INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1.

Significant Accounting Policies and Practices

(A)

Business and Organization

Independence Holding Company, a Delaware corporation ("IHC"), is a holding company principally engaged in the life and health insurance business through: (i) its wholly owned insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life") and Madison National Life Insurance Company, Inc. ("Madison National Life"); and (ii) its marketing and administrative companies, including Insurers Administrative Corporation (“IAC”), managing general underwriters ("MGUs") in which it owns a significant voting interest, Health Plan Administrators, Inc. (“HPA”), GroupLink, Inc. (“GroupLink”), IHC Health Solutions, Inc. (“IHC Health Solutions”), and Actuarial Management Corporation (“AMC”). These companies are sometimes collectively referred to as the "Insurance Group," and IHC and its subsidiaries (including the Insurance Group) are sometimes collectively referred to as the "Company." At ~~March 31,~~June 30, 2009, the Company also owned a 49.7% equity interest in American Independence Corp. ("AMIC"), which owns Independence American Insurance Company (“Independence American”), three MGUs and controlling interests in two agencies.

Geneve Corporation, a diversified financial holding company, and its affiliated entities held approximately 53% of IHC's outstanding common stock at ~~March 31,~~June 30, 2009.

(B)

Basis of Presentation

The condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") and include the accounts of IHC and its consolidated subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The preparation of financial statements in conformity with U.S. ~~generally accepted accounting principles~~GAAP requires management to make estimates and assumptions that affect: (i) the reported amounts of assets and liabilities; (ii) the disclosure of contingent assets and liabilities at the date of the financial statements; and (iii) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. IHC’s annual report on Form 10-K as filed with the Securities and Exchange Commission should be read in conjunction with the accompanying condensed consolidated financial statements.

In the opinion of management, all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods have been included. The condensed consolidated results of operations for the three months and six months ended ~~March 31,~~June 30, 2009 are not necessarily indicative of the results to be anticipated for the entire year.

(C)

Recent Accounting Pronouncements

Recently Issued Accounting Standards Not Yet Adopted

In ~~April~~June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 168,"The FASB ~~Staff Position~~Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a Replacement of FASB Statement No. 162", ("~~FSP"~~SFAS 168"). SFAS 168 establishes the Accounting Standards Codification ("Codification"), which was officially released on July 1, 2009, to become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The subsequent issuances of new standards will be in the form of

8

Accounting Standards Updates that will be included in the Codification. The Codification is not expected to change U.S. GAAP as it does not include any guidance or interpretations of U.S. GAAP beyond what is already reflected in the existing FASB literature. All other accounting literature excluded from the Codification will be considered nonauthoritative. SFAS 168 is effective for interim and annual reporting periods ending after September 15, 2009. The adoption of SFAS 168 is not expected to have an effect on the Company's consolidated financial statements. However, because the Codification completely replaces existing standards, it will affect the way U.S. GAAP is referenced by the Company in its consolidated financial statements and accounting policies.

In June 2009, the FASB issued SFAS No. 167,"Amendments to FASB Interpretation No. 46(R)", ("SFAS 167) which, among other things, amends FASB Interpretation No. 46(R),"Consolidation of Variable Interest Entities -- An Interpretation of ARB No. 51" ("FIN 46(R)") to (i) require an entity to perform an analysis to determine whether an entity's variable interest or interests give it a controlling financial interest in a variable interest entity; (ii) require ongoing reassessments of whether an entity is the primary beneficiary of a variable interest entity and eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity; (iii) amend certain guidance in FIN 46(R) for determining whether an entity is a variable interest entity; and (iv) require enhanced disclosure that will provide users of financial statements wit h more transparent information about an entity's involvement in a variable interest entity. SFAS 167 is be effective for the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter with earlier application prohibited.. The adoption of SFAS 167 is not expected to have a material effect on the Company's consolidated financial statements.

In June 2009, the FASB issued SFAS No. 166,"Accounting for Transfers of Financial Assets - an Amendment of FASB Statement No. 140", ("SFAS 166"). SFAS 166 removes the concept of a qualifying special-purpose entity from SFAS 140 and removes the exception from applying FIN 46(R) to qualifying special-purpose entities. SFAS 166 changes the requirements for derecognizing financial assets modifying the financial-components approach used in SFAS 140 and limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. SFAS 166 removes the special provisions in SFAS 140 and SFAS 65 for guaranteed mortgage securitizations, and as a result, requires those securitizations to be treated the same as any other transfer of financial assets within the scope of SFAS 140. Additional disclosures are required to provide financial statement users with greater transparency about transfers of financial assets and a transferor's continuing involvement with transferred financial assets. SFAS 166 is effective for the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter with earlier application prohibited. The recognition and measurement provisions of SFAS 166 shall be applied to transfers that occur on or after the effective date. The adoption of SFAS 166 is not expected to have a material effect on the Company's consolidated financial statements

Recently Adopted Accounting Standards

In May 2009, the FASB issued SFAS 165, "Subsequent Events", ("SFAS 165"). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 sets forth the period after the balance sheet date during which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of thei r financial statements. The adoption of SFAS 165, effective April 1, 2009, did not have a material effect on the Company's consolidated financial statements.

In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions That Are Not Orderly", ("FSP FAS 157-4"). FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, "Fair Value Measurements", when the volume and level of activity for the asset or liability have significantly decreased, and guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the ~~s ame.~~same. Fair value is the price that would be received to sell an asset

8

or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. For comparative purposes, FSP FAS 157-4 does not require disclosures for earlier periods presented at initial adoption. For periods after initial adoption, comparative disclosures are required only for those periods ending after initial adoption. The adoption of FSP FAS 157-4 isdid not ~~expected to~~ have a material effect on the Company's consolidated financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments", ("FSP FAS 115-2 and FAS 124-2"). FSP FAS 115-2 and FAS 124-2 applies to debt securities classified as available-for-sale and held-to-maturity that are subject to other-than-temporary impairment guidance. FSP FAS 115-2 and FAS 124-2 modifies the existing requirement whereby an investor must assert that it has both the intent and ability to hold a security for a period of time sufficient to allow for an anticipated recovery in its fair value to its amortized cost basis in order to avoid recognizing an other-than-temporary impairment. Instead, an entity must assess whether (a) it has the intent to sell the debt security, or (b) it more likely than not will be required to sell the debt security before its anticipated recovery. If either of these conditions is met, the entit y must recognize an other-than-temporary impairment. In assessing whether the entire amortized cost basis of the security will be recovered, an entity shall compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security and, if the expected cash flows is less than the amortized cost basis, a credit loss exists, and an other-than-temporary impairment shall be considered to have occurred. The guidance provides numerous factors to be considered when estimating whether a credit loss exists and the period over which the debt security is expected to recover. If an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis, the entire difference between the security's amortized cost basis and its fair value at the balance sheet date shall be recognized in earnings. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the other-than-temporary impairment shall be separated into (a) the amount representing the credit loss, and (b) the amount related to all other factors. The amount related to the credit loss shall be recognized in earnings and the amount related to all other factors shall be recognized in other comprehensive income, net of applicable income taxes. The new amortized cost basis of the investment shall be the previous amortized cost basis less the other-than-temporary impairment recognized in earnings. FSP FAS 115-2 and FAS 124-2 also expands and increases the frequency of existing disclosures about other-than-temporary impairments for both debt and equity securities and requires new disclosures pertaining to the significant inputs used in determining a credit loss, as well as a rollforward of that amount each period.FSP FAS 115-2 and FAS 124-2 is effective for interim and annual reporting periods ending aft er June 15, 2009 and shall be applied to existing and new investments held by an entity as of the beginning of the interim period in which it is adopted. For debt securities held at the beginning of the interim period for which an other-than-temporary impairment was previously recognized, if an entity does not intend to sell and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the entity shall recognize the cumulative effect of initially applying this FSP as an adjustment to the opening balance of retained earnings with a corresponding adjustment to accumulated other comprehensive income, net of tax. The amortized cost basis of the security shall be adjusted by the cumulative-effect adjustment before taxes. As of March 31, 2009, the Company ~~has~~had previously recognized $18,123,000 and $4,788,000 of other-than-temporary impairments on ~~certain~~available-for-sale fixed maturities ~~available-for-sale~~and certain preferred stocks evaluated as debt securities,

respectively, in the Consolidated Statement of Operations. The Company ~~is currently analyzing these investments to determine~~has determined that (a) the portion of the previously recorded losses on debt securities and preferred stocks evaluated as debt securities representing ~~the~~a credit loss is $20,517,000, and (b) the amount of a cumulative-effect adjustment to the opening balance of retained earnings and corresponding adjustment to ~~accumulate~~accumulated other comprehensive income representing the amount of previously recorded losses on debt securities and preferred stocks evaluated as debt securities related to all other ~~factors.~~factors is $1,542,000, net of $852,000 of tax benefits. The Company also recorded an additional $49,000 adjustment to the opening balance of retained earnings and a corresponding adjustment to accumulated other comprehensive income representing its proportionate share of AMIC's cumulative-effect adjustment as a result of it s adoption of FSP FAS 115-2 and FAS 124-2.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1,"Interim Disclosures about Fair Value of Financial Instruments", ("FSP FAS 107-1 and APB 28-1"). FSP FAS 107-1 and APB 28-1 require public companies to include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. Such disclosures should include the fair

Assets.” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 applies prospectively to intangible assets that are acquired, individually or with a group of other assets, after the effective date in either a business combination or asset acquisition. The adoption of FSP FAS 142-3, effective January 1, 2009, did not have a material effect on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 expands the current disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement 133 and its

accompanying Condensed Consolidated Balance Sheet and Condensed Consolidated Statements of Operations as of and for the three-month and six-month periods ended June 30, 2009. The Company did not recognize subsequent events that provided evidence about conditions that arose after the balance sheet date.

Note 2.

American Independence Corp.

