Independence Holding Company (NYSE:IHC) today reported 2012
fourth-quarter and annual results. As previously reported, IHC paid
a special 10% stock dividend to shareholders of record on February
17, 2012. All per share amounts reflect such stock dividend. 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 attributable to IHC increased to $.46 per
share, diluted, or $8,290,000, for the three months ended December
31, 2012 compared to $.18 per share, diluted, or $3,225,000, for
the three months ended December 31, 2011. Revenues increased to
$112,960,000 for the three months ended December 31, 2012 compared
to revenues for the comparable period in 2011 of $104,493,000,
primarily as a result of an increase in premiums. Due to the
profitability in 2012 and projected continuing profitable results
of the Company's 80% owned subsidiary, American Independence Corp.
(AMIC), IHC's net income and operating income for the fourth
quarter and year 2012 was positively impacted 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). The deferred tax asset is reviewed for
reasonableness on a quarterly basis.
Net income per share attributable to IHC increased to $1.09 per
share, diluted, or $19,661,000, for the year ended December 31,
2012 compared to $.74 per share, diluted, or $13,003,000, for the
year ended December 31, 2011. This increase was achieved despite
not receiving a one-time benefit this period comparable to the
credit of $2,319,000 of deferred income taxes relative to the
Company's investment in AMIC that we recorded in the first quarter
of 2011. The year 2012 net income was positively impacted by the
increase in deferred tax asset of AMIC mentioned above. Revenues
increased to $428,061,000 for the year ended December 31, 2012
compared to revenues for the year ended December 31, 2011 of
$417,996,000, primarily due to an increase in premiums.
IHC reported operating income1 per share of $.42 per share,
diluted, or $7,595,000, for the three months ended December 31,
2012, compared to $.16 per share, diluted, or $2,815,000, for the
year ended December 31, 2011. IHC reported operating income per
share of $.93 per share, diluted, or $16,816,000, for the year
ended December 31, 2012, compared to $.64 per share, diluted, or
$11,301,000, for the year ended December 31, 2011. The operating
income for the year ended December 31, 2011 benefited from the tax
credit of $2,319,000 as described above whereas the operating
income for the year ended December 31, 2012 had no such benefit.
The operating results for both the three months and year ended
December 31, 2012 were positively impacted by the aforementioned
increase in deferred tax asset of AMIC.
Chief Executive Officer's Comments
Roy Thung, Chief Executive Officer, commented, "We continue to
be encouraged by the significant increase in the profitability and
growth of our stop-loss segment, our largest core business, which
we attribute to the more efficient and controlled model of writing
the majority of our medical stop-loss on a direct basis. At
present, all indicators point to a continuation of this growth and
higher level of profitability. We are also encouraged by the
performance of our other lines of business, our expansion into new
lines of business, including pet, non-subscriber occupational
accident and international insurance, and our new
direct-to-consumer tools and distribution platforms. Our overall
investment portfolio continues to be very highly rated (on average,
AA), and has a duration of approximately six years. Our book value
has increased 10% to $15.93 per share at December 31, 2012 from
$14.46 per share at December 31, 2011 and our total stockholders'
equity of $286 million is an all-time high."
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 net income attributable to IHC
excluding net realized gains or losses and other-than-temporary
impairment losses; 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 Net Income
Attributable to IHC to Non-GAAP Income from 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
marketing and administrative 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 various supplemental 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, individual life insurance, and various
supplemental products. Independence American offers major medical
for individuals and families, medical stop-loss, small group major
medical, short-term medical, pet insurance, and non-subscriber
occupational accident and international coverages. 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 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. 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.
