TRIPLE-S MANAGEMENT CORP - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

		For the quarterly period ended September 30, 2002

		OR

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

For the transition period from to

Commission File Number: 0-49762

TRIPLE-S MANAGEMENT CORPORATION

(Exact name of registrant as specified in its charter)


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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

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


Title of each class		Outstanding at September 30, 2002

Common Stock, $40.00 par value		9,337

TABLE OF CONTENTS


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

TRIPLE-S MANAGEMENT CORPORATION

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


		PAGE
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001		3
	Consolidated Statements of Operations for the three months and nine months ended September 30, 2002 and 2001		4
	Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the three months and nine months ended September 30, 2002 and 2001		5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and 2001		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		49
Item 4.	Controls and Procedures		49
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		50
Item 4.	Submissions of Matters to a Vote of Security Holders		50
Item 5.	Other Information		51
Item 6.	Exhibits and Reports on Form 8-K		51
SIGNATURES			53

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets
(Dollar amounts in thousands)


			(Unaudited)
			September 30,		December 31,
			2002		2001

ASSETS
Investments and cash:
	Securities held for trading, at fair value:
		Fixed maturities	$	40,135		38,107
		Equity securities		39,410		50,743
	Securities available for sale, at fair value:
		Fixed maturities		300,313		286,505
		Equity securities		37,736		37,829
	Securities held to maturity, at amortized cost:
		Fixed maturities		5,983		3,779
	Cash and cash equivalents			117,480		80,970

Total investments and cash				541,057		497,933

Premiums and other receivables, net				85,634		74,872
Deferred policy acquisition costs				12,630		9,550
Property and equipment, net				36,513		39,090
Other assets				33,895		34,613

Total assets			$	709,729		656,058

LIABILITIES AND STOCKHOLDERS’ EQUITY
Claim liabilities:
	Claims processed and incomplete, and future policy benefits		$	128,182		114,599
	Unreported losses			107,697		103,240
	Unpaid loss-adjustment expenses			12,683		11,601

Total claim liabilities				248,562		229,440

Unearned premiums				66,487		58,306
Individual retirement annuities				13,907		17,426
Liability to Federal Employees Health Benefits Program				10,875		12,130
Accounts payable and accrued liabilities				101,680		97,078
Loans payable to bank				51,177		55,650

Total liabilities				489,951		470,030

Stockholders’ equity:
	Common stock, $40 par value. Authorized 12,500 shares; issued and outstanding 9,337 and 9,714 at September 30, 2002 and December 31, 2001, respectively			373		389
	Additional paid-in capital			150,406		150,405
	Operating reserve			43,105		14,250
	Accumulated other comprehensive income – net unrealized gain on securities available for sale			25,082		20,984

Total stockholders’ equity				218,966		186,028

Total liabilities and stockholders’ equity			$	709,729		656,058

See accompanying notes to unaudited consolidated financial statements.

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

For the three months and nine months ended September 30, 2002 and 2001
(Dollar amounts in thousands, except net income per share)


		Three months ended						Nine months ended
		September 30,						September 30,

		2002			2001			2002			2001

REVENUES:
	Premiums earned, net	$	304,586			288,760			922,906			843,126
	Amounts attributable to self-funded arrangements		38,524			30,862			110,789			97,199
	Less amounts attributable to claims under self-funded arrangements		(35,210	)		(30,404	)		(104,047	)		(93,412	)

			307,900			289,218			929,648			846,913
	Net investment income		6,186			6,345			18,535			18,905
	Net realized investment gains		683			2,995			533			5,375
	Net unrealized investment loss on trading securities		(6,695	)		(6,152	)		(12,072	)		(9,276	)
	Other income, net		6,174			26			6,598			4,558

Total revenue			314,248			292,432			943,242			866,475

BENEFITS AND EXPENSES:
	Claims incurred		263,274			252,402			795,925			745,957
	Operating expenses, net of reimbursement for services		35,550			35,859			112,903			102,802
	Interest expense		830			1,298			2,821			4,345

Total benefits and expenses			299,654			289,559			911,649			853,104

Income before taxes			14,594			2,873			31,593			13,371

INCOME TAX EXPENSE:
	Current		185			99			702			590
	Deferred		460			217			1,224			503

Total income taxes			645			316			1,926			1,093

Net income		$	13,949			2,557			29,667			12,278

Basic net income per share as if the Company operated as a for-profit organization		$	899.81			255.11			2,268.48			986.75

Basic net income per share as if Triple-S, Inc. operated as a not-for-profit organization		$	187.30			252.48			779.48			794.15

See accompanying notes to unaudited consolidated financial statements.

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity and
Comprehensive Income (Unaudited)

For the three months
and nine months ended September 30, 2002 and 2001
(Dollar amounts in thousands)


				2002			2001

BALANCE AT JULY 1				$	206,991			177,136
Stock redemption					(11	)		—
	Comprehensive income:
		Net income			13,949			2,557
		Net unrealized change in investment securities			(1,151	)		(395	)

			Total comprehensive income		12,798			2,162

BALANCE AT SEPTEMBER 30				$	219,778			179,298

BALANCE AT JANUARY 1				$	186,028			159,693
Stock redemption					(15	)		1
	Comprehensive income:
		Net income			29,667			12,278
		Net unrealized change in investment securities			4,098			7,326

			Total comprehensive income		33,765			19,604

BALANCE AT SEPTEMBER 30				$	219,778			179,298

See accompanying notes to unaudited consolidated financial statements.

TRIPLE-S MANAGEMENT CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

For the nine months ended September 30, 2002 and 2001
(Dollar amounts in thousands)


			Nine months ended
			September 30,

			2002			2001

CASH FLOWS FROM OPERATING ACTIVITIES:
Premiums collected			$	920,027			831,599
Cash paid to suppliers and employees				(110,906	)		(90,789	)
Claims losses and benefits paid				(776,803	)		(736,966	)
Interest received				18,256			18,316
Proceeds from trading securities sold or matured:
	Fixed maturities sold			82,762			16,408
	Equity securities			9,813			12,354
Acquisitions of investments in trading portfolio:
	Fixed maturities			(82,930	)		(19,558	)
	Equity securities			(12,447	)		(13,457	)
Interest paid				(1,993	)		(3,351	)
Expense reimbursement from Medicare				9,648			9,494
Contingency reserve funds from FEHBP				5,976			4,226

Net cash provided by operating activities				61,403			28,276

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments sold or matured:
	Securities available for sale:
		Fixed maturities sold		33,239			4,076
		Fixed maturities matured		143,006			96,024
		Equity securities		3,681			6,787
	Securities held to maturity:
		Fixed maturities matured		1,458			—
Acquisitions of investments:
	Securities available for sale:
		Fixed maturities		(187,383	)		(111,419	)
		Equity securities		—			(571	)
	Securities held to maturity:
		Fixed maturities		(3,621	)		—
	Capital expenditures			(4,463	)		(3,840	)
	Proceeds from sale of property and equipment			1,113			472

Net cash used in investing activities				(12,970	)		(8,471	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Change in outstanding checks in excess of bank balances				(3,365	)		(5,986	)
Payments of long term debt				(4,473	)		(1,593	)
Redemption of common stocks				(15	)		1
Proceeds from individual retirement annuities				1,071			1,429
Surrenders of individual retirement annuities				(5,14