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Independence Holding Company Announces 2016 Fourth-Quarter and Annual Results

STAMFORD, Conn., May 22, 2017 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE:IHC) today reported 2016 fourth-quarter and annual results.

Financial Results

Net income attributable to IHC of $8,529,000, or $.49 per share diluted, for the three months ended December 31, 2016 increased from $4,933,000, or $.28 per share diluted, in the same period of 2015. Income from continuing operations increased to $.44 per share, diluted, or $7,753,000, for the three months ended December 31, 2016 compared to $.21 per share, diluted, or $3,892,000, for the three months ended December 31, 2015. As the result of the liquidation of Health Plan Administrators, Inc. (“HPA”), a subsidiary of IHC, a tax benefit of approximately $3,903,000 was recognized for IHC’s unrecovered investment in HPA in the fourth quarter of 2016.

Net income attributable to IHC of $123,298,000, or $7.09 per share diluted, for the year ended December 31, 2016 increased from $29,944,000, or $1.71 per share diluted, in the same period of 2015. As IHC previously reported, we completed the sale of IHC Risk Solutions, LLC (“Risk Solutions”) and exited the medical stop-loss business. The Company recorded a gain on this transaction of $100,819,000, net of applicable income taxes and noncontrolling interest, which is presented in discontinued operations on our Consolidated Statement of Income for the year ended December 31, 2016. Income from continuing operations decreased to $1.27 per share, diluted, or $22,510,000, for the year ended December 31, 2016 compared to $1.58 per share, diluted, or $27,974,000, for the year ended December 31, 2015. The Company recorded two significant gains in the third quarter 2015, both having a positive impact in 2015 but not in 2016. The first was a gain of $3,285,000, net of applicable income tax, resulting from the ceding of substantially all of our run-off blocks of individual life and annuities and the sale of the infrastructure related to those blocks. The second, effective September 1, 2015, related to IHC entering into a joint venture with Ebix, Inc. to form Ebix Health Exchange Holdings, LLC, which acquired our subsidiary Ebix Health Administration Exchange. The transaction resulted in a gain of $6,884,000, net of applicable income tax.

The Company reported revenues of $78,871,000 and $311,004,000 for the three months and year ended December 31, 2016, respectively, compared to revenues for the three months and year ended December 31, 2015 of $124,602,000 and $530,495,000, respectively. Revenues decreased primarily due to a reduction in premiums from the 100% co-insurance of the Company’s stop-loss business produced by Risk Solutions.

Chief Executive Officer’s Comments

Roy T. K. Thung, Chief Executive Officer, commented, “In the past two years, IHC has sold our capital-intensive medical stop-loss business for $152.5 million, which generated a material gain of $100.8 million, as reported above, sold our life and annuity blocks and related infrastructure for $42 million, and used some of our cash to retire all of our debt and to take American Independence Corp. (AMIC) private. We have made five equity investments to bolster the distribution of our specialty health products, worksite marketing expertise, and most recently acquired 85% of the stock of PetPartners, Inc. (PetPartners), which is a pet insurance administrator with a very solid administrative system that allows for worksite marketing of pet insurance. With this acquisition, we now have a fully vertically integrated structure for marketing, administering, pricing and retaining the risk on our pet insurance product, and PetPartners also has an exclusive relationship with the American Kennel Club (AKC) that allows us to directly market pet insurance to breeders and owners who register their dogs with AKC.”

Mr. Thung further commented, “Through these efforts, we have successfully transformed IHC from a company with relatively higher risk products requiring higher statutory capital to a lower risk company by moving into lines of business that have higher margins, are less capital intensive and are less volatile. We are now a specialty benefits company with multiple group and individual specialty health lines, pet insurance and niche specialty group disability (including New York statutory disability benefit policies (DBL)) and group life lines of business. We are delighted to report that sales of our specialty health products have more than doubled in the first four months of this year versus last year led by sales of our hospital indemnity and short-term medical products. Our individual premiums will accelerate during 2018 Open Enrollment as a result of major medical carriers exiting many markets, and our short-term medical sales will benefit from the withdrawal of several significant competitors and by the introduction of a new product in the fourth quarter. We anticipate writing considerably more group business in 2018 as a result of a new marketing relationship with a large United States health insurer who has contracted with IHC for supplemental health products. We look forward to soon providing more details on this new strategic partnership. Our DBL revenues should more than double in 2018 as a result of the newly enacted Paid Family Leave Act in New York.”

