Independence Holding Company (NYSE:IHC) today reported 2010
first-quarter results. This press release contains both GAAP and
non-GAAP financial information for which reconciliations can be
found at the end of this release.
Financial Results
Net income per share from continuing operations attributable to
IHC was $1.05 per share, diluted, or $16,161,000, for the three
months ended March 31, 2010 compared to $.22 per share, diluted, or
$3,356,000, for the three months ended March 31, 2009. Revenues
increased 18% to $116,350,000 for the three months ended March 31,
2010, compared to revenues for the three months ended March 31,
2009 of $98,795,000. These results were positively impacted by the
gain on bargain purchase under acquisition accounting as a result
of IHC acquiring a controlling interest in American Independence
Corp. (AMIC) in March 2010. The gain in the first quarter was
generated because in the fourth quarter of 2009 the Company was
required to record an other-than-temporary impairment (OTTI) loss
at December 31, 2009. The gain recorded in the 2010 first
quarter on IHC's investment in AMIC was $16,733,000, net of
$11,097,000 of taxes.
IHC reported operating income1 per share of $.02 per share,
diluted, or $230,000, for the three months ended March 31, 2010,
compared to $.16 per share, diluted, or $2,403,000, for the three
months ended March 31, 2009.
Chief Executive Officer's Comments
Roy Thung, Chief Executive Officer, commented, "The Company's
financial condition remains very strong as our book value per
share increased 11% to $14.55 at March 31, 2010 from $13.16 at
December 31, 2009 and stockholders' equity at March 31, 2010
reached $222 million. We repurchased 156,700 of our common
shares during the quarter at an average price of $8.01, which
represents 55% of our book value per share as of March 31, 2010.
The repurchases were made pursuant to the Company's share
repurchase program, under which 343,300 shares remain available for
repurchase."
Mr. Thung continued, "Our operating income dropped to $.02 per
share from $.16 per share for the comparable quarter of 2009 and
$.14 per share for the fourth quarter of 2009. This decline is
primarily due to a decrease in IHC's investment income of $1.3
million and a much higher than expected incidence of death and long
term disability (LTD) claims in our group business amounting to
approximately $1.6 million more than expected claims. The decrease
in investment income is due to a decrease in yields (from 4.9% for
the first quarter of 2009 to 4.1% for the comparable quarter of
2010) and the shorter duration of our portfolio. IHC has
approximately $80 million in highly rated shorter duration
securities earning on average 1.1%; our portfolio as a whole is
rated, on average, AA. A portfolio that is shorter in duration
enables us, if we deem prudent, the flexibility to reinvest in much
higher yielding longer-term securities, which would significantly
increase investment income. With respect to the group segment,
fluctuations in death claims occur from time to time, but can be
expected to return to projected levels over an extended period. The
large influx in LTD claims this quarter is attributable to
significant cuts in state and municipal budgets as a result of the
recession. Group claims are beginning to show signs of
subsiding subsequent to quarter end."
Non-GAAP Financial Measures
The Company provides non-GAAP financial measures to complement
its consolidated financial statements presented in accordance with
GAAP: (i) Operating income is income from continuing operations net
of income or losses attributable to non-controlling interests and
excluding net realized gains or losses, other-than-temporary
impairment losses and gain on bargain purchase, net of applicable
income taxes; and (ii) Operating income per share is operating
income (loss) on a per share basis. These non-GAAP financial
measures are intended to supplement the user's overall
understanding of the Company's current financial performance and
its prospects for the future. Specifically, the Company
believes the non-GAAP results provide useful information to both
management and investors by excluding realized gains or losses, net
of taxes, that, when excluded from the GAAP results, may provide
additional understanding of the Company's core operating results or
business performance. However, these non-GAAP financial
measures are not intended to supersede or replace the Company's
GAAP results. A reconciliation of the non-GAAP results to the
GAAP results is provided in the "Reconciliation of GAAP Income from
Continuing Operations to Non-GAAP Income from Continuing
Operations" schedule below.
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
managing general underwriters, third-party administrators, and
marketing affiliates. Standard Security Life markets medical
stop-loss, small group major medical, short-term medical, major
medical for individuals and families, limited medical, group long
and short-term disability and life, dental, vision and managed
health care products. Madison Life sells group life and disability,
employer medical stop-loss, small group major medical, major
medical for individuals and families, short-term medical, dental,
vision, and individual life insurance. Independence American offers
medical stop-loss, small group major medical, short-term medical,
and major medical for individuals and families. 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 in this news 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 which 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.