AMIC is an insurance holding company engaged in the insurance and reinsurance business. AMIC does business with the Insurance Group, including reinsurance treaties under which, in 2008, Standard Security Life and Madison National Life ceded to Independence American an average of 23% of their medical stop-loss business, 10% of certain of their fully insured health business and 20% of their New York Statutory Disability business. IHC owned 49.7% of AMIC's outstanding common stock at ~~March 31,~~June 30, 2009 and December 31, 2008 which was purchased in various transactions from 2002 through 2008. IHC accounts for its investment in AMIC under the equity method. At ~~March 31,~~June 30, 2009 and December 31, 2008, IHC's investment in AMIC had a total carrying value of ~~$45,998,000~~$47,114,000 and $45,439,000 respectively, including goodwill of $4,222,000. This goodwill represents the excess of IHC's cost over the underlying equity in AMIC's net assets at the ~~re spective~~resp ective purchase dates. At ~~March 31,~~June 30, 2009 and December 31, 2008, based on the closing market price of AMIC's common stock, the fair value of the AMIC shares owned by IHC was approximately ~~$15,007,000~~$19,657,000 and $11,541,000, respectively.

For the ~~quarters~~three months ended ~~March 31,~~June 30, 2009 and 2008, IHC recorded ~~$693,000~~$235,000 and ~~$401,000,~~$389,000, respectively, of equity income from its investment in AMIC, representing IHC's proportionate share of income based on its ownership interests during those periods. IHC's equity income for the six months ended June 30, 2009 and 2008 was $928,000 and $790,000, respectively. AMIC paid no dividends on its common stock in the three-month and six-month periods ended ~~March 31,~~June 30, 2009 and 2008.

IHC and its subsidiaries earned ~~$235,000~~$271,000 and ~~$218,000~~$195,000 for the quarters ended ~~March 31,~~June 30, 2009 and 2008, respectively, and $506,000 and $413,000 for the six months ended June 30, 2009 and 2008, respectively, from service agreements with AMIC and its subsidiaries. These are reimbursements to IHC and its subsidiaries, at agreed upon rates including an overhead factor, for management services provided by IHC and its subsidiaries, including accounting, legal, compliance, underwriting and claims. The Company ceded premiums to AMIC of ~~$11,894,000~~$11,840,000 and ~~$15,690,000~~$15,105,000 for the three months ended ~~March 31,~~June 30, 2009 and 2008, respectively, and $23,734,000 and $30,795,000 for the six months ended June 30, 2009 and 2008, respectively. Benefits to policyholders on business ceded to AMIC were ~~$6,686,000~~$7,969,000 and $10,491,000 in the ~~first~~second quarter of 2009 and ~~$10,625,000 in~~2008, respectively, and $14,655,000 and $21,116,000 for the ~~first quarter of 2008.~~six months ended June 30, 2009 a nd 2008, respectively. Additionally, AMIC subsidiaries market, underwrite and provide administrative services (including premium collection, medical management and claims adjudication) for a substantial portion of the Medical Stop-Loss business written by the ~~insura nce~~insurance subsidiaries of IHC. IHC recorded gross premiums of ~~$16,782,000~~$15,977,000 and ~~$20,580,000~~$19,702,000 in the ~~first~~second quarters of 2009 and 2008, respectively, and net commission expense of ~~$742,000~~$666,000 and ~~$951,000~~$935,000 in the ~~first~~second quarters of 2009 and 2008, respectively, for these services. For the six months ended June 30, 2009 and 2008, IHC recorded gross premiums of $32,849,000 and $40,282,000, respectively, and net commission expense of $1,408,000 and $1,886,000, respectively, for these services. The Company also contracts for several types of insurance coverage (e.g. directors and officers and professional liability converge) jointly with AMIC. The cost of this coverage is allocated between the Company and AMIC according to the type of risk, and IHC’s ~~portion~~porti on is recorded in Selling, General and Administrative Expenses.

Included in the Company’s Condensed Consolidated Balance Sheets at ~~March 31,~~June 30, 2009 and December 31, 2008, respectively, are the following balances arising from transactions in the normal course of business with AMIC and its subsidiaries: Due from reinsurers ~~$16,322,000~~$16,378,000 and $18,394,000; Other assets ~~$3,292,000~~$4,039,000 and $3,009,000; and Other liabilities of ~~$222,000~~$386,000 and $404,000.

Note 3.

Income Per Common Share

Income per share calculations are based on income from continuing operations attributable to the common shareholders of IHC for the three and six months ended ~~March 31,~~June 30, 2009 and 2008, as shown below ~~and are net of $7,000 and $68,000, respectively, of losses attributable to non-controlling interests in subsidiaries~~ (in thousands):

Three Months Ended

March 31,

2009

2008

Income from continuing operations attributable to IHC

shareholders, net of tax
$
3,356
$
3,072

Loss from discontinued operations, net of tax

(216)

-
Loss on disposition of discontinued operations

(21)

-

Net income attributable to IHC shareholders
$
3,119
$
3,072


			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2009		2008		2009		2008

Income (loss) from continuing operations		$	1,963	$	(6,667)	$	5,312	$	(3,663)

(Income) loss from noncontrolling interests
	in subsidiaries		13		(26)		20		42

Income (loss) from continuing operations
	attributable to IHC shareholders, net of tax		1,976		(6,693)		5,332		(3,621)

Loss from discontinued operations, net of tax			(117)		-		(354)		-

Net income (loss) attributable to IHC shareholders		$	1,859	$	(6,693)	$	4,978	$	(3,621)

Included in the diluted income per share calculations for the ~~three~~six months ended ~~March 31,~~June 30, 2009 ~~and 2008,~~ are ~~3,000 and 53,000~~2,000 incremental shares ~~respectively,~~ from the assumed exercise of options and vesting of restricted stock using the treasury stock method. Such shares were deemed anti-dilutive for the three-month period ended June 30, 2009 and for the three-month and six-month periods ended June 30, 2008.

Note 4.

Investments

The cost (amortized cost with respect to certain fixed maturities), gross unrealized gains, gross unrealized losses and fair value of investment securities are as follows:

March 2009

GROSS

GROSS

AMORTIZED

UNREALIZED

UNREALIZED

FAIR

COST

GAINS

LOSSES

VALUE

(In thousands)
FIXED MATURITIES

AVAILABLE-FOR-SALE:

Corporate securities
$
201,979
$
17
$
(31,231)
$
170,765

CMOs⁽¹⁾

116,241

1,199

(14,396)

103,044

U.S. Government obligations

6,382

135

-

6,517

Agency MBS⁽²⁾

71,836

357

-

72,193

GSEs⁽³⁾

6,507

-

(147)

6,360

States and political subdivisions

305,207

2,069

(17,224)

290,052

Total fixed maturities
$
708,152
$
3,777
$
(62,998)
$
648,931

EQUITY SECURITIES

AVAILABLE-FOR-SALE:

Preferred stocks
$
68,267
$
171
$
(23,482)
$
44,956

Total equity securities
$
68,267
$
171
$
(23,482)
$
44,956


				June 2009
						GROSS		GROSS
				AMORTIZED		UNREALIZED		UNREALIZED		FAIR
				COST		GAINS		LOSSES		VALUE
				(In thousands)
FIXED MATURITIES
	AVAILABLE-FOR-SALE:
	Corporate securities		$	211,290	$	83	$	(19,559)	$	191,814
	CMOs- residential⁽¹⁾			93,178		3,127		(9,379)		86,926
	CMOs - commercial			868		-		(494)		374
	U.S. Government obligations			6,361		130		-		6,491
	Agency MBS - residential⁽²⁾			49,840		12		(630)		49,222
	GSEs⁽³⁾			5,962		-		(156)		5,806
	States and political subdivisions			350,060		2,515		(14,433)		338,142

		Total fixed maturities	$	717,559	$	5,867	$	(44,651)	$	678,775

EQUITY SECURITIES
	AVAILABLE-FOR-SALE:
	Preferred stock - perpetuals		$	35,981	$	-	$	(7,782)	$	28,199
	Preferred stock - with maturities			20,996		-		(2,607)		18,389

		Total equity securities	$	56,977	$	-	$	(10,389)	$	46,588


				December 31, 2008										December 31, 2008
						GROSS		GROSS								GROSS		GROSS
				AMORTIZED		UNREALIZED		UNREALIZED		FAIR				AMORTIZED		UNREALIZED		UNREALIZED		FAIR
				COST		GAINS		LOSSES		VALUE				COST		GAINS		LOSSES		VALUE
				(In thousands)										(In thousands)
FIXED MATURITIES	FIXED MATURITIES										FIXED MATURITIES
	AVAILABLE-FOR-SALE:										AVAILABLE-FOR-SALE:
	Corporate securities		$	212,620	$	895	$	(32,876)	$	180,639	Corporate securities		$	212,620	$	895	$	(32,876)	$	180,639
	CMOs⁽¹⁾			134,068		711		(13,466)		121,313	CMOs - residential⁽¹⁾			133,201		711		(13,229)		120,683
	U.S. Government obligations			6,402		199		-		6,601	CMOs - commercial			867		-		(237)		630
	Agency MBS⁽²⁾			44,733		515		-		45,248	U.S. Government obligations			6,402		199		-		6,601
	GSEs⁽³⁾			9,815		-		(242)		9,573	Agency MBS - residential⁽²⁾			44,733		515		-		45,248
	States and political subdivisions			283,237		3		(38,127)		245,113	GSEs⁽³⁾			9,815		-		(242)		9,573
											States and political subdivisions			283,237		3		(38,127)		245,113
		Total fixed maturities	$	690,875	$	2,323	$	(84,711)	$	608,487
												Total fixed maturities	$	690,875	$	2,323	$	(84,711)	$	608,487

EQUITY SECURITIES	EQUITY SECURITIES										EQUITY SECURITIES
	AVAILABLE-FOR-SALE:										AVAILABLE-FOR-SALE:
	Common stocks		$		$		$		$		Preferred stock - perpetuals		$	49,943	$	-	$	(12,489)	$	37,454
	Preferred stocks			68,538		-		(14,531)		54,007	Preferred stock - with maturities			18,595		-		(2,042)		16,553

		Total equity securities	$	68,538	$	-	$	(14,531)	$	54,007		Total equity securities	$	68,538	$	-	$	(14,531)	$	54,007

(1)

Collateralized mortgage obligations (“CMOs”).

(2)

Mortgage-backed securities (“MBS”).

