Independence Holding Company Announces 2013 Fourth-Quarter And Annual Results

STAMFORD, Conn., March 13, 2014 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE:IHC) today reported 2013 fourth-quarter and annual results.

Financial Results

IHC reported net income of $.10 per diluted share, or $1,748,000, for the three months ended December 31, 2013 compared to $.46 per diluted share, or $8,290,000, for the three months ended December 31, 2012. Revenues increased 27% to $143,618,000 for the three months ended December 31, 2013 compared to revenues for the three months ended December 31, 2012 of $112,960,000, primarily due to increases in premium revenue. The fourth quarter of 2013 was negatively affected by a $4.2 million loss before taxes in our major-medical lines that is largely attributable to the requirements of the Affordable Care Act (ACA).

For the year ended December 31, 2013, IHC reported net income of $.77 per diluted share, or $13,779,000, compared to $1.09 per diluted share, or $19,661,000, for the year ended December 31, 2012. Revenues increased 34% to $575,044,000 for the year ended December 31, 2013 compared to revenues for the year ended December 31, 2012 of $428,061,000, primarily due to an increase in premium revenue and net realized investment gains. The year ended 2013 was negatively affected by $8.4 million of losses before taxes in our major-medical lines for the reason referred to above.

2013 results include the write-off of approximately $9.3 million of deferred acquisition costs related to a coinsurance agreement entered into by Madison National Life to cede approximately $219 million of reserves (primarily annuities) in the second quarter of 2013. 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. Also, IHC's 2012 results (Q4 and year-end) were positively affected by an increase of $4,637,000, net of minority interest, for an increase in the deferred tax asset related to AMIC's federal net operating loss carryforward (NOL); there was not a corresponding positive affect during 2013. The deferred tax asset is reviewed for reasonableness on a quarterly basis.

Chief Executive Officer's Comments

Roy Thung, Chief Executive Officer, commented, "2014 marks our transition, after exiting the individual major-medical line and severely curtailing our small-group major-medical line, to a specialty health company focusing on higher-margin medical stop-loss and ancillary health benefits, disability income, and pet insurance. No longer will a significant portion of our premiums be derived from unprofitable major-medical business subject to ever-changing ACA regulations. Our stop-loss and pet lines are experiencing significant growth as the markets for these products expand. Our disability income business is expanding, and the demand for our ancillary health products (dental, vision, short-term medical and supplemental products such as fixed-indemnify limited benefit, critical illness and hospital indemnity) is also increasing as consumers pursue alternatives to the expensive plans offered on the public exchanges.  We are well-positioned to take advantage of the changing distribution of these products through direct-to-consumer tools, including our private exchange (healthedeals.com), call center and consumer direct sales agency."

Mr. Thung continued, "Earned premium for medical stop-loss, our largest segment, grew substantially over the same quarter and twelve months of last year. This growth is being driven by the business we write on a direct basis.  Annual written premiums for the direct business increased approximately 24% over 2012 levels. We attribute this growth to enhanced sales efforts, 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 growth of business written in 2014, as evidenced by our 35% growth in business written in January 2014, which is our largest production month. Profitability of our medical stop-loss line continues at expected levels.

Although we have generated positive underwriting margins in the fully insured segment over the past five years, our results for the fourth quarter (and the first three quarters) of 2013 were negatively affected by the significant losses in our major-medical lines of business stemming from our compliance with the requirements of the ACA. As mentioned above, we have now exited the individual major-medical line and curtailed our sale of small-group major-medical policies. The significant losses resulting from major medical are now behind us, although we may continue to see relatively insignificant negative results on the (much smaller) remaining block of policies through run-out. In aggregate, we expect that our fully insured underwriting margins will return to or exceed their historical levels.

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 $15.22 per share at December 31, 2013 and our total stockholders' equity is $269 million. During 2014 to date, we have repurchased 58,632 shares of IHC stock for $739,857 at prices ranging from $11.54 to $14.00 per share.  As a result of our expected significant increase in sales of stop-loss and an increase of higher-margin fully insured products not negatively affected by reform and the absence of aforementioned significant losses, we are optimistic as to our 2014 operating results." 

