STAMFORD, Conn., Aug. 7, 2013 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE: IHC ) today reported 2013 second-quarter and six-month results.
Financial Results
Net income per share attributable to IHC increased to $.21 per share, diluted, or $3,691,000, for the three months ended June 30, 2013 compared to $.20 per share, diluted, or $3,531,000, for the three months ended June 30, 2012. Revenues increased 50% to $151,900,000 for the three months ended June 30, 2013 compared to revenues for the three months ended June 30, 2012 of $101,443,000, primarily due to increases in premium revenue, fee income and net realized investment gains.
Net income per share attributable to IHC increased to $.47 per share, diluted, or $8,392,000, for the six months ended June 30, 2013 compared to $.41 per share, diluted, or $7,453,000, for the six months ended June 30, 2012. Revenues increased 42% to $289,782,000 for the six months ended June 30, 2013 compared to revenues for the six months ended June 30, 2012 of $203,599,000, primarily due to an increase in premium revenue, fee income and net realized investment gains.
During the quarter, Madison National Life entered into a coinsurance agreement to cede approximately $219 million of reserves, primarily annuities. As a result of this transaction, the Company wrote off approximately $9.3 million of deferred acquisition costs. However, those costs were more than offset by the gains realized by the Company in the transaction, most of which resulted from the required sale and transfer of invested assets.
Chief Executive Officer's Comments
Roy Thung, Chief Executive Officer, commented, "Earned premium for medical stop-loss, which is by far our largest line of business, grew 25% over the same quarter last year, driven by annual growth rates in excess of 28% in our direct-written segment. Profitability of this line continues at expected levels. We see a significant portion of this growth arising from employer groups moving from fully insured to self-funding as they consider alternatives under health care reform. We expect a continuation of these trends through the remainder of this year and into 2014. We are also encouraged by the performance of our existing group-life, disability and DBL business lines and our expansion into new business lines.
"We have made the decision to exit major-medical for individuals and families in the majority of states in which we do business due to changes brought about under health care reform. In addition, in the first two quarters of 2013, the Company experienced an increase in loss ratios in our fully insured segment from business produced by certain of our major-medical distributors. Accordingly, we either have terminated, or soon will be terminating, all small-group producers that were hindering our performance. In order to leverage our expertise in fully insured health, we are concentrating on expanding our products in markets not adversely affected by reform, including: short-term medical, dental, small-group stop-loss; non-subscriber occupational accident, insurance for overseas employees and travelers, and pet insurance. We expect that the loss in underwriting income from substantially exiting the individual major-medical market in 2014 will be offset by an increase in underwriting income from growth in these other areas.
"Our overall investment portfolio continues to be very highly rated (on average, AA) and has a duration of approximately six years. Our book value has decreased to $15.44 per share at June 30, 2013 from $15.93 per share at December 31, 2012 and our total stockholders' equity is $273 million. These declines are primarily attributable to sharp increases in ten-year treasury interest rates experienced during the quarter that caused a downward valuation in our bond portfolio. Were rates to continue to increase, we would expect a positive effect on future earnings as cash flows could be invested at higher rates."