(3)

Government-sponsored enterprises (“GSEs”) which are the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and Federal Home Loan Banks. GSEs are private enterprises established and chartered by the Federal Government.

Gross unrealized losses at June 30, 2009 include $2,394,000 of other-than-temporary impairment losses related to certain preferred stocks with maturities recorded in connection with the adoption ofFSP FAS 115-2 and FAS 124-2 on April 1, 2009.

Government-sponsored enterprise securities consist of Federal National Mortgage Association mortgage-backed securities and other fixed maturity securities issued by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association.

The amortized cost and fair value of fixed maturities at ~~March 31,~~June 30, 2009, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The average life of mortgage-backed securities is affected by prepayments on the underlying loans and, therefore, is materially shorter than the original stated maturity.

% OF

AMORTIZED

FAIR

TOTAL FAIR

COST

VALUE

VALUE

(In thousands)

Due in one year or less

$
8,600

$
8,200

1.3%
Due after one year through five years

36,389

32,365

5.0%
Due after five years through ten years

80,915

71,879

11.1%
Due after ten years

387,664

354,891

54.7%

513,568

467,335

72.1%
CMO and MBS

15 year

117,504

104,264

16.0%

20 year

1,045

1,016

.1%

30 year

76,035

76,316

11.8%

$
708,152

$
648,931

100.0%


						% OF
			AMORTIZED		FAIR	TOTAL FAIR
			COST		VALUE	VALUE
			(In thousands)

Due in one year or less		$	6,588	$	11,696	1.7%
Due after one year through five years			78,544		71,881	10.6%
Due after five years through ten years			72,417		68,055	10.0%
Due after ten years			410,162		384,817	56.7%
			567,711		536,449	79.0%
CMO and MBS
	15 year		95,211		88,431	13.0%
	20 year		975		948	.2%
	30 year		53,662		52,947	7.8%

		$	717,559	$	678,775	100.0%

The following tables summarize, for all securities in an unrealized loss position at ~~March 31,~~June 30, 2009 and December 31, 2008, respectively, the aggregate fair value and gross unrealized loss by length of time those securities had continuously been in an unrealized loss position:


				Less than 12 Months				12 Months or Longer				Total							Less than 12 Months				12 Months or Longer				Total

				Fair		Unrealized		Fair		Unrealized		Fair			Unrealized				Fair		Unrealized		Fair		Unrealized		Fair			Unrealized
March 31, 2009				Value		Losses		Value		Losses		Value			Losses
June 30, 2009																June 30, 2009			Value		Losses		Value		Losses		Value			Losses
				(In thousands)															(In thousands)

Corporate securities	Corporate securities		$	41,233	$	4,328	$	127,733	$	26,903	$	168,966	$	31,231		Corporate securities		$	47,876	$	3,469	$	124,075	$	16,090	$	171,951	$	19,559
CMOs				17,132		1,575		38,959		12,821		56,091		14,396
CMOs - residential																CMOs - residential			1,409		193		41,647		9,186		43,056		9,379
CMO's - commercial																CMO's - commercial			-		-		374		494		374		494
Agency MBS - residential																Agency MBS - residential			48,359		630		-		-		48,359		630
GSEs	GSEs			4,123		76		2,237		71		6,360		147		GSEs			-		-		5,806		156		5,806		156
States and political	States and political															States and political
		subdivisions		128,593		7,791		82,000		9,433		210,593		17,224			subdivisions		113,051		2,406		142,433		12,027		255,484		14,433
Total fixed maturities	Total fixed maturities			191,081		13,770		250,929		49,228		442,010		62,998		Total fixed maturities			210,695		6,698		314,335		37,953		525,030		44,651
Preferred stocks-perpetual	Preferred stocks-perpetual			16,979		12,976		11,375		7,572		28,354		20,548		Preferred stocks-perpetual			10,040		2,504		18,159		5,278		28,199		7,782
Preferred stocks- with	Preferred stocks- with															Preferred stocks- with
		maturities		6,044		1,741		7,409		1,193		13,453		2,934			maturities		8,140		1,651		10,249		956		18,389		2,607
Total temporarily	Total temporarily															Total temporarily
	impaired securities		$	214,104	$	28,487	$	269,713	$	57,993	$	483,817	$	86,480		impaired securities		$	228,875	$	10,853	$	342,743	$	44,187	$	571,618	$	55,040



				Less than 12 Months					12 Months or Longer				Total						Less than 12 Months				12 Months or Longer				Total
					��
				Fair			Unrealized		Fair		Unrealized		Fair		Unrealized				Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2008	December 31, 2008			Value			Losses		Value		Losses		Value		Losses	December 31, 2008			Value		Losses		Value		Losses		Value		Losses
				(In thousands)															(In thousands)

Corporate securities	Corporate securities		$	44,316		$	6,681	$	117,035	$	26,195	$	161,351	$	32,876	Corporate securities		$	44,316	$	6,681	$	117,035	$	26,195	$	161,351	$	32,876
CMOs				12,566			2,853		38,962		10,613		51,528		13,466
CMOs - residential																CMOs - residential			12,566		2,853		38,332		10,376		50,898		13,229
CMOs - commercial																CMOs - commercial			-		-		630		237		630		237
GSEs	GSEs			4,311			119		5,262		123		9,573		242	GSEs			4,311		119		5,262		123		9,573		242
States and political	States and political															States and political
		subdivisions		218,106			36,330		11,911		1,797		230,017		38,127		subdivisions		218,106		36,330		11,911		1,797		230,017		38,127
Total fixed maturities	Total fixed maturities			279,299			45,983		173,170		38,728		452,469		84,711	Total fixed maturities			279,299		45,983		173,170		38,728		452,469		84,711
Preferred stocks-perpetual	Preferred stocks-perpetual			33,231			12,003		4,223		486		37,454		12,489	Preferred stocks-perpetual			33,231		12,003		4,223		486		37,454		12,489
Preferred stocks- with	Preferred stocks- with															Preferred stocks- with
		maturities		8,616			1,377		7,937		665		16,553		2,042		maturities		8,616		1,377		7,937		665		16,553		2,042
Total temporarily	Total temporarily															Total temporarily
	impaired securities		$	321,146		$	59,363	$	185,330	$	39,879	$	506,476	$	99,242	impaired securities		$	321,146	$	59,363	$	185,330	$	39,879	$	506,476	$	99,242

At June 30, 2009 and December 31, 2008, a total of 57 and 110 securities,respectively, were in a continuous unrealized loss position for less than 12 months and 176 and 64 securities, respectively, had continuous unrealized losses for 12 months or longer. The Company has only one non-performing fixed maturity investment at June 30, 2009 with an adjusted cost basis of $650,000, or 0.1% of total fixed maturities.

Substantially all of the unrealized losses at ~~March 31,~~June 30, 2009 and December 31, 2008 relate to investment grade securities and are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. The unrealized ~~loss~~losses on corporate securities and state and political subdivisions isare due to wider spreads. Spreads have widened as investors shifted funds to US Treasuries in response to the current market turmoil. Because the Company does not intend to sell, nor is it more likely than not that the Company will have to sell, such investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2009.

At ~~March 31,~~June 30, 2009, the Company had ~~$25.4 million~~$29,595,000 invested in whole loan CMOs backed by Alt-A mortgages. Of this amount, ~~40.1%~~39% were in CMOs that originated in 2005 or earlier and ~~59.9%~~61% were in CMOs that originated in 2006. The Company’s mortgage security portfolio has no direct exposure to sub-prime mortgages. The decline in market value for the equity securities was primarily due to wider spreads from preferred stocks issued by financial institutions ~~followin g~~following the disruption in credit markets. Some of these financial institutions have exposure to sub-prime mortgages.

~~At March 31, 2009~~Changes in interest rates, credit spreads, and ~~December 31, 2008, a total~~investment quality ratings may cause the market value of ~~108 and 110~~the Company’s investments to fluctuate. The Company does not have the intent to sell nor is it more likely than not that the Company will have to sell debt securities,~~respectively, were~~ in ~~a continuous~~ unrealized loss ~~position for less than 12 months and 133 and 64 securities, respectively, had continuous unrealized losses for 12 months or longer. The Company has only one non-performing~~positions that are not other-than-temporarily impaired before recovery. In the event that the Company’s liquidity needs require the sale of fixed maturity securities in unfavorable interest rate, liquidity or credit spread environments, the Company may realize investment ~~at March 31, 2009 with a cost of $650,000, or 0.1% of the total carrying value of fixed maturities.~~

default. Additionally, the model takes into account loan age, seasonality, payment changes and exposure to refinancing as additional drivers of default. For transactions where loan level data is not available, the model uses a proxy based on the collateral characteristics. Loss severity in the model is a function of multiple factors including but not limited to the unpaid balance, interest rate, mortgage insurance ratios, assessed property value at origination, change in property valuation and loan-to-value ratio at origination. Prepayment speeds, both actual and estimated, are also considered. The cash flows generated by the collateral securing these securities are then determined with these default, loss severity and prepayment assumptions. These collateral cash flows are then utilized, along with consideration for the issue’s position in the over all structure, to determine the cash flows associated with the mortgage-backed security held by the Company.

To the extent that the present value of the cash flows generated by a debt security is less than the amortized cost, a credit loss exists, and an other-than-temporary impairment is recognized through earnings. It is reasonably possible that further declines in estimated fair values of such investments, or changes in assumptions or estimates of anticipated recoveries and/or cash flows, may cause further other-than-temporary impairments in the near term, which could be significant.

In addition, the Company evaluates other asset-backed securities for other-than-temporary impairment by examining similar characteristics referenced above for mortgage-backed securities. The Company evaluates U.S. Treasury securities and obligations of U.S. Government corporations, U.S. Government agencies, and obligations of states and political subdivisions for other-than-temporary impairment by examining similar characteristics referenced above for corporate debt securities.