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 medical, short-term medical, limited medical, group long-term and short-term disability and life, dental, vision and various supplemental products. Madison National Life sells group life and disability, group major medical, dental, individual life insurance and various supplemental products. Independence American offers pet insurance, non-subscriber occupational accident, international coverages, small-group major medical and short-term medical. 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
 
FOURTH QUARTER REPORT
December 31, 2013
(In Thousands, Except Per Share Data)
         
  Three Months Ended Year Ended
  December 31, December 31,
  2013 2012 2013 2012
REVENUES:        
Premiums earned  $ 127,984  $ 94,588  $ 495,991  $ 356,067
Net investment income 5,627 7,650 27,471 33,356
Fee income 8,083 8,226 26,954 29,290
Other income 945 1,395 4,878 4,953
Net realized investment gains 979 1,101 19,750 5,099
Total other-than-temporary impairment losses -- -- -- (704)
  143,618 112,960 575,044 428,061
         
EXPENSES:        
Insurance benefits, claims and reserves 91,877 64,357 354,790 244,791
Selling, general and administrative expenses 46,214 40,405 179,553 149,999
Amortization of deferred acquisitions costs 1,340 1,754 15,132 6,566
Interest expense on debt 468 503 1,915 2,091
         
  139,899 107,019 551,390 403,447
         
Income before income taxes 3,719 5,941 23,654 24,614
Income taxes 1,577 (4,120) 8,398 2,003
         
Net income 2,142 10,061 15,256 22,611
Less: income from noncontrolling interests in subsidiaries (394) (1,771) (1,477) (2,950)
         
NET INCOME ATTRIBUTABLE TO IHC  $ 1,748  $ 8,290  $ 13,779  $ 19,661
         
Basic income per common share  $ .10  $ .46  $ .78  $ 1.09
         
WEIGHTED AVERAGE SHARES OUTSTANDING 17,682 17,946 17,758 17,979
         
Diluted income per common share  $ .10  $ .46  $ .77  $ 1.09
         
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 17,815 18,123 17,871 18,088

As of March 1, 2014, there were 17,608,549 common shares outstanding, net of treasury shares.
     
INDEPENDENCE HOLDING COMPANY
 
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
     
  December 31, December 31,
  2013 2012
     
ASSETS:    
Investments:    
Short-term investments  $ 50  $ 50
Securities purchased under agreements to resell 22,594 33,956
Trading securities 7,125 7,016
Fixed maturities, available-for-sale 542,287 719,602
Equity securities, available-for-sale 11,803 15,598
Other investments 25,123 35,134
Total investments 608,982 811,356
     
Cash and cash equivalents 24,229 23,945
Deferred acquisition costs 29,777 33,401
Due and unpaid premiums 59,435 49,430
Due from reinsurers 380,229 166,880
Premium and claim funds 37,353 40,596
Goodwill 50,318 50,318
Other assets 78,712 86,382
     
TOTAL ASSETS  $ 1,269,035  $ 1,262,308
     
LIABILITIES AND STOCKHOLDERS' EQUITY:    
LIABILITIES:    
Policy benefits and claims  $ 237,754  $ 194,480
Future policy benefits 287,449 290,238
Funds on deposit 274,826 278,084
Unearned premiums 12,423 8,453
Other policyholders' funds 25,129 22,373
Due to reinsurers 37,113 48,192
Accounts payable, accruals and other liabilities 71,889 71,495
Debt 6,000 8,000
Junior subordinated debt securities 38,146 38,146
     
TOTAL LIABILITIES 990,729 959,461
     
STOCKHOLDERS' EQUITY:    
IHC STOCKHOLDERS' EQUITY:    
Preferred stock (none issued) -- --
Common stock 18,524 18,462
Paid-in capital 126,239 126,589
Accumulated other comprehensive income (loss) (10,472) 15,013
Treasury stock, at cost (8,169) (4,533)
Retained earnings 142,669 130,153
     
TOTAL IHC STOCKHOLDERS' EQUITY 268,791 285,684
NONCONTROLLING INTERESTS IN SUBSIDIARIES 9,515 17,163
     
TOTAL EQUITY 278,306 302,847
     
TOTAL LIABILITIES AND EQUITY  $ 1,269,035  $ 1,262,308
CONTACT: ADAM VANDERVOORT         (646) 509-2156         www.IHCGroup.com

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