STAMFORD, Conn., Aug. 12, 2010 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE:IHC) today reported 2010 second-quarter and six-months results. This press release contains both GAAP and non-GAAP financial information for which reconciliations can be found at the end of this release.
Financial Results
Net income per share from continuing operations attributable to IHC was $.11 per share, diluted, or $1,753,000, for the three months ended June 30, 2010 compared to $.13 per share, diluted, or $1,976,000, for the three months ended June 30, 2009. Revenues increased 6% to $106,431,000 for the three months ended June 30, 2010, compared to revenues for the three months ended June 30, 2009 of $99,983,000.
Net income per share from continuing operations attributable to IHC increased to $1.17 per share, diluted, or $17,914,000, for the six months ended June 30, 2010 compared to $.35 per share, diluted, or $5,332,000, for the six months ended June 30, 2009. Revenues increased 12% to $222,781,000 for the six months ended June 30, 2010, compared to revenues for the six months ended June 30, 2009 of $198,778,000. These results were positively impacted by the gain on bargain purchase under acquisition accounting as a result of IHC acquiring a controlling interest in American Independence Corp. (AMIC) in March 2010. The gain recorded in the 2010 first quarter on IHC's investment in AMIC was $16,733,000, net of $11,097,000 of taxes. The gain was generated because in the fourth quarter of 2009 the Company was required to record an other-than-temporary impairment (OTTI) loss at December 31, 2009 in approximately the same amount.
IHC reported operating income(1) per share of $.09 per share, diluted, or $1,395,000, for the three months ended June 30, 2010, compared to $.08 per share, diluted, or $1,162,000, for the three months ended June 30, 2009. IHC reported operating income per share of $.11 per share, diluted, or $1,625,000 for the six months ended June 30, 2010, compared to $.23 per share, diluted, or $3,565,000 for the six months ended June 30, 2009.
Chief Executive Officer's Comments
Roy Thung, Chief Executive Officer, commented, "The Company's financial condition remains very strong as our book value per share increased 14% to $14.97 at June 30, 2010 from $13.16 at December 31, 2009, and stockholders' equity at June 30, 2010 reached $228 million. We repurchased 49,700 of our common shares during the quarter at an average price of $6.77. The repurchases were made pursuant to the Company's share repurchase program, under which 293,600 shares remain available for repurchase."
Mr. Thung continued, "Our operating income in the second quarter of 2010 amounted to $.09 per share up from $.08 per share for the comparable quarter of 2009 and significantly improved from $.02 per share for the first quarter of 2010. Our first quarter results were adversely impacted by a much higher than expected incidence of death and long-term disability claims in our group business. These results did not reoccur in the second quarter and the higher than expected death claims should approach the average over future periods. IHC continues to experience a decrease in investment income due to lower yields (4.4% for the first six months of 2010 compared to 5.1% for the comparable period of 2009) and the low duration of our portfolio. IHC has approximately $120 million in highly rated shorter maturity securities earning on average 1.4%; our portfolio as a whole is rated, on average, AA. In addition, for the first time since the economic crisis began, we are pleased to report that our overall portfolio is now in an unrealized gain position. The low duration of our portfolio enables us, if we deem prudent, the flexibility to reinvest in much higher yielding longer-term securities, which would significantly increase investment income. A low duration portfolio such as ours also mitigates the adverse impact of potential inflation. Given our expertise in medical stop-loss and supplemental health products, we are well-positioned to take advantage of opportunities that will be created as health care reform is implemented."
Non-GAAP Financial Measures
The Company provides non-GAAP financial measures to complement its consolidated financial statements presented in accordance with GAAP: (i) Operating income is income from continuing operations net of income or losses attributable to non-controlling interests and excluding net realized gains or losses, other-than-temporary impairment losses and gain on bargain purchase, net of applicable income taxes; and (ii) Operating income per share is operating income (loss) on a per share basis. These non-GAAP financial measures are intended to supplement the user's overall understanding of the Company's current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding realized gains or losses, net of taxes, that, when excluded from the GAAP results, may provide additional understanding of the Company's core operating results or business performance. However, these non-GAAP financial measures are not intended to supersede or replace the Company's GAAP results. A reconciliation of the non-GAAP results to the GAAP results is provided in the "Reconciliation of GAAP Income from Continuing Operations to Non-GAAP Income from Continuing Operations" schedule below.
About Independence Holding Company
IHC is a holding company principally engaged in the life and health insurance business and the acquisition of blocks of policies through its insurance company subsidiaries (Standard Security Life Insurance Company of New York, Madison National Life Insurance Company, Inc. and Independence American Insurance Company) and its managing general underwriters, third-party administrators, and marketing affiliates. Standard Security Life markets medical stop-loss, small group major medical, short-term medical, major medical for individuals and families, limited medical, group long and short-term disability and life, dental, vision and managed health care products. Madison Life sells group life and disability, employer medical stop-loss, small group major medical, major medical for individuals and families, short-term medical, dental, vision, and individual life insurance. Independence American offers medical stop-loss, small group major medical, short-term medical, and major medical for individuals and families. IHC owns certain subsidiaries through its majority ownership of American Independence Corp. (Nasdaq:AMIC), which is a holding company principally engaged in the insurance and reinsurance business.