Equity securities may experience other-than-temporary impairment in the future based on the prospects for full recovery in value in a reasonable period of time and the Company’s ability and intent to hold the security ~~for~~to recovery. If a ~~period of time sufficient to allow for a recovery~~decline in fair ~~value. For structured securities, such as mortgage-backed securities, an impairment~~value is judged by management to be other-than-temporary, a loss is recognized ~~when there has been~~by a ~~decrease in expected cash flows and/or a decline~~charge to total other-than-temporary impairment losses in the ~~security’s fair value below cost.~~ Consolidated Statements of Operations. For the purpose of other-than-temporary impairment evaluations, preferred stocks are treated in a manner similar to debt securities. Declines in the creditworthiness of the issuer of debt securities with both debt and equity-like features requires the use of the equity model in analyzing the security for other-than-temporary impairment.

Based on management’s review of the portfolio, which considered these factors, the Company recorded the following losses ~~of $271,000 and $81,000~~ for other-than-temporary impairments in the Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2009 and 2008 (in thousands):


			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2009		2008		2009		2008


Other-than-temporary impairments:
	Common stocks	$	-	$	(2,058)	$	-	$	(2,139)
	Preferred stocks		-		(15,335)		(271)		(15,335)
		$	-	$	(17,393)	$	(271)	$	(17,474)

As of March 31, 2009, the Company had previously recognized a total of $18,123,000 and ~~2008, respectively.~~ $4,788,000 of other-than-temporary impairments on available-for-sale fixed maturities and certain preferred stocks evaluated as debt securities, respectively, in the Consolidated Statements of Operations. As a result of the adoption of FSP FAS 115-2 and FAS 124-2 on April 1, 2009, the Company has determined that (a) the portion of the previously recorded losses on debt securities, and preferred stocks evaluated as debt securities, representing a credit loss is $20,517,000, and (b) the amount of a cumulative-effect adjustment to the opening balance of retained earnings and corresponding adjustment to accumulated other

comprehensive income representing the amount of previously recorded losses on debt securities, and preferred stocks evaluated as debt securities, related to all other factors is $1,542,000, net of $852,000 of tax benefits. The Company also recorded an additional $49,000 adjustment to the opening balance of retained earnings and a corresponding adjustment to accumulated other comprehensive income representing its proportionate share of AMIC's cumulative-effect adjustment as a result of its adoption of FSP FAS 115-2 and FAS 124-2. Since the adoption of FSP FAS 115-2 and FAS 124-2, no additional other-than-temporary impairment losses were recorded and therefore the amount of the cumulative credit loss remains $20,517,000 at June 30, 2009. No losses for other-than-temporary impairments were recognized in other comprehensive income in the three months or six months ended June 30, 20 09.

Further deterioration in credit quality of the companies backing the securities, further deterioration in the condition of the financial ~~service s~~services industry, a continuation of the current imbalance in liquidity that exist in the marketplace, a continuation or worsening of the current economic recession, or additional declines in real estate values may further affect the fair value of these securities and increase the potential that certain unrealized losses be designated as other-than-temporary in future periods and the Company may incur additional write-downs.

~~There was no activity in the Company's trading accounts during~~Note 5.

Net Realized Investment Gains

Net realized investment gains (losses) for the three months and six months ended ~~March 31,~~June, 30, 2009 and 2008 are as follows (in thousands):


			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2009		2008		2009		2008

Net realized investment gains (losses):
	Fixed maturities	$	1,274	$	655	$	2,939	$	743
	Common stocks		-		1,304		-		904
	Preferred stocks		(12)		(10)		(12)		711
			1,262		1,949		2,927		2,358

Sales of trading securities			-		429		-		429
IHC stock puts/call and other gains (losses)			-		(72)		-		(286)

Net realized investment gains		$	1,262	$	2,306	$	2,927	$	2,501

For the three months and assix months ended June 30, 2009, the Company realized gross gains of $3,131,000 and $4,829,000, respectively, and gross losses of $1,869,000 and $1,902,000, respectively, on sales of available-for-sale securities. For the three months and six months ended June 30, 2008, the Company realized gross gains of $2,555,000 and $6,004,000, respectively, and gross losses of $606,000 and $3,646,000, respectively, on sales of available-for-sale securities. As of December 31, 2008, the Company no longer has any ~~such~~ trading accounts.

Note 5.6.

Derivative Instruments

In connection with its currently outstanding $10,000,000 line of credit, a subsidiary of IHC entered into an interest rate swap with the commercial bank lender, for a notional amount equal to the debt principal amount, under which the Company receives a variable rate equal to the rate on the debt and pays a fixed rate (6.65%) in order to manage the risk in overall changes in cash flows attributable to forecasted interest payments. There was no hedge ineffectiveness on this interest rate swap which is accounted for as a cash flow hedge. At ~~March 31,~~June 30, 2009 and December 31, 2008, the fair value of the interest rate swap was ~~$164,000~~$64,000 and $260,000, respectively, which is included in other liabilities on the accompanying Condensed Consolidated Balance Sheets. See Note 6 for further discussion on the valuation techniques utilized to

determine the fair value of the interest rate swap. For the ~~three~~six months ended ~~March 31,~~June 30, 2009 and 2008, the Company recorded ~~$57,000~~$118,000 and ~~$(197,000)~~$(116,000) respectively, of gains (losses) on the effective portion of the interest rate swap in accumulated other comprehensive loss on the accompanying Condensed Consolidated Balance Sheets, net of related taxes (benefits) of ~~$38,000~~$78,000 and ~~$(130,000)~~$(77,000), respectively.

At ~~March 31,~~June 30, 2009 and December 31, 2008, the Company held no other derivative instruments and, for the three months and six months ended ~~March 31,~~June 30, 2009, recorded no gains or losses related to derivative instruments in the accompanying Condensed Consolidated Statements of Operations. For the three months and six months ended ~~March 31,~~June 30, 2008, the Company recorded ~~a loss~~losses of ~~$245,000~~$66,000 and $311,000, respectively, in net realized investment gains ~~(losses)~~ representing the net change in fair value of a stock put on IHC shares of common stock issued in connection with the acquisition of IAC in 2006. All of the shares subject to the IHC stock put were subsequently exercised during 2008.

The following tables present our financial assets and liabilities measured at fair value on a recurring basis, at ~~March 31,~~June 30, 2009 and December 31, 2008, respectively (in thousands):


March 31, 2009
June 30, 2009											June 30, 2009
				Level 1		Level 2		Level 3		Total				Level 1		Level 2		Level 3		Total

FINANCIAL ASSETS:	FINANCIAL ASSETS:										FINANCIAL ASSETS:
Investment securities held for sale:
Fixed maturities held for sale:											Fixed maturities held for sale:
											Corporate securities		$	-	$	191,814	$	-	$	191,814
											CMOs - residential			-		51,121		35,805		86,926
											CMOs - commercial			-		-		374		374
											US Government obligations			-		6,491		-		6,491
											Agency MBS - residential			-		49,222		-		49,222
											GSEs			-		5,806		-		5,806
											States and political subdivisions			-		338,142		-		338,142
												Total fixed maturities		-		642,596		36,179		678,775

Equity securities held for sale:											Equity securities held for sale:
											Preferred stocks - perpetual			28,199		-		-		28,199
	Fixed maturities		$	-	$	617,275	$	31,656	$	648,931	Preferred stocks - with maturities			16,277		2,112		-		18,389
	Equity securities			42,844		2,112		-		44,956		Total equity securities		44,476		2,112		-		46,588

		Total	$	42,844	$	619,387	$	31,656	$	693,887		Total	$	44,476	$	644,708	$	36,179	$	725,363

FINANCIAL LIABILITIES:	FINANCIAL LIABILITIES:										FINANCIAL LIABILITIES:
	Interest rate swap		$	-	$	164	$	-	$	164	Interest rate swap		$	-	$	64	$	-	$	64

December 31, 2008

Level 1

Level 2

Level 3

Total

FINANCIAL ASSETS:

Investment securities held for sale:

Fixed maturities
$
-

$
583,155

$
25,332
$
608,487

Equity securities

51,851

2,156

-

54,007

Total
$
51,851

$
585,311

$
25,332
$
662,494

FINANCIAL LIABILITIES:

Interest rate swap
$
-

$
260

$
-
$
260


December 31, 2008
					Level 1		Level 2		Level 3		Total

FINANCIAL ASSETS:
Fixed maturities held for sale:
	Corporate securities			$	-	$	180,639	$	-	$	180,639
	CMOs - residential				-		95,981		24,702		120,683
	CMOs - commercial				-		-		630		630
	US Government obligations				-		6,601		-		6,601
	Agency MBS - residential				-		45,248		-		45,248
	GSEs				-		9,573		-		9,573
	States and political subdivisions				-		245,113		-		245,113
			Total fixed maturities		-		583,155		25,332		608,487

Equity securities held for sale:
	Preferred stocks - perpetual				37,454		-		-		37,454
	Preferred stocks - with maturities				14,397		2,156		-		16,553
			Total equity securities		51,851		2,156		-		54,007

Total				$	51,851	$	585,311	$	25,332	$	662,494

FINANCIAL LIABILITIES:
		Interest rate swap		$	-	$	260	$	-	$	260

Inputs for certain fixed maturity securities that were observable at December 31, 2008 were not observable at ~~March 31,~~June 30, 2009 as a result of limited or inactive markets. These securities were transferred out of Level 2 and into the Level 3 category during 2009. No securities were sold or transferred out of the Level 3 category in 2009. Changes in the carrying value of Level 3 financial assets and liabilities for the ~~three~~six months ended ~~March 31,~~June 30, 2009 are summarized as follows (in thousands):


				Fixed					CMOs
				Maturities					Residential		Commercial		Total

Balance at beginning of year	Balance at beginning of year		$	25,332	Balance at beginning of year			$	24,702	$	630	$	25,332

Transfers into Level 3	Transfers into Level 3			7,532	Transfers into Level 3				7,532		-		7,532

Net realized investment gains (losses) included in earnings:
Net realized investment gains (losses) included in					Net realized investment gains (losses) included in
	Net realized investment gains from repayments of fixed maturities			-	earnings:
	Other-than-temporary impairments			-		Net realized investment gains			-		-		-
				-		Other-than-temporary impairments			-		-		-
									-		-		-
Net unrealized gains (losses) included in accumulated other comprehensive loss:

Net unrealized gains (losses) included in					Net unrealized gains (losses) included in
					accumulated other comprehensive loss:
						Net unrealized gains			5,973		(256)		5,717
	Net unrealized losses			(783)		Reclassification of unrealized losses
	Reclassification of unrealized losses deemed to be other-than-temporary to						deemed to be other-than-temporary to net
		net realized losses included in earnings		-			net realized losses included in earnings		-		-		-
				(783)					5,973		(256)		5,717

Repayments of fixed maturities	Repayments of fixed maturities			(425)	Repayments of fixed maturities				(2,402)		-		(2,402)

Balance at end of period	Balance at end of period		$	31,656	Balance at end of period			$	35,805	$	374	$	36,179

The following methods and assumptions were used to estimate the fair value of financial instruments not disclosed elsewhere in the Notes to Condensed Consolidated Financial Statements:

(A)

Policy Loans

The fair value of policy loans is estimated by projecting aggregate loan cash flows to the end of the expected lifetime period of the life insurance business at the average policy loan rates, and discounting them at a current market interest rate.

