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8-K - IHC 8-K FILING 3Q2014 - INDEPENDENCE HOLDING COihc3q2014_8k.pdf






 


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 6, 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 November 6, 2014, Independence Holding Company issued a news release announcing its 2014 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 99.1

News Release of Independence Holding Company dated November 6, 2014: Independence Holding Company Announces 2014 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 7, 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

2014 THIRD-QUARTER AND NINE-MONTH RESULTS



Stamford, Connecticut, November 6, 2014. Independence Holding Company (NYSE: IHC) today reported 2014 third-quarter and nine-month results.  

Financial Results

Net income attributable to IHC increased 29% to $.27 per share, diluted, or $4,710,000, for the three months ended September 30, 2014 compared to $.21 per share, diluted, or $3,639,000, for the three months ended September 30, 2013. Net income attributable to IHC increased to $.69 per share, diluted, or $12,259,000, for the nine months ended September 30, 2014 compared to $.67 per share, diluted, or $12,031,000, for the nine months ended September 30, 2013.

 Revenues decreased to $406,843,000 for the nine months ended September 30, 2014 compared to revenues for the nine months ended September 30, 2013 of $431,426,000. The decrease in revenues for both the third quarter and the first nine months of 2014 is primarily due to the runoff of major medical business from lines that we exited largely as a result of the requirements of the Affordable Care Act (“ACA”), offset in part by an increase in medical stop-loss and specialty health premiums.   

Chief Executive Officer’s Comments

Roy Thung, Chief Executive Officer, commented, “We are pleased with the continued growth in earned premium and significantly increased earnings for medical stop-loss, by far our largest line of business, for the third quarter and first nine months of the year.  We attribute these positive developments to enhanced sales efforts in our direct business, 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 improvement in this line of business, as evidenced by the 36% growth in our direct business written in the twelve months ended October 31, 2014, while maintaining consistent profit margins on a growing premium base.

The Company exited major medical health plans for individuals and families and significantly curtailed its small group major medical health plans.  As a result, our fully insured segment has been adversely affected by the ACA, including the runoff of major-medical business and the health insurance tax. We expect this downward pressure on margins to continue to lessen for the balance of 2014 as this business fully runs off. In addition, in the three-month and nine-month periods, the Company recorded $1.7 million and $2.9 million, respectively, in amortization of deferred loss in connection with the assumption of certain ceded annuity policies from the prior year’s coinsurance agreement.  This amortization will be substantially less in the fourth quarter of 2014.   Our specialty health business increased significantly in the first nine months of 2014 compared to last year, and we are pleased with our group life and disability business, which has continued to perform well in 2014.  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 $16.37 per share at September 30, 2014, an increase of 8% over the book value per share at December 31, 2013, and our total stockholders’ equity is $284 million at September 30, 2014 compared to $269 million at December 31, 2013. Through September







30, 2014, we have repurchased 296,775 shares of IHC stock for $4.0 million at an average price of $13.38 per share.

We are optimistic that our operating results for the fourth quarter will compare very favorably to the comparable period in 2013, even after the aforementioned expected charges in the fourth quarter of 2014, largely as a result of the accelerating growth in premiums and income from our direct medical stop-loss line of business, the continued profitability of the group business, and the transition of our fully insured division to a specialty health insurance operation with controlled distribution and higher-margin lines of business.”     

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 and limited medical, short-term medical, group long-term and short-term disability and life, group and individual dental, vision and various supplemental products. Madison National Life sells group life and disability, group major and limited medical, group and individual dental, individual life insurance and various supplemental products. Independence American offers pet insurance, non-subscriber occupational accident, short-term medical, medical stop-loss, group and individual dental and various supplemental products. 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

THIRD QUARTER REPORT

September 30, 2014

(In Thousands, Except Per Share Data)



 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

Premiums earned

$

117,705

$

125,174

$

362,110

$

368,007

Net investment income

 

5,439

 

6,841

 

16,674

 

21,844

Fee income

 

4,813

 

6,290

 

18,013

 

18,871

Other income

 

951

 

922

 

3,132

 

3,933

Net realized investment gains

 

844

 

2,417

 

6,914

 

18,771

Net impairment losses recognized in earnings

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

129,752

 

