DEF 14A 1 bp01230x1_def14a.htm DEF 14A gts-def14a_042718

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

 

Information Required in Proxy Statement
Scheduled 14A Information
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

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Preliminary Proxy Statement

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Definitive Proxy Statement

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Soliciting Material Pursuant to § 240.14a-12


TRIPLE-S MANAGEMENT CORPORATION

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Dear fellow Shareholder:


It is my pleasure to invite you to our annual meeting of shareholders, which will be held on Friday, April 27, 2018, at 9:00 a.m., local time, in our corporate offices located at 1441 F.D. Roosevelt Avenue, San Juan, Puerto Rico 00920.  

At this year’s meeting, we will elect four directors to our Board of Directors, ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2018, and vote on an advisory resolution to approve the compensation of the Company’s named executive officers. We will also act on any other business matter properly brought before the meeting.

This booklet, which includes a formal notice of the meeting and the proxy statement, details the business to be conducted at the meeting and provides additional information about us and the meeting that you should consider as you cast your vote. I appreciate the time and attention you devote to reading these materials and voting your shares.

Your vote is very important to us. I encourage you to vote as soon as possible whether or not you plan to attend the meeting. You may cast your vote over the Internet or by telephone according to the instructions in the proxy statement and the notice. As an alternative, if you requested and received a printed copy of the proxy card by mail, you may complete, sign and date the proxy card in accordance with the instructions set forth in the proxy statement. You may also return the completed proxy card by mail in the postage-paid envelope provided with your request.

On behalf of the Board, thank you for your continued interest and support.

Sincerely,

Luis A. Clavell-Rodríguez, MD

Chair of the Board

March 16, 2018

Triple-S Management Corporation

P.O. Box 363628

San Juan, Puerto Rico 00936-3628

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT

To our Shareholders:

NOTICE IS HEREBY GIVEN that the 2018 Annual Meeting of Shareholders will be held on Friday, April 27, 2018, at 9:00 a.m., local time, in our corporate offices located at 1441 F.D. Roosevelt Avenue, San Juan, Puerto Rico 00920.

Items of business

Shareholders will be asked to consider and vote on the following matters:

1.The election of four nominees to serve as “Group 2” directors, each for a term of three years;

2.The ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for 2018;

3.The consideration of an advisory resolution to approve the compensation of our named executive officers; and

4.Any other business that may properly come before the meeting or any adjournment or postponement thereof.

Record date

Shareholders of record of the Company at the close of business on February 26, 2018 are entitled to receive notice of, attend, and vote at the meeting.

Your vote is important

Please vote as promptly as possible by using the Internet, telephone, or by signing, dating and returning the completed proxy card in accordance with the instructions in the Notice or your proxy card.


Important notice regarding the availability of proxy materials

We are delivering the proxy materials to all our shareholders via the Internet, as permitted by U.S. Securities and Exchange Commission rules. Instead of sending a paper copy of the proxy materials, we are sending to our shareholders of record a Notice of Internet Availability of Proxy Materials (the “Notice”) with instructions on how to access the proxy materials and how to vote via the Internet.

Our proxy statement and the 2017 annual report to shareholders are available at our website http://www.triplesmanagement.com. Shareholders may request a printed copy of the proxy materials by following the instructions set forth in the Notice and the proxy statement.

By order of the Board of Directors,

Carlos L. Rodríguez-Ramos

Secretary

San Juan, Puerto Rico

March 16, 2018

i

TABLE OF CONTENTS

PROXY SUMMARY

1

Information about the meeting of shareholders

1

Voting matters

1

Director nominees

1

Corporate governance highlights

2

Casting your vote

2

Submitting proposals for the 2019 Annual Meeting of shareholders

2

Independent registered public accounting firm

2

Executive compensation components

3

Other components of the compensation program

3

2017 compensation summary

4

Compensation mix

4

PROXY STATEMENT FOR THE 2018 ANNUAL MEETING OF SHAREHOLDERS

5

INFORMATION ABOUT VOTING, SOLICITATION AND THE ANNUAL MEETING

5

PROPOSAL 1 — ELECTION OF DIRECTORS

10

Overview

10

Information about the nominees and directors continuing in office

10

Nominees for election

11

Directors continuing in office

13

PROPOSAL 2 — RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

16

Overview

16

Independent registered public accounting firm fees and other matters

16

Audit Committee’s pre-approval policies and procedures

17

PROPOSAL 3 — AN ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

18

Overview

18

CORPORATE GOVERNANCE

20

Overview

20

Corporate Governance documents and additional information

21

Code of Business Conduct and Ethics

21

Independence of Directors

21

Board leadership structure

22

Board meetings and committees

22

Director nominations process

26

Criteria

26

Risk oversight

27

Communications from shareholders and other interested parties

28

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

29

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

30


1

PROXY SUMMARY

This summary highlights certain information about Triple-S Management Corporation (the “Company,” “we,” “our,” or “us”) and certain information contained elsewhere in this proxy statement for the Company’s 2018 Annual Meeting of shareholders (“the meeting”). This summary does not contain all of the information that you should consider. We encourage you to read the entire proxy statement carefully before voting.

Information about the meeting of shareholders

Time and date:Friday, April 27, 2018 at 9:00 a.m., local time.

Location:1441 F.D. Roosevelt Avenue, San Juan, Puerto Rico 00920.

Record Date:Monday, February 26, 2018.

• Voting:All shareholders as of the record date are entitled to attend the meeting and vote. Each share of our common stock owned on the record date entitles the shareholder to one vote on each proposal presented for consideration.

Voting matters

 

Board
recommendation

 

Page
reference

Election of four “Group 2” directors.

FOR each nominee

10

Ratification of the selection of Deloitte & Touche LLP as the independent registered public accounting firm for 2018.

FOR

16

An advisory resolution to approve the compensation of our named executive officers.

FOR

18


Director nominees

At the meeting, shareholders are being asked to vote for four “Group 2” directors, each for a three-year term. Each nominee currently serves as a director on our Board. Also, our Board has determined that, except for Mr. Clavell-Rodríguez and Mr. García-Rodríguez, all nominees are independent pursuant to the independence criteria outlined by the New York Stock Exchange (“NYSE”) and the BlueCross and BlueShield Association (“BCBSA”). The Board determined that Mr. Clavell-Rodríguez was not independent because as part of his employment, he serves as chief medical officer of an entity that received approximately $12 million in insurance claims from the Company, its subsidiaries and affiliates, and is employed by a company that received approximately $278,000 in insurance claims from the Company, its subsidiaries and affiliates. Mr. García-Rodríguez is not independent because he is our president and chief executive officer.

Name

 

Age

 

Director
since

 

Experience/Qualification

 

Committee memberships

Luis A. Clavell-Rodríguez

66

2006

Healthcare experience; medical field expertise and executive leadership

Investment and Financing

Executive (Chair)

Joseph A. Frick

65

2013

Health insurance expertise; executive leadership; and public company knowledge

Compensation and Talent Development

Corporate Governance and Nominating

Gail B. Marcus

61

2017

Financial and healthcare expertise; managerial experience

Audit

Compensation and Talent Development

Roberto García-Rodríguez

54

2016

Executive leadership, operational expertise and legal acumen


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Corporate governance highlights

8 of our 10 current directors are independent.

Separate chair of the Board and chief executive officer positions.

Lead Independent Director.

Annual Board, committee, and individual director self-evaluations.

Stock ownership guidelines for directors and executives.

Guidelines for annual continuing education of directors.

Casting your vote

Visit www.proxyvote.com and follow the instructions in the Notice.

Scan the QR Code in the Notice, with your mobile phone and vote following the instructions in the Notice.

Call the telephone number in the Notice.

Send your completed and signed proxy card to Triple-S Management Corporation c/o Broadridge Financial Solutions, Inc. at 51 Mercedes Way, Edgewood, New York 11717.

Cast your vote in person if you are the registered shareholder or by obtaining a “legal proxy” if your shares are held in “street name” by completing and signing your proxy card at the meeting.


Submitting proposals for the 2019 Annual Meeting of shareholders

Deadline for shareholders proposal for inclusion in the 2019 proxy statement:

November 16, 2018

Period for submitting proposals and nominations for directors to be considered at the 2019 Annual Meeting:

November 28, 2018 to December 28, 2018


Independent registered public accounting firm

As a matter of good corporate governance, our shareholders are being asked to ratify the selection of Deloitte & Touche LLP (“D&T”) as our independent registered public accounting firm for 2018. Below is a summary of the fees that we paid or accrued in connection with services provided by D&T for 2017 and 2016.

Type of Fees

 

2017

 

2016

Audit Fees

$3,115,160

$3,309,348

Audit-Related Fees

$1,119,943

$456,742

Tax Fees

$0

$0

All Other Fees

$0

$300,888

Total

$4,235,103

$4,066,978


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PROXY SUMMARY

Executive compensation components

Components of our compensation plan are summarized below. Some components are inapplicable to certain executives, as further described in this proxy statement. For more information on the compensation of our executive officers, see the “Compensation discussion and analysis” section of this proxy statement.

Component

 

Description

Fixed

Base salary

Cash compensation to recognize individual contribution to the Company, taking into consideration the executive’s experience, knowledge and scope of responsibilities.

Reviewed annually based on individual performance, market-level relative salary, the Company’s financial performance, and ability to pay.

Adjusted if and when appropriate.

Variable

Short-term cash incentive

Motivates individual to attain annual objectives and reinforces the optimization of operating results and corporate goals.

May range from zero to 150% of the target opportunity.

Company’s financial results account for 70% of each executive’s evaluation, and individual performance accounts for the remaining 30%.

Equity compensation

Promotes long-term success, the retention of talented individuals, and mitigation of excessive risk taking.

75% as performance shares; payout range from zero to 150% from target opportunity over a 3-year performance period.

25% as restricted shares vesting in equal installments over a 3-year period.

Variable

Benefits and perquisites including retirement programs, non-qualified deferred compensation plan, and health and life insurance, among others.


Other components of the compensation program

Our compensation program includes policies and practices that we believe promote good governance and align executive compensation with the interests of our shareholders.

What we do

Have an equity grant policy with pre-scheduled grant dates to avoid backdating of equity awards.

Deliver 75% of annual long-term incentive in the form of performance shares.

Have an incentive compensation recoupment policy to ensure compensation is paid on accurate financial data.

Require executive officers, directors and other individuals to request pre-clearance to transact with our stock.

Engage an independent compensation consultant selected by, and that reports directly to, the Compensation and Talent Development Committee.

Have stock ownership guidelines requiring directors, executives and other participants of equity compensation to own and retain Company stock.

What we don’t do

No hedging on our Company stock.

No unusual or excessive perquisites.

No option awards.

No cash severance payment upon change in control. Chief executive officer may only receive cash severance payment upon a change in control with termination of employment (“double trigger”).

4

PROXY SUMMARY

2017 compensation summary

The compensation of our named executive officers (“NEOs”) for 2017 is summarized below. For more information, see the narrative and notes accompanying the 2017 summary compensation tables included in this proxy statement.

Name and Position

 

Salary

 

Bonus

 

Stock
Awards

 

Non-Equity
Incentive Plan
Compensation

 

Change in
Pension Value and
Non-Qualified
Deferred
Compensation

 

All Other
Compensation

 

Total

Roberto García-Rodríguez

President and CEO

$750,000

$600

$1,874,986

$510,010

$0

$37,996

$3,173,592

Juan J. Román-Jiménez

Executive Vice President and CFO

$503,846

$600

$749,977

$348,950

$185,000

$12,900

$1,801,273

Madeline Hernández-Urquiza

President of Triple-S Salud & Triple-S Advantage, Inc.

$525,000

$600

$787,471

$366,525

$15,000

$39,086

$1,733,682

José E. Novoa Loyola

Chief Medical Officer

$404,231

$600

$389,999

$271,789

$0

$5,400

$1,072,019

Arturo L. Carrión-Crespo

President of Triple-S Vida, Inc.

$324,700

$600

$324,665

$203,958

$0

$43,385

$897,308


Compensation mix

For 2017, 70% of the total compensation approved to our CEO and 63% for our other NEOs was at-risk, variable compensation. Actual amounts realized depend on our annual and long-term performance and our Company’s stock price. Also, equity compensation granted comprised 62% of CEO compensation and 46% of all other NEOs compensation. We believe this compensation design promotes our executives to achieve the Company’s financial results while taking into consideration the impact of their decisions. The compensation mix of our CEO and our other NEOs is illustrated in the charts below, which considers maximum payout of approved performance equity grants and cash compensation.

5

PROXY STATEMENT FOR THE 2018 ANNUAL MEETING OF SHAREHOLDERS

We are providing this proxy statement to our shareholders in connection with a solicitation of proxies by the Board of Directors (the “Board”) of the Company for use at the meeting and at any adjournment or postponement of the meeting. We will hold the meeting on Friday, April 27, 2018, beginning at 9:00 a.m., local time, in our corporate offices located at 1441 F.D. Roosevelt Avenue, San Juan, Puerto Rico 00920.

We are furnishing the proxy materials over the Internet pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”).  On or about March 16, 2018, we began mailing the Notice to our shareholders of record as of the close of business on February 26, 2018. The Notice contains instructions on how to access this proxy statement and our annual report and how to cast your vote. You will not receive a paper copy of the proxy materials unless you request one. The Notice will contain instructions on how to access the proxy materials over the Internet and vote online or by telephone. The Notice also contains instructions on how to request a paper copy of our proxy materials, free of charge.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on April 27, 2018: This proxy statement, our 2017 Annual Report, the form of proxy and voting instructions are being made available to shareholders of record of our Class A and Class B common stock on or about March 16, 2018 at www.proxyvote.com. If you would still like to receive a printed copy of the proxy materials or our 2017 Annual Report, including audited financial statements for the year ended December 31, 2017, you may request a printed copy by: (a) telephone at 1-800-579-1639; (b) Internet at www.proxyvote.com; or (c) e-mail at sendmaterial@proxyvote.com.  Please make the request as instructed above on or before April 13, 2018 to facilitate timely delivery.