(B)

Funds on Deposit

The Company has two types of funds on deposit. The first type is credited with a current market interest rate, resulting in a fair value which approximates the carrying amount. The second type carries fixed interest rates which are higher than current market interest rates. The fair value of these deposits was estimated by discounting the payments using current market interest rates. The Company's universal life policies are also credited with current market interest rates, resulting in a fair value which approximates the carrying amount.

(C)

Debt

The fair value of debt with variable interest rates approximates its carrying amount. The fair value of fixed rate debt is estimated by discounting the cash flows using current market interest rates.

The estimated fair values of financial instruments not disclosed elsewhere in the Notes to Condensed Consolidated Financial Statements are as follows:


				JUNE 30, 2009				DECEMBER 31, 2008
				CARRYING		FAIR		CARRYING		FAIR
				AMOUNT		VALUE		AMOUNT		VALUE
				(In thousands)
FINANCIAL ASSETS:
	Policy loans		$	24,329	$	31,991	$	24,947	$	32,914

FINANCIAL
	LIABILITIES:
	Funds on deposit		$	406,221	$	408,227	$	411,188	$	407,767
	Debt and junior
		subordinated debt
		securities		48,146		48,378		48,146		48,620

Note 7.8.

Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill and other intangible assets (included in other assets in the Condensed Consolidated Balance Sheets) for the ~~first~~second quarter of 2009 is as follows (in thousands):


			Other Intangible				Other Intangible
		Goodwill	Assets			Goodwill	Assets

Balance at December 31, 2008	$	52,331	$	15,308	$	52,331	$	15,308
Acquire Wisconsin Underwriting Associates, LLC		750		-		750		-
Capitalized software development		-		121		-		281
Amortization expense		-		(644)		-		(1,293)
Balance at March 31, 2009	$	53,081	$	14,785

Balance at June 30, 2009					$	53,081	$	14,296

In January 2009, Wisconsin Underwriting Associates, Inc., a newly formed wholly owned subsidiary of IHC Health Holdings Corp., ("IHC Health Holdings") acquired the assets of Wisconsin Underwriting Associates, LLC ("WUA") in exchange for $300,000, $100,000 of contingent consideration and 49% of its capital stock. The addition of $750,000 of goodwill above represents the excess fair value of the consideration transferred over the total fair value of the net assets of WUA acquired.

Note 8.9.

Discontinued Operations

The Company sold its credit life and disability segment by entering into a 100% coinsurance agreement with an unaffiliated insurer effective December 31, 2007. Unearned premium reserves of this

During the three and six months ended ~~March 31,~~June 30, 2009, the Company recorded ~~a loss~~losses from discontinued operations of ~~$216,000,~~$117,000 and $354,000, respectively, net of ~~$116,000~~$64,000 and $191,000, respectively, of income tax benefits, which ~~represents~~represent expenses and changes in claims and reserves related to the insurance liabilities (currently in run-off status) for claims incurred prior to December 31, ~~2007.~~2007 and an adjustment to previously accrued exit costs. The Company did not record income or loss from discontinued operations during the three months ~~ended March 31, 2008. The Company also recorded a loss on the disposition of discontinued operations in the three~~or six months ended ~~March 31, 2009 amounting to $21,000, net of $11,000 of income tax benefits, representing an adjustment to accrued exit costs.~~June 30, 2008.

Changes in the liabilities related to discontinued operations for the ~~three~~six months ended ~~March 31,~~June 30, 2009 were as follows (in thousands):


					Claims		Accrued		Termination						Claims		Accrued		Termination
					Liability		Expenses		Benefits		Total				Liability		Expenses		Benefits		Total

Balance at beginning of year	Balance at beginning of year			$	3,328	$	-	$	214	$	3,542	Balance at beginning of year		$	3,328	$	-	$	214	$	3,542

Loss on disposition of discontinued operations:
Loss from discontinued operations:												Loss from discontinued operations:
	Exit costs				-		32		-		32	Changes in claims and reserves

Loss from discontinued operations:
		Changes in claims and reserves											related to block in run-off		471						471
			related to block in run-off		314				-		314	Expenses incurred related to block in run-off					42				42
		Expenses incurred related to block in run-off					18				18	Adjustment to accrued exit costs					32				32
											332										545

Payments of expenses accrued to administer	Payments of expenses accrued to administer											Payments of expenses accrued to administer
		the business sold					(50)		(77)		(127)		the business sold				(74)		(118)		(192)

Claim payments related to block in run-off	Claim payments related to block in run-off				(624)		-		-		(624)	Claim payments related to block in run-off			(1,406)						(1,406)

Balance at March 31, 2009				$	3,018	$	-	$	137	$	3,155
Balance at June 30, 2009												Balance at June 30, 2009		$	2,393	$	-	$	96	$	2,489

The Company believesthat the net liabilities of discontinued operations at ~~March 31,~~June 30, 2009 adequately estimate the remaining costs associated with the credit life and disability discontinued operations.

Note 9.10.

Share-Based Compensation

~~For~~Total share-based compensation was $74,000 and $353,000 for the three months ended ~~March 31,~~June 30, 2009 and 2008, ~~total share-based compensation expense was $267,000~~respectively, and ~~$292,000,~~$341,000 and $645,000 for the six months ended June 30, 2009 and 2008, respectively. Related tax benefits of ~~$107,000~~$29,000 and ~~$116,000,~~$141,000, were recognized for the three months ended ~~March 31,~~June 30, 2009 and 2008, respectively, and $136,000 and $257,000 for the six months ended June 30, 2009 and 2008, respectively.

Under the terms of the Company’s stock-based compensation plans, option exercise prices are equal to the quoted market price of the shares at the date of grant; option terms range from five to ten years; and vesting periods are three years for employee options. The Company may also grant shares of restricted stock, share appreciation rights (“SARs”) and share-based performance awards. Restricted shares are valued at the quoted market price of the shares at the date of grant, and have a three year vesting period. Exercise prices of SARs are equal to the quoted market price of the shares at the date of the grant and have three year vesting periods. At ~~March 31,~~June 30, 2009, there were ~~743,220~~779,535 shares available for future grants under the Company’s 2006 Stock ~~Incentive Plan that was approved by shareholders in June 2006.~~Incentive.

Stock Options

The Company’s stock option activity for the ~~three~~six months ended ~~March 31,~~June 30, 2009 is as follows:


	Shares	Weighted- Average		Shares	Weighted- Average
	Under Option	Exercise Price		Under Option	Exercise Price

December 31, 2008	759,093	$	17.94	759,093	$	17.94
Forfeited				(33,333)	16.07
Expired	(5,333)	22.29		(252,923)	20.86
March 31, 2009	753,760		17.91
June 30, 2009				472,837		16.50

The following table summarizes information regarding outstanding and exercisable options as of ~~March 31,~~June 30, 2009:


		Outstanding		Exercisable		Outstanding		Exercisable

Number of options		753,760		541,091		472,837		330,169
Weighted average exercise price per share	$	17.91	$	19.44	$	16.50	$	18.59
Aggregate intrinsic value for all options	$	-	$	-	$	-	$	-
Weighted average contractual term remaining		2.0 years		1.5 years		2.7 years		2.3 years

The fair value of an option award is estimated on the date of grant using the Black-Scholes option valuation model. No options were granted during the ~~three~~six months ended ~~March 31,~~June 30, 2009. The weighted average grant-date fair-value of options granted during the ~~three~~six months ended ~~March 31,~~June 30, 2008 was $3.44 per share. The assumptions set forth in the table below were used to value the stock options granted during the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2008:




Weighted-average risk-free interest rate		2.21%
Annual dividend rate per share	$	.05
Weighted-average volatility factor of the Company's common stock		36.6%
Weighted-average expected term of options		4.5 years

Compensation expense of ~~$191,000~~$15,000 and ~~$187,000~~$240,000 was recognized in the three months ended ~~March 31,~~June 30, 2009 and 2008, respectively, and $206,000 and $427,000 in the six months ended June 30, 2009 and 2008, respectively, for the portion of the grant-date fair value of stock options vesting during that period.

No options were exercised during the three months ~~ending March 31,~~and six months ended June 30, 2009. During the three months and six months ended ~~March 31,~~June 30, 2008, ~~77,400~~the Company received cash proceeds of $173,000 upon the exercise of 15,608 options with an intrinsic value of $31,000. In addition, another 276,192 options were exercised and, pursuant to the terms of the Company’s applicable stock option ~~plan, a discretionary payment was~~plans, payments were made equal to the difference between the fair value of such shares, with respect to the options at such exercise date, and the aggregate option strike price. The intrinsic value of such totaled ~~$61,000~~$640,000 and the ~~payment was~~payments were made in the form of IHC common stock totaling ~~3,109~~29,486 shares after deducting applicable income ~~taxes of $24,000.~~taxes.

As of ~~March 31,~~June 30, 2009, the total unrecognized compensation expense related to non-vested stock options was ~~$647,000~~$453,000 which is expected to be recognized over the remaining requisite weighted-average service period of ~~1.2~~1.6 years.