Certain statements in this news release may be considered forward-looking statements, such as statements relating to management's views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the markets in which IHC operates, new federal or state governmental regulation, IHC's ability to effectively operate, integrate and leverage any past or future strategic acquisition, and other factors which can be found in IHC's other news releases and filings with the Securities and Exchange Commission.
(1) Operating income is a non-GAAP measure representing income from continuing operations net of (income) losses attributable to non-controlling interests and excluding net realized investment gains (losses), other-than-temporary impairment losses and gain on bargain purchase of AMIC, net of applicable income tax. The Company believes that the presentation of operating income may offer a better understanding of the core operating results of the Company. A reconciliation of income from continuing operations to operating income is included in this press release.
| INDEPENDENCE HOLDING COMPANY | ||||
| SECOND QUARTER REPORT (2) | ||||
| June 30, 2010 | ||||
| (In Thousands, Except Per Share Data) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2010 | 2009 | 2010 | 2009 | |
| REVENUES | ||||
| Premiums earned | $84,614 | $77,081 | $155,498 | $153,514 |
| Net investment income | 10,131 | 11,428 | 19,502 | 22,147 |
| Fee income | 9,681 | 7,870 | 17,241 | 16,329 |
| Net realized investment gains | 1,634 | 1,262 | 1,983 | 2,927 |
| Total other-than-temporary impairment losses | (1,039) | -- | (2,665) | (271) |
| Equity income from AMIC | -- | 235 | 280 | 928 |
| Gain on bargain purchase of AMIC | -- | -- | 27,830 | -- |
| Other income | 1,410 | 2,107 | 3,112 | 3,204 |
| 106,431 | 99,983 | 222,781 | 198,778 | |
| EXPENSES | ||||
| Insurance benefits, claims and reserves | 64,679 | 60,423 | 121,507 | 116,619 |
| Selling, general and administrative expenses | 36,390 | 34,991 | 67,825 | 71,469 |
| Amortization of deferred acquisition costs | 1,720 | 1,300 | 3,038 | 2,350 |
| Interest expense on debt | 477 | 761 | 948 | 1,531 |
| 103,266 | 97,475 | 193,318 | 191,969 | |
|
Income from continuing operations before income taxes |
3,165 | 2,508 | 29,463 | 6,809 |
| Income taxes | 847 | 545 | 10,768 | 1,497 |
| Income from continuing operations | 2,318 | 1,963 | 18,695 | 5,312 |
| Discontinued operations: | ||||
| Loss from discontinued operations | (55) | (117) | (182) | (354) |
| Net Income | 2,263 | 1,846 | 18,513 | 4,958 |
|
(Income) loss from noncontrolling interests in subsidiaries |
(565) | 13 | (781) | 20 |
| NET INCOME ATTRIBUTABLE TO IHC | $1,698 | $1,859 | $17,732 | $4,978 |
| Basic income per common share: | ||||
| Income from continuing operations | $.11 | $.13 | $1.17 | $.35 |
| Loss from discontinued operations | -- | (.01) | (.01) | (.03) |
| Basic income per common share | $.11 | $.12 | $1.16 | $.32 |
| WEIGHTED AVERAGE SHARES OUTSTANDING | 15,266 | 15,419 | 15,303 | 15,413 |
| Diluted income per common share: | ||||
| Income from continuing operations | $.11 | $.13 | $1.17 | $.35 |
| Loss from discontinued operations | -- | (.01) | (.01) | (.03) |
| Diluted income per common share | $.11 | $.12 | $1.16 | $.32 |
|
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING |
15,268 | 15,419 | 15,306 | 15,415 |
| As of August 12, 2010, there were 15,232,865 common shares outstanding, net of treasury shares. | ||||
| (2) IHC applied business acquisition accounting and consolidated the financial results of AMIC as of March 5, 2010, resulting in a consolidated statement of income which consolidates approximately four months of AMIC results and reflects the equity method of accounting for the first two months of 2010. | ||||
|
RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS TO NON-GAAP INCOME FROM CONTINUING OPERATIONS |
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| (In Thousands, Except Per Share Data) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2010 | 2009 | 2010 | 2009 | |
| Income from continuing operations | $2,318 | $1,963 | $18,695 | $5,312 |
|
(Income) loss from noncontrolling interest in subsidiaries |
(565) | 13 | (781) | 20 |
| Realized (gains) losses net of taxes | (1,028) | (814) | (1,271) | (1,939) |
| Other-than temporary impairment losses, net of taxes | 670 | -- | 1,715 | 172 |
| Gain on bargain purchase of AMIC, net of taxes | -- | -- | (16,733) | -- |
| Operating income from continuing operations | $1,395 | $1,162 | $1,625 | $3,565 |
| Non - GAAP basic income per common share: | ||||
| Operating income from continuing operations | $.09 | $.08 | $.11 | $.23 |
| Non - GAAP diluted income per common share: | ||||
| Operating income from continuing operations | $.09 | $.08 | $.11 | $.23 |
|
Included in the realized gains, net of taxes, above are IHC's proportionate share of AMIC's realized gains (losses) net of taxes. The other-than-temporary-impairment losses are primarily due to the write down in value of certain Alt-A mortgage fixed maturities. |
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