All proxies will be voted in accordance with the instructions they contain.  If you do not provide voting instructions on your proxy card with respect to a particular matter, your shares will be voted in accordance with the recommendations of our Board.

INFORMATION ABOUT VOTING, SOLICITATION AND THE ANNUAL MEETING

Why am I receiving these materials?

Our Board is providing these materials to you to solicit proxies on its behalf to be voted at the meeting on April 27, 2018 at 9:00 a.m., local time, at the offices of Triple-S Management Corporation, 1441 F.D. Roosevelt Avenue, San Juan, Puerto Rico 00920.

Why did I receive a one-page notice in the mail instead of a full set of proxy materials?

We have elected to deliver our proxy materials over the Internet to all our shareholders under the “notice and access” rules of the SEC. If you are a shareholder of record, we sent you a Notice by mail. You will not receive a printed copy of the proxy materials unless you request one. We encourage you to help us reduce the environmental impact of the meeting, and reduce the cost associated with printing and mailing of proxy materials by accessing the proxy materials over the Internet.

How can I request a printed copy of the proxy materials?

You may request a printed copy of the proxy materials by calling 1-800-579-1639; or accessing www.proxyvote.com over the Internet; or by sending an email to sendmaterial@proxyvote.com. Please make the request on or before April 13, 2018 to facilitate timely delivery.

What should I do if I receive more than one Notice?

You may receive more than one Notice. For example, you may receive a separate Notice if: (i) you hold Class A and Class B shares, or (ii) you hold Class B shares in more than one brokerage account. Please vote all your shares over the Internet, by telephone, or by signing and mailing all proxy cards or voting instruction forms that you receive.

Who can vote?

To be able to vote, you must have been a holder of record of our common stock at the close of business on February 26, 2018. This date is the “record date” for the 2018 Annual Meeting. Shareholders of record on the record date are entitled to receive notice of, attend, and vote on each proposal at the meeting or on any postponement or adjournment of the meeting.


6

How many votes do I have?

You are entitled to one vote per each share of our common stock that you owned on the record date on each matter that is presented for consideration. All shares of our Class A and Class B common stock will vote together as a single class on all matters brought before the meeting.

Who may be present at the meeting?

Only shareholders of record and beneficial owners with a legal proxy issued in their name by their respective organization holding their shares may be present at the meeting. No other person, including persons accompanying a shareholder, will be allowed at the meeting. Please bring a valid form of photo identification, such as a driver’s license or passport, to corroborate your identity as one of our shareholders. No video or audio recording will be allowed during the meeting. We encourage you to vote your shares in advance even if you plan to attend the meeting.

What constitutes a quorum for the meeting?

At least one-third (1/3) of the shares entitled to vote must be present at the meeting, in person or by proxy, to constitute a quorum. As of the record date, 22,358,325 shares of common stock were issued and outstanding. Shares of common stock represented in person or by proxy, “broker non-votes,” as discussed below, and shares that abstain or do not vote with respect to a particular proposal, will be treated as shares that are present to determine if there is a quorum. If a quorum is not present, we may propose to adjourn the meeting to solicit additional proxies.

What is the difference between a shareholder of record and a beneficial owner of shares held in street name?

Shareholder of record. If your shares of common stock are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, and not through a brokerage firm, bank, broker-dealer or other similar organization, you are considered the “shareholder of record” with respect to those shares. We have sent the Notice directly to you.  

Beneficial owner of shares held in street name. If your shares are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the “beneficial owner” of shares held in “street name,” and a Notice should be sent to you by that organization. You have the right to instruct that organization how to vote your shares.

How do I vote if I am the shareholder of record of my shares?

If you are the shareholder of record, you may vote in one of the following four ways:

Through the Internet. Vote by following the instructions on the Notice or going to the Internet address stated on your proxy card.

By telephone. Call the telephone number provided on your proxy card.

By mail. If you requested and received a printed copy of the proxy materials or downloaded the proxy materials over the Internet, you can complete and sign your proxy card and mail it to the following address:

Triple-S Management Corporation

c/o Broadridge Financial Solutions, Inc.

51 Mercedes Way

Edgewood, New York 11717

In person. Attend the meeting and vote in person or by submitting your proxy card at the meeting. If you wish to obtain directions to be able to attend and vote at our meeting in person you may obtain directions by calling the Company at 787-749-4949, Ext. 4667.

Completing and sending the proxy card. Provide your full title when signing a proxy as attorney-in-fact, executor, administrator, trustee, guardian, authorized officer of a corporation, or on behalf of a minor to ensure your proxy card is voted according to your instructions and to avoid delays in ballot taking and counting.  If shares are registered in the name of more than one record holder, all record holders must sign the proxy card. If you vote via the Internet or by phone, do not return the proxy card.

Closing of voting facilities. The Internet and telephone voting facilities will close at 11:59 p.m., Eastern time, on April 26, 2018. If you plan to vote by mail, your proxy card must be received no later than 12:00 p.m., Eastern Time, on April 26, 2018.


7

How do I vote if I am a “beneficial owner”?

If you are a beneficial owner you will receive the Notice from the organization that holds your shares with instructions on how to vote your shares. That organization will allow you to deliver your voting instructions via the Internet and may also permit you to submit your voting instructions by telephone. In addition, you may request paper copies of our proxy statement and proxy card by following the instructions on the Notice provided by the organization.

You can vote in person at the meeting, but you must bring at the meeting a “legal proxy” issued in your name by the organization that holds your shares. The legal proxy authorizes you to vote your shares held in street name at the meeting. Contact the organization that holds your shares for instructions on how to obtain a legal proxy. You must bring a copy of the legal proxy to the meeting and ask for a ballot in order to cast your vote in person. In order for your vote to be counted, you must hand the copy of the legal proxy with your completed ballot when you cast your vote.

Can I change or revoke my vote after I have voted?

Yes.  You can change your vote or revoke your proxy at any time before the taking of votes at the meeting by:

Delivering a written notice of revocation to our Secretary at or before the meeting; or

Submitting another proxy by mail, telephone or the Internet prior to the applicable cutoff time; or

Presenting to our Secretary, before or at the meeting before polls close, a later dated proxy executed by the person who executed the prior proxy; or

Voting in person at the meeting.

If you elect to revoke your vote by delivering a written notice of revocation or by submitting another proxy by mail to our Secretary, deliver it to the following address:

Triple-S Management Corporation

c/o Carlos L. Rodríguez-Ramos, Secretary

1441 F.D. Roosevelt Avenue, 6th Floor

San Juan, Puerto Rico 00920

If you provide more than one proxy, the properly signed proxy having the latest date will revoke any earlier proxy. Attending the meeting will not automatically revoke a proxy unless you properly vote at the meeting or specifically request that your prior proxy be revoked. 

If you are a beneficial owner, you must contact the organization that holds your shares to change your vote or, if you intend to be present and vote at the meeting, bring the legal proxy issued in your name by such organization to the meeting.

What happens if I do not give specific voting instructions?

If you are a shareholder of record and you indicated when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or you signed and returned a proxy card without giving specific voting instructions, then the persons named as proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this proxy statement and, as proxy holders, may determine in their discretion with respect to any other matters properly presented for a vote at the meeting and at any postponement or adjournment thereof.

If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions then, under applicable rules, the organization that holds your shares may generally vote on “routine” matters but cannot vote on “non-routine” matters.  If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” In order to minimize the number of broker non-votes, the Company encourages you to vote or provide voting instructions with respect to each proposal to the organization that holds your shares by carefully following the instructions provided in the Notice or voting instruction form.


8

Which proposals are considered routine or non-routine?

The election of directors (Proposal 1), and the advisory resolution to approve the compensation of our NEOs (Proposal 3) are considered non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore broker non-votes may exist in connection with Proposal 1 and Proposal 3.

The ratification of the selection of D&T as our independent registered public accounting firm for 2018 (Proposal 2) is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore it is likely that no broker non-votes will exist in connection with Proposal 2.

Who will count the votes?

A representative of Broadridge Financial Solutions, Inc., an independent third party, will act as the inspector of the election and tabulate the votes cast by proxy or in person at the meeting.

What is the required vote to approve each proposal?

Election of directors (Proposal 1). A nominee must be elected to our Board by the affirmative vote of a majority of votes cast with respect to such nominee by the shares of common stock entitled to vote and present at the meeting or represented by proxy.  If shareholders do not elect a nominee who is already serving as a director, Puerto Rico corporation law provides that the director will continue to serve on our Board as a “holdover” director until a successor is elected. An “affirmative vote of a majority of votes cast” on a proposal means that the votes cast “for” the proposal exceed the votes cast “against” such proposal. Abstentions and broker non-votes will not count as a vote “for” or “against” the proposal and thus will have no effect in determining whether the proposal has received the affirmative vote of a majority of the votes cast at the meeting.

Ratification of the selection of the independent registered public accounting firm (Proposal 2). The approval of this proposal requires the affirmative vote of the holders of a majority of the shares of common stock entitled to vote and present at the meeting or represented by proxy. Abstentions will have the same effect as votes “against” this proposal and broker non-votes will have no effect on the proposal. 

Approval of the compensation of our named executive officers (Proposal 3). The approval, on an advisory basis, of this proposal requires the affirmative vote of the holders of a majority of the shares of common stock entitled to vote and present at the meeting or represented by proxy. Abstentions will have the same effect as votes “against” this proposal and broker non-votes will have no effect on this proposal.

How does the Board recommend to vote on the proposals?

The Board recommends shareholders to vote as set forth below.

Election of Directors (Proposal 1). FOR each of the four nominees.

Ratification of the selection of the independent registered public accounting firm (Proposal 2). FOR the ratification of D&T as our independent registered public accounting firm for 2018.

Approval of the compensation of our named executive officers (Proposal 3). FOR the approval, on an advisory basis, of the compensation of our named executive officers.

Will any other business be conducted on at this meeting?

We do not know of any other business that may come before the meeting other than as described in the Notice. The chair of the meeting will declare out of order and disregard the conduct of any business not properly presented. However, if any new matter requiring the vote of our shareholders is properly presented before the meeting, proxies may be voted with respect thereto at the discretion of the proxy holders. The affirmative vote of the holders of a majority of the shares of common stock entitled to vote and present at the meeting or represented by proxy with respect to any other item properly presented at the meeting will be required for approval of such item, unless a greater percentage is required by law, our articles of incorporation or our bylaws.


9

Where can I find the voting results of the meeting?

We will announce preliminary voting results at the meeting and publish voting results in a Current Report on Form 8-K, which will be filed with the SEC within four business days following the meeting.

What is the cost and method of soliciting proxies?

We will bear the costs of soliciting proxies. We will also reimburse banks, brokers or other custodians, nominees and fiduciaries representing beneficial owners for their reasonable out-of-pocket expenses incurred in distributing proxy materials to shareholders and obtaining their votes. In addition, our directors, officers and employees may solicit proxies on the Company’s behalf in person, by telephone, or email without additional compensation.  

What happens if the meeting is postponed or adjourned?

Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy at any time before it is voted.

How and when may I submit a shareholder proposal, including a shareholder nomination for director, for the 2019 annual meeting of shareholders?

If you are interested in submitting a proposal for inclusion in the proxy statement for the 2019 annual meeting of shareholders, you need to follow the procedures outlined in Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  To be eligible for inclusion, we must receive the shareholder’s proposal for our proxy statement for the 2019 annual meeting of shareholders at our principal corporate offices in San Juan, Puerto Rico, at the address below no later than November 16, 2018.

In addition, our bylaws require that we be given advance written notice of director nominations for election to our Board and other matters that shareholders wish to present for action at an annual meeting, other than those to be included in our proxy statement under Rule 14a-8 of the Exchange Act. The Secretary must receive such notice from a shareholder of record at the address noted below not less than 120 days or more than 150 days before the first anniversary of the preceding year’s annual meeting. However, if the date of our annual meeting is advanced by more than 30 days, or delayed by more than 60 days, from the anniversary date, then we must receive such notice at the address noted below not later than the close of business on the tenth day after the day on which public disclosure of the meeting was made. Assuming that the 2019 annual meeting is not advanced by more than 30 days nor delayed by more than 60 days from the anniversary date of the meeting, you would need to give us appropriate notice of the proposal at the address noted below no earlier than the close of business on November 28, 2018, and no later than the close of business on December 28, 2018. If a shareholder of record does not provide timely notice of a nomination or other matters to be presented at the 2019 annual meeting, it will not appear in the notice of meeting. If you are a beneficial owner, you can contact the organization that holds your shares for information about how to register your shares directly in your name as a shareholder of record.

Our bylaws also specify requirements relating to the content of the notice that shareholders of record must provide to our Secretary for any matter, including a shareholder proposal or nomination for director, to be properly presented at a shareholder meeting. A copy of the full text of our bylaws is on file with the SEC and available on our website at www.triplesmanagement.com.

Any proposals, nominations or notices should be sent to:

Triple-S Management Corporation

c/o Carlos L. Rodríguez-Ramos, Secretary

1441 F.D. Roosevelt Avenue, 6th Floor

San Juan, Puerto Rico 00920


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PROPOSAL 1 — ELECTION OF DIRECTORS

Our Board has nominated Messrs. Luis A. Clavell-Rodríguez, Joseph A. Frick and Roberto García-Rodríguez, and Ms. Gail B. Marcus to serve as Group 2 directors, each for a three-year term until the 2021 annual meeting or until a successor is elected and qualified. 

Recommendation:  Vote FOR each nominee.

Overview

Our Board is divided into three groups, with one group being elected each year and members of each group holding office for a three-year term. This classified board structure is required by our articles of incorporation and by the terms of our license agreement with the BCBSA. The Board currently consists of ten members: three Group 1 directors (with terms expiring at the 2020 annual meeting), four Group 2 directors (with terms expiring at the 2018 annual meeting), and three Group 3 directors (with terms expiring at the 2019 annual meeting).