Restricted Stock

NoThe Company issued 2,250 shares of restricted stock ~~were issued by~~during both the ~~Company in the first three~~six months ended June 30, 2009 and 2008, with weighted average grant-date fair values of ~~2009 or 2008.~~$6.74 and $12.26 per share, respectively. The total fair value of restricted stock that vested during the first ~~three~~six months of 2009 and 2008 was ~~$29,000~~$70,000 and ~~$144,000,~~$223,000, respectively. Restricted stock expense was ~~$52,000~~$28,000 and $100,000, respectively, for

Interest expense and penalties for the three months and six months ended June 30, 2009 and 2008 are insignificant, however $36,000 of interest income related to tax refunds received is included in selling, general and administrative expenses on the Condensed Consolidated Statement of Operations for the three months and six months ended June 30, 2009.

Note ~~11.~~12.

Supplemental Disclosures of Cash Flow Information

NoTax refunds, net of tax payments, were ~~made~~$1,961,000 during the ~~three~~six months ended ~~March 31,~~June 30, 2009. Net cash payments for income taxes during the ~~three~~six months ended ~~March 31,~~June 30, 2008 were ~~$13,000.~~ $7,000.

Cash payments for interest were ~~$954,000~~$1,687,000 and ~~$939,000~~$1,899,000 during the ~~three~~six months ended ~~March 31,~~June 30, 2009 and 2008, respectively.

Note 13.

Note ~~13.~~15.

Segment Reporting

The Insurance Group principally engages in the life and health insurance business. Information by business segment for the three months and six months ended ~~March 31,~~June 30, 2009 and 2008 is presented below:

Three Months Ended

March 31,

2009

2008

(In thousands)
Revenues:

Medical Stop-Loss^(A)
$
36,435
$
43,453
Fully Insured Health^(B)

29,711

32,020
Group disability, life, annuities and DBL^(C)

16,226

14,970
Individual life, annuities and other

15,824

14,867
Corporate

(219)

(1,006)

97,977

104,304
Net realized investment gains

1,394

114

$
99,371
$
104,418


Income from Continuing Operations
Before Income Taxes:
						Three Months Ended				Six Months Ended
						June 30,				June 30,
						2009		2008		2009		2008

Revenues:
Medical Stop-Loss^(A)					$	35,879	$	42,292	$	72,314	$	85,745
Fully Insured Health^(B)						30,992		31,486		60,703		63,506
Group disability, life, annuities and DBL^(C)						16,632		14,235		32,858		29,205
Individual life, annuities and other						14,961		16,569		30,785		31,436
Corporate						873		(177)		654		(1,183)
						99,337		104,405		197,314		208,709
Net realized investment gains						1,262		2,306		2,927		2,501
Other-than-temporary impairment losses, net						-		(17,393)		(271)		(17,474)

					$	100,599	$	89,318	$	199,970	$	193,736

Income Before Income Taxes:
Medical Stop-Loss^(A)	$	1,649	$	2,321	$	1,127	$	1,114	$	2,776	$	3,435
Fully Insured Health^{(B) (D)}		1		1,233		(751)		1,071		(750)		2,304
Group disability, life, annuities and DBL^(C)		2,354		1,636		1,027		2,222		3,381		3,858
Individual life, annuities and other		1,310		2,545		491		1,560		1,801		4,105
Corporate		(1,637)		(2,506)		113		(1,047)		(1,524)		(3,553)
		3,677		5,229		2,007		4,920		5,684		10,149
Net realized investment gains and losses		1,394		114
Net realized investment gains						1,262		2,306		2,927		2,501
Other-than-temporary impairment losses, net						-		(17,393)		(271)		(17,474)
Interest expense		(770)		(986)		(761)		(909)		(1,531)		(1,895)
	$	4,301	$	4,357
					$	2,508	$	(11,076)	$	6,809	$	(6,719)

Note 16.

Non-Recognized Subsequent Event

On July 1, 2009, IHC Health Holdings acquired the remaining non-controlling interest in GroupLink, effectively making the administrative company a wholly owned subsidiary as of such date. The non-controlling interest, consisting of 250 shares of GroupLink common stock, was purchased from a senior officer of GroupLink for a purchase price of $500,000.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of Independence Holding Company ("IHC") and its subsidiaries (collectively, the "Company") should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements of the Company and the related Notes thereto appearing in our annual report on Form 10-K for the fiscal year ended December 31, 2008, as filed with the Securities and Exchange Commission, and our unaudited Condensed Consolidated Financial Statements and related Notes thereto appearing elsewhere in this quarterly report.

Overview

Independence Holding Company, a Delaware corporation ("IHC"), is a holding company principally engaged in the life and health insurance business through: (i) its wholly owned insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life") and Madison National Life Insurance Company, Inc. ("Madison National Life"); and (ii) its marketing and administrative companies, including Insurers Administrative Corporation (“IAC”), managing general underwriters ("MGUs") in which it owns a significant voting interest, Health Plan Administrators, Inc. (“HPA”), GroupLink, Inc. (“GroupLink”), IHC Health Solutions, Inc. (“IHC Health Solutions”), and Actuarial Management Corporation (“AMC”). These companies are sometimes collectively referred to as the "Insurance Group," and IHC and its subsidiaries (including the Insurance Group) are sometimes collectively referred to as the "Company." At ~~March 31,~~June 30, 2009, the Company also owned a 49.7% equity interest in American Independence Corp. ("AMIC"), which owns Independence American Insurance Company (“Independence American”), three MGUs and controlling interests in two agencies.

While management considers a wide range of factors in its strategic planning and decision-making, underwriting profit is consistently emphasized as the primary goal in all decisions as to whether or not to increase our retention in a core line, expand into new products, acquire an entity or a block of business, or otherwise change our business model. Management's assessment of trends in healthcare and morbidity, with respect to medical stop-loss, fully insured medical, disability and New York State short-term statutory disability benefit product ("DBL"); mortality rates with respect to life insurance; and changes in market conditions in general play a significant role in determining the rates charged, deductibles and attachment points quoted, and the percentage of business retained. The Company believes that the acquisition of Actuarial Management Corp. (“AMC”) has further enabled it to make thes e assessments. IHC also seeks transactions that permit it to leverage its vertically integrated organizational structure by generating fee income from production and administrative operating companies as well as risk income for its carriers and profit commissions. Management has always focused on managing the costs of its operations and providing its insureds with the best cost containment tools available.

The following is a summary of key performance information and events:

The results of operations for the three months and six months ended ~~March 31,~~June 30, 2009 and 2008 are summarized as follows (in thousands):

2009

2008

Revenues
$
99,371

$
104,418

Expenses

95,070

100,061

Income from continuing operations before income taxes

4,301

4,357

Income taxes

952

1,353

Income from continuing operations

3,349

3,004

Discontinued operations:

Loss from discontinued operations

(216)

-

Loss from disposition of discontinued operations

(21)

-

Net income

3,112

3,004

Loss from noncontrolling interests in subsidiaries

7

68

Net income attributable to IHC
$
3,119

$
3,072


				Three Months Ended				Six Months Ended
				June 30,				June 30,
				2009		2008		2009		2008

Revenues			$	100,599	$	89,318	$	199,970	$	193,736
Expenses				98,091		100,394		193,161		200,455

Income (loss) from continuing operations
	before income taxes (benefit)			2,508		(11,076)		6,809		(6,719)
Income taxes (benefit)				545		(4,409)		1,497		(3,056)

	Income (loss) from continuing operations			1,963		(6,667)		5,312		(3,663)

Discontinued operations:
Income (loss) from discontinued operations				(117)		-		(354)		-

Net income (loss)				1,846		(6,667)		4,958		(3,663)

(Income) loss from noncontrolling interests
	in subsidiaries			13		(26)		20		42

		Net income (loss) attributable to IHC	$	1,859	$	(6,693)	$	4,978	$	(3,621)

·

Income from continuing operations increased ~~10.0%~~$8.7 million to ~~$3.3~~$2.0 million for the three months ended ~~March 31,~~June 30, 2009 compared to ~~$3.0~~a loss of $6.7 million for the three months ended ~~March 31, 2008:~~June 30, 2008. Income from continuing operations increased $9.0 million to $5.3million for the six months ended June 20, 2009 compared to a loss of $3.7 million for the six months ended June 30, 2008. Included in the 2008 results are losses for other-than-temporary impairments of $17.4 million and $17.5 million in the three months and six months ended June 30, due to the write down in value of preferred stocks of certain financial instructions. Included in the 2009 results are losses of $.3 million for other-than-temporary impairments in the six-month period ended June 30;

·

Consolidated investment ~~yield~~yields (on an annualized basis) of ~~4.9%~~5.3% and 5.1% for the three months and six months ended ~~March 31,~~June 30, 2009 ~~versus~~compared to 4.9% and 4.8% for the comparable ~~period~~periods in 2008:

·

Revenues ~~decreased 4.8% to $99.4~~of $100.6 million and $200.0 million for the three months ~~ended March 31, 2009 compared to $104.4 million for the three~~and six months ended ~~March 31,~~June 30, 2009, respectively, representing increases of 12.7% and 3.3% over the respective three-month and six-month periods in 2008; and

·

Book value of ~~$11.25~~$12.70 per common share, representing a ~~6.5%~~20.3% increase from December 31, 2008, primarily reflecting net income and net unrealized gains on securities for the ~~three~~six months ended ~~March 31,~~June 30, 2009.

months ended June 30, 2009, as compared to $3.4 million in the same period in 2008. ~~This~~The decrease is primarily a result of reduced production ~~and~~due to stricter underwriting guidelines;

o

Underwriting experience for the Medical Stop-Loss segment, as indicated by its GAAP Combined Ratios, are as follows for the periods indicated (in thousands):

Three Months ended

March 31,

2009

2008

Premiums Earned

$
34,928

$
41,719

Insurance Benefits, Claims & Reserves

24,513

29,807

Expenses

9,629

10,787

Loss Ratio^(A)

70.1%

71.4%

Expense Ratio^(B)

27.6%

25.9%

Combined Ratio^(C)

97.7%

97.3%



		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2009		2008		2009		2008

Premiums Earned	$	34,361	$	40,902	$	69,289	$	82,621
Insurance Benefits, Claims & Reserves		24,850		30,039		49,363		59,846
Expenses		9,302		10,103		18,931		20,890

Loss Ratio^(A)		72.3%		73.4%		71.3%		72.4%
Expense Ratio^(B)		27.1%		24.7%		27.3%		25.3%
Combined Ratio^(C)		99.4%		98.1%		98.6%		97.7%

(A)

Loss ratio represents insurance benefits, claims and reserves divided by premiums earned.