Mr. Thung then stated, “Therefore, although our earnings and premiums have been temporarily reduced as a result of selling our medical stop-loss business, our 2018 operating income is expected to exceed our operating income prior to the sale of the medical stop-loss segment excluding any gains from the sale of securities and assets due to the aforementioned activity. Our parent company’s balance sheet is much stronger; we have no debt, and we still have over $160 million (after given effect to the recent stock repurchases, repayment of debt and aforementioned acquisitions) in cash and undeployed capital. In order to enhance shareholder value, we have determined to decrease our cash position and offer liquidity to our shareholders through our intention, as recently announced, to commence a tender offer to purchase up to 2,000,000 shares of our common stock at a price per share of $20.00. After giving effect to this tender, we will still have abundant capital and liquidity to take advantage of numerous opportunities in the current ever-changing health insurance marketplace, support our anticipated growth of specialty health business and generate more earnings. Our overall investment portfolio continues to be very highly rated (on average, AA) and has a duration of approximately five years. Our book value increased to $25.53 per share (after including a charge of $.60 per share due to the sharp increase in the U.S. interest rate environment in the fourth quarter of 2016) at December 31, 2016 from $18.73 per share at December 31, 2015, and our total stockholders’ equity increased to $437 million at December 31, 2016 compared to $323 million at December 31, 2015.”

THIS PRESS RELEASE IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO BUY OR THE SOLICITATION OF AN OFFER TO SELL SHARES OF INDEPENDENCE HOLDING COMPANY COMMON STOCK. THE TENDER OFFER FOR SHARES OF INDEPENDENCE HOLDING COMPANY COMMON STOCK DESCRIBED IN THIS PRESS RELEASE HAS NOT YET COMMENCED. THE TENDER OFFER WILL BE MADE ONLY PURSUANT TO AN OFFER TO PURCHASE, LETTER OF TRANSMITTAL AND RELATED MATERIALS THAT IHC INTENDS TO DISTRIBUTE TO ITS STOCKHOLDERS AND FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. STOCKHOLDERS AND INVESTORS SHOULD READ CAREFULLY THE OFFER TO PURCHASE, LETTER OF TRANSMITTAL AND RELATED MATERIALS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION, INCLUDING THE VARIOUS TERMS OF, AND CONDITIONS TO, THE TENDER OFFER. STOCKHOLDERS AND INVESTORS WILL BE ABLE TO OBTAIN A FREE COPY OF THE TENDER OFFER STATEMENT ON SCHEDULE TO, THE OFFER TO PURCHASE, LETTER OF TRANSMITTAL AND OTHER DOCUMENTS THAT IHC INTENDS TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AT THE COMMISSION’S WEBSITE AT WWW.SEC.GOV OR BY CALLING THE INFORMATION AGENT (TO BE IDENTIFIED AT THE TIME THE OFFER IS MADE) FOR THE TENDER OFFER. STOCKHOLDERS ARE URGED TO CAREFULLY READ THESE MATERIALS PRIOR TO MAKING ANY DECISION WITH RESPECT TO THE TENDER OFFER.

About The IHC Group

Independence Holding Company (NYSE:IHC) is a holding company that is principally engaged in underwriting, administering and/or distributing group and individual specialty benefit products, including disability, supplemental health, pet, and group life insurance through its subsidiaries since 1980. The IHC Group owns three insurance companies (Standard Security Life Insurance Company of New York, Madison National Life Insurance Company, Inc. and Independence American Insurance Company), and IHC Specialty Benefits, Inc., a technology-driven insurance sales and marketing company that creates value for insurance producers, carriers and consumers (both individuals and small businesses) through a suite of proprietary tools and products (including ACA plans and small group medical stop-loss). All products are placed with highly rated carriers.

