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) March 13, 2014


INDEPENDENCE HOLDING COMPANY

(Exact name of registrant as specified in its charter)


Delaware

010306

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))














 





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 March 13, 2014, Independence Holding Company issued a news release announcing its 2013 Fourth-Quarter and Annual results, a copy of which is attached as Exhibit 99.1.


Item 9.01 Financial Statements and Exhibits


(c)  

Exhibits:


Exhibit 99.1

News Release of Independence Holding Company dated March 13, 2014: Independence Holding Company Announces 2013 Fourth-Quarter and Annual 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:


March 14, 2014










INDEPENDENCE HOLDING COMPANY

CONTACT:  ADAM VANDERVOORT

96 CUMMINGS POINT ROAD

(646) 509-2156

STAMFORD, CONNECTICUT 06902

www.IHCGroup.com

NYSE: IHC

 


NEWS RELEASE


INDEPENDENCE HOLDING COMPANY ANNOUNCES

2013 FOURTH-QUARTER AND ANNUAL RESULTS



Stamford, Connecticut, March 13, 2014. Independence Holding Company (NYSE: IHC) today reported 2013 fourth-quarter and annual results.    

Financial Results

IHC reported net income of $.10 per diluted share, or $1,748,000, for the three months ended December 31, 2013 compared to $.46 per diluted share, or $8,290,000, for the three months ended December 31, 2012. Revenues increased 27% to $143,618,000 for the three months ended December 31, 2013 compared to revenues for the three months ended December 31, 2012 of $112,960,000, primarily due to increases in premium revenue. The fourth quarter of 2013 was negatively affected by a $4.2 million loss before taxes in our major-medical lines that is largely attributable to the requirements of the Affordable Care Act (ACA).  

For the year ended December 31, 2013, IHC reported net income of $.77 per diluted share, or $13,779,000, compared to $1.09 per diluted share, or $19,661,000, for the year ended December 31, 2012. Revenues increased 34% to $575,044,000 for the year ended December 31, 2013 compared to revenues for the year ended December 31, 2012 of $428,061,000, primarily due to an increase in premium revenue and net realized investment gains. The year ended 2013 was negatively affected by $8.4 million of losses before taxes in our major-medical lines for the reason referred to above.

2013 results include the write-off of approximately $9.3 million of deferred acquisition costs related to a coinsurance agreement entered into by Madison National Life to cede approximately $219 million of reserves (primarily annuities) in the second quarter of 2013.  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. Also, IHC’s 2012 results (Q4 and year-end) were positively affected by an increase of $4,637,000, net of minority interest, for an increase in the deferred tax asset related to AMIC’s federal net operating loss carryforward (NOL); there was not a corresponding positive affect during 2013. The deferred tax asset is reviewed for reasonableness on a quarterly basis.

Chief Executive Officer’s Comments

Roy Thung, Chief Executive Officer, commented, “2014 marks our transition, after exiting the individual major-medical line and severely curtailing our small-group major-medical line, to a specialty health company focusing on higher-margin medical stop-loss and ancillary health benefits, disability income, and pet insurance.  No longer will a significant portion of our premiums be derived from unprofitable major-medical business subject to ever-changing ACA regulations. Our stop-loss and pet lines are experiencing significant growth as the markets for these products expand. Our disability income business is expanding, and the demand for our ancillary health products (dental, vision, short-term medical and supplemental products such as fixed-indemnify limited benefit, critical illness and hospital indemnity) is also increasing as consumers pursue alternatives to the expensive plans offered on the public exchanges.  We are well-positioned to take advantage of the changing distribution of these products through direct-to-consumer tools, including our private exchange (healthedeals.com), call center and consumer direct sales agency.”







 Mr. Thung continued, “Earned premium for medical stop-loss, our largest segment, grew substantially over the same quarter and twelve months of last year. This growth is being driven by the business we write on a direct basis.  Annual written premiums for the direct business increased approximately 24% over 2012 levels. We attribute this growth to enhanced sales efforts, focused underwriting and a general expansion of the market as new employer groups migrate to self-funding from fully insured in response to health care reform.  We expect continued growth of business written in 2014, as evidenced by our 35% growth in business written in January 2014, which is our largest production month. Profitability of our medical stop-loss line continues at expected levels.

Although we have generated positive underwriting margins in the fully insured segment over the past five years, our results for the fourth quarter (and the first three quarters) of 2013 were negatively affected by the significant losses in our major-medical lines of business stemming from our compliance with the requirements of the ACA. As mentioned above, we have now exited the individual major-medical line and curtailed our sale of small-group major-medical policies. The significant losses resulting from major medical are now behind us, although we may continue to see relatively insignificant negative results on the (much smaller) remaining block of policies through run-out.  In aggregate, we expect that our fully insured underwriting margins will return to or exceed their historical levels.

Our overall investment portfolio continues to be very highly rated (on average, AA) and has a duration of approximately six years. Our book value was $15.22 per share at December 31, 2013 and our total stockholders’ equity is $269 million. During 2014 to date, we have repurchased 58,632 shares of IHC stock for $739,857 at prices ranging from $11.54 to $14.00 per share.  As a result of our expected significant increase in sales of stop-loss and an increase of higher-margin fully insured products not negatively affected by reform and the absence of aforementioned significant losses, we are optimistic as to our 2014 operating results.”  