141,644

 

406,843

 

431,426

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

74,916

 

88,177

 

243,488

 

262,913

Selling, general and administrative expenses

 

44,916

 

45,597

 

137,998

 

133,339

Amortization of deferred acquisitions costs

 

1,416

 

1,404

 

3,887

 

13,792

Interest expense on debt

 

539

 

470

 

1,357

 

1,447

 

 

 

 

 

 

 

 

 

 

 

121,787

 

135,648

 

386,730

 

411,491

 

 

 

 

 

 

 

 

 

Income before income taxes

 

7,965

 

5,996

 

20,113

 

19,935

Income taxes

 

3,141

 

2,080

 

7,404

 

6,821

 

 

 

 

 

 

 

 

 

Net income

 

4,824

 

3,916

 

12,709

 

13,114

Less: income from noncontrolling interests

 

 

 

 

 

 

 

 

 

in subsidiaries

 

(114)

 

(277)

 

(450)

 

(1,083)

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO IHC

$

4,710

$

3,639

$

12,259

$

12,031

 

 

 

 

 

 

 

 

 

Basic income per common share

$

.27

$

.21

$

.70

$

.68

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

17,410

 

17,683

 

17,505

 

17,784

 

 

 

 

 

 

 

 

 

Diluted income per common share

$

.27

$

.21

$

.69

$

.67

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE DILUTED SHARES

 

 

 

 

 

 

 

 

 

OUTSTANDING

 

17,578

 

17,735

 

 17,665

 

17,890




As of November 3, 2014, there were 17,371,040 common shares outstanding, net of treasury shares.









INDEPENDENCE HOLDING COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)


 

 

 

September 30,

 

 

December 31,

 

 

 

2014

 

 

2013

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

Short-term investments

 

$

50

 

$

50 

 

Securities purchased under agreements to resell

 

 

16,413

 

 

22,594 

 

Trading securities

 

 

11,370

 

 

7,125 

 

Fixed maturities, available-for-sale

 

 

566,612

 

 

542,287 

 

Equity securities, available-for-sale

 

 

13,121

 

 

11,803 

 

Other investments

 

 

26,406

 

 

25,123 

 

Total investments

 

 

633,972

 

 

608,982 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

18,215

 

 

24,229 

 

Deferred acquisition costs

 

 

30,302

 

 

29,777 

 

Due and unpaid premiums

 

 

61,820

 

 

59,435 

 

Due from reinsurers

 

 

280,023

 

 

380,229 

 

Premium and claim funds

 

 

39,509

 

 

37,353 

 

Goodwill

 

 

50,318

 

 

50,318 

 

Other assets

 

 

54,244

 

 

78,712 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,168,403

 

$

1,269,035 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

Policy benefits and claims

 

$

227,877

 

$

237,754 

 

Future policy benefits

 

 

277,878

 

 

287,449 

 

Funds on deposit

 

 

194,140

 

 

274,826 

 

Unearned premiums

 

 

8,731

 

 

12,423 

 

Other policyholders' funds

 

 

19,244

 

 

25,129 

 

Due to reinsurers

 

 

37,999

 

 

37,113 

 

Accounts payable, accruals and other liabilities

 

 

66,274

 

 

71,889 

 

Debt

 

 

4,000

 

 

6,000 

 

Junior subordinated debt securities

 

 

38,146

 

 

38,146 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

874,289

 

 

990,729 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

IHC STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

Preferred stock (none issued)

 

 

 - 

 

 

 

Common stock

 

 

18,531

 

 

18,524 

 

Paid-in capital

 

 

126,999

 

 

126,239 

 

Accumulated other comprehensive loss

 

 

(3,195)

 

 

(10,472)

 

Treasury stock, at cost

 

 

(12,141)

 

 

(8,169)

 

Retained earnings

 

 

154,256

 

 

142,669 

 

 

 

 

 

 

 

TOTAL IHC STOCKHOLDERS’ EQUITY

 

 

284,450

 

 

268,791 

NONCONTROLLING INTERESTS IN SUBSIDIARIES

 

 

9,664

 

 

9,515 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

294,114

 

 

278,306 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

$

1,168,403

 

$

1,269,035