANNUAL SALARY REVISION. The VMDP's Salary will be reviewed annually,
            effective July 1st of each year, beginning on January 1, 2007. Said
            revision would take into account the percent of change in Puerto
            Rico's general economic inflation rate, as determined by the
            Planning Board for the previous year, and other factors regarding
            compensation of other Officers of same or similar position and
            responsibility within the local industry and commerce, and any other
            relevant factor, for example, that Triple-S, Inc. has closed the
            revision applicable year with positive financial results. The BOARD
            shall do the computing of the salary change at the time it reviews
            compensation to Vice-presidents.

      11.   FRINGE BENEFITS. The VMDP will have the right to all fringe benefits
            such as: Retirement Plan, Health Plan, vacations, sick leave,
            disability insurance and others, in conformance to Triple-S, Inc.'s
            policies and norms as applicable to its management employees, and as
            modified from time to time.

            Triple-S, Inc. also will reimburse or pay the VMDP the following:

               a.    Representation, travel and miscellaneous expenses which are
                     reasonably and necessarily incurred in carrying out his
                     official duties;

               b.    Annual membership fees to two professional associations
                     such as the Puerto Rico College of Physicians and Surgeons,
                     and the Puerto Rico Medical Association, per prior approval
                     from the CEO, and

               c.    Any other related expenses that the CEO deems necessary in
                     carrying out his duties.

      12.   DEDUCTIONS. Triple-S, Inc. will make all deductions from the VMDP's
            remuneration that the law requires, such as: social security,
            retained income taxes, and his spouse's and any other optional
            dependent's life and disability insurance portion. The VMDP is
            authorized to acquire any life insurance coverage in addition to the
            one currently held by Triple-S, Inc., at his own responsibility and
            cost.

      13.   EXCLUSION FROM THE MINIMUM WAGE LAW. The VMDP recognizes that the
            duties he will undertake are excluded from the Puerto Rico Minimum
            Wage Law.



      14.   EFFECTIVENESS AND TERM OF CONTRACT. This contract's effective date
            is established to be July 1, 2005 and its ending date is June 30,
            2010. The Board of Directors can, at their option, renew this
            contract. The Board of Directors must notify the VMDP no later than
            one year before the ending date of this original contract term or of
            its renovation, of their decision to renew or not renew it.

            If Triple-S, Inc. decides not to renew the Contract, it is under the
            obligation to pay the VMDP one year's salary. Triple-S, Inc. must
            also have fulfilled all obligations to the VMDP which correspond to
            his contract's terms, including those regarding compensation and
            fringe benefits. Disbursement of this amount shall occur no later
            than the last effective date of this contract. In case this contract
            is renewed and then terminated by Triple-S Inc. before the
            renovation's ending date, Triple-S, Inc. is under the obligation of
            providing the VMDP with the same compensation.

      15.   UNILATERAL RESOLUTION- JUST CAUSE. It is understood that Triple-S,
            Inc. is assisted by just cause for unilaterally dissolving this
            CONTRACT when the VMDP incurs in any of the following behaviors:

                  a.    Negligence in carrying out his duties, or their late,
                        inadequate or inept performance;

                  b.    Conviction of a felony or misdemeanor involving moral
                        depravation;

                  c.    Insubordination;

                  d.    Material non-conformance to corporate norms, rules and
                        agreements, or those of this CONTRACT;

                  e.    Improper or disorderly conduct;

                  f.    Existence of a conflict of interests;

                  g.    Total, temporary or partial closing of Triple-S, Inc.'s
                        operations;

                  h.    Employment reductions that result from Triple-S, Inc.'s
                        diminishing business volume.

                  In such case, the compensations described in clause 15 and 16
                  will not be applicable.

      16.   UNILATERAL RESOLUTION. The parties agree that Triple-S, Inc. has the
            right to dissolve unilaterally this contract at any time before the
            agreed ending



            date. To exercise this right, the PBD and the CEO will jointly
            notify the VMDP thirty days before the effective date of said
            unilateral dissolution. As a condition for Triple-S, Inc. to
            exercise this right, it must proceed immediately with the total cash
            liquidation of the balance of this professional employment contract,
            in addition to the one year salary specified in paragraph 14,
            including the fringe benefits, and subtracting the discounts
            applicable by law. Triple-S, Inc. will have the option of continuing
            monthly payments until the contract is completed.

            The VMDP will be able to resolve this contract unilaterally in any
            moment, notifying the PBD and the CEO thirty (30) days prior to
            being effective said unilateral resolution. In said case, the
            compensations discussed before will not be applicable.

