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Independence Holding Company Announces 2014 Third-Quarter and Nine-Month Results

STAMFORD, Conn., Nov. 6, 2014 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE:IHC) today reported 2014 third-quarter and nine-month results.

Financial Results

Net income attributable to IHC increased 29% to $.27 per share, diluted, or $4,710,000, for the three months ended September 30, 2014 compared to $.21 per share, diluted, or $3,639,000, for the three months ended September 30, 2013. Net income attributable to IHC increased to $.69 per share, diluted, or $12,259,000, for the nine months ended September 30, 2014 compared to $.67 per share, diluted, or $12,031,000, for the nine months ended September 30, 2013.

Revenues decreased to $406,843,000 for the nine months ended September 30, 2014 compared to revenues for the nine months ended September 30, 2013 of $431,426,000. The decrease in revenues for both the third quarter and the first nine 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 third quarter and first nine 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 36% growth in our direct business written in the twelve months ended October 31, 2014, while maintaining consistent profit margins on a growing premium base.

The Company exited major medical health plans for individuals and families and significantly curtailed its small group major medical health plans. As a result, our fully insured segment has been adversely affected by the ACA, including the runoff of major-medical business and the health insurance tax. We expect this downward pressure on margins to continue to lessen for the balance of 2014 as this business fully runs off. In addition, in the three-month and nine-month periods, the Company recorded $1.7 million and $2.9 million, respectively, in amortization of deferred loss in connection with the assumption of certain ceded annuity policies from the prior year's coinsurance agreement. This amortization will be substantially less in the fourth quarter of 2014. Our specialty health business increased significantly in the first nine months of 2014 compared to last year, and we are pleased with our group life and disability business, which has continued to perform well in 2014. 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 $16.37 per share at September 30, 2014, an increase of 8% over the book value per share at December 31, 2013, and our total stockholders' equity is $284 million at September 30, 2014 compared to $269 million at December 31, 2013. Through September 30, 2014, we have repurchased 296,775 shares of IHC stock for $4.0 million at an average price of $13.38 per share.

We are optimistic that our operating results for the fourth quarter will compare very favorably to the comparable period in 2013, even after the aforementioned expected charges in the fourth quarter of 2014, largely as a result of the accelerating growth in premiums and income from our direct medical stop-loss line of business, the continued profitability of the group business, and the transition of our fully insured division to a specialty health insurance operation with controlled distribution and higher-margin lines of business."

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
THIRD QUARTER REPORT
September 30, 2014
(In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
REVENUES:
Premiums earned $ 117,705 $ 125,174 $ 362,110 $ 368,007
Net investment income 5,439 6,841 16,674 21,844
Fee income 4,813 6,290 18,013 18,871
Other income 951 922 3,132 3,933
Net realized investment gains 844 2,417 6,914 18,771
Net impairment losses recognized in earnings -- -- -- --
129,752 141,644 406,843 431,426
EXPENSES:
Insurance benefits, claims and reserves 74,916 88,177 243,488 262,913
Selling, general and administrative expenses 44,916 45,597 137,998 133,339
Amortization of deferred acquisitions costs 1,416 1,404 3,887 13,792
Interest expense on debt 539 470 1,357 1,447
121,787 135,648 386,730 411,491
Income before income taxes 7,965 5,996 20,113 19,935
Income taxes 3,141 2,080 7,404 6,821
Net income 4,824 3,916 12,709 13,114
Less: income from noncontrolling interests in subsidiaries (114) (277) (450) (1,083)
NET INCOME ATTRIBUTABLE TO IHC $ 4,710 $ 3,639 $ 12,259 $ 12,031
Basic income per common share $ .27 $ .21 $ .70 $ .68
WEIGHTED AVERAGE SHARES OUTSTANDING 17,410 17,683 17,505 17,784
Diluted income per common share $ .27 $ .21 $ .69 $ .67
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 17,578 17,735 17,665 17,890
As of November 3, 2014, there were 17,371,040 common shares outstanding, net of treasury shares.
INDEPENDENCE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
September 30, December 31,
2014 2013
ASSETS:
Investments:
Short-term investments $ 50 $ 50
Securities purchased under agreements to resell 16,413 22,594
Trading securities 11,370 7,125
Fixed maturities, available-for-sale 566,612 542,287
Equity securities, available-for-sale 13,121 11,803
Other investments 26,406 25,123
Total investments 633,972 608,982
Cash and cash equivalents 18,215 24,229
Deferred acquisition costs 30,302 29,777
Due and unpaid premiums 61,820 59,435
Due from reinsurers 280,023 380,229
Premium and claim funds 39,509 37,353
Goodwill 50,318 50,318
Other assets 54,244 78,712
TOTAL ASSETS $ 1,168,403 $ 1,269,035
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Policy benefits and claims $ 227,877 $ 237,754
Future policy benefits 277,878 287,449
Funds on deposit 194,140 274,826
Unearned premiums 8,731 12,423
Other policyholders' funds 19,244 25,129
Due to reinsurers 37,999 37,113
Accounts payable, accruals and other liabilities 66,274 71,889
Debt 4,000 6,000
Junior subordinated debt securities 38,146 38,146
TOTAL LIABILITIES 874,289 990,729
STOCKHOLDERS' EQUITY:
IHC STOCKHOLDERS' EQUITY:
Preferred stock (none issued) -- --
Common stock 18,531 18,524
Paid-in capital 126,999 126,239
Accumulated other comprehensive loss (3,195) (10,472)
Treasury stock, at cost (12,141) (8,169)
Retained earnings 154,256 142,669
TOTAL IHC STOCKHOLDERS' EQUITY 284,450 268,791
NONCONTROLLING INTERESTS IN SUBSIDIARIES 9,664 9,515
TOTAL EQUITY 294,114 278,306
TOTAL LIABILITIES AND EQUITY $ 1,168,403 $ 1,269,035

CONTACT: ADAM VANDERVOORT (646) 509-2156 www.IHCGroup.comSource:Independence Holding Company