Independence Holding Company Announces 2017 Third-Quarter and Nine-Month Results

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STAMFORD, Conn., Nov. 09, 2017 (GLOBE NEWSWIRE) — 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

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

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