IHC Group

Independence Holding Company

Nov 6, 2018

Independence Holding Company Announces 94% Increase in 2018 Third-Quarter Per Share Results

STAMFORD, Conn., Nov. 06, 2018 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE: IHC) today reported 2018 third-quarter and nine-month results. 

Financial Results

The Company reported income before income taxes of $12,903,000 for the three months ended September 30, 2018 compared to $7,879,000 for the same period of 2017 and $31,451,000 for the nine months ended September 30, 2018 versus $19,354,000 for the same period of 2017. Net income attributable to IHC per share increased 94% to $.66 per share, diluted, or $9,935,000, for the three months ended September 30, 2018 compared to $.34 per share, diluted, or $5,229,000, for the three months ended September 30, 2017. Net income attributable to IHC per share was $1.57 per share, diluted, or $23,653,000, for the nine months ended September 30, 2018 compared to $1.50 per share, diluted, or $24,496,000, for the nine months ended September 30, 2017, but net income attributable to IHC in 2017 includes $11,589,000 of tax benefits from a worthless stock deduction recognized as a result of the winding down and dissolution of a subsidiary (which had a positive impact on income per share in 2017 of $.71 per share, diluted).

The Company reported revenues of $89,935,000 for the three months ended September 30, 2018 compared to revenues for the three months ended September 30, 2017 of $83,752,000. The Company reported revenues of $263,127,000 for the nine months ended September 30, 2018 compared to revenues for the nine months ended September 30, 2017 of $237,829,000. The first nine months of 2017 included revenues from the run out of the Company’s stop-loss segment with no comparable amounts in 2018.

Chief Executive Officer’s Comments

Roy T. K. Thung, Chief Executive Officer, commented, “We are gratified that we are able to report an increase of 94% in our third quarter income per share. Management is optimistic about our future due to an expected increase in sales of short-term medical (“STM”) during the current open enrollment period as a result of its longer permissible duration in many states, our improved infrastructure, and our enhanced product offerings. In the coming years, we believe there will be an even greater demand for our products as a result of (i) the lack of a penalty, beginning January 1, 2019, for individuals who do not have coverage that is compliant with the Affordable Care Act (“ACA”), (ii) the proposed rule recently released by the Departments of Health and Human Services, Treasury and Labor (the “Departments”) which, if adopted, will provide a new way for employers to provide health insurance to their employees using health reimbursement arrangements (“HRA”), and (iii) guidance from the federal government that grants state governments more freedom, as a result of the expansion of the 1332 waiver programs, to implement new alternatives to ACA plans. The proposed rule is significant to IHC because it would allow employers of any size to attract and retain talent by offering their employees a strong package of benefits by utilizing a tax-advantaged HRA without having the administrative burden of offering group benefits to employees. Employees could use the funds to purchase individual medical coverage, including STM policies. In addition, we look forward to working with state regulators to use STM, or develop new IHC products, to meet the innovative ideas arising from the expanded 1332 waiver process.

We are recognized for our development of medical insurance products that provide affordable coverage alternatives for consumers who cannot afford ACA policies or need our supplemental products to cover their high deductibles on their ACA plans. In addition to increasing sales of STM, we believe that we will realize an increase in sales of our bundled offerings, including: MetalGap (affordable coverage for claims due to both accidents and critical illnesses), dental, vision, Rx discount card and telemedicine. We are particularly excited about the opportunity to increase sales of our Fusion product, coupling a fixed indemnity policy with a high deductible STM product, which provides both first dollar coverage for hospitalizations and peace of mind for large expenditures. We also recently introduced Connect Plus, which is a first-of-its-kind temporary medical plan providing coverage for certain pre-existing conditions of up to $25,000 to consumers who qualify, subject to a deductible and coinsurance. IHC’s carriers distribute these products through co-branded arrangements with many of the largest health insurers and e-brokers in the country, as well as through IHC’s own distribution channels and contracted local producers and call center agents.

In October 2018, the HealtheDeals division of IHC Specialty Benefits began supporting the members of a nationally recognized insurance, banking, and investment services provider serving millions of members and their families in selecting among a number of quality health insurance choices, including alternative health coverages underwritten by Independence American Insurance Company. In order to support these members, HealtheDeals has opened a new call center with licensed agents in Minneapolis, Minnesota and Milwaukee, Wisconsin. We have also enhanced our Direct-to-Consumer transactional website, www.HealtheDeals.com, and significantly increased our lead generation capabilities. As part of our vertically integrated platform, we are now able to generate leads, both organic and acquired, for our direct-to-consumer and career advisor distribution initiatives. These producers will then sell as directed by HealtheDeals, whether they are selling policies underwritten by IHC’s carriers or unaffiliated insurers. We continue to value our national account and individual broker distributions, but by owning a substantial portion of our distribution, our agency is positioned to generate commission income by cross-selling IHC products. In 2019, we expect to expand our portfolio to include additional life, Medicare supplement and Medicare Advantage products from other highly rated insurance companies. Our call center and career advisor models are both highly scalable.”