      17.   PREMATURE TERMINATION- DEATH, DISABILITY OR BANKRUPTCY. If the VMDP
            should die during this CONTRACT term, Triple-S, Inc. will liquidate
            his wages through payment to the heirs. Besides the life insurance
            the VMDP is entitled to as specified, and the liquidation of his
            wages, the VMDP's heirs are not entitled to any additional
            compensation.

            If the VMDP should suffer a significant mental or physical
            disability, or if Triple-S, Inc. should be brought, voluntarily or
            involuntarily, to a bankruptcy process, Triple-S, Inc. can, at its
            option entirely, dissolve this contract unilaterally. This without
            the assumption that the VMDP's rights are violated in case of a
            physical disability, due to the disability insurance stated before.

            For purposes of the last paragraph, it will be understood that the
            VMDP suffers from significant physical or mental disability when he
            absents himself from his employment for SIX (6) consecutive months,
            or he is absent in excess of NINETY PERCENT (90%) of said SIX
            consecutive month period. In termination for any of the before
            mentioned reasons, the payment of one year's salary will not apply.

      18.   PRIVILEGED MATERIAL- CONFIDENTIALITY. Except as formerly stated, all
            the information Triple-S, Inc. shares with the VMDP, or that he is
            privy to as a consequence of his employee relationship with
            Triple-S, Inc., in the guise of any chores, relationships, contacts,
            businesses, clients and duties, will constitute privileged and
            confidential material.

            Consequently, the VMDP will not divulge said information to third
            parties, including Triple-S, Inc. employees, functionaries or
            officers who do not have a legitimate reason to know this
            information. The confidentiality and privilege obligation discussed
            here shall survive the conclusion, unilateral resolution or
            termination of this CONTRACT.



      19.   DOCUMENTS. At the end of this contract, the VMDP will keep or return
            all documents, objects, materials and the rest of the information he
            has obtained through Triple-S, Inc. business, in the Triple-S, Inc.
            offices, recognizing at the same time that said documents, objects,
            materials and related information are the exclusive property of
            Triple-S, Inc.

      20.   LIMITATION- OTHER EMPLOYMENT OR DUTIES. The VMDP is not to count on
            third parties for supplying any service, independent of whether
            economic compensation is involved or not, unless the CEO and PBD
            have previously given their express consent.

      21.   TRIPLE-S, INC. PERSONNEL. The VMDP will not solicit or encourage the
            Triple-S, Inc. personnel to quit their jobs and join him or a third
            party in other activities that are not to Triple-S, Inc.'s benefit.

      THIS CONTRACT IS AGREED UPON BY THE UNDERSIGNED IN CONSIDERATION OF THE
FOLLOWING:

                            MISCELLANEOUS PROVISIONS

      22.   CONTRACT CONSTRUCTION. Triple-S, Inc. and their legal representative
            wrote this contract, therefore its intellectual property and
            author's rights are theirs. At the same time, the contract is a
            product of negotiations between both parties, so no assumption or
            inference should be made in favor of any of them.

      23.   CEDING. The VMDP may not totally or partially cede the obligations
            and responsibilities assumed through this CONTRACT to a third party.

      24.   PACT TOTALITY. This document constitutes the total and complete pact
            agreed to by the contracting parts. No other former agreement,
            contract or pact should be considered valid or effective.

      25.   AMENDMENTS. In case the undersigned wish to amend the content of any
            clause in this CONTRACT, this should be done in writing, clearly
            stating which clause is being amended and what the amendment
            consists of.

      26.   HEADINGS. The headings included in this CONTRACT have been added to
            aid in reading and analyzing it. At no time should these headings be
            interpreted as the pact agreed upon by the undersigned, or that they
            amend the content of the clauses each one heads.

      27.   LIMITED INVALIDITY. In case any clause in this CONTRACT is declared
            null or illegal, the rest of the clauses will continue with full
            effectiveness and force.



      28.   INTERPRETATION. This CONTRACT will be interpreted according to the
            prevailing judicial order in the Commonwealth of Puerto Rico.

      29.   JURISDICTION AND COMPETENCE. If it were necessary to judicially
            annul any controversy related to this CONTRACT, the parties will
            submit voluntarily to the jurisdiction of the Puerto Rico Court of
            First Instance and would choose the San Juan Halls of the Superior
            or District Court, as were the case, to void it.

      SUCH IS THE PACT agreed upon by contracting parties, which they recognize
and sign in San Juan, Puerto Rico on the date stated above.