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
CONSOLIDATED STATEMENTS OF INCOME
December 31, 2016
(In Thousands, Except Per Share Data)
Three Months Ended Year Ended
December 31, December 31,
2016 2015 2016 2015
REVENUES:
Premiums earned $67,180 $117,939 $262,704 $479,534
Net investment income 3,870 3,407 16,570 17,237
Fee income 3,905 1,456 16,446 10,651
Other income 3,359 1,918 12,257 10,267
Gain on sale of subsidiary to joint venture - (221) - 9,940
Net realized investment gains 557 103 4,502 3,094
Net impairment losses recognized in earnings - - (1,475) (228)
78,871 124,602 311,004 530,495
EXPENSES:
Insurance benefits, claims and reserves 35,734 73,960 145,231 307,178
Selling, general and administrative expenses 34,227 44,001 132,174 177,641
Interest expense on debt 168 444 1,534 1,798
70,129 118,405 278,939 486,617
Income from continuing operations before income taxes 8,742 6,197 32,065 43,878
Income taxes 989 2,305 9,555 15,904
Income from continuing operations, net of tax 7,753 3,892 22,510 27,974
Discontinued operations:
Income (loss) from discontinued operations, before
income taxes (19) 2,056 117,617 4,310
Income taxes (benefits) on discontinued operations (911) 801 6,813 1,762
Income from discontinued operations, net of tax 892 1,255 110,804 2,548
Net income 8,645 5,147 133,314 30,522
Less: income from noncontrolling interests
in subsidiaries (116) (214) (10,016) (578)
NET INCOME ATTRIBUTABLE TO IHC $8,529 $4,933 $123,298 $29,944
Basic income per common share:
Income from continuing operations $.45 $.22 $1.28 $1.59
Income from discontinued operations .05 .07 5.90 .14
Basic income per common share $.50 $.29 $7.18 $1.73
WEIGHTED AVERAGE SHARES OUTSTANDING 17,084 17,262 17,162 17,314
Diluted income per common share:
Income from continuing operations $.44 $.21 $1.27 $1.58
Income from discontinued operations .05 .07 5.82 .13
Diluted income per common share $.49 $.28 $7.09 $1.71
WEIGHTED AVERAGE DILUTED SHARES
OUTSTANDING 17,311 17,447 17,379 17,484
As of May 15, 2017, there were 16,377,756 common shares outstanding, net of treasury shares.


INDEPENDENCE HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
December 31, December 31,
2016 2015
ASSETS:
Investments:
Short-term investments $6,912 $50
Securities purchased under agreements to resell 28,962 28,285
Trading securities 592 1,259
Fixed maturities, available-for-sale 449,487 428,601
Equity securities, available-for-sale 5,333 8,426
Other investments 23,534 21,538
Total investments 514,820 488,159
Cash and cash equivalents 22,010 17,500
Due and unpaid premiums 42,896 69,075
Due from reinsurers 440,285 483,073
Premium and claim funds 17,952 22,015
Goodwill 41,573 47,276
Other assets 54,928 57,934
Assets attributable to discontinued operations - 12,931
TOTAL ASSETS $1,134,464 $1,197,963
LIABILITIES AND STOCKHOLDERS’ EQUITY:
LIABILITIES:
Policy benefits and claims $219,113 $245,443
Future policy benefits 219,450 270,624
Funds on deposit 145,749 173,350
Unearned premiums 9,786 10,236
Other policyholders' funds 9,769 11,822
Due to reinsurers 35,796 46,355
Accounts payable, accruals and other liabilities 55,477 64,109
Liabilities attributable to discontinued operations 68 (15)
Debt - 5,189
Junior subordinated debt securities - 38,146
TOTAL LIABILITIES 695,208 865,259
STOCKHOLDERS’ EQUITY:
IHC STOCKHOLDERS' EQUITY:
Preferred stock (none issued) - -
Common stock 18,620 18,569
Paid-in capital 126,468 127,733
Accumulated other comprehensive income (6,964) (3,440)
Treasury stock, at cost (17,483) (13,961)
Retained earnings 315,918 194,450
TOTAL IHC STOCKHOLDERS’ EQUITY 436,559 323,351
NONCONTROLLING INTERESTS IN SUBSIDIARIES 2,697 9,353
TOTAL EQUITY 439,256 332,704
TOTAL LIABILITIES AND EQUITY $1,134,464 $1,197,963

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

Source:Independence Holding Company