Our articles of incorporation and our license with the BCBSA require our Board to be comprised of three groups as equal in number as possible. We are currently in compliance with this requirement.

The Board nominated four individuals to serve as Group 2 directors, each for a three-year term. Nominees are current directors. The affirmative vote of a majority of the votes cast by the shares of common stock entitled to vote and present or represented by proxy at the meeting is required to elect each nominee.

The persons named as proxies in the proxy card will vote for each of these nominees unless you instruct otherwise on the proxy card. Nominees have indicated their willingness and ability to serve, if elected. However, if any or all of the nominees should be unable or unwilling to serve, the proxies may be voted for a substitute nominee designated by our Board or our Board may reduce the number of directors. Proxies cannot be voted for a greater number of persons than the number of nominees. We have no knowledge that any nominee will become unavailable for election.

Information about the nominees and directors continuing in office

The following candidates for election have been nominated by the Board based on the recommendation of the Corporate Governance and Nominating Committee. Below you will find information about the nominees and directors whose terms in office will continue after the meeting, including their age, positions held, their principal occupation, business experience and directorships (including positions held in our Board’s committees, if any) for at least the past five years. In addition, we have included information regarding each nominee’s and director’s specific experience, qualifications, attributes and skills that led our Board to conclude that the nominees and directors should serve as members of the Board. We believe that all of our nominees and directors have a reputation of integrity, honesty and adherence to high ethical standards. Also, they each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to the Company, which taken as a whole, enable the Board to satisfy its oversight responsibilities in light of our business and structure.

The information presented about each nominee for election and director continuing in office is as of the date of this proxy statement. Information about the number of shares of common stock beneficially owned by each of the nominees and directors appears below under the heading “Security ownership of certain beneficial owners and management.”  See also “Other relationships, transactions and events.” There are no family relationships among any of our directors and executive officers. We encourage our shareholders to read the “Corporate Governance―Director nominations process” section of this proxy, for further details.

 

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Nominees for election

Nominees for Group 2 Directors, each for a three-year term

Luis A. Clavell-Rodríguez, MD

Director since 2006

Not independent

Age: 66

Professional background: Dr. Clavell-Rodríguez is the chief executive officer of the Comprehensive Cancer Center of the University of Puerto Rico since 2015. As part of the services provided by San Jorge Children’s Medical Specialties PSC, a professional services corporation that currently employs Dr. Clavell-Rodríguez, he serves as chief medical officer of San Jorge Children’s Hospital in San Juan, Puerto Rico, since 1994. Also, since 1994 he is the president of the Professional Board at San Jorge Children’s Hospital.

He is the principal investigator for the Children’s Oncology Group, a clinical trial organization, and the Puerto Rico National Cancer Institute Oncology Community Research Program, organizations sponsored by the National Cancer Institute. He is also a professor of pediatrics and cancer medicine at the University of Puerto Rico’s School of Medicine. He has particular expertise in translational research, and health delivery research and policy. He is a NACD Board Leadership Fellow.

Qualifications: Dr. Clavell-Rodríguez’ profound understanding of the managed care business and his more than thirty years of professional experience in the medical field, including the administration of medical facilities and related entities, provide valuable insight for our Board.

Board and Committee positions: Chair of the Board and the Executive Committee and member of the Investment and Financing Committee.

Joseph A. Frick

Director since 2013

Independent

Age: 65

Professional background: Mr. Frick is currently a senior advisor to Diversified Search, a national executive search firm. From May 2011 to October 2016, he served as executive vice chair of the firm. He is also a board and executive committee member of Independence Blue Cross, a health insurance company, where he previously served as president and chief executive officer from 2005 to 2010 and as senior vice president of human resources and administration from 1993 to 2005. He is a member of the board of directors of BioTelemetry, Inc., a publicly-traded company, since October 2013. Before serving in Independence Blue Cross, he worked in various management positions within the publishing and the electronics industries. He also served on the boards of directors of BCBSA and America’s Health Insurance Plans, among others. He is a NACD Board Leadership Fellow.

Qualifications: Mr. Frick’s significant experience as an executive and a director in several companies with similar businesses as ours and in a publicly-traded company provides an invaluable perspective to our Board.

Board and Committee positions: Member of the Corporate Governance and Nominating Committee and the Compensation and Talent Development Committee.


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Roberto García-Rodríguez

Director since 2016

Management

Age: 54

Professional background: Mr. García-Rodríguez has served as the Company’s president and chief executive officer since January 2016. He served as the Company’s chief operating officer from December 2013 to December 2015 and as the Company’s vice president of legal affairs and general counsel from May 2008 to December 2013. Mr. García-Rodríguez serves on the BCBSA board of directors and is a NACD Board Leadership Fellow.

Qualifications: Mr. García-Rodríguez brings executive leadership, operational expertise and legal acumen to our Board.

Board and Committee positions: As a member of the Company’s management, Mr. Garcia-Rodriguez does not serve on any committee of the Board.

Gail B. Marcus

Director since 2017

Independent

Age: 61

Professional background: Ms. Marcus has served as a consultant and practice leader in the healthcare consulting practice of Exceptional Leaders International, a consulting company, since 2015, and as an Assistant Professor & Director of the Global Healthcare Management and Biomedical Informatics programs at the Massachusetts College of Pharmacy and Health Sciences since 2016. From 2012 to 2015, Ms. Marcus served as Chief Executive Officer and President of Calloway Laboratories, a provider of clinical toxicology laboratory services. Prior to that, Ms. Marcus held a variety of executive leadership roles with diagnostics, pharmacy benefit management and managed care companies, including Caremark, United Healthcare, and Cigna. Ms. Marcus currently serves on the board of directors of Natera, Inc., a worldwide genetic testing and diagnostics company, and on the board of directors of Team Better, a private company, and Engineering World Health, a non-profit organization. Ms. Marcus also sits on the Centers for Medicare & Medicaid Services Diagnostic Lab Advisory Committee.

Qualifications: Ms. Marcus’ vast financial, managerial, and healthcare experience, as well as her experience in a publicly-traded company, are strong attributes for our Board.

Board and Committee positions: Member of the Audit Committee and the Compensation and Talent Development Committee.


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Directors continuing in office

Group 1 Directors (terms expire at the 2020 annual meeting)

Jorge L. Fuentes-Benejam, PE

Director since 2008

Independent

Age: 69

Professional background: Mr. Fuentes-Benejam was chair, president and chief executive officer from 1986 until 2010, and is currently chair of Gabriel Fuentes Jr. Construction Co. Inc., a heavy and marine construction business, and of Fuentes Concrete Pile Co. Inc., a precast concrete pile manufacturing business, and related entities. Currently, Mr. Fuentes-Benejam is a member of the board of trustees of Interamerican University of Puerto Rico, Puerto Rico’s largest private university. Mr. Fuentes-Benejam is a NACD Board Leadership Fellow.

Qualifications: Mr. Fuentes-Benejam’s broad understanding of Puerto Rico’s business environment, particularly the construction industry—one of the key industries we serve—as well as his considerable management and board experience, which includes his past service on the board of Puerto Rico Cement Company, a former publicly-traded company, provides a wealth of knowledge to us as a public company.

Board and Committee positions: Chair of the Corporate Governance and Nominating Committee; member of the Investment and Financing Committee and the Executive Committee.

Roberto Santa María

Director since 2015

Independent

Age: 66

Professional background: Mr. Santa María was managing partner of the San Juan, Puerto Rico office of Pricewaterhouse Coopers, LLC (PwC), until his retirement in 2012. He joined the Audit Practice of PwC in 1973 and was admitted to the partnership in 1988. In 2004, he was appointed partner-in-charge of PwC’s audit practice division as well as managing partner of the San Juan Office. He served solely as managing partner of the San Juan Office from 2008 to 2012. He currently serves as a member of the board of the Angel Ramos Foundation and of the Puerto Rico chapter of United Way Worldwide.

Qualifications: Mr. Santa María’s vast experience with a major accounting firm and his understanding of accounting and finance principles are strong attributes for our Board.

Board and Committee positions: Member of the Audit Committee and the Investment and Financing Committee.


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Cari M. Dominguez, PhD

Director since 2012

Independent

Age: 69

Professional background: Ms. Dominguez is president of Dominguez & Associates, a management consulting firm, since 2007. Prior to that, Ms. Dominguez held several leadership positions in the public and private sectors, including chair of the United States Equal Employment Opportunity Commission from 2001 to 2006, Partner of Heidrick & Struggles, a consulting firm, from 1995 to 1998, Director of Spencer Stuart, a consulting firm, from 1993 to 1995 and Assistant Secretary for Employment Standards, and Director of the Office of Federal Contract Compliance Programs of U.S. Department of Labor, from 1989 to 1993. She also held a series of executive positions with Bank of America from 1984 to 1989. Ms. Dominguez serves as a director of Manpower Group, Inc., a global workforce solutions provider, since 2007, and is a member of its compensation and human resources committee. She also serves as a trustee of the Calvert Funds since 2008, and a director, faculty member, and Board Leadership Fellow of the NACD.

Qualifications: Ms. Dominguez has extensive experience in government relations and labor markets from her various governmental positions. She also brings executive, international, and operational experience in the human resources industry. Her expertise in workforce preparedness, human resources management, corporate governance, social responsibility, and public policy are of increasing importance to our company.

Board and Committee positions: Vice Chair and Lead Independent Director of the Board and Member of the Corporate Governance and Nominating Committee and the Compensation and Talent Development Committee.

Group 3 Directors (terms expire at the 2019 annual meeting)

David H. Chafey, Jr.

Director since 2013

Independent

Age: 64

Professional background: Mr. Chafey is a member of the administrative board of the Puerto Rico Dairy Industry Development Fund and director of Industria Lechera de Puerto Rico, Inc. (Indulac) since July 2016. Mr. Chafey was the chair of the board of directors of the Government Development Bank for Puerto Rico from January 2013 to June 2015. Previously, he served as president and chief operating officer of Popular, Inc., a publicly traded financial holding company, from 2009 to 2010, and president of Banco Popular de Puerto Rico, a subsidiary of Popular, Inc., from 2004 to 2010. He also served in various senior executive positions within Popular, Inc., including chief financial officer and executive vice president. Mr. Chafey also served in several boards of directors, including Popular, Inc., VISA Latin America and Caribbean, and VISA International. He is a NACD Board Leadership Fellow.

Qualifications: Mr. Chafey’s governmental experience, operational management skills in the banking and financial industry, financial acumen, and executive leadership in a publicly traded company provide critical insight into business and financial matters to our Board.

Committee positions: Chair of the Investment and Financing Committee, member of the Audit Committee and the Executive Committee.


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Manuel Figueroa-Collazo,

PE, PhD

Director since 2004

Independent

Age: 66

Professional background: Mr. Figueroa-Collazo is the president of VERNET, Inc., an educational software development company, since 1999.  He has over thirty years of experience in senior management positions in the computer, information and telecommunications industries. He was chief executive officer for Lucent Technologies, Mexico and a department head at AT&T Bell Laboratories. He is a NACD Board Leadership Fellow.

Qualifications: Mr. Figueroa-Collazo brings to our Board considerable experience in information technology, international markets, and executive management insight, which is critical to our business.

Committee positions: Chair of the Compensation and Talent Development Committee; member of the Corporate Governance and Nominating Committee and the Executive Committee.

Antonio F. Faría-Soto

Director since 2007

Independent

Age: 69

 

Professional background: Mr. Faría-Soto is a member of the board of trustees of the Interamerican University of Puerto Rico since May 2017. Mr. Faría-Soto held several senior positions within the commercial and investment banking industry until his retirement in 2006 and prominent positions in the government of Puerto Rico until 2004. He served as chair of the board of directors and chief executive officer of Doral Bank, from 2005 to 2006, and as president of the Government Development Bank for Puerto Rico from 2003 to 2004. He also served as president of the Economic Development Bank for Puerto Rico from 2002 to 2003, and before that, as Commissioner of Financial Institutions of Puerto Rico. He is a NACD Board Leadership Fellow. 

Qualifications: Mr. Faría-Soto’s broad understanding of the banking and financial industry, government regulation and public affairs, as well as his proven executive leadership provides a valuable perspective to our Board.

Board and Committee positions: Chair of the Audit Committee; member of the Investment and Financing Committee and the Executive Committee.


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PROPOSAL 2 —RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Audit Committee has selected D&T as our independent registered public accounting firm for 2018. Our Board considers the selection of the independent registered public accounting firm to be an important matter of shareholder concern and is submitting the selection of D&T for ratification by shareholders.

Recommendation:  Vote FOR the proposal.

Overview

Current law, rules, and regulation, as well as the charter of the Audit Committee, require the Audit Committee to engage, retain, and supervise our independent registered public accounting firm. Although ratification by our shareholders is not required by our bylaws or otherwise, the Board believes submitting the selection of D&T is a matter of good corporate governance. If shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain D&T. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in our best interests and those of our shareholders. Representatives of D&T are expected to attend the meeting and will be given an opportunity to make a statement if so desired and to respond to appropriate questions.

The affirmative vote of the holders of a majority of the shares of common stock entitled to vote and present or represented by proxy at the meeting is required to ratify the selection of D&T as the Company’s independent registered public accounting firm for 2018. 