  /s/  Dr. Wilmer Rodriguez Silva              /s/ Dr. Francisco Joglar Pesquera
- -----------------------------------------    -----------------------------------
By: Dr. Wilmer Rodriguez Silva               By: Dr. Francisco Joglar Pesquera
    Chairman of the Board of Directors

  /s/ Socorro Rivas Rodriguez
- ------------------------------------------
By: Socorro Rivas Rodriguez
    President and CEO Triple-S, Inc.



                                                                    ATTACHMENT A

                          ANNUAL COMPENSATION STATEMENT

Name:                   _________________________
Department:             _________________________
Division:               _________________________
Basic Monthly Salary:       $14,583.33



                                                   
Basic Annual Salary:                                     $  175,000.00
                                                         -------------
Marginal Benefits:
    Vacations (18 days) A              $    12,115.38
    Legal Christmas Bonus (Maximum) B  $       200.00
    Additional Christmas Bonus (c)     $    16,041.67
    Sick Leave (15 Days) D             $    10,096.15    $   38,453.21

    Health Plan (Familiar)             $     7,495.20
    Pension Plan                       $    11,025.00
    Life Insurance (Maximum $100,000)  $       261.30
    Long Term Disability               $       245.00    $   19,026.50

    Social Security                    $     9,246.01
    Unemployment (State)               $       175.00
    Unemployment (Federal)             $        56.00
    Disability Insurance               $        45.00    $    9,522.01

    Performance Bonus (E)              $    52,500.00    $   52,500.00
                                                         -------------
Total Marginal Benefits                                  $  119,501.71
                                                         -------------
Total Compensation                                       $  294,501.71
                                                         =============


A     Effective at the completion of the probative period. The accumulation, the
      benefit and the marginal benefits are directed by corporate policies.

B     If worked 700 hours or more before September 30th

C     If worked 700 hours or more before September 30th and is a active regular
      management employee to the date in which the additional Christmas bonus is
      paid.

D     We pay 90% of the net accumulated license.

E     We pay a maximum of 30% of the basic salary depending on the performance
      of the officer, and the benefits of the Corporation. It will be
      discretional of the Board of Directors.

      The Pension Plan contributions start after the person has been employed a
      year.

   THE CORPORATION RESERVES THE RIGHT TO AMEND, MODIFY, SUSPEND OR FINISH THE
BENEFITS HERE DETAILED, IN ALL OR IN PART, IN ANY MOMENT AT ITS SOLE DISCRETION,
  EXCEPT FOR THOSE GIVEN BY DISPOSITION OF LAW, MANDATORY DECREE OR COLLECTIVE
                                   AGREEMENT.

EX-31.1

                                                                    EXHIBIT 31.1

CERTIFICATION

I, Ramon 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 functions):

      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, 2005              By: /s/ Ramon M. Ruiz-Comas
                                       -------------------------------------
                                       Ramon M. Ruiz-Comas, CPA
                                       President and
                                       Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

CERTIFICATION

I, Juan J. Roman, 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 functions):

      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, 2005                        By: /s/ Juan J. Roman
                                                 ------------------------------
                                                 Juan J. Roman, CPA
                                                 Vice President of Finance
                                                 and Chief Financial Officer

EX-32.1

                                                                    EXHIBIT 32.1

CERTIFICATION

I, Ramon M. Ruiz-Comas, President and Chief Executive Officer of Triple-S
Management Corporation (the Corporation), certify, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1.    The Quarterly Report on Form 10-Q of the Corporation for the period ended
      June 30, 2005 (the Report) fully complies with the requirements of Section
      13(a) of the Securities and Exchange Act of 1934 (15 U.S.C. 78m) 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, 2005                       By: /s/ Ramon M. Ruiz-Comas
                                                --------------------------------
                                                Ramon M. Ruiz-Comas, CPA
                                                President and
                                                Chief Executive Officer

EX-32.2

                                                                    EXHIBIT 32.2

CERTIFICATION

I, Juan J. Roman, Vice President of Finance and Chief Financial Officer of
Triple-S Management Corporation (the Corporation), certify, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1.    The Quarterly Report on Form 10-Q of the Corporation for the period ended
      June 30, 2005 (the Report) fully complies with the requirements of Section
      13(a) of the Securities and Exchange Act of 1934 (15 U.S.C. 78m) 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, 2005                       By: /s/ Juan J. Roman
                                                --------------------------------
                                                Juan J. Roman, CPA
                                                Vice President of Finance
                                                and Chief Financial Officer