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, small group major medical, short-term medical, limited medical, group long and short-term disability and life, dental, vision and various supplemental products. Madison Life sells group life and disability, small group major medical, major medical for individuals and families, dental, individual life insurance, and various supplemental products. Independence American offers major medical for individuals and families, medical stop-loss, small group major medical, short-term medical, pet insurance, and non-subscriber occupational accident and international coverages. 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 which 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 | |||||
| SECOND QUARTER REPORT | |||||
| June 30, 2013 | |||||
| (In Thousands, Except Per Share Data) | |||||
| Three Months Ended | Six Months Ended | ||||
| June 30, | June 30, | ||||
| 2013 | 2012 | 2013 | 2012 | ||
| REVENUES: | |||||
| Premiums earned | $ 125,465 | $ 85,469 | $ 242,833 | $ 169,243 | |
| Net investment income | 7,002 | 7,609 | 15,003 | 16,360 | |
| Fee income | 6,039 | 5,889 | 12,581 | 13,310 | |
| Other income | 1,659 | 1,247 | 3,011 | 2,403 | |
| Net realized investment gains | 11,735 | 1,850 | 16,354 | 2,987 | |
| Total other-than-temporary impairment losses | -- | (621) | -- | (704) | |
| 151,900 | 101,443 | 289,782 | 203,599 | ||
| EXPENSES: | |||||
| Insurance benefits, claims and reserves | 89,276 | 60,265 | 174,736 | 117,400 | |
| Selling, general and administrative expenses | 44,862 | 33,331 | 87,742 | 69,803 | |
| Amortization of deferred acquisitions costs | 10,948 | 1,631 | 12,388 | 3,225 | |
| Interest expense on debt | 490 | 540 | 977 | 1,079 | |
| 145,576 | 95,767 | 275,843 | 191,507 | ||
| Income before income taxes | 6,324 | 5,676 | 13,939 | 12,092 | |
| Income taxes | 2,166 | 1,846 | 4,741 | 3,932 | |
| Net income | 4,158 | 3,830 | 9,198 | 8,160 | |
| Less: income from noncontrolling interests in subsidiaries | (467) | (299) | (806) | (707) | |
| NET INCOME ATTRIBUTABLE TO IHC | $ 3,691 | $ 3,531 | $ 8,392 | $ 7,453 | |
| Basic income per common share | $ .21 | $ .20 | $ .47 | $ .41 | |
| WEIGHTED AVERAGE SHARES OUTSTANDING | 17,753 | 17,987 | 17,836 | 18,008 | |
| Diluted income per common share | $ .21 | $ .20 | $ .47 | $ .41 | |
| WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING | 17,805 | 18,025 | 17,922 | 18,100 | |
As of August 2, 2013, there were 17,667,526 common shares outstanding, net of treasury shares.
| INDEPENDENCE HOLDING COMPANY | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (In Thousands, Except Share Data) | ||
| June 30, | December 31, | |
| 2013 | 2012 | |
| ASSETS: | ||
| Investments: | ||
| Short-term investments | $ 50 | $ 50 |
| Securities purchased under agreements to resell | 10,588 | 33,956 |
| Trading securities | 7,997 | 7,016 |
| Fixed maturities, available-for-sale | 573,527 | 719,602 |
| Equity securities, available-for-sale | 5,594 | 15,598 |
| Other investments | 25,648 | 35,134 |
| Total investments | 623,404 | 811,356 |
| Cash and cash equivalents | 18,977 | 23,945 |
| Deferred acquisition costs | 29,624 | 33,401 |
| Due and unpaid premiums | 73,146 | 49,430 |
| Due from reinsurers | 383,848 | 166,880 |
| Premium and claim funds | 36,524 | 40,596 |
| Goodwill | 50,318 | 50,318 |
| Other assets | 77,548 | 86,382 |
| TOTAL ASSETS | $ 1,293,389 | $ 1,262,308 |
| LIABILITIES AND STOCKHOLDERS' EQUITY: | ||
| LIABILITIES: | ||
| Claims and claim adjustment expenses-health | $ 240,155 | $ 194,480 |
| Future policy benefits-life and annuity | 289,726 | 290,238 |
| Funds on deposit | 276,287 | 278,084 |
| Unearned premiums | 11,106 | 8,453 |
| Other policyholders' funds | 24,990 | 22,373 |
| Due to reinsurers | 45,454 | 48,192 |
| Accounts payable, accruals and other liabilities | 71,425 | 71,495 |
| Debt | 8,000 | 8,000 |
| Junior subordinated debt securities | 38,146 | 38,146 |
| TOTAL LIABILITIES | 1,005,289 | 959,461 |
| STOCKHOLDERS' EQUITY: | ||
| IHC STOCKHOLDERS' EQUITY: | ||
| Preferred stock (none issued) | -- | -- |
| Common stock | 18,474 | 18,462 |
| Paid-in capital | 127,187 | 126,589 |
| Accumulated other comprehensive income | (3,459) | 15,013 |
| Treasury stock, at cost | (7,431) | (4,533) |
| Retained earnings | 137,921 | 130,153 |
| TOTAL IHC STOCKHOLDERS' EQUITY | 272,692 | 285,684 |
| NONCONTROLLING INTERESTS IN SUBSIDIARIES | 15,408 | 17,163 |
| TOTAL EQUITY | 288,100 | 302,847 |
| TOTAL LIABILITIES AND EQUITY | $ 1,293,389 | $ 1,262,308 |
DAVID T. KETTIG (212) 355-4141 Ext. 3047 www.IHCGroup.com
