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 10, 2015


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 10, 2015, Independence Holding Company issued a news release announcing its 2014 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 10, 2015: Independence Holding Company Announces 2014 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 11, 2015










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

2014 FOURTH-QUARTER AND ANNUAL RESULTS


Stamford, Connecticut, March 10, 2015. Independence Holding Company (NYSE: IHC) today reported 2014 fourth-quarter and annual results.  

Financial Results

Net income attributable to IHC increased to $.23 per share, diluted, or $4,034,000, for the three months ended December 31, 2014 compared to $.10 per share, diluted, or $1,748,000, for the three months ended December 31, 2013. Net income attributable to IHC increased to $.92 per share, diluted, or $16,293,000, for the year ended December 31, 2014 compared to $.77 per share, diluted, or $13,779,000, for the year ended December 31, 2013.

Revenues decreased to $127,090,000 for the three months ended December 31, 2014 as compared to revenues for the three months ended December 31, 2013 of $143,618,000; and revenues decreased to $533,933,000 for the year ended December 31, 2014 compared to revenues for the year ended December 31, 2013 of $575,044,000. The decrease in revenues for both the fourth quarter and the year ended December 31, 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 19% increase in our earnings in 2014 to $.92 per share from $.77 per share in 2013.  We achieved this increase despite recording significant underwriting losses on major medical in 2014 as a result of ACA, which will not reoccur in 2015, and significant amortization of deferred loss, which will be substantially less in 2015.

Our positive earnings development in the current year was largely driven by continued growth in earned premium and significantly increased earnings from our direct medical stop-loss, by far our largest line of business.  We expect continued growth in this line of business, as evidenced by the 38% increase in our direct business written in the twelve months ended January 31, 2015, while maintaining consistent profit margins on a growing premium base. Our earnings were also positively impacted by our specialty health business, which grew by 34% and produced very positive profit margins in 2014. We are also pleased with our group life, disability and DBL line of business, which continued to perform well.   

Our fully insured segment has been adversely affected the last two years by the ACA, including the runoff of major-medical business and the health insurance tax, causing the 2014 fourth quarter income before income taxes to be impacted by approximately $4.2 million and the full year 2014 by approximately $7.1 million.  As a result of exiting major medical health plans for individuals and families, the Company will not have any earned premiums or administrative fee income from this line in 2015.    Therefore, we expect to see significantly better underwriting results for the fully insured segment as we continue to ramp up the specialty line of business and largely eliminate the underwriting losses from major medical that has negatively impacted our last two years.







In addition, in the three-month and twelve-month periods, the Company recorded $0.6 million and $3.5 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 2015 as the majority of policies were assumed in 2014. Offsetting these charges, IHC’s 2014 results (Q4 and year-end) were positively affected by an increase of $2,250,000, 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 effect during 2013.

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 $16.76 per share at December 31, 2014, an increase of 10% over the book value per share at December 31, 2013, and our total stockholders’ equity is $291 million at December 31, 2014 compared to $269 million at December 31, 2013. Through December 31, 2014, we have repurchased 296,775 shares of IHC stock for $4.0 million at an average price of $13.38 per share.

Although 2015 will be impacted by the decrease in administrative fee income due to the exit from major medical (which we are seeking to replace by administering major medical for other carriers and by continuing to ramp up our specialty benefits sales) and by reduced investment income resulting from the continued low interest rate environment, we are optimistic that we will achieve a meaningful improvement in operating results in 2015, largely as a result of the accelerating growth in premiums and income from our direct medical stop-loss and specialty health insurance lines of business and the continued profitability of the group life and disability business.”     

About Independence Holding Company

Independence Holding Company 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 furnishes 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.