Mr. Thung added, “The proposed rule on using HRA funds to purchase STM policies, and the guidance on 1332 waivers should also help us in expanding our presence in the small group market, which is one of our top priorities in 2019 and is a larger market than the individual, non-subsidy eligible commercial market. Although small employers are not subject to the employer mandate, employers that wish to provide fully insured coverage to their employees have been forced to purchase expensive ACA-compliant plans. We believe that it is likely that some states will seek waivers to allow small employers to provide more innovative group policies, and IHC is again well positioned to develop new products for this underserved market. We have recently launched a new employer group online enrollment platform, which will take the burden off the human resource department of small businesses. It is designed to enroll not only IHC products, but also group plans from unaffiliated carriers.

Our book value increased from $28.98 at December 31, 2017 to $29.92 per share at September 30, 2018 despite the charge to stockholders’ equity due to the impact on our bond portfolio of the sharp increase in interest rates. We have increased our dividend in each of the last four years, including a 50% increase to $.30 per share annually, as announced in April of this year. In the first nine months of 2018, IHC repurchased 129,521 shares at an average cost of $29.47 per share or $3.8 million. Subsequent to September 30, we have repurchased an additional 4,566 shares at an average cost of $35.02 per share. Our overall investment portfolio continues to be very highly rated (on average, AA) and has an effective duration of approximately four years. Finally, IHC has a substantial amount of free cash at the corporate level and excess capital in our insurance companies, and will continue to grow due to the substantial positive cash flow of the Company.”

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), and IHC Specialty Benefits, Inc., a technology-driven full-service marketing and distribution company that focuses on small employer and individual consumer products through general agents, telebrokerage, call centers, private label arrangements, and through the following brands: www.HealtheDeals.com; Health eDeals Advisors; www.PetPartners.com; and www.PetPlace.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
September 30, 2018
(In Thousands, Except Per Share Data)
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2018
  2017   2018
  2017
REVENUES:                
Premiums earned $ 81,757   $ 75,639 $ 238,583   $ 210,507  
Net investment income   3,611     4,403   10,214     12,414  
Fee income   4,397     2,634   14,193     11,556  
Other income   153     361   472     2,365  
Net investment gains (losses)   17     715   (335 )   987  
    89,935     83,752   263,127     237,829  
                 
EXPENSES:                
Insurance benefits, claims and reserves   36,011     33,536   105,619     103,071  
Selling, general and administrative expenses   41,021     42,337   126,057     115,404  
                 
    77,032     75,873   231,676     218,475  
                 
Income before income taxes   12,903     7,879   31,451     19,354  
Income taxes (benefits)   2,860     2,666   7,518     (5,175 )
                 
Net income   10,043     5,213   23,933     24,529  
(Income) loss from noncontrolling interests   (108 )   16   (280 )   (33 )
                 
NET INCOME ATTRIBUTABLE TO IHC $ 9,935   $ 5,229 $ 23,653   $ 24,496  
                 
                 
Basic income per common share $ .67   $ .35 $ 1.60   $ 1.53  
                 
WEIGHTED AVERAGE SHARES OUTSTANDING   14,795     14,965   14,808     15,999  
                 
Diluted income per common share $ .66   $ .34 $ 1.57   $ 1.50  
                 
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING   15,109     15,274   15,104     16,287  
                 

As of November 2, 2018, there were 14,795,106 common shares outstanding, net of treasury shares.

 
INDEPENDENCE HOLDING COMPANY
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
 
    September 30,   December 31,
    2018
  2017
         
ASSETS:        
Investments:        
Short-term investments $ 1,047   $ 50  
Securities purchased under agreements to resell   18,025     10,269  
Fixed maturities, available-for-sale   432,950     441,912  
Equity securities   5,528     6,120  
Other investments   17,511     18,547  
Total investments   475,061     476,898  
         
Cash and cash equivalents   25,620     26,465  
Due and unpaid premiums   29,100     21,950  
Due from reinsurers   371,540     380,593  
Goodwill   50,697     50,697  
Other assets   83,928     84,020  
         
TOTAL ASSETS $ 1,035,946   $ 1,040,623  
         
LIABILITIES AND STOCKHOLDERS’ EQUITY:        
LIABILITIES:        
Policy benefits and claims $ 158,168   $ 168,683  
Future policy benefits   209,588     214,766  
Funds on deposit   141,685     143,537  
Unearned premiums   9,452     6,666  
Other policyholders' funds   10,900     10,402  
Due to reinsurers   4,855     3,808  
Accounts payable, accruals and other liabilities   53,752     56,453  
         
TOTAL LIABILITIES   588,400     604,315  
         
         
Commitments and contingencies        
Redeemable noncontrolling interest   2,146     2,065  
         
STOCKHOLDERS’ EQUITY:        
Preferred stock (none issued)   -     -  
Common stock   18,625     18,625  
Paid-in capital   125,279     124,538  
Accumulated other comprehensive loss   (11,963 )   (4,598 )
Treasury stock, at cost   (66,918 )   (63,404 )
Retained earnings   377,848     356,383  
         
TOTAL IHC STOCKHOLDERS’ EQUITY   442,871     431,544  
NONREDEEMABLE NONCONTROLLING INTERESTS   2,529     2,699  
         
TOTAL EQUITY   445,400     434,243  
         
TOTAL LIABILITIES AND EQUITY $ 1,035,946   $ 1,040,623  
         

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

Source: Independence Holding Company