Independent registered public accounting firm fees and other matters

The following is a description of the fees we paid or accrued for the professional services rendered by D&T, our auditors for the years ended December 31, 2017 and 2016:

Type of Fees

 

2017

 

2016

Audit Fees

$3,115,160

$3,309,348

Audit-Related Fees

$1,119,943

$456,742

Tax Fees

$0

$0

All Other Fees

$0

$300,888

Total

$4,235,103

$4,066,978


Audit fees.  The audit fees for the years ended December 31, 2017 and 2016 corresponded to professional services rendered by D&T for the integrated audits of our annual consolidated financial statements and system of internal control over financial reporting, reviews of the financial statements included in our quarterly reports on Form 10-Q, and statutory audits required of our subsidiaries. Total fees related to the audit of the financial statements for the year ended December 31, 2017 amounted to $2,889,000 in audit fees, $115,560 for sales and use tax and $95,000 related to reimbursed expenses. Also, for the year ended December 31, 2017, we paid D&T $15,600, including $600 of sale and use tax, to obtain D&T’s consent to incorporate D&T’s report on the Company’s audited financial statements for the year ended December 31, 2016 in the Registration Statement on Form S-8 filed by the Company with the SEC on May 11, 2017 in connection with the Company’s 2017 Incentive Plan.

Total audit fees for the year ended December 31, 2016 amounted to $2,996,700 in audit fees, $119,868 for sales and use tax and $192,780 corresponding to reimbursed expenses. Included in the total audit fees for the year ended December 31, 2016 are $288,700 in audit fees, $11,548 of sales and use tax and $106,500 of reimbursed expenses corresponding to 2016 but billed by the accounting firm during 2017 after our submission of last year’s proxy statement.

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Audit-related fees. Audit-related fees for the years ended December 31, 2017 and 2016 included fees that corresponded to procedures performed for SSAE 18 (Statement of Standards for Attestation Engagements-Reporting on Controls at Service Organizations) audits. These fees for the year ended December 31, 2017 amounted to $325,000 in audit-related fees and $34,247 related to expenses, including the sales and use tax. The fees for the year ended December 31, 2016 amounted to $306,000 in audit-related fees and $12,240 related to expenses, including the sales and use tax. In addition, included in the audit-related fees is the audit of the Federal Employees Health Benefit Program administered by Triple-S Salud, Inc. which amounted to $115,440 and $113,620, including the sales and use tax, for the years ended December 31, 2017 and 2016, respectively. Included as expenses for 2016 are $24,882 of additional expenses billed in 2017 but corresponding to 2016.

During the year ended December 31, 2017, D&T also charged $222,799 for the SOC 2 Report Covering Security Trust Service Principle (TSP) for BlueCard and Federal Employee Program (FEP) production data, which is a requirement of the BCBSA for all licensees. This amount included $22,799 in expenses and sales and use tax. Also, included in audit-related fees for the year ended December 31, 2017 are $422,457 corresponding to due diligence services and advice performed by D&T with respect to the organizational restructuring of the Company and its subsidiaries, which includes $16,000 of sales and use tax and $6,457 of expenses related to such services.

Tax fees. No professional tax services were rendered by D&T for the years ended December 31, 2017 and 2016.

All other fees. For the year ended December 31, 2016, we paid $246,885 in connection to D&T’s assistance in the readiness to obtain a report for SSAE 18 Type 2 report for HITRUST. Expenses and the related sales and use tax amounted to $54,003. No other services were rendered by D&T for the year ended December 31, 2017.

Audit Committee’s pre-approval policies and procedures

The Audit Committee must pre-approve all auditing and non-audit services rendered by our independent registered public accounting firm.  Pre-approval, however, is not required for non-audit services if: (1) the aggregate dollar value of such services does not exceed five percent of the total fees paid by the Company to the external auditors during the fiscal year in which the non-audit services are provided; (2) we did not recognize such services as non-audit services at the time of the engagement; and (3) such services are promptly brought to the attention of and approved by the Audit Committee prior to the completion of the audit.  In accordance with the foregoing, the Audit Committee pre-approved all audit and non-audit services provided by D&T in 2017.

 

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PROPOSAL 3 —AN ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS


Our Board believes our executive compensation program was designed appropriately and is working to ensure that management’s interests are aligned with our shareholders’ interests and support long-term value creation. We are presenting the following resolution, which provides you the opportunity to endorse or not endorse our executive compensation program:

RESOLVED, that the shareholders approve, on an advisory basis, the compensation of our named executive officers, as disclosed in ‘Compensation Disclosure—Compensation discussion and analysis,’ the compensation tables and the narrative discussion contained in our 2018 proxy statement.”

Recommendation:  Vote FOR the proposal.

Overview

In 2017, our shareholders voted that the compensation of our NEOs be presented to our shareholders on an annual basis.  Our Board accepted our shareholders’ advisory vote, and in this proxy statement, we are asking our shareholders to provide advisory approval of the compensation of our NEOs, as such compensation is described in the section titled “Compensation Disclosure” of this proxy statement.

Our executive compensation program is designed to enable us to attract, motivate and retain executive talent, which is critical to our success. We seek to accomplish this goal in a way that rewards performance and is aligned with our shareholders’ long-term interests. We encourage our shareholders to review the information in “Compensation Disclosure—Compensation discussion and analysis” of this proxy statement, the executive-related compensation tables and the narrative disclosures that accompany the compensation tables for more detailed information on our executive compensation program and the decisions made by the Compensation and Talent Development Committee in 2017.

The following is a summary of some elements of the executive compensation program:

Competitive pay within best practices. Compensation aims to reflect best practices. Total executive compensation is regularly compared by our Compensation and Talent Development Committee with total compensation levels for equivalent positions at companies of similar size and complexity. 

Balanced compensation mix. Total compensation—which includes base salary, short and long-term variable pay opportunities, benefits and perquisites—is generally between the 25th and 50th percentile of the comparable group of companies. A significant percentage of total compensation is delivered in the form of incentive compensation.  

Appropriate reward of short-term performance. Cash incentive focuses on the achievement of various financial, management and individual objectives. Maximum payment of NEOs’ cash incentive is limited to 150% of their respective target opportunity, based on their base salary.

Equity compensation focused on long-term performance. 75% of the equity award value is granted in the form of performance shares and the remaining 25% in the form of time-based restricted stock. Performance shares vest at the end of a three-year performance period and restricted shares vest in equal proportions over a three-year period.

Annual review of chief executive officer and other executive officers performance. The Compensation and Talent Development Committee has direct responsibility to oversee the performance of the chief executive officer. The committee also discusses with the chief executive officer the performance of those executives and other personnel under his direct report as part of the committee determinations on executive compensation.

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Commitment to good governance. The Compensation and Talent Development Committee has retained an independent compensation consultant and includes compensation analytical tools as part of its annual executive compensation review. The committee also oversees the compliance of compensation-related policies and practices, including our claw-back provisions, stock ownership guidelines, an equity award grant policy, and insider trading policy, among others. Additionally, the committee reviews on an annual basis all compensation-related risks.

Rule 14a-21 of the Exchange Act enables our shareholders to vote to approve, on an advisory basis, the compensation of our NEOs.  At the Company’s 2017 annual meeting of shareholders, 99.4% of our shareholders approved, on an advisory basis, the compensation of our NEOs. Pursuant to that vote, our Board approved an executive compensation program that is similar to the one presented to our shareholders in our 2017 proxy statement.

Also, the Rule 14a-21 enables our shareholders to advise the Company on the frequency of their vote on the compensation of our NEOs.  In 2017, our shareholders voted that such compensation be presented for shareholder’s advisory approval on an annual basis and the Board accepted the advice of our shareholders. The executive compensation program presented to our shareholders in this proxy statement is similar to the one presented at last year’s annual meeting.

In accordance with Rule 14a-21 of the Exchange Act, the next shareholder vote on the frequency of the vote on executive compensation will be held no later than the 2023 annual meeting of shareholders.

The affirmative vote of the holders of a majority of the shares of common stock entitled to vote and present or represented by proxy at the meeting is required to approve this proposal.

While our Board intends to carefully consider the vote resulting from the proposal, the vote is advisory in nature and it is not binding on the Company, the Board, or our Compensation and Talent Development Committee, nor will it create or imply any additional fiduciary duty for the Company, the Board, or the Compensation and Talent Development Committee. The shareholders’ vote will not overrule any decision made by our Board nor require the Board to take any action. However, the Compensation and Talent Development Committee and the Board value the opinions expressed by our shareholders in their vote on this proposal and will take into account the outcome of the vote when considering future executive compensation decisions regarding our NEOs.

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CORPORATE GOVERNANCE

Our Board has responsibility for establishing broad corporate policies and reviewing the Company’s overall performance rather than day-to-day operations. The Board also oversees our president and chief executive officer and other senior management and, in so doing, serves the Company’s and our shareholders’ best interests. The Board selects, evaluates and provides for the succession of executive officers, nominates individuals to serve as directors of the Company for election at annual shareholder meetings and elects individuals to fill any vacancies on the Board. It reviews and approves corporate objectives and strategies, evaluates significant policies and proposed major commitments of corporate resources, and participates in decisions that have a potential major economic impact on us. Management keeps the directors informed of our activity through regular written reports and presentations at Board and committee meetings.

Good corporate governance is paramount to ensure that we are managed for the long-term benefit of our shareholders. The Board engages in a regular process of reviewing our corporate governance practices and compares them to those suggested by various authorities in corporate governance and the practices of other public companies. The Board also reviews its policies and practices in light of proposed and adopted laws and regulation, including the rules of the SEC and the NYSE. We encourage you to read this section of our proxy statement, which provides information about our Board and our corporate governance practices.

Overview

Board oversight of our Company is guided by strong corporate governance, effective policies and practices, and high ethical standards. The following is an overview of our corporate governance structure:

Board
composition and
structure

Our Board has currently fixed the number of directors at 10.

Our Board is divided into three groups, with one group being elected each year and members of each group holding office for a three-year term. This classified board structure is required by the terms of our license agreement with the BlueCross and BlueShield Association.

Positions of chair of the Board and chief executive officer are separated.

Board
independence

8 out of 10 of our current directors are independent.

Our president and chief executive officer is the only management director.

The chair of the Board is not independent.

The vice chair of the Board is our lead independent director and leads in executive sessions with independent directors.

Board
Committees

Five committees: Audit, Corporate Governance and Nominating, Compensation and Talent Development, Investment and Financing, and Executive.

Except for the Investment and Financing, and the Executive committees, in which the Chair of the Board is a member, all other committees are composed entirely of independent directors.

The president and chief executive officer is not appointed as a member of any committee.

Our Board and its committees have the authority to retain independent advisors.


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Membership criteria and qualifications

Directors must notify the Board before accepting invitations to serve on another public company board.

Directors must submit an offer to resign in the event of a substantial change in their principal occupation.

Annual performance evaluations and self-assessment of the Board, committees, and directors.

The Corporate Governance and Nominating Committee regularly reviews the Board’s competency mix and recommends candidates in light of Board and Company strategy.

Directors are strongly encouraged to complete a minimum level of director training annually.


Corporate Governance documents and additional information

You may visit the Corporate Governance section of our website at http://investors.triplesmanagement.com to find additional information about our Company’s corporate governance program and policies, including electronic copies of our corporate governance guidelines, our code of business conduct and ethics, the charters of the Audit, the Corporate Governance and Nominating, and Compensation and Talent Development committees, and our Articles and bylaws. Shareholders may also request print copies of any of these documents, without charge by contacting our Secretary, Carlos L. Rodríguez-Ramos, Esq., P.O. Box 363628, San Juan, Puerto Rico 00936-3628, or by calling during our business hours at (787) 749-4949, Ext. 4667.

Code of Business Conduct and Ethics

The Company has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) designed to support our commitment to integrity, ethical behavior and professionalism and to comply with the laws, rules and regulations that govern our business. Our Code of Ethics applies to our Board, officers, and employees, as well as to agents, consultants and other representatives when engaged by or otherwise representing our Company and its interests. Our Board, through the Audit Committee, monitors compliance with the Code of Ethics.

Our Code of Ethics expresses the values and principles behind the way we conduct our business, including providing a positive and productive work environment, protecting the environment, fair dealing, avoiding conflicts of interest, and proper use of corporate resources, among others. The Code of Ethics also provides guidance and information on how to report violations and unethical behavior, including access to EthicsPoint, a confidential hotline operated by an independent service, available at the toll-free number 1-866-384-4277 or electronically through www.ethicspoint.com. Communications received by EthicsPoint are completely confidential and allow for shareholders, employees and other interested parties to report any violations or irregularities that could affect us.

Any waiver of the Code of Ethics may be made only by our Board. The Code of Ethics provides guidance and information on how to report suspicious or illegal activities and violations to our Code of Ethics. The Company intends to disclose any changes in, or waivers from, the Code of Ethics by posting such information on its website or as required by law or stock exchange rules or regulations. Our Board has not granted any waivers to the Code of Ethics.

Independence of Directors

Our director independence standards conform to those required by the NYSE and BCBSA.  Under these standards, a director qualifies as “independent” if our Board affirmatively determines that the director has no material relationship with us other than as a director.  In assessing whether a director has a material relationship with us, directly or as a partner, shareholder or officer of an organization that has a relationship with us, the Board uses the criteria outlined in Section 303A.02 of the NYSE Listed Company Manual.  For relationships not covered by the NYSE guidelines, the determination of whether a material relationship exists is made by the members of our Board who are independent under said guidelines.  Our Board has reviewed the relationships between the Company, including our subsidiaries or affiliates, and each board member, including each such director’s immediate family members.

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The Board has affirmatively determined that all current directors are independent other than Mr. Clavell-Rodríguez and Mr. García-Rodríguez. The Board determined that Mr. Clavell-Rodríguez is not independent because (i) the company that currently employs Mr. Clavell-Rodríguez, San Jorge Children’s Medical Specialties PSC, received approximately $278,000 in insurance claims from the Company and its subsidiaries and affiliates; and (ii) as part of the services provided by San Jorge Children’s Medical Specialties PSC, Mr. Clavell-Rodríguez serves as chief medical officer of San Jorge Children’s Hospital, an entity that received approximately $12 million dollars in insurance claims from the Company and its subsidiaries and affiliates.  Mr. García-Rodríguez is not independent because he is our president and chief executive officer. Each of the independent directors has no relationship with us, other than any relationship that is categorically not material under the guidelines indicated above and other than as disclosed in this proxy statement under “Compensation Disclosure—Director Compensation” and “Other relationships, transactions and events.”  The Board has determined that the relationships described in this proxy statement do not preclude a determination of independence because the relationships will not impair the applicable director’s ability to render an independent judgment.