(B)

Expense ratio represents net commissions (including profit commissions), administrative fees, premium taxes and other underwriting expenses divided by premiums earned.

(C)

The combined ratio is equal to the sum of the loss ratio and the expenses ratio.

·

The Fully Insured Health segment reported ~~a negligible amount~~$.8 million of ~~income~~loss before taxes for the three months ended ~~March 31,~~June 30, 2009 as compared to ~~$1.2~~income before taxes $1.1 million for the comparable period in 2008, and a loss before taxes of $.8 million for the six months ended June 30, 2009 as compared to $2.3 million of income before taxes for the six months ended June 30, 2008;

o

Fee and other income decreased ~~$2.0~~$1.3 million and $3.3 million for the three months and six months ended ~~March 31,~~June 30, 2009, respectively, as compared to the same ~~period~~periods in 2008 due to a decrease in gross premiums. The Company also experienced a decrease in general expenses due to a reduction in work force and related expenses in response to its lower volume of business.

o

Underwriting experience, ~~for the Fully Insured segment,~~ as indicated by its GAAP Combined Ratios, ~~are~~for the Fully Insured segment for the three months and six months ended June 30, 2009 and 2008 is as follows ~~for the periods indicated~~ (in thousands):



		Three Months Ended				Three Months Ended				Six Months Ended
		March 31,				June 30,				June 30,
		2009		2008		2009		2008		2009		2008

Premiums Earned	$	20,488	$	20,840	$	21,765	$	20,909	$	42,253	$	41,749
Insurance Benefits, Claims & Reserves		13,248		13,626		15,329		12,835		28,577		26,461
Expenses		6,815		4,954		6,267		6,634		13,082		11,588

Loss Ratio		64.7%		65.4%		70.4%		61.4%		67.6%		63.4%
Expense Ratio		33.2%		23.8%		28.8%		31.7%		31.0%		27.8%
Combined Ratio		97.9%		89.2%		99.2%		93.1%		98.6%		91.2%

o

The loss ratio increased due to unusually large claims in the small group medical line and an increase in the frequency of claims in the dental line.

o

The underwriting expense ratio increased primarily as a result of: (i) an increase in premium taxes and assessments due in part to a true-up of 2007 expenses recorded in the first quarter of 2008 thereby reducing the 2008 expense combined with higher state taxes and assessments recorded in the first quarter of 2009; (ii) an increase in profit commissions

·

Premiums by principal product for the three months ~~ended March 31,~~and six months 2009 and 2008 are as follows (in thousands):

Three Months Ended
Gross Direct and Assumed

March 31,

Earned Premiums:

2009

2008

Medical Stop-Loss
$
54,328
$
68,129
Fully Insured Health

46,453

51,605
Group disability, life, annuities and DBL

25,637

20,114
Individual life, annuities and other

7,867

7,683

$
134,285
$
147,531


		Three Months Ended				Three Months Ended						Six Months Ended
		March 31,				June 30,						June 30,
Net Premiums Earned:		2009		2008

Gross Direct and Assumed					Gross Direct and Assumed
					Earned Premiums:			2009		2008		2009			2008

Medical Stop-Loss	$	34,928	$	41,719	Medical Stop-Loss	$	54,119		$	65,256	$	108,447	$		133,385
Fully Insured Health		20,488		20,840	Fully Insured Health	48,978			51,653		95,431		103,258
Group disability, life, annuities and DBL		13,724		12,068	Group disability, life, annuities and DBL	25,846			19,445		51,483		39,559
Individual life, annuities and other		7,293		7,027
Individual, life, annuities and other					Individual, life, annuities and other		7,690			8,722		15,557		16,405

	$	76,433	$	81,654		$	136,633		$	145,076	$	270,918	$	292,607


	Three Months Ended						Six Months Ended
	June 30,						June 30,

Net Premiums Earned:			2009		2008		2009			2008

Medical Stop-Loss	$	34,361		$	40,902	$	69,289	$		82,621
Fully Insured Health	21,765			20,909		42,253		41,749
Group disability, life, annuities and DBL	14,091			11,605		27,815		23,673
Individual, life, annuities and other		6,864			8,268		14,157		15,295

	$	77,081		$	81,684	$	153,514	$	163,338

Results of Operations for the Three Months Ended ~~March 31,~~June 30, 2009 Compared to the Three Months Ended ~~March 31,~~June 30, 2008

Income from continuing operations was ~~$3.3~~$2.0 million for the three months ended ~~March 31,~~June 30, 2009, an increase of ~~$.3~~$8.7 million compared to ~~income~~a loss from continuing operations of ~~$3.0~~$6.7 million for the three months ended ~~March 31,~~June 30, 2008. The Company's income from continuing operations before taxes ~~decreased $.1~~increased $13.6 million to ~~$4.3~~$2.5 million for the three months ended ~~March 31,~~June 30, 2009 from ~~$4.4~~a loss of $11.1 million for the three months ended ~~March 31,~~June 30, 2008. Information by business segment for the three months ended ~~March 31,~~June 30, 2009 and 2008 is as follows:


							Equity						Benefits,		Amortization			Selling,												Equity				Benefits,		Amortization		Selling,
					Net		Income			Fee and			Claims		of Deferred			General										Net		Income		Fee and		Claims		of Deferred		General
		Premiums			Investment		From			Other			and		Acquisition			And								Premiums		Investment		From		Other		and		Acquisition		And
March 31, 2009		Earned			Income		AMIC			Income			Reserves		Costs			Administrative		Total
June 30, 2009																									June 30, 2009	Earned		Income		AMIC		Income		Reserves		Costs		Administrative		Total
(In thousands)	(In thousands)																								(In thousands)

Medical stop-loss		$	34,928	822			488		197			24,513			-		10,273				$			1,649
Fully insured health		20,488			163		139			8,921			13,248		7			16,455		1
Medical Stop-Loss																									Medical Stop-Loss	$	34,361	974		165		379		24,850		-		9,902		$	1,127
Fully Insured Health																									Fully Insured Health	21,765		220		47		8,960		15,329		7		16,407			(751)
Group disability,	Group disability,																								Group disability,
	life, annuities																								life, annuities
	and DBL	13,724			2,349		66			87			8,788		53			5,031		2,354					and DBL	14,091		2,424		23		94		11,142		51		4,412			1,027
Individual life,	Individual life,																								Individual life,
	annuities																								annuities and	6,864		6,937		-		1,160		9,102		1,242		4,126			491
	and other	7,293			7,604		-			927			9,647		990			3,877		1,310					other
Corporate	Corporate		-			(219)		-			-			-		-			1,418				(1,637)		Corporate	-		873		-								760			113
Sub total	Sub total	$	76,433			10,719		693			10,132			56,196		1,050			37,054				3,677		Sub total	$	77,081	$	11,428	$	235	$	10,593	$	60,423	$	1,300	$	35,607		2,007


Net realized investment gains	Net realized investment gains																					1,394			Net realized investment gains																1,262
Other-than-temporary impairment losses, net																									Other-than-temporary impairment losses, net																-
Interest expense	Interest expense																					(770)			Interest expense																(761)
Income from continuing operations before taxes																				4,301
Income from continuing operations before income taxes																									Income from continuing operations before income taxes																2,508
Income taxes	Income taxes																					952			Income taxes																545
Income from continuing operations	Income from continuing operations																			$		3,349			Income from continuing operations															$	1,963


						Equity				Benefits,		Amortization		Selling,														Equity					Benefits,		Amortization		Selling,
				Net		Income		Fee and		Claims		of Deferred		General												Net		Income		Fee and			Claims		of Deferred		General
		Premiums		Investment		From		Other		and		Acquisition		And									Premiums			Investment		From		Other			and		Acquisition		And
March 31, 2008		Earned		Income		AMIC		Income		Reserves		Costs		Administrative			Total
June 30, 2008																						June 30, 2008	Earned			Income		AMIC		Income			Reserves		Costs		Administrative		Total
(In thousands)	(In thousands)																					(In thousands)

Medical stop-loss		$	41,719	1,046		347		341		29,807		-		11,325			$	2,321
Fully insured health		20,840		215		23		10,942		13,626		48		17,113			1,233
Medical Stop-Loss																						Medical Stop-Loss	$	40,902	664			277		449			30,039		-		11,139		$	1,114
Fully Insured Health																						Fully Insured Health	20,909			215		98		10,264			12,835		30		17,550			1,071
Group disability,	Group disability,																					Group disability,
	life, annuities																					life, annuities
	and DBL	12,068		2,773		31		98		8,666		35		4, 633			1,636					and DBL	11,605			2,541		14		75			8,451		38		3,524			2,222
Individual life,	Individual life,																					Individual life,
	annuities and																					annuities and other	8,268			7,916		-		385			10,290		1,887		2,832			1,560
	other	7,027		7,617		-		223		8,685		1,371		2,266			2,545
Corporate	Corporate		-		(1,006)		-				-		-		1,500					(2,506)		Corporate	-			(180)		-		3			-				870			(1,047)
Sub total	Sub total	$	81,654		10,645		401		11,604		60,784		1,454		36,837					5,229		Sub total	$	81,684		$	11,156	$	389		$	11,176	$	61,615	$	1,955	$	35,915		4,920


Net realized investment gains	Net realized investment gains																		114			Net realized investment gains																		2,306
Other-than-temporary impairment losses, net																						Other-than-temporary impairment losses, net																		(17,393)
Interest expense	Interest expense																		(986)			Interest expense																		(909)
Income from continuing operations before taxes																					4,357
Income taxes																					1,353
Income from continuing operations																$					3,004
Loss from continuing operations before income taxes																						Loss from continuing operations before income taxes																		(11,076)
Income tax benefits																						Income tax benefits																		(4,409)
Loss from continuing operations																						Loss from continuing operations																	$	(6,667)

Premiums Earned

Total premiums earned decreased ~~$5.3~~$4.6 million to ~~$76.4~~$77.1 million in the ~~first~~second quarter of 2009 from $81.7 million in the comparable period of 2008. The decrease is primarily due to: (i) the Medical Stop-Loss segment which decreased ~~$6.8~~$6.5 million, primarily due to reduced production ~~and~~from stricter underwriting guidelines; and (ii) a decrease of $1.5 million in premiums earned in the individual life, annuities and other segment primarily as a result of the ceding of a block of ordinary life and annuities business effective April 1, 2009; offset by (iii) the Fully Insured Health segment which had a ~~$.3~~$.9 million ~~decrease~~increase in premiums in the ~~first~~second quarter of 2009 compared to the ~~first~~second quarter of 2008, comprised primarily of a ~~$1.0~~$1.3 million decrease in student accident premiums as a result of the cancellation of a producer of this product, offset by a ~~$1.1~~$1.0 million increase in dental premiums as a result of increased production, a $1. 0 million increase in small group premiums as a result of new production sources and increased retention, and a ~~$.4~~$.2 million net ~~decrease~~increase in all other lines of this segment; ~~offset by~~and (iii) a ~~$1.6~~$2.5 million increase in the group disability, life, annuities and DBL segment primarily from the LTD line due to an increase in ~~both~~ retention and ~~ne w~~new business written.

