STAMFORD, Conn., Aug. 09, 2017 (GLOBE NEWSWIRE) — Independence Holding Company (NYSE:IHC) today reported 2017 second-quarter and six-month results. 

Financial Results

Income from continuing operations after tax increased to $.86 per share, diluted, or $14,307,000, for the three months ended June 30, 2017 compared to $.25 per share, diluted, or $4,495,000, for the three months ended June 30, 2016, primarily due to $11,589,000 of tax benefits from a worthless stock deduction recognized as a result of the winding down and dissolution of a subsidiary in the second quarter of 2017. Income from continuing operations after tax increased to $1.15 per share, diluted, or $19,316,000, for the six months ended June 30, 2017 compared to $.58 per share, diluted, or $10,391,000, for the three months ended June 30, 2016. Net income attributable to IHC of $14,331,000, or $.86 per share diluted, for the three months ended June 30, 2017 increased from $4,436,000, or $.26 per share diluted, in the same period of 2016.

On March 31, 2016, IHC completed the sale of IHC Risk Solutions LLC (“Risk Solutions”), exited the medical stop-loss business and realized an after tax gain of approximately $99,934,000, net of noncontrolling interest in the six-month period ended June 30, 2016.  In addition, under the purchase and sale agreement, all of IHC’s in-force medical stop-loss business produced by Risk Solutions was 100% co-insured as of January 1, 2016 and will be run out in 2017 as evidenced by the decrease in income from the stop-loss segment in 2017.  Net income attributable to IHC of $19,267,000, or $1.15 per share diluted, for the six months ended June 30, 2017 decreased from $110,446,000, or $6.34 per share diluted, in the same period of 2016 primarily due to the gain on sale of Risk Solutions in 2016 partially offset by the aforementioned tax benefit recorded in 2017.

The Company reported revenues of $82,237,000 for the three months ended June 30, 2017 compared to revenues for the three months ended June 30, 2016 of $77,696,000.  The Company reported revenues of $154,077,000 for the six months ended June 30, 2017 compared to revenues for the six months ended June 30, 2016 of $153,591,000.  Revenues increased only slightly primarily due to significant increases in specialty health premiums largely offset by a reduction in premiums from the exit of the Company’s stop-loss business. 

Chief Executive Officer’s Comments

Roy T. K. Thung, Chief Executive Officer, commented, “We are pleased with our second quarter and six-month results, particularly when considering that the second quarter and six months of 2016 included $1.4 million and $8.5 million, respectively, more in earnings from the medical stop-loss segment than did the comparable periods in 2017.  These decreases were largely offset by increased earnings from the specialty health segment and an increase in corporate investment income on the proceeds from the sale of Risk Solutions. The sale of Risk Solutions and exiting the medical stop-loss segment generated significant liquidity and excess capital. We have redeployed some of this excess to purchase equity stakes in several companies that distribute our products (including the recent acquisition of PetPartners, Inc.), to repurchase IHC stock, and to pay off all of our debt.

We are now one of the fastest growing providers of specialty health products in the United States, and several of the largest health insurers and e-brokers in the country are now distributing a significant amount of our products. There is a growing need for our products as a result of the turmoil surrounding Affordable Care Act plans on and off the exchanges, with consumers experiencing enormous rate increases and lack of products to choose from in many counties.  As a result, we are expecting to have a significant increase in sales during open enrollment.   In anticipation of this growth we have begun to make material enhancements to our systems and infrastructure and will contribute additional capital to Independence American Insurance Company if needed from our excess liquidity. For these reasons, we believe that we will have solid sales growth for the balance of 2017, and will report significantly higher earned premiums and income in this segment in 2018.”

Mr. Thung continued, “During the first six months of 2017, the Company repurchased an aggregate 2,109,887 shares of our common stock at a total cost of $42.1 million primarily through a tender offer at a price per share of $20.00, and through private purchases. Our parent company’s balance sheet is very strong, we have no debt, and we still have substantial cash and un-deployed capital.  Our stock is trading at a significant discount to book value of $27.89 per share at June 30, 2017 compared to $25.53 per share at December 31, 2016, and $18.73 per share at December 31, 2015. Our overall investment portfolio continues to be very highly rated (on average, AA) and has a duration of approximately five years.”           

