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Independence Holding Company Announces 2015 Third-Quarter and Nine-Month Results

STAMFORD, Conn., Nov. 09, 2015 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE:IHC) today reported 2015 third-quarter and nine-month results.

Financial Results

Net income attributable to IHC increased to $.85 per share, diluted, or $14,760,000, for the three months ended September 30, 2015 compared to $.27 per share, diluted, or $4,710,000, for the three months ended September 30, 2014. Net income attributable to IHC increased to $1.43 per share, diluted, or $25,011,000, for the nine months ended September 30, 2015 compared to $.69 per share, diluted, or $12,259,000, for the nine months ended September 30, 2014.

During the third quarter, IHC completed two significant transactions that resulted in gains, reduced overhead and further reinforced our future as a specialty health company. On July 31, 2015, we closed on the reinsurance of substantially all of our run-off blocks of individual life and annuities and the sale of the infrastructure related to those blocks. In addition to deleveraging IHC’s balance sheet, the Company recorded a gain of $3,285,000, net of applicable income tax, in the quarter ended September 30, 2015 from the transaction. In addition, effective September 1, 2015, IHC entered into a joint venture with Ebix, Inc. to form Ebix Health Exchange Holdings, LLC, which acquired our subsidiary Ebix Health Administration Exchange (fka IHC Health Solutions, Inc.), a full service administrative services company that operates in the individual and employer markets. The transaction resulted in a gain of $6,884,000. Also included in net income, net of tax, are net realized investment losses and impairment losses of $844,000 and realized gains net of impairment losses of $1,826,000 for the three months and nine months ended September 30, 2015, respectively.

Revenues increased $10,666,000 to $140,418,000 for the three months ended September 30, 2015 compared to revenues for the three months ended September 30, 2014. Revenues increased $945,000 to $407,788,000 for the nine months ended September 30, 2015 compared to revenues for the nine months ended September 30, 2014. Revenues increased primarily due to an increase in medical stop-loss and specialty health premiums and due to the two transactions noted above which more than offset the decrease in premiums from having exited major medical and the decrease in realized gains. Exiting this line of business, which was triggered by the requirements of the Affordable Care Act (“ACA”), resulted in a reduction in revenue of $10,827,000 for the third quarter and $42,526,000 for the first nine months of 2015.

Chief Executive Officer’s Comments

Roy T. K. Thung, Chief Executive Officer, commented, “The transactions referred to above allow us to focus on our future as a specialty health insurer, distributor and administrator with controlled and varied distribution, profitable blocks of business in multiple product lines in which we are market leaders, and a technology-enhanced third party administrative exchange. We continue to see strong growth in our direct written stop loss business, increasing 32% in the twelve months ended October 31, 2015, which has been driven by increased persistency and strong sales. The Company currently has $295 million gross premiums in-force and we expect it to reach $305 million by the end of 2015. Our disciplined underwriting approach has resulted in consistent underwriting margins, thus producing a growing contribution to net income. Our earnings were also positively impacted by our specialty health business, which grew significantly and produced very positive profit margins in 2015. Our earnings reflect an increase as a result of completing the reinsurance of substantially all of our run-off blocks of individual life and annuities.

Despite the negative impact on revenues resulting from exiting major medical, we are seeing strong sales of short-term medical and other ancillary products and we are optimistic that sales of our specialty products will continue to increase at favorable underwriting margins. We believe that the prospects are bright for Ebix Health Administration Exchange, which provides state-of-the-art and highly efficient administrative services to health insurance exchanges and, through an affiliate, will provide pet insurance solutions through an open exchange model. We project significant growth in fee income for this company during the next Open Enrollment and in the future due to the trend toward risk-bearing provider systems seeking technology driven solutions for their administrative needs.

Our overall investment portfolio continues to be very highly rated (on average, AA) and has a duration of approximately six years.

Our book value increased to $18.12 per share at September 30, 2015 from $16.76 per share at December 31, 2014, and our total stockholders’ equity increased to $313 million at September 30, 2015 compared to $291 million at December 31, 2014. Both of these are all-time highs.”