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 Independence Holding Company (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

FOURTH QUARTER REPORT

December 31, 2014

(In Thousands, Except Per Share Data)



 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

Premiums earned

$

116,938 

$

127,984 

$

479,048 

$

495,991 

Net investment income

 

5,018 

 

5,627 

 

21,692 

 

27,471 

Fee income

 

2,633 

 

8,083 

 

20,646 

 

26,954 

Other income

 

1,727 

 

945 

 

4,859 

 

4,878 

Net realized investment gains

 

774 

 

979 

 

7,688 

 

19,750 

Net impairment losses recognized in earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

127,090 

 

143,618 

 

533,933 

 

575,044 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

82,547 

 

91,877 

 

326,035 

 

354,790 

Selling, general and administrative expenses

 

39,850 

 

46,214 

 

177,848 

 

179,553 

Amortization of deferred acquisitions costs

 

1,054 

 

1,340 

 

4,941 

 

15,132 

Interest expense on debt

 

440 

 

468 

 

1,797 

 

1,915 

 

 

 

 

 

 

 

 

 

 

 

123,891 

 

139,899 

 

510,621 

 

551,390 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

3,199 

 

3,719 

 

23,312 

 

23,654 

Income taxes

 

(1,013)

 

1,577 

 

6,391 

 

8,398 

 

 

 

 

 

 

 

 

 

Net income

 

4,212 

 

2,142 

 

16,921 

 

15,256 

Less: income from noncontrolling interests

 

 

 

 

 

 

 

 

 

in subsidiaries

 

(178)

 

(394)

 

(628)

 

(1,477)

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO IHC

$

4,034 

$

1,748 

$

16,293 

$

13,779 

 

 

 

 

 

 

 

 

 

Basic income per common share

$

.23 

$

.10 

$

.93 

$

.78 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

17,371 

 

17,682 

 

17,471 

 

17,758 

 

 

 

 

 

 

 

 

 

Diluted income per common share

$

.23 

$

.10 

$

.92

$

.77 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE DILUTED SHARES

 

 

 

 

 

 

 

 

 

OUTSTANDING

 

17,549 

 

17,815 

 

17,635

 

17,781 




As of March 6, 2015, there were 17,352,918 common shares outstanding, net of treasury shares.









INDEPENDENCE HOLDING COMPANY

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)


 

 

 

December 31,

 

 

December 31,

 

 

 

2014

 

 

2013

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

Short-term investments

 

$

50

 

$

50 

 

Securities purchased under agreements to resell

 

 

16,790

 

 

22,594 

 

Trading securities

 

 

11,095

 

 

7,125 

 

Fixed maturities, available-for-sale

 

 

583,880

 

 

542,287 

 

Equity securities, available-for-sale

 

 

13,895

 

 

11,803 

 

Other investments

 

 

25,251

 

 

25,123 

 

Total investments

 

 

650,961

 

 

608,982 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

25,083

 

 

24,229 

 

Deferred acquisition costs

 

 

30,806

 

 

29,777 

 

Due and unpaid premiums

 

 

62,628

 

 

59,435 

 

Due from reinsurers

 

 

278,242

 

 

380,229 

 

Premium and claim funds

 

 

32,553

 

 

37,353 

 

Goodwill

 

 

50,318

 

 

50,318 

 

Other assets

 

 

57,126

 

 

78,712 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,187,717

 

$

1,269,035 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

Policy benefits and claims

 

$

236,803

 

$

237,754 

 

Future policy benefits

 

 

277,041

 

 

287,449 

 

Funds on deposit

 

 

186,782

 

 

274,826 

 

Unearned premiums

 

 

9,455

 

 

12,423 

 

Other policyholders' funds

 

 

18,802

 

 

25,129 

 

Due to reinsurers

 

 

47,945

 

 

37,113 

 

Accounts payable, accruals and other liabilities

 

 

67,641

 

 

71,889 

 

Debt

 

 

4,000

 

 

6,000 

 

Junior subordinated debt securities

 

 

38,146

 

 

38,146 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

886,615

 

 

990,729 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

IHC STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

Preferred stock (none issued)

 

 

 - 

 

 

 

Common stock

 

 

18,531

 

 

18,524 

 

Paid-in capital

 

 

127,098

 

 

126,239 

 

Accumulated other comprehensive income (loss)

 

 

22

 

 

(10,472)

 

Treasury stock, at cost

 

 

(12,141)

 

 

(8,169)

 

Retained earnings

 

 

157,667

 

 

142,669 

 

 

 

 

 

 

 

TOTAL IHC STOCKHOLDERS’ EQUITY

 

 

291,177

 

 

268,791 

NONCONTROLLING INTERESTS IN SUBSIDIARIES

 

 

9,925

 

 

9,515 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

301,102

 

 

278,306 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

$

1,187,717

 

$

1,269,035