IHC Group

Independence Holding Company

Aug 9, 2017

Independence Holding Company Announces 2017 Second-Quarter and Six-Month Results

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 

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  
 TOTAL EQUITY    421,016      439,256  
 TOTAL LIABILITIES AND EQUITY  $  1,047,570   $  1,134,464  


CONTACT:  Loan Nisser
(646) 509-2107