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Independence Holding Company Announces 2014 Fourth-Quarter and Annual Results

STAMFORD, Conn., March 10, 2015 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE:IHC) today reported 2014 fourth-quarter and annual results.

Financial Results

Net income attributable to IHC increased to $.23 per share, diluted, or $4,034,000, for the three months ended December 31, 2014 compared to $.10 per share, diluted, or $1,748,000, for the three months ended December 31, 2013. Net income attributable to IHC increased to $.92 per share, diluted, or $16,293,000, for the year ended December 31, 2014 compared to $.77 per share, diluted, or $13,779,000, for the year ended December 31, 2013.

Revenues decreased to $127,090,000 for the three months ended December 31, 2014 as compared to revenues for the three months ended December 31, 2013 of $143,618,000; and revenues decreased to $533,933,000 for the year ended December 31, 2014 compared to revenues for the year ended December 31, 2013 of $575,044,000. The decrease in revenues for both the fourth quarter and the year ended December 31, 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 19% increase in our earnings in 2014 to $.92 per share from $.77 per share in 2013. We achieved this increase despite recording significant underwriting losses on major medical in 2014 as a result of ACA, which will not reoccur in 2015, and significant amortization of deferred loss, which will be substantially less in 2015.

Our positive earnings development in the current year was largely driven by continued growth in earned premium and significantly increased earnings from our direct medical stop-loss, by far our largest line of business. We expect continued growth in this line of business, as evidenced by the 38% increase in our direct business written in the twelve months ended January 31, 2015, while maintaining consistent profit margins on a growing premium base. Our earnings were also positively impacted by our specialty health business, which grew by 34% and produced very positive profit margins in 2014. We are also pleased with our group life, disability and DBL line of business, which continued to perform well.

Our fully insured segment has been adversely affected the last two years by the ACA, including the runoff of major-medical business and the health insurance tax, causing the 2014 fourth quarter income before income taxes to be impacted by approximately $4.2 million and the full year 2014 by approximately $7.1 million. As a result of exiting major medical health plans for individuals and families, the Company will not have any earned premiums or administrative fee income from this line in 2015. Therefore, we expect to see significantly better underwriting results for the fully insured segment as we continue to ramp up the specialty line of business and largely eliminate the underwriting losses from major medical that has negatively impacted our last two years.

In addition, in the three-month and twelve-month periods, the Company recorded $0.6 million and $3.5 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 2015 as the majority of policies were assumed in 2014. Offsetting these charges, IHC's 2014 results (Q4 and year-end) were positively affected by an increase of $2,250,000, 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 effect during 2013.

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 $16.76 per share at December 31, 2014, an increase of 10% over the book value per share at December 31, 2013, and our total stockholders' equity is $291 million at December 31, 2014 compared to $269 million at December 31, 2013. Through December 31, 2014, we have repurchased 296,775 shares of IHC stock for $4.0 million at an average price of $13.38 per share.

Although 2015 will be impacted by the decrease in administrative fee income due to the exit from major medical (which we are seeking to replace by administering major medical for other carriers and by continuing to ramp up our specialty benefits sales) and by reduced investment income resulting from the continued low interest rate environment, we are optimistic that we will achieve a meaningful improvement in operating results in 2015, largely as a result of the accelerating growth in premiums and income from our direct medical stop-loss and specialty health insurance lines of business and the continued profitability of the group life and disability business."

About Independence Holding Company

Independence Holding Company 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 furnishes 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.

Forward-looking Statements

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 Independence Holding Company (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 unless required by applicable law.

INDEPENDENCE HOLDING COMPANY
FOURTH QUARTER REPORT
December 31, 2014
(In Thousands, Except Per Share Data)
Three Months Ended
December 31,
Year Ended
December 31,
2014 2013 2014 2013
REVENUES:
Premiums earned $ 116,938 $ 127,984 $ 479,048 $ 495,991
Net investment income 5,018 5,627 21,692 27,471
Fee income 2,633 8,083 20,646 26,954
Other income 1,727 945 4,859 4,878
Net realized investment gains 774 979 7,688 19,750
Net impairment losses recognized in earnings -- -- -- --
127,090 143,618 533,933 575,044
EXPENSES:
Insurance benefits, claims and reserves 82,547 91,877 326,035 354,790
Selling, general and administrative expenses 39,850 46,214 177,848 179,553
Amortization of deferred acquisitions costs 1,054 1,340 4,941 15,132
Interest expense on debt 440 468 1,797 1,915
123,891 139,899 510,621 551,390
Income before income taxes 3,199 3,719 23,312 23,654
Income taxes (1,013) 1,577 6,391 8,398
Net income 4,212 2,142 16,921 15,256
Less: income from noncontrolling interests in subsidiaries (178) (394) (628) (1,477)
NET INCOME ATTRIBUTABLE TO IHC $ 4,034 $ 1,748 $ 16,293 $ 13,779
Basic income per common share $ .23 $ .10 $ .93 $ .78
WEIGHTED AVERAGE SHARES OUTSTANDING 17,371 17,682 17,471 17,758
Diluted income per common share $ .23 $ .10 $ .92 $ .77
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 17,549 17,815 17,635 17,781
As of March 6, 2015, there were 17,352,918 common shares outstanding, net of treasury shares.
INDEPENDENCE HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
December 31,
2014
December 31,
2013
ASSETS:
Investments:
Short-term investments $ 50 $ 50
Securities purchased under agreements to resell 16,790 22,594
Trading securities 11,095 7,125
Fixed maturities, available-for-sale 583,880 542,287
Equity securities, available-for-sale 13,895 11,803
Other investments 25,251 25,123
Total investments 650,961 608,982
Cash and cash equivalents 25,083 24,229
Deferred acquisition costs 30,806 29,777
Due and unpaid premiums 62,628 59,435
Due from reinsurers 278,242 380,229
Premium and claim funds 32,553 37,353
Goodwill 50,318 50,318
Other assets 57,126 78,712
TOTAL ASSETS $ 1,187,717 $ 1,269,035
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Policy benefits and claims $ 236,803 $ 237,754
Future policy benefits 277,041 287,449
Funds on deposit 186,782 274,826
Unearned premiums 9,455 12,423
Other policyholders' funds 18,802 25,129
Due to reinsurers 47,945 37,113
Accounts payable, accruals and other liabilities 67,641 71,889
Debt 4,000 6,000
Junior subordinated debt securities 38,146 38,146
TOTAL LIABILITIES 886,615 990,729
STOCKHOLDERS' EQUITY:
IHC STOCKHOLDERS' EQUITY:
Preferred stock (none issued) -- --
Common stock 18,531 18,524
Paid-in capital 127,098 126,239
Accumulated other comprehensive income (loss) 22 (10,472)
Treasury stock, at cost (12,141) (8,169)
Retained earnings 157,667 142,669
TOTAL IHC STOCKHOLDERS' EQUITY 291,177 268,791
NONCONTROLLING INTERESTS IN SUBSIDIARIES 9,925 9,515
TOTAL EQUITY 301,102 278,306
TOTAL LIABILITIES AND EQUITY $ 1,187,717 $ 1,269,035

CONTACT: LOAN NISSER (646) 509-2107 www.IHCGroup.comSource:Independence Holding Company