Pursuant to NYSE and BCBSA requirements, neither non-independent directors nor our officers and employees, including those of our subsidiaries, are members of the Compensation and Talent Development, Audit or Corporate Governance and Nominating committees.

Board leadership structure

The Board believes its current leadership structure best serves the oversight of management, its ability to carry out its roles and responsibilities on behalf of the shareholders, and the Company’s overall corporate governance. We believe that the separate roles of president and chief executive officer and chair of the board reflects the differences between the two roles. The president and chief executive officer is responsible for executing our strategic plan and overseeing the performance of our day-to-day operations, while the chair of the Board provides guidance to the president and chief executive officer, sets the agenda for Board meetings and presides over meetings of the Board and executive sessions of non-management directors. 

Each director in our Board is free to call upon any director to provide leadership in a given situation. However, because Mr. Clavell-Rodríguez, our chair, is not independent, our Board appointed the vice chair of our Board, Ms. Dominguez, as lead independent director. Ms. Dominguez’ responsibilities as lead independent director include: presiding all meetings of the board at which the chair of the board is not present, serving as liaison between the chair of the board and the independent directors, presiding over the executive sessions of the independent directors and having the authority to call meetings of the independent directors. The Board holds executive sessions with independent directors at least once a year. The Board periodically reviews the leadership structure and may make changes to the current structure in the future.

Board meetings and committees

Our Board met seven times during 2017. Each of the incumbent directors attended 75% or more of the aggregate meetings of the Board and the committees on which they served during the period for which such person has been a director during 2017. Directors are also kept informed of our business through meetings and other communications, including direct communications with our Board’s chair and others regarding matters of interest and concern to us and our shareholders. Mr. García-Rodríguez is the only director who is also an employee of the Company. He does not participate in any discussion or vote in any Board or committee meeting at which his compensation is evaluated.  

We encourage our directors to attend our annual meeting of shareholders; however, we have not adopted a formal policy requiring director attendance at the annual meeting of shareholders. All of our then current members of the Board attended our 2017 annual meeting of shareholders.

Non-management directors meet regularly in executive sessions without management. Non-management directors are all our Board members who are not our officers and include directors, if any, who are not “independent” by virtue of the existence of a material relationship with us. The chair of the Board presides over these executive sessions, which are typically held in conjunction with each regularly scheduled meeting of the Board. Independent directors also meet at least once per year in executive session without management or directors who are not independent. Ms. Dominguez, the vice chair of the Board and lead independent director, presides over these executive sessions.

23

Our Board has five standing committees: Audit, Compensation and Talent Development, Corporate Governance and Nominating, Investment and Financing, and Executive. The responsibilities of each committee are set forth in its respective charters, which have been approved by the Board. Committees must review their respective charters and perform a self-evaluation at least annually. Each committee has the authority to engage, retain, and approve the fees and payment of advisors as deemed necessary or appropriate to carry out its responsibilities without further action by the Board. Such independent advisors may be the regular advisors to the Company.

The following table sets forth the current members of the Board and each of its committees.

Director

Audit

Compensation
and Talent
Development

Corporate
Governance and
Nominating

Investment and
Financing

Executive

Luis A. Clavell-Rodríguez, Chair*

Member

Chair

David H. Chafey, Jr.

Member#

Chair

Member

Cari M. Dominguez, Vice Chair

Member

Member

Vice Chair

Antonio F. Faría-Soto

Chair

Member

Member

Manuel Figueroa-Collazo

Chair

Member

Member

Joseph A. Frick

Member

Member

Jorge L. Fuentes-Benejam

Chair

Member

Member

Gail B. Marcus

Member#

Member

Roberto Santa María

Member#

Member

Roberto García-Rodríguez*


*Not independent #Audit Committee financial expert

Audit Committee

 

Members:

Messrs. Faría-Soto (chair),
Chafey, and Santa María,
and Ms. Marcus

The committee assists the Board, among other things, in fulfilling its oversight responsibilities relating to:

Integrity of the Company’s financial statements;

Effectiveness of the Company’s internal control over financial reporting;

Selection of the independent registered public account firm;

Performance of the Company’s internal audit function and independent registered accounting firm;

Overseeing compliance of our Code of Ethics; and

Company compliance with laws and regulations.


Independence and other criteria. All members of the committee have been determined by the Board to meet the independence requirements under NYSE and BCBSA standards and Rule 10A-3(b)(1) of the Exchange Act. The Board has determined that each member of the committee is financially literate and has accounting and/or related financial management expertise as required under the rules of the NYSE, and that Messrs. Chafey, Santa María, and Ms. Marcus qualify as “audit committee financial experts” as defined under applicable SEC rules. None of the committee members serve on the audit committee of another listed public company. 

Meetings. The committee met nine times during 2017.

Additional information about the committee and its activities during 2017 is described in the Audit Committee Report contained in this proxy statement.  

24

Compensation and Talent Development Committee

Members:

Messrs. Figueroa-Collazo
(chair), and Frick, and
Mses. Dominguez
and Marcus

The committee is responsible, among other things, for the following matters:

Reviewing the compensation plan of our non-employee directors and making recommendations to the Board with respect to such compensation;

Evaluating the policies, program design and structure of, and reviewing and approving annual performance objectives relevant to, the compensation of the executive officers of the Company;

Overseeing the administration of and compliance with the Company’s incentive compensation plans, and making recommendations to the Board with respect to awards under such plans; and

Overseeing the Board’s annual review of succession planning with respect to our chief executive officer and other senior executives.


Independence. The Board has determined that each member of the committee is independent under the NYSE and BCBSA standards.

Meetings. The committee met seven times during 2017.

Compensation consultant. In 2017, the Compensation and Talent Development Committee retained Pay Governance LLC (“Pay Governance”), an independent compensation consulting firm, to assist the committee on matters related to executive and director compensation. The Board has determined that Pay Governance is an independent consultant pursuant to Section 10C of the Exchange Act. Pay Governance reports exclusively to the Compensation and Talent Development Committee and does not provide any additional services to us.

Pay Governance worked with the Compensation and Talent Development Committee to review our comparable group to ensure it remains appropriate to use for our competitive market assessments of total compensation, and reviewed our compensation policies to ensure they remain contemporary with prevailing best practices. Pay Governance also assisted the Compensation and Talent Development Committee in performing a risk assessment of our compensation programs, in establishing the 2017 Triple-S Management Incentive Plan, and in providing support for the preparation of our compensation disclosure in this proxy statement. 

Additional information about the Compensation and Talent Development Committee and its activities during 2017 is described in “Compensation Disclosure—Compensation discussion and analysis” in this proxy statement.

 

25

Corporate Governance and Nominating Committee

 

Members:

Messrs. Fuentes-Benejam
(chair), Figueroa-Collazo,
Frick, and
Ms. Dominguez

The committee is responsible, among other things, for the following matters:

Recommending to the Board the criteria for the selection of individuals qualified to serve as directors;

Identifying individuals qualified to serve on the Board consistent with criteria approved by the Board;

Recommending the Board nominees for election as directors at any meeting of shareholders;

Developing and recommending to the Board a set of corporate governance principles;

Reviewing our corporate governance guidelines, our Code of Ethics, committee charters and other corporate documents and recommending changes to the Board, consistent with best practices;

Overseeing compliance with our corporate governance guidelines and practices, and director’s independence requirements; and

Overseeing of the enterprise risk management program.


Independence. The Board has determined that each member of the committee is independent under the NYSE and BCBSA standards. 

Meetings. The committee met seven times during 2017.

Investment and Financing Committee

 

Members:

Messrs. Chafey (chair),
Faría-Soto,
Clavell-Rodríguez,
Fuentes-Benejam, and
Santa María

The committee is responsible, among other things, for the following matters:

Recommending to the Board the Company’s investment policy and guidelines, and financing policies, procedures and activities in accordance with best practices, good corporate governance, and compliance with applicable laws and regulation;

Overseeing the Company’s investment portfolio and activities, including investment performance, risk management exposure, and our capital structure; and

Reviewing and providing advice to the Board with respect to financial and investment development and transactions.


Meetings. In 2017, the committee met five times.

Executive Committee

 

Members:

Mr. Clavell-Rodríguez
(chair), Ms. Dominguez
(vice chair), Messrs.
Chafey, Faría-Soto,
Figueroa-Collazo, and
Fuentes-Benejam.

The committee is responsible, among other things, for the following matters:

Reviewing material policy, strategic and emerging issues of the Company;

Transacting administrative matters on behalf of the Board; and  

Assisting the Board in discharging its duties between meetings of the Board, especially when timing is critical.  


Meetings. The committee met one time during 2017.

26

Director nominations process

As part of the nominations process, the Corporate Governance and Nominating Committee is responsible for determining the appropriate skills and characteristics required for new Board members in light of the current Board composition and for identifying qualified candidates for Board membership. The process followed by the committee to identify and evaluate candidates includes requests to Board members, senior management and others for recommendations, periodic meetings to evaluate biographical information and background material relating to potential candidates, and interviews of candidates identified by members of the committee and the Board.

In considering whether to recommend any candidate for inclusion in the Board’s slate of recommended director nominees, the Corporate Governance and Nominating Committee applies the criteria set forth in our guidelines of corporate governance and its committee charter. Generally, the committee verifies that the selected individuals possess the following specific qualities or skills: experience or relevant knowledge, time availability and commitment, good reputation, analytical thinking, ability to work as a team, independent judgment, and ability to verbalize and present ideas in a rational and eloquent fashion. The committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees.  This process also takes into consideration our strategies, the annual peer and self-evaluations of each director, the fit between candidates’ qualifications and our needs, and applicable legal, regulatory and statutory requirements.  The goal is to assemble a diverse board that is strong in its collective knowledge and consists of individuals who possess a variety of complementary attributes that serve the Company and its shareholders well. The Board is responsible for the final approval of new director candidates, as well as the nomination of existing directors for reelection.

Shareholders may recommend individuals for the Corporate Governance and Nominating Committee to consider as potential director candidates in the Board’s slate of nominees by submitting their names and background to “Triple-S Management Corporation, Corporate Governance and Nominating Committee,” at Triple-S Management Corporation, P.O. Box 363628, San Juan, PR 00936-3628. The committee will review the qualifications of recommended candidates if appropriate biographical information and background material are provided on a timely basis.  Evaluation of such candidates will follow the same process, and apply the same criteria, as for candidates submitted by Board members, senior management or others. If the Board decides to nominate a shareholder-recommended candidate and recommends his or her election as a director by the shareholders, the name will be included in our proxy card for the shareholders’ meeting at which his or her election is recommended.

Shareholders also have the right to directly nominate director candidates, without any action or recommendation on the part of the Corporate Governance and Nominating Committee or the Board, by following the procedures set forth in the Company’s bylaws and described in response to the question “How and when may I submit a shareholder proposal, including a shareholder nomination for director, for the 2019 annual meeting of shareholders?” in the “Information about voting, solicitation and the annual meeting” section of this proxy statement.

Criteria

In considering whether to recommend any candidate for inclusion in the Board’s slate of recommended nominees, including re-election of directors and candidates recommended by shareholders, the Corporate Governance and Nominating Committee, in accordance with the Board’s diversity policy and the committee charter, will review certain criteria to ensure we benefit from a broad diversity of director experience, thoughts, viewpoints and backgrounds. The committee considers personal characteristics each individual must show in order to be considered as a director and those competencies represented in the Board to promote a balanced composition of knowledge, experience and abilities that will allow the Board to fulfill its responsibilities, as further described below.

27

Personal attributes

Competencies

Other considerations

Integrity and good reputation

Independent judgment

Analytical thinking

Educational background

Professional experience

Business acumen

Commitment

Diligence

Ability to serve

Public company service

Accounting and finance

Industry knowledge

Technology

International markets

Government and public policy

Human resources

Legal

Executive leadership

Independence

Conflict of interest

Acceptance of the Company’s ethical norms and responsibilities

Compliance with legal and regulatory requirements

Other commitments

Peer-review and evaluation process

Cultural sensitivity


The committee recognizes the value of inclusiveness on the Board and carefully considers the Board’s diversity in the director identification and nomination process by taking into consideration the personal attributes, the competencies, and other perspectives of the individuals considered for director.  The committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. We do not discriminate against nominees on the basis of race, color, gender, religion, national origin, sexual orientation, disability or any other basis prohibited by law.

Risk oversight

The Board has the primary role, as a whole and through its committees, in overseeing the way in which management identifies and manages risks. Senior management is responsible for identifying significant risks, and developing and implementing the strategies, assessment, prioritization, mitigation and control of the Company’s most important risks. The Company maintains an Executive Risk Committee comprised of senior personnel that, among other things, ensures that the Company is maintaining effective risk management processes to identify, discuss, and communicate significant and emerging risks. Management is also responsible for identifying risk and risk controls related to significant business activities and Company objectives, and developing programs to determine the sufficiency of risk identification, the balance of potential risk to potential reward, the appropriate manner in which to control risk, and the support of the risk-controlling behaviors and the risks to the Company’s strategy.

