IHC Group

Independence Holding Company

May 7, 2020

Independence Holding Company Announces 2020 First-Quarter Results

STAMFORD, Conn., May 07, 2020 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE: IHC) today reported 2020 first-quarter results.   

Financial Results

Net income attributable to IHC per share was $.29 per share, diluted, or $4,278,000, for the three months ended March 31, 2020 compared to $.58 per share, diluted, or $8,727,000, for the three months ended March 31, 2019.  Net income for this quarter is lower primarily because (i) the 2019 first quarter includes a pre-tax gain of $3.6 million on the sale of an equity method investment and (ii) of expenses incurred in the first quarter of this year related to the ramp up of our senior marketing division.

The Company reported revenues of $103,997,000 for the three months ended March 31, 2020 compared to revenues for the three months ended March 31, 2019 of $94,182,000.

Chief Executive Officer’s Comments

Roy T. K. Thung, Chief Executive Officer, commented, “Our thoughts continue to be with those suffering from the COVID-19 pandemic and those on the front lines. This outbreak has not had a material negative impact on first quarter results, however, we may incur additional expenses for the balance of the year relating to possible COVID-19 related claims activity and possible delayed premium payments. We have implemented business continuity and emergency response plans to continue to provide service to our customers and to protect the health and wellbeing of our employees whether they are working from home or once they return to offices that have been modified to protect them.”

Mr. Thung continued, “I would like to first update you on our entrance into the senior health market, which is a new line of business we entered into in a small way in the fourth quarter of last year.  We have spent a considerable amount of capital entering this market, which is growing by an estimated 10,000 people per day.  We have enhanced our SalesForce CRM platform, as well as our producer licensing, consumer and web-based enrollment systems. We have also built out our Marketing Technology (MarTech) capabilities through the acquisition of a technology company that utilizes artificial intelligence (AI) capabilities to generate high-intent leads. This acquisition (http://ir.ihcgroup.com/news-releases) will significantly enhance our ability to identify consumer intent, improve conversion rates, and provide the engine we need to generate enough quality leads to efficiently achieve the growth targets we’ve set for our call centers, career agents, and Direct-to-Consumer transactional sites.  Now that this infrastructure is in place to efficiently generate leads, we are actively working to hire, train and license additional agents. By the fourth quarter of this year, we anticipate having 150 licensed call center agents focused primarily on the senior market, and 275 licensed career agents selling products underwritten by both IHC’s carriers and other highly rated insurance companies.  The majority of the agents we are hiring, training and licensing are not expected to produce a significant number of sales in the next two quarters since the majority of Medicare Supplement (Med Supp) and Medicare Advantage sales typically occur during the Annual Enrollment Period (AEP), which occurs in the fourth quarter of each year.  Therefore, we will not generate a corresponding increase in revenues in the next two quarters, which will affect our earnings to some degree.  In addition, we have invested in one of our carriers, Independence American Insurance Company (IAIC), launching a Medicare Supplement product in four states (with a total of 30 states expected by the AEP).  This will be the “anchor tenant” in our impressive portfolio of senior products.   We expect this product to be priced very competitively as we utilized a sophisticated buyer propensity and health model developed through collaboration among IAIC, our recently acquired MarTech technology company and a leading Med Supp carrier and reinsurer.  We also remain excited by the prospects of our pet division as there is a very strong demand for pet insurance resulting from record adoptions and breeder sales as pet parents are seeking the comfort of dog and cat companions in these troubled times. To this end, Pet Partners, Inc. (PPI) continues to be closely aligned with American Kennel Club.  PPI remains on track to bring state-of-the-art Android and iOS apps to market in the third quarter of this year, which will permit clients to enroll in pet insurance, check claims status, maintain e-records of immunizations and appointments and generally assist in supporting the health and wellbeing of their pets.  In conclusion, we now have all of the necessary tools in place to be very successful in the senior and pet markets, and the expenses we are incurring now are an important investment in our future.”

Mr. Thung added, “IHC has a very strong balance sheet with no indebtedness and a very substantial amount of free cash at the corporate level and significant excess capital in our insurance companies. Our book value increased from $17.25 per share at December 31, 2014 to $30.92 per share at December 31, 2019 and to $31.03 per share at March 31, 2020.  IHC increased its annual dividend to $.44 per share in 2020, which is the sixth increase since December 2014 when the annual dividend paid to the stockholders was $.07 per share. Our overall investment portfolio continues to be very highly rated (on average, AA) and has an effective duration under three years. In April 2020, the Company commenced a tender offer to purchase up to 1,000,000 shares of IHC common stock at a price of $27 per share in order to provide liquidity to its stockholders by permitting them the opportunity to tender shares of IHC common stock for cash.”

