Independence Holding Company Announces 2013 Second-Quarter And Six-Month Results

STAMFORD, Conn., Aug. 7, 2013 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE:IHC) today reported 2013 second-quarter and six-month results.

Financial Results

Net income per share attributable to IHC increased to $.21 per share, diluted, or $3,691,000, for the three months ended June 30, 2013 compared to $.20 per share, diluted, or $3,531,000, for the three months ended June 30, 2012. Revenues increased 50% to $151,900,000 for the three months ended June 30, 2013 compared to revenues for the three months ended June 30, 2012 of $101,443,000, primarily due to increases in premium revenue, fee income and net realized investment gains.

Net income per share attributable to IHC increased to $.47 per share, diluted, or $8,392,000, for the six months ended June 30, 2013 compared to $.41 per share, diluted, or $7,453,000, for the six months ended June 30, 2012. Revenues increased 42% to $289,782,000 for the six months ended June 30, 2013 compared to revenues for the six months ended June 30, 2012 of $203,599,000, primarily due to an increase in premium revenue, fee income and net realized investment gains.

During the quarter, Madison National Life entered into a coinsurance agreement to cede approximately $219 million of reserves, primarily annuities. As a result of this transaction, the Company wrote off approximately $9.3 million of deferred acquisition costs. However, those costs were more than offset by the gains realized by the Company in the transaction, most of which resulted from the required sale and transfer of invested assets.

Chief Executive Officer's Comments

Roy Thung, Chief Executive Officer, commented, "Earned premium for medical stop-loss, which is by far our largest line of business, grew 25% over the same quarter last year, driven by annual growth rates in excess of 28% in our direct-written segment. Profitability of this line continues at expected levels. We see a significant portion of this growth arising from employer groups moving from fully insured to self-funding as they consider alternatives under health care reform. We expect a continuation of these trends through the remainder of this year and into 2014. We are also encouraged by the performance of our existing group-life, disability and DBL business lines and our expansion into new business lines.

"We have made the decision to exit major-medical for individuals and families in the majority of states in which we do business due to changes brought about under health care reform. In addition, in the first two quarters of 2013, the Company experienced an increase in loss ratios in our fully insured segment from business produced by certain of our major-medical distributors. Accordingly, we either have terminated, or soon will be terminating, all small-group producers that were hindering our performance. In order to leverage our expertise in fully insured health, we are concentrating on expanding our products in markets not adversely affected by reform, including: short-term medical, dental, small-group stop-loss; non-subscriber occupational accident, insurance for overseas employees and travelers, and pet insurance. We expect that the loss in underwriting income from substantially exiting the individual major-medical market in 2014 will be offset by an increase in underwriting income from growth in these other areas.

"Our overall investment portfolio continues to be very highly rated (on average, AA) and has a duration of approximately six years. Our book value has decreased to $15.44 per share at June 30, 2013 from $15.93 per share at December 31, 2012 and our total stockholders' equity is $273 million. These declines are primarily attributable to sharp increases in ten-year treasury interest rates experienced during the quarter that caused a downward valuation in our bond portfolio. Were rates to continue to increase, we would expect a positive effect on future earnings as cash flows could be invested at higher rates."

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, small group major medical, short-term medical, limited medical, group long and short-term disability and life, dental, vision and various supplemental products. Madison Life sells group life and disability, small group major medical, major medical for individuals and families, dental, individual life insurance, and various supplemental products. Independence American offers major medical for individuals and families, medical stop-loss, small group major medical, short-term medical, pet insurance, and non-subscriber occupational accident and international coverages. 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 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. 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, 2013
(In Thousands, Except Per Share Data)
 
  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
         
REVENUES:        
Premiums earned  $ 125,465  $ 85,469  $ 242,833  $ 169,243 
Net investment income  7,002   7,609   15,003   16,360 
Fee income  6,039   5,889   12,581   13,310 
Other income  1,659   1,247   3,011   2,403 
Net realized investment gains  11,735   1,850   16,354   2,987 
Total other-than-temporary impairment losses  --   (621)  --   (704)
         
   151,900   101,443   289,782   203,599 
         
EXPENSES:        
Insurance benefits, claims and reserves  89,276   60,265   174,736   117,400 
Selling, general and administrative expenses  44,862   33,331   87,742   69,803 
Amortization of deferred acquisitions costs  10,948   1,631   12,388   3,225 
Interest expense on debt  490   540   977   1,079 
         
   145,576   95,767   275,843   191,507 
         
Income before income taxes  6,324   5,676   13,939   12,092 
Income taxes  2,166   1,846   4,741   3,932 
         
Net income  4,158   3,830   9,198   8,160 
Less: income from noncontrolling interests in subsidiaries   (467)   (299)  (806)   (707)
         
NET INCOME ATTRIBUTABLE TO IHC  $ 3,691   $ 3,531   $ 8,392   $ 7,453 
         
Basic income per common share $ .21   $ .20   $ .47   $ .41 
         
WEIGHTED AVERAGE SHARES OUTSTANDING  17,753   17,987   17,836   18,008 
         
Diluted income per common share $ .21   $ .20   $ .47   $ .41 
         
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING   17,805   18,025    17,922    18,100 

As of August 2, 2013, there were 17,667,526 common shares outstanding, net of treasury shares.
 
 
INDEPENDENCE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
 
  June 30, December 31,
  2013 2012
     
ASSETS:    
Investments:    
Short-term investments $ 50 $ 50
Securities purchased under agreements to resell 10,588  33,956
Trading securities 7,997  7,016
Fixed maturities, available-for-sale 573,527  719,602
Equity securities, available-for-sale 5,594  15,598
Other investments 25,648  35,134
Total investments 623,404  811,356
     
Cash and cash equivalents 18,977  23,945
Deferred acquisition costs 29,624  33,401
Due and unpaid premiums 73,146  49,430
Due from reinsurers 383,848  166,880
Premium and claim funds 36,524  40,596
Goodwill 50,318  50,318
Other assets 77,548  86,382
     
TOTAL ASSETS $ 1,293,389  $ 1,262,308
     
LIABILITIES AND STOCKHOLDERS' EQUITY:    
LIABILITIES:    
Claims and claim adjustment expenses-health $ 240,155 $ 194,480 
Future policy benefits-life and annuity 289,726  290,238 
Funds on deposit 276,287  278,084 
Unearned premiums 11,106  8,453 
Other policyholders' funds 24,990  22,373 
Due to reinsurers 45,454  48,192 
Accounts payable, accruals and other liabilities 71,425  71,495 
Debt 8,000  8,000 
Junior subordinated debt securities 38,146  38,146 
     
TOTAL LIABILITIES 1,005,289  959,461 
     
STOCKHOLDERS' EQUITY:    
IHC STOCKHOLDERS' EQUITY:    
Preferred stock (none issued)  --   -- 
Common stock 18,474  18,462 
Paid-in capital 127,187  126,589 
Accumulated other comprehensive income (3,459)  15,013 
Treasury stock, at cost (7,431)  (4,533)
Retained earnings 137,921  130,153 
     
TOTAL IHC STOCKHOLDERS' EQUITY 272,692  285,684 
NONCONTROLLING INTERESTS IN SUBSIDIARIES 15,408  17,163 
     
TOTAL EQUITY 288,100  302,847 
     
TOTAL LIABILITIES AND EQUITY $ 1,293,389 $ 1,262,308 
CONTACT: DAVID T. KETTIG         (212) 355-4141 Ext. 3047         www.IHCGroup.com

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