The Board receives management reports on the potentially significant risks that the Company faces and how the Company is seeking to control risk, where appropriate. The Corporate Governance and Nominating Committee has primary oversight over the Company’s enterprise risk management program. Additionally, each Board committee also considers risks within its area of responsibility. For example, the Audit Committee oversees management of financial risks, including issues related to internal control over financial reporting, and our policies with respect to risk assessment and management. The Compensation and Talent Development Committee oversees the management of risks relating to our executive compensation structure. Our Investment and Financing Committee oversees risks related to our investment policy, financial strategies, and corporate acquisitions. While each of these committees is responsible for evaluating and overseeing the management of specific risks, the entire Board is regularly informed about such risks through committee reports. The Board also receives regular reports from members of senior management regarding areas of material risk to us, including operational, financial, legal, regulatory, strategic and reputational risks, and often discusses risk as part of its review of the ongoing business, financial performance, and other activities of the Company. In addition, the Board annually reviews our strategic plan which addresses, among other matters, the risks and opportunities we face. Review of this information enables the Board to understand and assess our risk identification, appetite and tolerance, management, and mitigation strategies.

28

Communications from shareholders and other interested parties

The Board will give appropriate attention to written communications on issues that are submitted by shareholders and other interested parties, and will respond as appropriate. Absent unusual circumstances or as contemplated by committee charters, the chair of the Board will, with the assistance of our chief legal counsel and Secretary and other personnel responsible to assist the Board and the Company with investor relations, be primarily responsible for monitoring communications from shareholders and other interested parties and provide copies or summaries of such communications to the other directors as they deem appropriate.

Communications will be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the chair of the Board considers to be important for the directors to review. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to personal grievances and matters as to which we tend to receive repetitive or duplicative communications.

Shareholders and other interested parties may contact our Board or any individual director by the following methods:

By Internet

Email us at investorrelations@ssspr.com (investor relations) or
crodrig@ssspr.com (secretary)

By mail

Triple-S Management Corporation
c/o Secretary
P.O. Box 363628
San Juan, Puerto Rico 00936-3628


The Board does not participate in daily management functions or operations of the Company or our subsidiaries. If you wish to contact the Company relating these matters, you may use the Contact Us form on our website, which will help you to direct your message to the appropriate area.

 

29

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table contains information regarding the beneficial ownership of our Class B shares as of December 31, 2017, except as otherwise indicated, by the shareholders we know to beneficially own more than 5% of our outstanding Class B shares. These shareholders do not own Class A shares. Additionally, no Class A shareholders owns more than 5% of our outstanding Class A shares.

Name and Address of Beneficial Owner(1)

Amount and Nature of
Beneficial Ownership
(2)

Percent of Class(3)

FMR LLC(4)
Abigail P. Johnson
Fidelity Low-Priced Stock Fund
245 Summer Street
Boston, Massachusetts 02210

2,067,800

9.14%

Dimensional Fund Advisors LP(5)
Building One
6300 Bee Cave Road
Austin, Texas 78746

1,978,316

8.74%

Pzena Investment Management, LLC(6)
320 Park Avenue, 8
th Floor
New York, NY 10022

1,701,200

7.5%

BlackRock, Inc.(7)
55 East 52nd Street
New York, NY 10055

1,611,292

7.1%

The Vanguard Group(8)
100 Vanguard Blvd.
Malvern, PA 19355

1,148,546

5.1%


(1)For purposes of this table, “beneficial ownership” is determined in accordance with Rule 13d-3 under the Exchange Act.

(2)For each person, the “Amount and Nature of Beneficial Ownership” column may include shares of a class of common stock attributable to the person because of that person’s voting or dispositive power or other relationship. The inclusion in the table of any shares, however, does not constitute an admission of beneficial ownership of those shares by the named shareholder.

(3)Based on 22,627,077 Class B shares outstanding as of the December 31, 2017. Under our license with BCBSA, no institutional shareholder may own more than 10% of all of our common stock.

(4)Based solely on a Schedule 13G/A filed by FMR LLC on February 13, 2018 reporting the above stock ownership as of December 31, 2017. FMR LLC reports that it has sole voting power with respect to 281,388 Class B shares and sole dispositive power with respect to 2,067,800, or 9.009% of the outstanding Class B shares. Abigail P. Johnson reports that she has sole voting power with respect to zero Class B shares and sole power to dispose of 2,245,900 Class B shares. FMR LLC reports that the interest of Fidelity Low-Priced Stock Fund amounted to 1,728,242 shares, or 7.64% of Class B shares.

(5)Based solely on a Schedule 13G/A filed by Dimensional Fund Advisors LP (“Dimensional”) on February 9, 2018 reporting the above stock ownership as of December 31, 2017. Dimensional reports that it has sole voting power with respect to 1,905,141 Class B shares and sole dispositive power with respect to 1,978,316 Class B shares. These securities are owned by certain funds that Dimensional serves as investment advisor, sub-adviser and/or manager. For purposes of the reporting requirements of the Exchange Act, Dimensional is deemed to be a beneficial owner of such securities; however, Dimensional expressly disclaims that it is, in fact, the beneficial owner of such securities.

(6)Based solely on a Schedule 13G/A filed by Pzena Investment Management, LLC (“Pzena”) on February 1, 2018 reporting the above stock ownership as of December 31, 2017. Pzena reports it has sole voting power with respect to 1,531,007 Class B shares and sole dispositive power with respect to 1,701,200 Class B shares.

(7)Based solely on a Schedule 13G/A filed by BlackRock, Inc. (“BlackRock”) on January 29, 2018 reporting the above stock ownership as of December 31, 2017. BlackRock, Inc. reports that it has sole voting power with respect to 1,548,797 Class B shares and sole dispositive power with respect to 1,611,292 Class B shares.

(8)Based solely on a Schedule 13G filed by The Vanguard Group (“Vanguard”) on February 7, 2018 reporting the above stock ownership as of December 31, 2017. The Vanguard Group reports that it has sole voting power with respect to 30,947 Class B shares and sole dispositive power with respect to 1,114,452 Class B shares.

30

The following table contains information regarding the beneficial ownership of our common stock as of March 6, 2018 by each director and nominee for director named in this proxy statement, each executive officer named in the Summary Compensation Table included in this proxy statement and all of our directors and executive officers as a group. 

Class A Shares

Class B Shares

Name and Address of
Beneficial Owner
(1)

Amount and
Nature of
Beneficial
Ownership

% of Class

Amount and
Nature of
Beneficial
Ownership
(2)

Shares
Acquirable
Within 60
Days

Total Shares
Beneficially
Owned

% of
Class
(3)

Directors and Nominees:

 

 

 

 

 

 

Luis A. Clavell-Rodríguez

0

0

45,701

4,819

50,520

*

David H. Chafey, Jr.

0

0

16,986

4,819

21,805

*

Cari M. Dominguez

0

0

14,481

4,819

19,300

*

Antonio F. Faría-Soto

0

0

24,148

4,819

28,967

*

Manuel Figueroa-Collazo

0

0

27,614

4,819

32,433

*

Joseph A. Frick

0

0

11,986

4,819

16,805

*

Jorge L. Fuentes-Benejam

0

0

20,814

4,819

25,633

*

Roberto Santa María

0

0

5,095

4,819

9,914

*

Gail B. Marcus

0

0

4,135

0

4,135

*

 

 

 

 

 

Named Executive Officers:

 

 

 

 

Roberto García-Rodríguez (4)

0

0

121,462

0

121,462

*

Juan J. Román-Jiménez

0

0

25,613

0

25,613

*

Madeline Hernández-Urquiza

0

0

55,191

0

55,191

*

Jose E. Novoa-Loyola

0

0

14,845

0

14,845

*

Arturo L. Carrión-Crespo

0

0

61,346

0

61,346

*

All our directors, nominees and executive officers as a group
(
18 persons)

0

0

449,417

38,552

487,969

2.16%


*Less than 1% of outstanding common stock of such class.

(1)For purposes of this table, “beneficial ownership” is determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, a person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days of the record date upon the exercise of options or warrants or upon the vesting of deferred stock awards.

(2)For each person, the “Amount and Nature of Beneficial Ownership” column may include shares of a class of common stock attributable to the person because of that person’s voting or dispositive power or other relationship. Unless otherwise indicated, each person in the table has sole voting and investment power over the shares listed.

(3)Each beneficial owner’s percentage ownership is determined based on 950,968 Class A shares and 22,613,316 Class B shares outstanding as of March 6, 2018.

(4)Mr. García-Rodríguez is the president and chief executive officer of the Company and member of the Board of Directors of the Company.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities (“10% Beneficial Owners”) to file with the SEC initial reports of ownership of our common stock and reports of changes in such ownership. Officers and directors are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. The Company believes, based solely on a review of our records and written representations by the persons required to file these reports during the fiscal year ended December 31, 2017, that all Section 16(a) filing requirements were timely met during 2017.

 

31

INFORMATION ABOUT EXECUTIVE OFFICERS

Executive officers of Triple-S Management Corporation

The Company’s executive officers are listed below. Biographical information of Mr. García-Rodríguez, our president and chief executive officer, who also serves as director of the Company, is in the section entitled “Nominees for election” of this proxy statement.

Name

Position(s) with the Company

Age

Juan J. Román-Jiménez

Executive Vice President and Chief Financial Officer

52

Madeline Hernández-Urquiza

President of Triple-S Salud, Inc., and President of Triple-S Advantage, Inc.

54

José Del Amo Mojica

President of Triple-S Propiedad, Inc.

51

Arturo L. Carrión-Crespo

President of Triple-S Vida, Inc.

60

José E. Novoa-Loyola

Chief Medical Officer

53

Juan J. Díaz-Goitía

Chief Information Officer

54

Iraida T. Ojeda-Castro

Chief Human Resources Officer

63

Carlos L. Rodríguez-Ramos

Vice President of Legal Affairs, Chief Legal Counsel and Secretary

39


Professional background of executive officers

Juan J. Román-Jiménez, Executive Vice President and Chief Financial Officer, rejoined our Company and assumed his current position in January 2016. Previously, he served as Executive Vice President and Chief Financial Officer of EVERTEC, INC., a full-service transaction processing company in Latin America and a NYSE listed company, from April 2012 to August 2015, and as Executive Vice President and Chief Financial Officer of EVERTEC Group, LLC from 2011 to 2012.

Madeline Hernández-Urquiza has been the President of our managed care subsidiaries Triple-S Salud, Inc. and Triple-S Advantage, Inc., since January 2016 and January 2015, respectively. She rejoined our Company in 2010 and assumed various positions in Triple-S Salud, including Vice President of Risk Management and Chief Risk Officer before assuming her current roles.

Jose Del Amo Mojica was appointed President of Triple-S Propiedad, Inc. on March 2017. Previously, he served as Senior Vice President of Underwriting and Claims of Triple-S Propiedad, Inc. from 2014 to February 2017.

Arturo L. Carrión-Crespo is the President of Triple-S Vida, Inc., our life insurance subsidiary, since 1998.

José E. Novoa-Loyola, Chief Medical Officer, joined our company and assumed his position in July 2015. Previously, he served at the Cardiovascular Center of Puerto Rico and the Caribbean from 2002 to 2015 in various positions, including Medical Director, Chief of the Cardiology Department and member of the Pharmacy and Therapeutics Committee.

Juan J. Díaz-Goitía has been our Chief Information Officer since October 2012. He also has served as President of Interactive Systems, Inc., our technology service subsidiary since 2012. Previously, he served as Executive Vice President of Triple-S Vida, Inc., from 2010 to 2012.

Iraida T. Ojeda-Castro has been our Chief Human Resources Officer since 2004.

Carlos L. Rodríguez-Ramos, Vice President of Legal Affairs, Chief Legal Counsel and Secretary, joined our Company in 2013 and assumed his current position in January 2016. Mr. Rodríguez-Ramos previous positions include Associate General Counsel, Acting General Counsel and Assistant Secretary. Before joining our Company he served as Adjunct Professor at the School of Law of the University of Puerto Rico from 2010 to 2014 and as Deputy Chief of Staff of Programmatic Affairs for the Governor of Puerto Rico from 2011 to 2012.


 

32

COMPENSATION DISCLOSURE

Compensation discussion and analysis

This compensation discussion and analysis describes our executive compensation program, policies and practices applicable to our named executive officers (“NEOs”) and to other executive officers of our Company. For 2017, our NEOs were:

Name

Position (as of December 31, 2017)

Roberto García-Rodríguez

President and Chief Executive Officer

Juan J. Román-Jiménez

Executive Vice President and Chief Financial Officer

Madeline Hernández-Urquiza

Executive Vice President and Chief Operating Officer, and President of Triple-S Salud, Inc. our managed care subsidiary, and
President of Triple-S Advantage, Inc., our Medicare Advantage subsidiary

José E. Novoa-Loyola

Chief Medical Officer

Arturo L. Carrión-Crespo

President of Triple-S Vida, Inc. our life insurance subsidiary


Overview

The Board’s Compensation and Talent Development Committee oversees the design and administration of our executive compensation program. The program is designed to support the attainment of our vision, financial and strategic goals and operating imperatives, apply good corporate governance principles, and align our interests with those of our shareholders. We believe that an effective executive compensation program recognizes individual contributions as well as overall business results, rewards executives for achieving our annual and long-term goals, aligns executive and shareholder interests and reflects responsible corporate governance practices to ultimately improve shareholder value. We believe the compensation of our executive officers reflects our results and further promotes the achievement of our goals.

The following table summarizes our compensation program and the decisions made by the Compensation and Talent Development Committee and ratified by our Board in 2017, and the rationale for each decision. These decisions considered the Company’s executive compensation philosophy, the Company’s financial and operating performance for 2016 and 2017, individual executive performance, prevailing compensation trends in our comparable group, which includes companies located in Puerto Rico and the United States, and our industry.

Compensation
component

Description of component

2017 highlights

Base salary

Designed to recognize individual contribution to the organization based on experience, knowledge and responsibilities.

Aimed to provide competitive compensation, appropriate incentives and financial stability to the NEOs for assuming a significant level of responsibility.

Targeted to be between the 25th and 50th percentile of comparable group.

Considers market-level salary, individual performance, and the Company’s overall financial results.

During 2017, there were no salary increases to our NEOs with the exception of Mr. José E. Novoa-Loyola.