About The IHC Group

Independence Holding Company (NYSE: IHC), formed in 1980, 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 (Independence Holding Company and its subsidiaries collectively referred to as “The IHC Group”).  The IHC Group consists of three insurance companies (Standard Security Life Insurance Company of New York, Madison National Life Insurance Company, Inc. and Independence American Insurance Company). We also own the following agencies: (i) PetPartners, Inc., our pet insurance administrator; (ii) IHC Specialty Benefits, Inc., a technology-driven full-service marketing and distribution company that focuses on small employer and individual consumer products through its call center, career agents, and Independence Brokerage Group; and (iii) The INSX Cloud Platform through My1HR, our wholly owned Web Based Entity. Our InsureTech division is comprised of our call centers, field and career agents, in-house MarTech artificial intelligence capabilities and domains, including www.healthedeals.com; www.healthinsurance.org; www.medicareresources.org; www.petplace.com; and www.mypetinsurance.com.

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

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
March 31, 2020

(In Thousands, Except Shares and Per Share Data)

    Three Months Ended
    March 31,
    2020   2019
REVENUES:        
Premiums earned $ 96,050   $ 82,789  
Net investment income   3,240     3,996  
Fee income   3,942     4,188  
Other income   477     3,684  
Net investment gains   288     171  
Net impairment losses recognized in earnings   -     (646 )
    103,997     94,182  
         
EXPENSES:        
Insurance benefits, claims and reserves   54,058     43,119  
Selling, general and administrative expenses   44,574     40,529  
         
    98,632     83,648  
         
Income before income taxes   5,365     10,534  
Income taxes   1,043     1,644  
         
Net income   4,322     8,890  
(Income) from noncontrolling interests   (44 )   (163 )
         
NET INCOME ATTRIBUTABLE TO IHC $ 4,278   $ 8,727  
         
         
Basic income per common share $ .29   $ .58  
         
WEIGHTED AVERAGE SHARES OUTSTANDING   14,856     14,948  
         
Diluted income per common share $ .29   $ .58  
         
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING   14,911     15,066  
           

As of May 8, 2020, there were 14,785,565 common shares outstanding, net of treasury shares.

INDEPENDENCE HOLDING COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)

    March 31,     December 31,
    2020     2019
           
ASSETS:          
Investments:          
Short-term investments $ 74,029     $ 50  
Securities purchased under agreements to resell   18,377       107,157  
Fixed maturities, available-for-sale   414,004       384,974  
Equity securities   2,959       3,747  
Other investments   14,743       15,208  
Total investments   524,112       511,136  
           
Cash and cash equivalents   23,048       21,094  
Due and unpaid premiums   32,621       26,244  
Due from reinsurers   362,301       362,969  
Goodwill   64,827       60,165  
Other assets   72,926       72,695  
           
TOTAL ASSETS $ 1,079,835     $ 1,054,303  
           
LIABILITIES AND STOCKHOLDERS’ EQUITY:          
LIABILITIES:          
Policy benefits and claims $ 170,836     $ 164,802  
Future policy benefits   200,986       201,205  
Funds on deposit   140,837       140,951  
Unearned premiums   27,403       7,282  
Other policyholders' funds   11,965       12,049  
Due to reinsurers   4,114       5,016  
Accounts payable, accruals and other liabilities   61,506       61,049  
           
TOTAL LIABILITIES   617,647       592,354  
           
           
Commitments and contingencies          
Redeemable noncontrolling interest   2,290       2,237  
           
STOCKHOLDERS’ EQUITY:          
Preferred stock (none issued)   -       -  
Common stock   18,625       18,625  
Paid-in capital   123,260       122,717  
Accumulated other comprehensive income   1,101       1,212  
Treasury stock, at cost   (71,196 )     (69,724 )
Retained earnings   388,102       386,864  
           
TOTAL IHC STOCKHOLDERS’ EQUITY   459,892       459,694  
NONREDEEMABLE NONCONTROLLING INTERESTS   6       18  
           
TOTAL EQUITY   459,898       459,712  
           
TOTAL LIABILITIES AND EQUITY $ 1,079,835     $ 1,054,303  
           

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

Source: Independence Holding Company