1Operating income is a non-GAAP measure representing income from
continuing operations net of (income) losses attributable to
non-controlling interests and excluding net realized investment
gains (losses), other-than-temporary impairment losses and gain on
bargain purchase of AMIC, net of applicable income tax. The Company
believes that the presentation of operating income may offer a
better understanding of the core operating results of the
Company. A reconciliation of income from continuing operations
to operating income is included in this press release.
INDEPENDENCE HOLDING
COMPANY |
FIRST QUARTER
REPORT2 |
March 31,
2010 |
(In Thousands, Except
Per Share Data) |
|
|
|
|
Three Months Ended
March 31, |
|
2010 |
2009 |
REVENUES |
|
|
Premiums earned |
$ 70,884 |
$ 76,433 |
Net investment income |
9,371 |
10,719 |
Fee income |
7,560 |
8,459 |
Net realized investment gains |
349 |
1,665 |
Total other-than-temporary
impairment-losses |
(1,626) |
(271) |
Equity income from AMIC |
280 |
693 |
Gain on bargain purchase of AMIC |
27,830 |
-- |
Other income |
1,702 |
1,097 |
|
116,350 |
98,795 |
|
|
|
EXPENSES |
|
|
Insurance benefits, claims and reserves |
56,828 |
56,196 |
Selling, general and administrative
expenses |
31,435 |
36,478 |
Amortization of deferred acquisition
costs |
1,318 |
1,050 |
Interest expense on debt |
471 |
770 |
|
90,052 |
94,494 |
|
|
|
Income from continuing operations before
income taxes |
26,298 |
4,301 |
Income taxes |
9,921 |
952 |
|
|
|
Income from continuing
operations |
16,377 |
3,349 |
|
|
|
Discontinued
operations: |
|
|
Loss from discontinued operations |
(127) |
(237) |
|
|
|
Net Income |
16,250 |
3,112 |
(Income) loss from noncontrolling interests
in subsidiaries |
(216) |
7 |
|
|
|
NET INCOME ATTRIBUTABLE TO
IHC |
$ 16,034 |
$ 3,119 |
|
|
|
Basic income (loss) per common
share: |
|
|
Income from continuing operations |
$ 1.06 |
$ .22 |
Loss from discontinued operations |
(0.1) |
(0.2) |
Basic income per common share |
$ 1.05 |
$ .20 |
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING |
15,341 |
15,408 |
|
|
|
Diluted income(loss) per common
share |
|
|
Income from continuing operations |
$ 1.05 |
$ .22 |
Loss from discontinued operations |
(0.1) |
(0.2) |
Diluted income per common share |
$ 1.04 |
$ .20 |
|
|
|
|
|
|
WEIGHTED AVERAGE DILUTED SHARES
OUTSTANDING |
15,345 |
15,411 |
|
|
|
As of May 14, 2010, there
were 15,275,155 common shares outstanding, net of treasury
shares. |
|
|
|
2IHC applied business acquisition
accounting and consolidated the financial results of AMIC as of
March 5, 2010, resulting in a consolidated statement of income
which consolidates approximately one month of AMIC results and
reflects the equity method of accounting for the first two months
of 2010. |
|
RECONCILIATION OF GAAP
INCOME FROM CONTINUING OPERATIONS TO |
NON-GAAP INCOME FROM
CONTINUING OPERATIONS |
(In Thousands, Except
Per Share Data) |
|
|
|
|
|
|
Three Months
Ended March 31, |
|
2010 |
2009 |
|
|
|
Income from continuing
operations |
$ 16,377 |
$ 3,349 |
|
|
|
(Income) loss from non-controlling interest
in subsidiaries |
(216) |
7 |
Realized gains, net of taxes |
(242) |
(1,126) |
Other-than-temporary-impairment losses, net
of taxes |
1,044 |
173 |
Gain on bargain purchase of AMIC, net of
taxes |
(16,733) |
-- |
|
|
|
Operating income from
continuing operations |
$ 230 |
$ 2,403 |
|
|
|
Non - GAAP basic income per common
share: |
|
|
Operating income from continuing
operations |
$ .02 |
$ .16 |
|
|
|
Non - GAAP diluted income per common
share: |
|
|
Operating income from continuing
operations |
$ .02 |
$ .16 |
|
|
|
Included in the realized gains,
net of taxes, above are IHC's proportionate share of AMIC's
realized gains (losses) net of taxes. The
other-than-temporary-impairment losses are primarily due to the
write down in value of certain Alt-A mortgage fixed
maturities. |
CONTACT: Independence Holding Company
David T. Kettig
(212) 355-4141 Ext. 3047
www.IHCGroup.com
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