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Annual short-term
cash incentive

Focuses executives on achieving annual financial, operating, and individual objectives.  

Supports long-term objective of creating shareholder value.

Provides, together with base salary, competitive cash compensation when our targeted performance objectives are met.

During 2017 and 2018, NEOs received annual short-term compensation for 2016 and 2017, respectively, as described in the Summary Compensation Table.

Long-term
equity incentive

Aligns management and shareholder interests.

Provides a variable portion of total compensation tied to our long-term market and financial performance.

Holds management responsible for their long-term decisions.

Supports the retention of a talented management team over time.

Emphasizes long-term performance by delivering 75% of the annual award value in performance equity grants that may be earned only if specific measures of operating performance are attained over a three-year period, with cliff vesting at the end of the third year. Remaining 25% of the equity award value is delivered in restricted stock, which vests over three years in increments of one third per year.

For the three-year plan beginning in 2017, the Compensation and Talent Development Committee established three levels of goal attainment based on three-year cumulative premiums earned, operating income and earnings per share (“EPS”), and determined the corresponding award size for each performance level for each NEO. These goals were set based on what the committee believes to be minimally acceptable, challenging yet attainable, and exceptional performance in the context of our stated objectives for premiums earned, operating income and EPS.

Long-term incentives were granted to NEOs in 2017 as described in the Summary Compensation Table.


Other compensation decisions

Enhanced individual performance metrics. During 2017, the Compensation and Talent Development Committee approved individual metrics that we believe better align individual performance with our strategic transformation. For more information, see “Components of executive compensation—Short-term annual cash incentive” section of this proxy statement.

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Our compensation philosophy

Our executive compensation program is designed to support our vision, our strategic and financial goals, and operating imperatives. It applies to our NEOs and other executive officers of our Company and subsidiaries.

Overarching principles

Reinforce our values by combining our efforts to deliver superior business results with good governance, socially responsible business practices, and high ethical standards.

Promote a high performance culture with clear emphasis on accountability and variable pay that is tied to both short and long-term results.

Ensure compensation is paid based on accurate financial data.

Attract, motivate and retain top talent in a cost-effective way by offering competitive compensation.

Require share ownership that increases with executives’ scope of responsibilities.

Emphasize uniformity of design features to reinforce collaboration, limit program complexity, and increase the effectiveness of the entire executive team.

Align executive and shareholder interests through long-term equity based plans.

Maintain a clear and understandable framework for evaluating the effectiveness of the program’s design.

Prohibit any activity that hedges employee’s economic risk of owning Company stock.

Provide a balanced total compensation to ensure that management is not encouraged to take unnecessary and excessive risks that may harm the Company.

Targeted pay posture

Provide a total compensation opportunity targeted around average levels within comparable group.

High performers, successors to key positions, and individuals in critical assignments may be targeted at a higher level to ensure engagement, motivation, and retention.

Newly promoted or inexperienced executives may be paid at a lower level of target pay until they become fully-seasoned contributors.

Peer group

We compare our compensation against companies with whom we compete for talent, capital, and customers using peer references used for competitive pay comparisons, and general industry surveys for which compensation peer group data is not available.

The Compensation and Talent Development Committee, and management, as applicable, will use their judgment when making adjustments to compensation and review executive pay from a holistic perspective, including reference to compensation peer group pay practices, importance of the position to the Company, level of responsibility of the position, individual performance and growth in position, our financial performance and ability to pay, and internal equity considerations.


Description of compensation policies

Equity award grant policy. The purpose of the equity award grant policy is to ensure the integrity of the award granting process and avoid the possibility or appearance of timing of equity grants for the personal benefit of executives. Under the policy, equity awards are made at the Compensation and Talent Development Committee’s regularly scheduled meeting taking place in the month of March.  Equity grants to certain newly hired employees or promoted individuals, including executive officers, are made on the last business day prior to the 15th day of each month following the date of hire or the last business day of each month, whichever day first follows the date on which the newly-hired individual commences providing acting services to the Company or the promoted individual commences providing active services to the Company at the promoted level. No off-cycle awards may be granted to the Company’s executive officers during quarterly and event-specific blackout periods under the Company’s insider trading policy. Our equity incentive plans prohibit the re-pricing or exchange of equity awards without shareholder’s approval.

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Recoupment Policy. Our recoupment policy applies to any current or former employee who received incentive compensation based on financial data on which the Company is required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirement under the securities laws. The recoupment policy aligns management’s interests with the interests of shareholders and supports good governance practices. The policy provides that the Company may, in the exercise of its discretion (as determined by the Compensation and Talent Development Committee) take action to recoup the amount by which such award exceeded the payment that would have been made based on the restated financial results. Our right of recoupment expires three years following the year for which the inaccurate performance criteria were measured; however, our right of recoupment is not subject to an expiration period in the event of fraud or misconduct.

Insider trading and anti-hedging policy. We prohibit directors, officers, employees and consultants of the Company from trading in the securities of the Company or its affiliates (e.g., customers, suppliers, etc.), directly or through family members or other persons or entities, if they are aware of material nonpublic information relating to the Company or its affiliates. Trading includes purchases and sales of stock, derivative securities such as put and call options and convertible debentures or preferred stock, and debt securities (debentures, bonds and notes). Trading also includes certain transactions under the Company’s plans (e.g., sale of underlying stock acquired upon the exercise of stock options, certain transactions associated with the Company’s retirement savings plan, and voluntary additional contributions to the Company’s dividend reinvestment plan). Our insider trading policy also prohibits our directors, officers and certain other employees from engaging in any hedging or monetization transactions involving Company securities.

Stock ownership guidelines for executives. We have stock ownership guidelines for our executive officers and other key employees to align their interests with those of our shareholders. The guidelines require executives and other employees to own Company stock in an amount equal to a multiple of base salary, as follows:

Level

Value of Stock as a
Multiple of Base Salary

CEO

5x

CFO and subsidiary presidents

3x

Corporate and subsidiary executives

2x

Other selected employees

1x


Until an executive reaches his or her applicable ownership level, he or she must retain 50% of the equity received from long-term compensation plans (after meeting tax withholding obligations), and once the ownership level is met, he or she may not sell shares if doing so would cause his or her ownership to fall below that level. The Compensation and Talent Development Committee reviews progress toward meeting the ownership guidelines on an annual basis.

The Committee has also approved stock ownership guidelines for non-management directors. See the section entitled “Director compensation—Stock ownership guidelines for non-management directors” of this proxy statement for more information.

Compensation consultants

The Compensation and Talent Development Committee has sole authority to engage and terminate the services of outside consultants.  In 2017, the committee retained Pay Governance to assist the committee on matters related to executive officer and director compensation, including the committee’s review of the comparable group, analysis of the competitiveness of executive compensation, the creation of the 2017 Triple-S Management Incentive Plan and reporting on trends and issues related to executive compensation.

The Board has determined that Pay Governance is an independent compensation consultant pursuant to Section 10C of the Exchange Act. Pay Governance reports exclusively to the Compensation and Talent Development Committee and does not provide any additional services to the Company.

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Results of advisory vote on say-on-pay and frequency of the vote

Rule 14a-21 of the Exchange Act enables our shareholders to vote to approve, on an advisory basis, the compensation of our NEOs.  In 2017, 99.4% of our shareholders voted in favor of the compensation of our NEOs. Also, the rule enables our shareholders to advise the Company on the frequency of their vote on the compensation of our NEOs.  In 2017, our shareholders voted that such compensation be presented for shareholder’s advisory approval on an annual basis and the Board accepted the advice of our shareholders. Our executive compensation program presented to our shareholders in this proxy statement is similar to the one presented at last year’s annual meeting.

In accordance with Rule 14a-21 of the Exchange Act, the next shareholder vote on the frequency of the vote on executive compensation will be held no later than the 2023 annual meeting of shareholders.

Determining executive compensation

We compare the compensation of the NEOs to that of companies with which we compete or could compete for executive talent, capital and customers. These companies include private or publicly-held companies, stand-alone businesses and/or divisions of larger corporations. Our size and organizational complexity is considered when selecting comparable companies in Puerto Rico and the United States and data analysis methods. Within our general competitive framework, specific comparisons may vary by type of role.

Based on our compensation philosophy, a significant percentage, an average of 70% for our CEO and 63% for all other NEOs in 2017, is delivered through our incentive compensation plans in the form of at-risk variable pay. The Compensation and Talent Development Committee has not adopted a policy or formula to allocate total compensation among its various components. As a general matter, the committee reviews competitive pay information provided by its compensation consultant as well as our current operating goals and environment to determine the appropriate level and mix of incentive compensation. Actual amounts earned from incentive compensation are realized only as a result of individual or Company performance, depending on the type of award, based on a comparison of actual results to pre-established goals.

The Compensation and Talent Development Committee collects relevant market data to consider when making executive compensation decisions.  In 2017, market data for total compensation was gathered for 14 comparable companies, including companies in Puerto Rico and direct industry competitors located within the United States (the “comparable group”), taking into consideration industry relevance, comparability of size in terms of total revenue and market capitalization, business competitors and input from management. The 2017 Peer Group comprises the following 14 companies, with one deletion from the 2016 Peer Group, as explained below:

Alleghany Corporation

FirstBank Corp.

Popular, Inc.

Argo Group International Holdings, LTD.

Infinity Property & Casualty Corp.

Selective Insurance Group, Inc.

Aspen Insurance Holdings, Ltd

Magellan Health, Inc.

State Auto Financial Corporation

Erie Indemnity Company

Molina Healthcare, Inc.

United Fire Group, Inc.

Evertec, Inc.

OFG Bancorp


Universal American Corporation was removed from the 2017 Peer Group because it was acquired by WellCare in April 2017.

We generally update the peer group every other year, or as may be appropriate to reflect changes in our operating environment or business model. For 2018, the Committee, with the assistance of Pay Governance, modified the peer group to better reflect the nature of our business by removing several property and casualty insurers and adding several healthcare and related businesses that are also relevant from a size perspective.

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The companies comprising the 2018 peer group, which will be used for 2018 compensation analyses, are as follows:

Acadia Healthcare Company, Inc.

HealthSouth Corporation

Popular, Inc.

Alleghany Corporation

Infinity Property & Casualty Corp.

Quorum Health Corporation

Argo Group International Holdings, LTD.

Kindred Healthcare, Inc.

Selective Insurance Group, Inc.

Aspen Insurance Holdings, Ltd

LifePoint Health, Inc.

State Auto Financial Corporation

Erie Indemnity Company

Magellan Health, Inc.

United Fire Group, Inc.

Evertec, Inc.

Mednax, Inc.

WellCare Health Plans, Inc.

FirstBank Corp.

Molina Healthcare, Inc.

HealthEquity, Inc.

OFG Bancorp


Components of executive compensation

Executive compensation is delivered through a combination of base salary, an annual short-term cash incentive, long-term equity incentive compensation, retirement programs and a non-qualified deferred compensation plan.

Base salary. Base salaries are designed to recognize an individual’s contribution to the organization and his or her experience, knowledge and responsibilities. Base salaries also aim to provide competitive compensation, appropriate incentives and financial stability to the NEOs for assuming a significant level of responsibility.

According to our salary adjustment policy, salary determinations are based on a number of factors, including importance of the position, level of responsibility, individual performance, growth in position, market-level relative salary, our financial and operating performance, and the Company’s ability to pay.  Also, our policy establishes that base pay adjustments send clear performance messages and make moderate distinctions based on performance. Significant distinctions in performance by executives are recognized through our annual short-term cash incentive plan. In addition, this policy requires that timing for increases, promotions and changes in responsibilities be consistent with market practice and that base salaries for executives be reviewed on an annual basis and adjusted as necessary to ensure pay levels remain competitive.

Short-term annual cash incentive. The short-term annual cash incentive portion of an executive’s total compensation opportunity is intended to accomplish a number of objectives, such as reinforcing the optimization of operating results throughout the year, facilitating the achievement of our stated objectives, paying for performance, reinforcing individual accountability, supporting our long-term objective to create shareholder value, and providing market competitive cash compensation when performance objectives for the year are met or exceeded. This incentive compensation can be highly variable from year to year depending on actual performance results.

The Company sets cash incentive target amounts as a percentage of base salary for all eligible executives at the beginning of each year based on job responsibilities, position within the Company, and a review of competitive market data. Actual incentive payouts may range from zero to 150% of the target opportunity depending on the Company’s financial results relative to predetermined performance goals and the Compensation and Talent Development Committee’s review of each executive’s individual performance.  The Compensation and Talent Development Committee approves the awards and has discretion to determine any changes to the final amount to be paid.  

For 2017, the target short-term annual cash incentive for each of the NEOs as a percentage of salary was as follows:

Executive

Target Bonus
Percent

Roberto García-Rodríguez

70%

Juan J. Román-Jiménez

70%

Madeline Hernández-Urquiza

70%

José E. Novoa-Loyola

70%

Arturo L. Carrión-Crespo

70%


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The Compensation and Talent Development Committee determines short-term annual cash incentives based on two types of performance measures: the Company’s financial and operating results and individual criteria. The Company’s financial and operating results account for 70% of each NEO evaluation and individual performance criteria account for the remaining 30%.

The weighting of financial results, in turn, is divided between Adjusted Premiums Earned (30%) and Adjusted Net Income (40%) (each term as defined in the following paragraph).  This mix of performance measures focuses executives appropriately on improving both top-line and bottom-line growth, while also emphasizing individual accountability through each executive’s individual performance goals (30%).

The Company believes that premiums earned and net income are key drivers of shareholder value and― adjusted to exclude non-budgeted items—are the most relevant measures by which to assess the Company’s short-term business performance and promote profitable revenue growth. Adjusted Premiums Earned represent the annual premiums earned in the calendar year as presented in the consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), adjusted to include only operations existing at the beginning of the year. Adjusted Net Income is measured as the net income earned in the calendar year, as presented in the consolidated financial statements in accordance with U.S. GAAP, minus realized and unrealized gains/losses in investment (net of the related income tax effect) and other non-budgeted items.