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, group major medical, short-term medical, limited medical, group long-term and short-term disability and life, dental, vision and various supplemental products. Madison National Life sells group life and disability, group major medical, dental, individual life insurance and various supplemental products. Independence American offers pet insurance, non-subscriber occupational accident, international coverages, small-group major medical and short-term medical. 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 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 or earnings guidance, and does not undertake to provide any such guidance in the future.








INDEPENDENCE HOLDING COMPANY

FOURTH QUARTER REPORT

December 31, 2013

(In Thousands, Except Per Share Data)



 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2013

 

2012

 

2013

 

2012

REVENUES:

 

 

 

 

 

 

 

 

Premiums earned

$

127,984 

$

94,588 

$

495,991 

$

356,067 

Net investment income

 

5,627 

 

7,650 

 

27,471 

 

33,356 

Fee income

 

8,083 

 

8,226 

 

26,954 

 

29,290 

Other income

 

945 

 

1,395 

 

4,878 

 

4,953 

Net realized investment gains

 

979 

 

1,101 

 

19,750 

 

5,099 

Total other-than-temporary impairment losses

 

 

 

 

(704)

 

 

143,618 

 

112,960 

 

575,044 

 

428,061 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

91,877 

 

64,357 

 

354,790 

 

244,791 

Selling, general and administrative expenses

 

46,214 

 

40,405 

 

179,553 

 

149,999 

Amortization of deferred acquisitions costs

 

1,340 

 

1,754 

 

15,132 

 

6,566 

Interest expense on debt

 

468 

 

503 

 

1,915 

 

2,091 

 

 

 

 

 

 

 

 

 

 

 

139,899 

 

107,019 

 

551,390 

 

403,447 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

3,719 

 

5,941 

 

23,654 

 

24,614 

Income taxes

 

1,577 

 

(4,120)

 

8,398 

 

2,003 

 

 

 

 

 

 

 

 

 

Net income

 

2,142 

 

10,061 

 

15,256 

 

22,611 

Less: income from noncontrolling interests

 

 

 

 

 

 

 

 

 

in subsidiaries

 

(394)

 

(1,771)

 

(1,477)

 

(2,950)

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO IHC

$

1,748 

$

8,290 

$

13,779 

$

19,661 

 

 

 

 

 

 

 

 

 

Basic income per common share

$

.10 

$

.46 

$

.78 

$

1.09 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

17,682 

 

17,946 

 

17,758 

 

17,979 

 

 

 

 

 

 

 

 

 

Diluted income per common share

$

.10 

$

.46 

$

.77 

$

1.09 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE DILUTED SHARES

 

 

 

 

 

 

 

 

 

OUTSTANDING

 

17,815 

 

18,123 

 

17,871 

 

18,088 





As of March 1, 2014, there were 17,608,549 common shares outstanding, net of treasury shares.









INDEPENDENCE HOLDING COMPANY

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)


 

 

 

December 31,

 

 

December 31,

 

 

 

2013

 

 

2012

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

Short-term investments

 

$

50

 

$

50

 

Securities purchased under agreements to resell

 

 

22,594

 

 

33,956

 

Trading securities

 

 

7,125

 

 

7,016

 

Fixed maturities, available-for-sale

 

 

542,287

 

 

719,602

 

Equity securities, available-for-sale

 

 

11,803

 

 

15,598

 

Other investments

 

 

25,123

 

 

35,134

 

Total investments

 

 

608,982

 

 

811,356

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

24,229

 

 

23,945

 

Deferred acquisition costs

 

 

29,777

 

 

33,401

 

Due and unpaid premiums

 

 

59,435

 

 

49,430

 

Due from reinsurers

 

 

380,229

 

 

166,880

 

Premium and claim funds

 

 

37,353

 

 

40,596

 

Goodwill

 

 

50,318

 

 

50,318

 

Other assets

 

 

78,712

 

 

86,382

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,269,035

 

$

1,262,308

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

Policy benefits and claims

 

$

237,754

 

$

194,480 

 

Future policy benefits

 

 

287,449

 

 

290,238 

 

Funds on deposit

 

 

274,826

 

 

278,084 

 

Unearned premiums

 

 

12,423

 

 

8,453 

 

Other policyholders' funds

 

 

25,129

 

 

22,373 

 

Due to reinsurers

 

 

37,113

 

 

48,192 

 

Accounts payable, accruals and other liabilities

 

 

71,889

 

 

71,495 

 

Debt

 

 

6,000

 

 

8,000 

 

Junior subordinated debt securities

 

 

38,146

 

 

38,146 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

990,729

 

 

959,461 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

IHC STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

Preferred stock (none issued)

 

 

-

 

 

 

Common stock

 

 

18,524

 

 

18,462 

 

Paid-in capital

 

 

126,239

 

 

126,589 

 

Accumulated other comprehensive income (loss)

 

 

(10,472)

 

 

15,013 

 

Treasury stock, at cost

 

 

(8,169)

 

 

(4,533)

 

Retained earnings

 

 

142,669

 

 

130,153 

 

 

 

 

 

 

 

TOTAL IHC STOCKHOLDERS’ EQUITY

 

 

268,791

 

 

285,684 

NONCONTROLLING INTERESTS IN SUBSIDIARIES

 

 

9,515

 

 

17,163 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

278,306

 

 

302,847 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

$

1,269,035

 

$

1,262,308