Independence Holding Company Announces 2014 Second-Quarter and Six-Month Results

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| Source: Independence Holding Company

STAMFORD, Conn., Aug. 7, 2014 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE:IHC) today reported 2014 second-quarter and six-month results.

Financial Results

Net income attributable to IHC increased to $.22 per share, diluted, or $3,848,000, for the three months ended June 30, 2014 compared to $.21 per share, diluted, or $3,691,000, for the three months ended June 30, 2013. Net income attributable to IHC decreased to $.43 per share, diluted, or $7,549,000, for the six months ended June 30, 2014 compared to $.47 per share, diluted, or $8,392,000, for the six months ended June 30, 2013.

Revenues decreased to $136,019,000 for the three months ended June 30, 2014 compared to revenues for the three months ended June 30, 2013 of $151,900,000. Revenues decreased to $277,091,000 for the six months ended June 30, 2014 compared to revenues for the six months ended June 30, 2013 of $289,782,000. The decrease in revenues for both the second quarter and the first six months of 2014 is primarily due to the runoff of major medical business from lines that we exited largely as a result of the requirements of the Affordable Care Act ("ACA"), offset in part by an increase in medical stop-loss and specialty health premiums.

Chief Executive Officer's Comments

Roy Thung, Chief Executive Officer, commented, "We are pleased with the continued growth in earned premium and significantly increased earnings for medical stop-loss, by far our largest line of business, for the second quarter and first six months of the year. We attribute these positive developments to enhanced sales efforts in our direct business, focused underwriting and a general expansion of the market as new employer groups migrate to self-funding from fully insured in response to health care reform. We expect continued improvement in this line of business, as evidenced by the 32% growth in our direct business written in the twelve months ended July 31, 2014, while maintaining consistent profit margins on a growing premium base.

Our specialty health business increased significantly in the first six months of 2014 compared to last year; however, our fully insured segment continued to be adversely affected by the ACA, including the runoff of major-medical business and the health insurance tax. This adversely impacted the 2014 second quarter by approximately $1.6 million and the first six months of 2014 by approximately $3.5 million. In addition, the Company recorded $1.2 million in amortization of deferred loss in connection with the assumption of certain ceded annuity policies from the prior year's coinsurance agreement. Our overall investment portfolio continues to be very highly rated (on average, AA) and has a duration of approximately six years. Our book value was $16.18 per share at June 30, 2014, an increase of 6% over the book value per share at December 31, 2013, and our total stockholders' equity is $282 million at June 30, 2014 compared to $269 million at December 31, 2013. Through August 1, 2014, we have repurchased 250,559 shares of IHC stock for $3.3 million at an average price of $13.35 per share.

We are optimistic that our operating results for the balance of this year will compare favorably to the comparable period in 2013, largely as a result of the continuing growth in premiums and income from our direct medical stop-loss line of business and of the transition of our fully insured division to being principally a specialty health insurance operation with controlled distribution and higher-margin lines of business. We expect the adverse consequences of the ACA to gradually decline over the next six months and be largely complete by the end of this year."  

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 marketing and administrative affiliates. Standard Security Life markets medical stop-loss, group major and limited medical, short-term medical, group long-term and short-term disability and life, group and individual dental, vision and various supplemental products. Madison National Life sells group life and disability, group major and limited medical, group and individual dental, individual life insurance and various supplemental products. Independence American offers pet insurance, non-subscriber occupational accident, short-term medical, medical stop-loss, group and individual dental and various supplemental products. 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 and information contained in this 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 that 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. IHC expressly disclaims any duty to update its forward-looking statements or earnings guidance, and does not undertake to provide any such guidance in the future.

INDEPENDENCE HOLDING COMPANY
SECOND QUARTER REPORT
June 30, 2014
(In Thousands, Except Per Share Data)
         
         
  Three Months Ended Six Months Ended
  June 30, June 30,
  2014 2013 2014 2013
         
REVENUES:        
Premiums earned $121,135 $125,465 $244,405 $242,833
Net investment income 5,434 7,002 11,235 15,003
Fee income 3,861 6,039 13,200 12,581
Other income 1,070 1,659 2,181 3,011
Net realized investment gains 4,519 11,735 6,070 16,354
         
  136,019 151,900 277,091 289,782
         
EXPENSES:        
Insurance benefits, claims and reserves 83,263 89,276 168,572 174,736
Selling, general and administrative expenses 44,947 44,862 93,082 87,742
Amortization of deferred acquisitions costs 1,189 10,948 2,471 12,388
Interest expense on debt 337 490 818 977
         
  129,736 145,576 264,943 275,843
         
Income before income taxes 6,283 6,324 12,148 13,939
Income taxes 2,403 2,166 4,263 4,741
         
Net income 3,880 4,158 7,885 9,198
Less: income from noncontrolling interests in subsidiaries (32) (467) (336) (806)
         
NET INCOME ATTRIBUTABLE TO IHC $3,848 $3,691 $7,549 $8,392
         
Basic income per common share $ .22 $ .21 $ .43 $ .47
         
WEIGHTED AVERAGE SHARES OUTSTANDING 17,485 17,753 17,553 17,836
         
Diluted income per common share $ .22 $ .21 $ .43 $ .47
         
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 17,657 17,805 17,709 17,922
         
As of August 1, 2014, there were 17,417,586 common shares outstanding, net of treasury shares.
 
INDEPENDENCE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
     
  June 30, December 31,
  2014 2013
     
ASSETS:    
Investments:    
Short-term investments  $ 50  $ 50
Securities purchased under agreements to resell 19,260 22,594
Trading securities 11,600 7,125
Fixed maturities, available-for-sale 571,727 542,287
Equity securities, available-for-sale 12,962 11,803
Other investments 25,599 25,123
Total investments 641,198 608,982
     
Cash and cash equivalents 26,631 24,229
Deferred acquisition costs 30,106 29,777
Due and unpaid premiums 59,282 59,435
Due from reinsurers 331,649 380,229
Premium and claim funds 39,235 37,353
Goodwill 50,318 50,318
Other assets 60,446 78,712
     
TOTAL ASSETS  $ 1,238,865  $ 1,269,035
     
LIABILITIES AND STOCKHOLDERS' EQUITY:    
LIABILITIES:    
Policy benefits and claims  $ 233,992  $ 237,754
Future policy benefits 283,036 287,449
Funds on deposit 234,863 274,826
Unearned premiums 12,639 12,423
Other policyholders' funds 22,629 25,129
Due to reinsurers 37,833 37,113
Accounts payable, accruals and other liabilities 77,681 71,889
Debt 6,000 6,000
Junior subordinated debt securities 38,146 38,146
     
TOTAL LIABILITIES 946,819 990,729
     
STOCKHOLDERS' EQUITY:    
IHC STOCKHOLDERS' EQUITY:    
Preferred stock (none issued) -- --
Common stock 18,529 18,524
Paid-in capital 126,899 126,239
Accumulated other comprehensive loss (1,519) (10,472)
Treasury stock, at cost (11,039) (8,169)
Retained earnings 149,555 142,669
     
TOTAL IHC STOCKHOLDERS' EQUITY 282,425 268,791
NONCONTROLLING INTERESTS IN SUBSIDIARIES 9,621 9,515
     
TOTAL EQUITY 292,046 278,306
     
TOTAL LIABILITIES AND EQUITY  $ 1,238,865  $ 1,269,035
ADAM VANDERVOORT
(646) 509-2156
www.IHCGroup.com