The financial results component of our short-term cash incentive performance goals of the Company’s executives, including our chief executive officer and chief financial officer, is solely based on consolidated results.  Awards to our business unit executives are split 40% based on our consolidated results and 30% based on the results of the relevant business unit. The remaining 30% considers the individual executive’s performance. The Compensation and Talent Development Committee, based on the recommendation of management, determined the individual metrics considered for executive compensation to align individual performance with our Company’s strategic transformation. These individual metrics are established to support our strategic priorities and are categorized as follows:

Metrics

Purpose

External stakeholders

Drives behavior to be externally focused, market backed, customer centric, and aligned with our providers.

Innovation

Drives excellence in execution, and efficient and effective ways of doing business.

Collaboration and teaming

Drives agility, accountability and effective working relationships across businesses and functional areas.

People development

Develops a talented, motivated and ownership-minded work force.


We believe these metrics provide the Board, the committee and our chief executive officer, with respect to those executives under his supervision, adequate guidance in evaluating how individual performance is aimed to accomplish our goals. This distribution in weighting is designed to encourage each executive with responsibility for a business unit to focus on his or her individual business while working as a team to achieve the Company’s overall success.

For 2017, performance measures of the short-term cash incentive plan were as follows:

Corporate Executives

Performance Measure and Weighting

30%

40%

30%

Consolidated
Premiums
Earned

Consolidated
Adjusted
Net Income

Individual

(dollar amounts in millions)

Performance

Roberto García-Rodríguez and Juan J. Román-Jiménez

Maximum

$3,484.8

$30.6

According

Target

$2,904.0

$25.5

to individual

Minimum

$2,323.2

$20.4

metrics


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Business Unit
Executives

Performance Measure and Weighting

Consolidated Results

Business Unit

15%

25%

15%

15%

30%

(dollar amounts in millions)

Premiums
Earned

Adjusted
Net Income

Premiums
Earned

Net
Income

Individual

Performance

Madeline Hernández-Urquiza and José E. Novoa-Loyola – Managed Care Segment

Maximum

$3,484.8

$30.6

$3,189.0

$8.4

According

Target

$2,904.0

$25.5

$2,657.5

$7.0

to individual

Minimum

$2,323.2

$20.4

$2,126.0

$5.6

metrics

Arturo L. Carrión-Crespo – Life Insurance Segment

Maximum

$3,484.8

$30.6

$195.5

$16.7

According

Target

$2,904.0

$25.5

$162.9

$13.9

to individual

Minimum

$2,323.2

$20.4

$130.3

$11.1

metrics


Annual non-performance cash bonus. We pay an annual non-performance cash bonus each December to active employees. Under Puerto Rico law, we are required to pay employees who worked more than 700 hours in the 12-month period commencing October 1 of the previous year and are employees at the date of payment a bonus in an amount which cannot be less than $600. The amount paid by the Company to active employees under this bonus is approximately 6% or 9% of the employee’s base salary, varying among business units, which may be greater than the minimum amount required by law in order to offer a competitive compensation to our employees. Neither NEOs nor our Section 16 officers participate in the annual non-performance cash bonus program. During 2017 and 2016, our NEOs received the minimum amount of the bonus required under Puerto Rico law, as further described in the summary compensation table in this proxy statement.

Long-term incentive awards. We believe that long-term incentives in the form of equity-based compensation are an important and essential component of our total compensation program that ensure our ability to attract, motivate, and retain top talent responsible for our long-term success. Our long-term incentives to key executive employees are designed to accomplish a number of important objectives, including to align management and shareholder’s interests, balance the short-term orientation of other compensation elements, provide a variable portion of total compensation tied to long-term market and financial performance, build executive stock ownership, hold executives accountable for their long-term decisions, reinforce collaboration across the Company, retain key talent over the long term, and share success with those who directly impact our performance results.

The Compensation and Talent Development Committee has an annual equity award program for executives under the Company’s incentive plan, based on recommendations from its compensation consultants and the principles contained in the Company’s executive compensation philosophy. The program aims to better focus and reward executives for multiple performance objectives that drive long-term value creation and in part to mitigate the possibility of excessive risk-taking. The program’s design provides both performance equity grants (“performance shares”) that may be earned only if specific measures of operating performance are attained and time-based vesting restricted stock that is earned only if the executive remains employed with the Company over the vesting period. Long-term incentive grants provide for accelerated vesting only upon death, disability, termination without cause, or retirement, provided that the executive releases the Company from liability by the execution of a general release and non-disparagement agreement. We assigned a weighting of 75% of the total equity award value to performance shares consistent with our stated philosophy of promoting a high performance culture with clear emphasis on accountability and variable pay that is tied to long-term results, and 25% of the total equity award value to restricted stock to emphasize the retention of key executives and alignment with shareholders.

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Under the current design, performance share awards may be earned if specific goals are attained over a three-year performance period. At the beginning of the performance period, minimum, target and maximum performance levels, along with the associated dollar value of shares that may be earned, are established by the Compensation and Talent Development Committee. The actual value of shares that may be earned may be as high as 150% of the target amount if the maximum level of performance for all metrics is achieved or as low as zero if the minimum level of performance for all metrics is not achieved over the three-year performance period. Determination of performance pay and vesting occur at the end of the third year. A summary of the performance share metrics and rationale for each is presented in the following table.

Performance metric

Weighting

Rationale

3-Year

Cumulative

Premiums Earned, Net

20%

Premiums earned, net improvement is critical to the continued growth and health of our business. Premiums earned, net is a key contributor to EPS and shareholder value creation.

3-Year

Cumulative

Operating Income

35%

Operating income improvement emphasizes cost control and is important as we continue to grow our top line. Operating income is also a key contributor to EPS and shareholder value creation.

3-Year

Cumulative EPS

45%

EPS sets the expectation of the Company’s success for our shareholders. We use EPS as the key accounting measure and evaluation of how the Company is performing.


The Compensation and Talent Development Committee approved aggressive financial goals in a challenging economic environment that are consistent with the Company’s budget and long-range plan.

Restricted stock may be earned only if the executive remains employed with the Company over the vesting period. Restricted stock vests in equal proportions over the three-year vesting period (i.e., one-third per year beginning on the first anniversary of the grant date). The Compensation and Talent Development Committee believes that the three-year performance period associated with performance shares and the three-year vesting period of restricted stock focuses our executives on sustained performance and supports retention objectives.

The Company’s policy is to make annual long-term incentive grants to its executives during the first quarter of the year. Also, we may make grants to newly hired or promoted senior management employees in connection with their employment. The Compensation and Talent Development Committee carefully considers the impact of the cost of equity awards, as well as dilution, in order to achieve a balance between our costs, competitiveness and the continuity of employee incentives.

Retirement programs. Our qualified and non-qualified employee retirement plans provide a retirement income base to a substantial majority of our employees, including our eligible executive officers. Ms. Hernández-Urquiza also participated in these retirement programs until 2010 and Mr. Juan J. Román-Jiménez until 2011. Union employees hired after December 19, 2006, as well as non-union employees hired after September 30, 2007, were ineligible to participate. Employees who participate in our qualified plan also participate in our non-qualified plan to the extent their income levels exceed compensation and benefit limits imposed by the United States Internal Revenue Code of 1986, as amended. Effective January 1, 2017, the Company froze the accumulation of benefits under the non-contributory defined-benefit pension plan. Effective February 1, 2017, all employees including our NEOs are eligible to participate in the Defined Contribution Plan.

Non-qualified deferred compensation plan. Under our non-qualified deferred compensation plan, senior executives, including our NEOs, who elect to become participants, may defer until a future date a portion of their annual compensation and benefit from the tax advantages related to such deferral.

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Role of executive officers in compensation decisions

The Compensation and Talent Development Committee is responsible for all compensation decisions with respect to NEOs of the Company. In determining the compensation of NEOs other than the chief executive officer, the committee takes into account the recommendations of the chief executive officer. The chief executive officer annually reviews the performance of the other NEOs. The conclusions reached and recommendations based on these reviews, including with respect to base salary adjustments and short-term cash incentive and equity incentive award amounts, are presented to the committee.  The committee reviews and approves the compensation of the NEOs, including the chief executive officer.

Compensation of named executive officers for 2017

During 2017, there were no salary increases to our NEOs with the exception of Mr. José E. Novoa-Loyola. With the assistance of Pay Governance, the Compensation and Talent Development Committee evaluated in 2017 the different components of executive compensation to ascertain that total compensation was targeted at adequate levels (that is, within the 25th to 50th percentile of external pay levels) when compared with companies in the comparable group. The main purpose was to assure that we maintained a competitive compensation program.

Base Salary. In setting base salaries for 2017, the Compensation and Talent Development Committee considered the following factors:

Company financial and operating results.

The corporate budget, meaning our overall budget for base salaries. The corporate budget was established based on planned performance for 2017. The objective of the budget is to allow salary increases to retain and motivate successful performers while maintaining affordability within our business plan.

The relative pay differences for different job levels.

Evaluation of peer group data specific to each executive position, where applicable.

NEO

Previous base salary

2017 Base salary

Percentage

Roberto García-Rodríguez

$750,000

$750,000

-

Madeline Hernández-Urquiza

$525,000

$525,000

-

Juan J. Román-Jimenez

$500,000

$500,000

-

José E. Novoa-Loyola(1)

$390,000

$410,000

5.12%

Arturo L. Carrión-Crespo

$324,700

$324,700

-


(1)On April 1, 2017, Mr. José E. Novoa-Loyola received a salary adjustment due to individual performance.

Salary determinations were based on the aforementioned principles, and were in line with budget and salary determinations for all other employees.

Short-term annual cash incentive. On March 6, 2018, the Compensation and Talent Development Committee determined that NEOs will receive the short-term cash incentive award for 2017 detailed in the Summary Compensation Table.  For 2017, hurricane María was an unprecedented event that materially affected (although favorably) the corporate financial results.  Consolidated results exceeded maximum performance goals under the plan and would have resulted in payouts at 150% of target, even after excluding the effect of hurricane María. However, the committee determined to pay bonuses to NEOs at target levels (i.e., 69.7% of base pay) to provide uniform treatment across corporate and business unit executives in light of the effect of hurricane María on certain business unit results.

Long-term incentive awards. Long-term incentives were granted to NEOs in 2017 as described in the Summary Compensation Table. Equity award targets for our NEOs are established based on dollar values and then converted into a specific number of shares based on the closing price of our Class B common stock on the grant date. All long-term incentives granted to NEOs were approved by the Compensation and Talent Development Committee in accordance with the 2017 Triple-S Management Incentive Plan.  See the section entitled “Components of executive compensation—Long-term incentive awards” of this proxy statement for more detail regarding the operation of performance share awards.

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Compensation and Talent Development Committee report

The Compensation and Talent Development Committee has reviewed and discussed the compensation discussion and analysis set forth above with management.  Based on such review and discussion, the Committee recommended to the Board that the compensation discussion and analysis be included in this proxy statement.

Submitted by:

Manuel Figueroa-Collazo, Chair
Cari M. Dominguez
Joseph A. Frick
Gail B. Marcus

Compensation and Talent Development Committee interlocks and insider participation

None of the members of the Compensation and Talent Development Committee is or has been one of our executive officers or employees.  None of our executive officers served on the board of directors’ compensation committee of any other company for which any of our directors served as an executive officer at any time during 2017.  Except as disclosed in “Other relationships, transactions and events” in this proxy statement, none of the members of the Compensation and Talent Development Committee had any relationship with us requiring disclosure under Item 404 of Regulation S-K.

Risk considerations in our executive compensation program

In 2017, the Compensation and Talent Development Committee reviewed the Company’s risk profile and related risk management processes to determine if any material risks were deemed likely to arise from our compensation policies and programs and whether these risks are reasonably likely to have a material adverse effect on our business. The Compensation and Talent Development Committee determined that the Company’s then-current pay plans and policies were not reasonably likely to have a material adverse effect on the Company. The Compensation and Talent Development Committee thereafter reported its findings to the Board. During 2017, the committee reviewed and determined that risk considerations and risk inventory of the compensation programs have remained unchanged. We believe that our compensation programs for our executives do not encourage excessive or unnecessary risk, as they are designed to, among others, reinforce responsible business practices, provide a balanced distribution of compensation elements, tie compensation to short and long-term results, provide for the recovery of compensation in the event of inaccurate financial disclosures, fraud or misconduct, require moderate levels of share ownership and prohibit hedging transactions involving Company securities.

 

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Compensation tables

Summary compensation table

The following table sets forth the total compensation paid to or earned by our NEOs for each of the three years ending December 31, 2017, 2016 and 2015 for services rendered in all capacities to the Company.

Name and Principal Position

Year

Salary(1)

Bonus(2)

Stock
Awards
(3)

Option
Awards

Non-Equity
Incentive
Plan
Compensation

Change in
Pension
Value
and Non-
Qualified
Deferred
Compensation
Earnings
(4)

All Other
Compensation
(5)

Total

Roberto García-Rodríguez
President & CEO, Triple-S
Management Corporation

2017

$750,000

$600

$1,874,986

$0

$510,010

$0

$37,996

$3,173,592

2016

$744,385

$600

$1,874,972

$0

$215,769

$0

$37,728

$2,873,454

2015

$585,093

$0

$649,972

$0

$487,256

$0

$15,658

$1,737,979

Juan J. Román-Jimenez
Executive Vice President &
CFO, Triple-S Management
Corporation

2017

$503,846

$600

$749,977

$0

$348,950

$185,000

$12,900

$1,801,273

2016

$471,154

$600

$749,981

$0

$102,747

$45,000

$12,800

$1,382,282

2015

$0

$0

$0

$0

 $0

$0

$0

$0