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.


June 30, 2017
(In Thousands, Except Per Share Data)

      Three Months Ended        Six Months Ended    
    June 30,   June 30,
    2017     2016     2017     2016  
Premiums earned $ 71,927   $ 65,627   $ 134,868   $ 128,189  
Net investment income   4,100     4,260     8,011     8,696  
Fee income   5,697     3,412     8,922     8,491  
Other income   413     3,379     2,004     6,637  
Net realized investment gains   100     1,018     272     1,578  
    82,237     77,696     154,077     153,591  
Insurance benefits, claims and reserves   37,324     40,477     69,535     71,220  
Selling, general and administrative expenses   40,985     29,897     73,067     65,124  
Interest expense on debt       473         926  
    78,309     70,847     142,602     137,270  
Income from continuing operations before income taxes   3,928     6,849     11,475     16,321  
Income taxes (benefits)   (10,379 )   2,354     (7,841 )   5,930  
Income from continuing operations, net of tax   14,307     4,495     19,316     10,391  
Discontinued operations                
  Income from discontinued operations, before income taxes               117,636  
  Income taxes (benefits) on discontinued operations       (142 )       7,724  
  Income from discontinued operations, net of tax       142         109,912  
Net income   14,307     4,637     19,316     120,303  
Less: (Income) loss from noncontrolling interests in subsidiaries     24     (201 )   (49 )   (9,857 )
NET INCOME ATTRIBUTABLE TO IHC $ 14,331   $ 4,436   $ 19,267   $ 110,446  
Basic income per common share                
  Income from continuing operations $ .88   $ .25   $ 1.17   $ .59  
  Income from discontinued operations       .01         5.83  
  Basic income per common share $ .88   $ .26   $ 1.17   $ 6.42  
WEIGHTED AVERAGE SHARES OUTSTANDING   16,349     17,204     16,524     17,223  
Diluted income per common share                
  Income from continuing operations $ .86   $ .25   $ 1.15   $ .58  
  Income from discontinued operations       .01         5.76  
  Diluted income per common share $ .86   $ .26   $ 1.15   $ 6.34  
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING   16,628     17,417     16,802     17,433  

As of August 4, 2017, there were 14,980,761 common shares outstanding, net of treasury shares.


(In Thousands, Except Share Data)

           June 30,            December 31, 
      2017      2016
  Short-term investments   $   50      $   6,912   
  Securities purchased under agreements to resell       14,479          28,962   
  Trading securities       520          592   
  Fixed maturities, available-for-sale       434,545          449,487   
  Equity securities, available-for-sale       5,455          5,333   
  Other investments       17,665          23,534   
      Total investments       472,714          514,820   
  Cash and cash equivalents       22,070          22,010   
  Due and unpaid premiums       33,830          42,896   
  Due from reinsurers       395,779          440,285   
  Premium and claim funds       10,035          17,952   
  Goodwill       50,697          41,573   
  Other assets       62,445          54,928   
  TOTAL ASSETS   $   1,047,570      $   1,134,464   
  Policy benefits and claims   $   181,565      $   219,113   
  Future policy benefits       218,291          219,450   
  Funds on deposit       146,702          145,749   
  Unearned premiums       8,742          9,786   
  Other policyholders’ funds       10,265          9,769   
  Due to reinsurers       7,115          35,796   
  Accounts payable, accruals and other liabilities       51,856          55,477   
  Liabilities attributable to discontinued operations       –          68   
  TOTAL LIABILITIES       624,536          695,208   
Commitments and contingencies            
Redeemable noncontrolling interest       2,018          –   
  Preferred stock (none issued)       –          –   
  Common stock       18,625          18,620   
  Paid-in capital       126,590          126,468   
  Accumulated other comprehensive loss       (2,504 )       (6,964 )
  Treasury stock, at cost       (59,588 )       (17,483 )
  Retained earnings       335,185          315,918   
TOTAL IHC STOCKHOLDERS’ EQUITY       418,308          436,559   
NONCONTROLLING INTERESTS IN SUBSIDIARIES             2,708          2,697   
  TOTAL EQUITY       421,016          439,256   
  TOTAL LIABILITIES AND EQUITY   $   1,047,570      $   1,134,464   


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