UNITED STATES

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) November 9, 2017

 

INDEPENDENCE HOLDING COMPANY

(Exact name of registrant as specified in its charter)

 

Delaware

001-32244

58-1407235

(State or other jurisdiction of incorporation or organization)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

 

96 Cummings Point Road, Stamford, Connecticut

06902

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code:  (203) 358-8000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2  of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company¨  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) if the Exchange Act.  ¨

 

 

 

 



Item 2.02 Results of Operations and Financial Condition.

 

The information set forth under this Item 2.02 (Results of Operations and Financial Condition) is intended to be furnished. Such information, including the Exhibit attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities and Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

 

On November 9, 2017, Independence Holding Company issued a news release announcing its 2017 Third-Quarter and Nine-Month results, a copy of which is attached as Exhibit 99.1.

 

Item 9.01 Financial Statements and Exhibits

 

(c)  Exhibits: 

 

Exhibit 99.1News Release of Independence Holding Company dated November 9, 2017: Independence Holding Company Announces 2017 Third-Quarter and Nine-Month Results. 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

INDEPENDENCE HOLDING COMPANY

(Registrant)

 

 

 

By: Teresa A. Herbert

 

 

 

/s/ Teresa A. Herbert

Teresa A. Herbert

Senior Vice President and Chief Financial Officer

 

Date:

 

November 9, 2017

 




EXHIBIT 99.1

 

INDEPENDENCE HOLDING COMPANY

CONTACT:  Loan Nisser

96 CUMMINGS POINT ROAD

(646) 509-2107

STAMFORD, CONNECTICUT 06902

www.IHCGroup.com

NYSE: IHC

 

 

NEWS RELEASE

 

INDEPENDENCE HOLDING COMPANY ANNOUNCES

2017 THIRD-QUARTER AND NINE-MONTH RESULTS

 

 

Stamford, Connecticut, November 9, 2017. Independence Holding Company (NYSE: IHC) today reported 2017 third-quarter and nine-month results.  

Financial Results

Net income attributable to IHC per share increased 36% to $.34 per share, diluted, or $5,229,000, for the three months ended September 30, 2017 compared to $.25 per share, diluted, or $4,323,000, for the three months ended September 30, 2016. Net income attributable to IHC of $24,496,000, or $1.50 per share diluted, for the nine months ended September 30, 2017 decreased from $114,769,000, or $6.60 per share diluted, in the same period of 2016 primarily due to the gain on sale of IHC Risk Solutions, LLC (“Risk Solutions”) in 2016.

The Company reported revenues of $83,752,000 for the three months ended September 30, 2017 compared to revenues for the three months ended September 30, 2016 of $78,542,000.  The Company reported revenues of $237,829,000 for the nine months ended September 30, 2017 compared to revenues for the nine months ended September 30, 2016 of $232,133,000.  Revenues increased 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 the 36% increase in our earnings per share for the quarter primarily attributable to a substantial increase in sales and earnings from the specialty health segment. The sale of Risk Solutions and exiting the medical stop-loss segment generated not only a large gain on sale but also significant liquidity and excess capital, which we have partially redeployed by purchasing equity stakes in several companies that distribute our products, repurchasing IHC stock, paying off all of our debt, and improving our infrastructure in anticipation of growth in specialty health, and the group disability and DBL segment.

 

We are one of the fastest growing and most innovative underwriters of specialty health products in the United States. In addition to our own distribution, several of the largest national health insurers and e-brokers (including eHealth) are now distributing a significant amount of our products. We are recognized for our development of medical insurance packages (including IHC’s Fusion product) that provide affordable coverage alternatives for consumers who either cannot afford Obamacare-compliant major medical health insurance coverages or who, because of increased subsidies, qualify for no cost Bronze plans under the Affordable Care Act, but need our supplemental products to cover their very high deductibles. We are also very well positioned for the expected increase in the duration of short-term medical plans as a result of the Trump Administration’s executive order directing federal agencies to extend the duration of these products to 364 days, subject to state law. For all the preceding reasons, we believe that we will continue the solid sales growth we have been experiencing for the balance of 2017, and will report significantly higher earned premiums and income in this segment in 2018.”




Mr. Thung continued, “Our marginal Federal tax rate is 35% and any reduction in the Federal tax rate, if the proposed tax reform legislation were to pass, would have a significant positive impact on our after tax earnings.  During the first nine months of 2017, the Company repurchased an aggregate 2,211,629 shares of our common stock at a total cost of $44.4 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 book value is $28.19 per share at September 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.