1 Operating income is a non-GAAP measure representing net income
attributable to IHC excluding net realized investment gains
(losses) and other-than-temporary impairment losses, 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 net
income attributable to IHC to operating income is included in this
press release.
|
INDEPENDENCE HOLDING
COMPANY |
|
THIRD QUARTER
REPORT |
December 31,
2012 |
(In Thousands, Except
Per Share Data) |
|
|
Three Months
Ended |
Year
Ended |
|
December
31, |
December
31, |
|
2012 |
2011 |
2012 |
2011 |
REVENUES: |
|
|
|
|
Premiums earned |
$ 94,588 |
$ 81,310 |
$ 356,067 |
$ 336,414 |
Net investment income |
7,650 |
10,804 |
33,356 |
39,788 |
Fee income |
8,226 |
5,809 |
29,290 |
28,632 |
Net realized investment gains |
1,101 |
6,065 |
5,099 |
8,670 |
Total other-than-temporary impairment
losses |
-- |
(948) |
(704) |
(1,523) |
Other income |
1,395 |
1,453 |
4,953 |
6,015 |
|
112,960 |
104,493 |
428,061 |
417,996 |
|
|
|
|
|
EXPENSES: |
|
|
|
|
Insurance benefits, claims and reserves |
64,357 |
55,802 |
244,791 |
238,862 |
Selling, general and administrative
expenses |
40,405 |
35,827 |
149,999 |
147,102 |
Amortization of deferred acquisitions
costs |
1,754 |
6,276 |
6,566 |
11,569 |
Interest expense on debt |
503 |
532 |
2,091 |
1,965 |
|
|
|
|
|
|
107,019 |
98,437 |
403,447 |
399,498 |
|
|
|
|
|
Income before income taxes |
5,941 |
6,056 |
24,614 |
18,498 |
Income taxes |
(4,120) |
2,565 |
2,003 |
3,732 |
|
|
|
|
|
Net income |
10,061 |
3,491 |
22,611 |
14,766 |
Less: income from noncontrolling interests in
subsidiaries |
(1,771) |
(266) |
(2,950) |
(1,763) |
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO
IHC |
$ 8,290 |
$ 3,225 |
$ 19,661 |
$ 13,003 |
|
|
|
|
|
Basic income per common
share |
$ .46 |
$ .18 |
$ 1.09 |
$ .74 |
|
|
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING |
17,946 |
18,060 |
17,979 |
17,577 |
|
|
|
|
|
Diluted income per common
share |
$ .46 |
$ .18 |
$ 1.09 |
$ .74 |
|
|
|
|
|
WEIGHTED AVERAGE DILUTED SHARES
OUTSTANDING |
18,123 |
18,061 |
18,088 |
17,584 |
As of March 6, 2013, there
were 17,913,966 common shares outstanding, net of treasury
shares.
|
RECONCILIATION OF GAAP
NET INCOME ATTRIBUTABLE TO IHC TO NON-GAAP |
INCOME FROM
OPERATIONS |
(In Thousands, Except
Per Share Data) |
|
|
Three Months
Ended |
Year
Ended |
|
December
31, |
December
31, |
|
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
Net income attributable to
IHC |
$ 8,290 |
$ 3,225 |
$ 19,661 |
$ 13,003 |
|
|
|
|
|
Realized gains, net of taxes |
(695) |
(3,883) |
(3,292) |
(5,553) |
Net impairment losses recognized in earnings,
net of taxes |
-- |
595 |
447 |
973 |
Write-off of deferred acquisition costs, net
of taxes2 |
-- |
2,878 |
-- |
2,878 |
|
|
|
|
|
Operating income from
operations |
$ 7,595 |
$ 2,815 |
$ 16,816 |
$ 11,301 |
|
|
|
|
|
Non - GAAP basic income per common
share |
$ .42 |
$ .16 |
$ .94 |
$ .64 |
|
|
|
|
|
Non - GAAP diluted income per common
share |
$ .42 |
$ .16 |
$ .93 |
$ .64 |
The other-than-temporary-impairment losses are
primarily due to the write down in value of certain Alt-A mortgage
fixed maturities.
2 In the fourth quarter of 2011, Standard Security Life entered
into a coinsurance agreement effective December 31, 2011, to
transfer approximately $143 million of group annuity contracts in
the first quarter of 2012. As a result of such agreement, the
Company wrote-off $4.6 million of deferred acquisition costs at
December 31, 2011.
CONTACT: DAVID T. KETTIG
(212) 355-4141 Ext. 3047
www.IHCGroup.com
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