About Independence Holding Company

Independence Holding Company (NYSE:IHC) is a holding company principally engaged in the life and health insurance business 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 limited medical, short-term medical, group long-term and short-term disability, group life, statutory disability benefit policies (DBL) in New York, group and individual dental, vision and various supplemental products. Madison National Life sells group life and disability; group limited medical, group and individual dental, 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 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
THIRD QUARTER REPORT
September 30, 2015
(In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
REVENUES:
Premiums earned$ 119,038 $ 117,705 $ 361,595 $362,110
Net investment income 3,938 5,439 13,884 16,674
Fee income 2,826 4,813 11,029 18,013
Other income 5,792 951 8,356 3,132
Gain on sale of subsidiary to joint venture 10,161 - 10,161 -
Net realized investment gains (1,109) 844 2,991 6,914
Impairment losses (228) - (228) -
140,418 129,752 407,788 406,843
EXPENSES:
Insurance benefits, claims and reserves 74,218 74,916 233,218 243,488
Selling, general and administrative expenses 41,984 44,916 129,835 137,998
Amortization of deferred acquisitions costs 558 1,416 3,446 3,887
Interest expense on debt 444 539 1,354 1,357
117,204 121,787 367,853 386,730
Income before income taxes 23,214 7,965 39,935 20,113
Income taxes 8,326 3,141 14,560 7,404
Net income 14,888 4,824 25,375 $12,709
Less: income from noncontrolling interests
in subsidiaries (128) (114) (364) $(450)
NET INCOME ATTRIBUTABLE TO IHC$ 14,760 $ 4,710 $ 25,011 $12,259
Basic income per common share$ .85 $ .27 $ 1.44 $.70
WEIGHTED AVERAGE SHARES OUTSTANDING 17,292 17,410 17,331 17,505
Diluted income per common share$ .85 $ .27 $ 1.43 $.69
WEIGHTED AVERAGE DILUTED SHARES
OUTSTANDING 17,457 17,578 17,496 17,665


As of November 1, 2015, there were 17,263,258 common shares outstanding, net of treasury shares.


INDEPENDENCE HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
September 30, December 31,
2015 2014
ASSETS:
Investments:
Short-term investments $ 50 $ 50
Securities purchased under agreements to resell 11,082 16,790
Trading securities 8,993 11,095
Fixed maturities, available-for-sale 435,929 583,880
Equity securities, available-for-sale 8,748 13,895
Other investments 24,037 25,251
Total investments 488,839 650,961
Cash and cash equivalents 18,730 25,083
Deferred acquisition costs 524 30,806
Due and unpaid premiums 68,988 62,628
Due from reinsurers 481,813 278,242
Premium and claim funds 24,420 32,553
Goodwill 53,371 50,318
Other assets 54,637 57,126
TOTAL ASSETS $ 1,191,322 $ 1,187,717
LIABILITIES AND STOCKHOLDERS’ EQUITY:
LIABILITIES:
Policy benefits and claims $ 252,927 $ 236,803
Future policy benefits 270,047 277,041
Funds on deposit 172,087 186,782
Unearned premiums 13,448 9,455
Other policyholders' funds 12,035 18,802
Due to reinsurers 36,904 47,945
Accounts payable, accruals and other liabilities 68,659 67,641
Debt 5,189 4,000
Junior subordinated debt securities 38,146 38,146
TOTAL LIABILITIES 869,442 886,615
STOCKHOLDERS’ EQUITY:
IHC STOCKHOLDERS' EQUITY:
Preferred stock (none issued) - -
Common stock 18,556 18,531
Paid-in capital 127,580 127,098
Accumulated other comprehensive income (1,346) 22
Treasury stock, at cost (13,890) (12,141)
Retained earnings 181,817 157,667
TOTAL IHC STOCKHOLDERS’ EQUITY 312,717 291,177
NONCONTROLLING INTERESTS IN SUBSIDIARIES 9,163 9,925
TOTAL EQUITY 321,880 301,102
TOTAL LIABILITIES AND EQUITY $ 1,191,322 $ 1,187,717


CONTACT: Loan Nisser (646) 509-2107 www.IHCGroup.com

Source:Independence Holding Company