INDEPENDENCE HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

September 30, 2017

(In Thousands, Except Per Share Data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2017

 

2016

 

2017

 

2016

REVENUES:

 

 

 

 

 

 

 

 

Premiums earned

$

75,639  

$

67,335  

$

210,507  

$

195,524  

Net investment income

 

4,403  

 

4,004  

 

12,414  

 

12,700  

Fee income

 

2,634  

 

4,050  

 

11,556  

 

12,541  

Other income

 

361  

 

2,261  

 

2,365  

 

8,898  

Net realized investment gains

 

715  

 

2,367  

 

987  

 

3,945  

Net impairment losses recognized in earnings

 

 

 

(1,475) 

 

 

 

(1,475) 

 

 

 

 

 

 

 

 

 

 

 

83,752  

 

78,542  

 

237,829 

 

232,133  

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

33,536  

 

38,277  

 

103,071  

 

109,497  

Selling, general and administrative expenses

 

42,337  

 

32,823  

 

115,404  

 

97,947  

Interest expense on debt

 

 

 

440  

 

 

 

1,366  

 

 

 

 

 

 

 

 

 

 

 

75,873  

 

71,540  

 

218,475  

 

208,810  

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

7,879  

 

7,002  

 

19,354  

 

23,323  

Income taxes (benefits)

 

2,666  

 

2,636  

 

(5,175) 

 

8,566  

 

 

 

 

 

 

 

 

 

Income from continuing operations, net of tax

 

5,213  

 

4,366  

 

24,529  

 

14,757  

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

 

 

Income from discontinued operations, before income taxes

 

 

 

 

 

 

 

117,636  

 

Income taxes on discontinued operations

 

 

 

 

 

 

 

7,724  

 

Income from discontinued operations, net of tax

 

 

 

 

 

 

 

109,912  

 

 

 

 

 

 

 

 

 

Net income

 

5,213  

 

4,366  

 

24,529  

 

124,669  

Less: (Income) loss from noncontrolling interests in subsidiaries

 

16  

 

(43) 

 

(33) 

 

(9,900) 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO IHC

$

5,229  

$

4,323  

$

24,496  

$

114,769  

 

 

 

 

 

 

 

 

 

Basic income per common share

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

.35  

$

.25  

$

1.53  

$

.84  

 

Income from discontinued operations

 

 

 

 

 

 

 

5.84  

 

Basic income per common share

$

.35  

$

.25  

$

1.53  

$

6.68  

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

14,965  

 

17,120  

 

15,999  

 

17,189  

 

 

 

 

 

 

 

 

 

Diluted income per common share

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

.34  

$

.25  

$

1.50  

$

.83  

 

Income from discontinued operations

 

 

 

 

 

 

 

5.77  

 

Diluted income per common share

$

.34  

$

.25  

$

1.50  

$

6.60  

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING

 

15,274  

 

17,340  

 

16,287  

 

17,402  

 

 

 

 

 

 

 

 

 

 

 

As of November 3, 2017, there were 14,862,346 common shares outstanding, net of treasury shares.




INDEPENDENCE HOLDING COMPANY

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

Short-term investments

 

$

50  

 

$

6,912  

 

Securities purchased under agreements to resell

 

 

20,597  

 

 

28,962  

 

Trading securities

 

 

516  

 

 

592  

 

Fixed maturities, available-for-sale

 

 

426,000  

 

 

449,487  

 

Equity securities, available-for-sale

 

 

5,460  

 

 

5,333  

 

Other investments

 

 

18,338  

 

 

23,534  

 

Total investments

 

 

470,961  

 

 

514,820  

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

26,565  

 

 

22,010  

 

Due and unpaid premiums

 

 

32,678  

 

 

42,896  

 

Due from reinsurers

 

 

383,192  

 

 

440,285  

 

Premium and claim funds

 

 

13,665  

 

 

17,952  

 

Goodwill

 

 

50,697  

 

 

41,573  

 

Other assets

 

 

61,472  

 

 

54,928  

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,039,230  

 

$

1,134,464  

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

Policy benefits and claims

 

$

169,547  

 

$

219,113  

 

Future policy benefits

 

 

217,415  

 

 

219,450  

 

Funds on deposit

 

 

143,637  

 

 

145,749  

 

Unearned premiums

 

 

7,993  

 

 

9,786  

 

Other policyholders' funds

 

 

10,249  

 

 

9,769  

 

Due to reinsurers

 

 

5,715  

 

 

35,796  

 

Accounts payable, accruals and other liabilities

 

 

59,747  

 

 

55,477  

 

Liabilities attributable to discontinued operations

 

 

 

 

 

68  

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

614,303  

 

 

695,208  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

2,035  

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

Preferred stock (none issued)

 

 

 

 

 

 

 

Common stock

 

 

18,625  

 

 

18,620  

 

Paid-in capital

 

 

126,135  

 

 

126,468  

 

Accumulated other comprehensive loss

 

 

(2,344) 

 

 

(6,964) 

 

Treasury stock, at cost

 

 

(61,712) 

 

 

(17,483) 

 

Retained earnings

 

 

339,512  

 

 

315,918  

 

 

 

 

 

 

 

TOTAL IHC STOCKHOLDERS’ EQUITY

 

 

420,216  

 

 

436,559  

NONREDEEMABLE NONCONTROLLING INTERESTS

 

 

2,676  

 

 

2,697  

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

422,892  

 

 

439,256  

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

$

1,039,230  

 

$

1,134,464