Net Investment Income

Total net investment income increased ~~$.1~~$.2 million. The overall annualized investment yields were 5.3% and 4.9% (approximately 5.6% and ~~4.8%~~5.0%, on a tax advantaged basis) in the ~~first~~second quarter of 2009 and 2008, respectively. The annualized investment ~~yield~~yields on bonds, equities and short-term investments ~~was~~were 4.9% and 5.1% ~~and 5.2%~~ in the ~~first~~second quarter of 2009 and 2008, respectively. A decrease in interest and dividend income, as a result of a reallocation of the investment portfolio toward more liquid assets during ~~2008,~~2009, was more than offset by a decrease in losses from partnership investments. In addition, the Company experienced unprecedented pre-payments in GNMAs during the quarter resulting in significantly reduced yields on such investments.

Net Realized Investment Gains and Other-Than-Temporary Impairment Losses, Net

Net realized investment gains ~~increased $1.3~~decreased $1.0 million to ~~$1.4~~$1.3 million in 2009 ~~from $.1~~compared to $2.3 million in 2008. These amounts include gains and losses from sales of fixed maturities and equity securities available-for-sale, as well as trading securities and other ~~investments, and other-than-temporary impairments.~~investments. Decisions to sell securities are based on management's ongoing evaluation of investment opportunities and economic and market conditions, thus creating fluctuations in gains and losses from period to period. ~~Included~~No other-than-temporary impairments were recorded in ~~net realized investment gains for~~ the three months ended ~~March 31, 2009 and~~June 30, 2009. For the three months ended June 30, 2008, ~~are~~the Company recorded pretax losses of ~~$.3~~$17.4 million ~~and $.1 million, respectively,~~ from ~~other than temporary~~other-than-temporary impairments.

~~Equity Income~~

Equity income from AMIC increased $.3 million in the first quarter of 2009 to $.7 million compared to $.4 million for the first quarter of 2008, primarily as a result of improved profitability in their Medical Stop-Loss business.

Fee Income and Other Income

Fee income decreased ~~$2.2~~$1.7 million to ~~$9.0~~$8.5 million in the ~~first quarter of~~three months ended June 30, 2009 from ~~$11.2~~$10.2 million in the ~~first quarter of~~three months ended June 30, 2008 primarily as a result of a decrease in gross premiums from the small group line of business in the Fully Insured Health segment due in part to stricter underwriting guidelines and ~~declining economic conditions.~~downward pressure on enrollment in medical plans due to the recession.

Total other income increased ~~$.7~~$1.1 million in the ~~first quarter of~~three months ended June 30, 2009 to ~~$1.1~~$2.1 million from ~~$.4~~$1.0 million in the ~~first quarter of~~three months ended June 30, 2008, primarily due to administrative fees associated with a coinsurance ~~agreement.~~agreement and deferred gain amortization associated with a block of ordinary life and annuities business ceded in second quarter of 2009.

Insurance Benefits, Claims and Reserves

Benefits, claims and reserves decreased ~~$4.6~~$1.2 million. The decrease is primarily due to: (i) a decrease of ~~$5.3~~$5.1 million in the Medical Stop-Loss segment, ~~primarily~~largely resulting from a decrease in premiums earned; and (ii) a decrease of ~~$.4~~$1.2 million in the individual life, annuities and other segment, primarily

resulting from a decrease in premiums earned in the ordinary life and annuity lines; partially offset by (iii) an increase of $2.5 million in the Fully Insured Health segment, primarily as a result of ~~reduced premiums~~the increase in ~~the student accident line~~claims and reserves of ~~business; partially offset by (iii)~~dental and small group businesses; and (iv) an increase of ~~$.9~~$2.6 million in the ~~individual~~Group disability, life, annuities and ~~other~~DBL segment ~~primarily resulting from the acquisition~~as a result of ~~a block of life~~increased LTD retention and ~~annuity~~new LTD business ~~in the second quarter of 2008.~~

Results of Operations for the Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008

Income from continuing operations was $5.3 million for the six months ended June 30, 2009, an increase of $9.0 million compared to a loss from continuing operations of $3.7 million for the six months ended June 30, 2008. The Company's income from continuing operations before taxes increased $13.5 million to $6.8 million for the six months ended June 30, 2009 from a loss of $6.7 million for the six months ended June 30, 2008. Information by business segment for the six months ended June 30, 2009 and 2008 is as follows:


						Equity				Benefits,		Amortization		Selling,
				Net		Income		Fee and		Claims		of Deferred		General
		Premiums		Investment		From		Other		and		Acquisition		And
June 30, 2009		Earned		Income		AMIC		Income		Reserves		Costs		Administrative		Total
(In thousands)

Medical Stop-Loss		$	69,289	1,796		653		576		49,363		-		20,175		$	2,776
Fully Insured Health		42,253		383		186		17,881		28,577		14		32,862			(750)
Group disability,
	life, annuities
	and DBL	27,815		4,773		89		181		19,930		104		9,443			3,381
Individual life,
	annuities and	14,157		14,541		-		2,087		18,749		2,232		8,003			1,801
	other
Corporate		-		654		-		-		-		-		2,178			(1,524)
Sub total		$	153,514	$	22,147	$	928	$	20,725	$	116,619	$	2,350	$	72,661		5,684


Net realized investment																	2,927
Other-than-temporary impairment losses, net																	(271)
Interest expense																	(1,531)
Income from continuing operations before income taxes																	6,809
Income taxes																	1,497
Income from continuing operations																$	5,312


							Equity					Benefits,		Amortization		Selling,
					Net		Income		Fee and			Claims		of Deferred		General
		Premiums			Investment		From		Other			and		Acquisition		And
June 30, 2008		Earned			Income		AMIC		Income			Reserves		Costs		Administrative		Total
(In thousands)

Medical Stop-Loss		$	82,621	1,710			624		790			59,846		-		22,464		$	3,435
Fully Insured Health		41,749			430		121		21,206			26,461		78		34,663			2,304
Group disability,
	life, annuities
	and DBL	23,673			5,314		45		173			17,117		73		8,157			3,858
Individual life,
	annuities and other	15,295			15,533		-		608			18,975		3,258		5,098			4,105
Corporate		-			(1,186)		-		3			-		-		2,370			(3,553)
Sub total		$	163,338		$	21,801	$	790		$	22,780	$	122,399	$	3,409	$	72,752		10,149


Net realized investment																			2,501
Other-than-temporary impairment losses, net																			(17,474)
Interest expense																			(1,895)
Loss from continuing operations before income taxes																			(6,719)
Income tax benefits																			(3,056)
Loss from continuing operations																		$	(3,663)

Premiums Earned

Total premiums earned decreased $9.8 million to $153.5 million in the second quarter of 2009 from $163.3 million in the comparable period of 2008. The decrease is largely due to: (i) the Medical Stop-Loss segment which decreased $13.3 million, primarily due to reduced production from stricter underwriting guidelines; and (ii) the individual life, annuities and other segment which decreased $1.1 million, primarily due to the ceding of a block of ordinary life and annuities business effective April 1, 2009; offset by (iii) the Fully Insured Health segment which had a $.5 million increase in premiums in the first six months of 2009 compared to the first six months of 2008, comprised primarily of a $2.4 million decrease in student accident premiums as a result of the cancellation of a producer of this product, offset by a $2.2 million increase in dental premiums as a result of increased production, a $.8 million increase in s mall group premiums earned as a result of new production sources and increased retention, and a $.1 million net decrease in all other lines of this segment; and (iv) a $4.1 million increase in the group disability, life, annuities and DBL segment primarily from the LTD line due to an increase in retention and new business written.

Net Investment Income

Total net investment income increased $.3 million. The overall annualized investment yields were 5.1% and 4.8% (approximately 5.4% and 4.9%, on a tax advantaged basis) in the first six months of 2009 and 2008, respectively. The annualized investment yields on bonds, equities and short-term investments were 5.0% and 5.2% in the first six months of 2009 and 2008, respectively. A decrease in interest and dividend income, as a result of a reallocation of the investment portfolio towards more liquid assets during 2009, was more than offset by a decrease in losses from partnership investments. In addition, the Company experienced unprecedented pre-payments in GNMAs during the quarter resulting in significantly reduced yields on such investments.

Net Realized Investment Gains and Other-Than-Temporary Impairment Losses, Net

Net realized investment gains increased $.4 million to $2.9 million in 2009 compared to $2.5 million in 2008. These amounts include gains and losses from sales of fixed maturities and equity securities available-for-sale, as well as trading securities and other investments. Decisions to sell securities are based on management's ongoing evaluation of investment opportunities and economic and market conditions, thus creating fluctuations in gains and losses from period to period. For the six months ended June 30, 2009 and 2008, the Company recorded pretax losses of $.3 million and $17.5 million, respectively, from other-than-temporary impairments.

Fee Income and Other Income

Fee income decreased $3.9 million to $17.5 million in the six months ended June 30, 2009 from $21.4 million in the six months ended June 30, 2008 primarily as a result of a decrease in gross premiums from the small group line of business in the Fully Insured Health segment due in part to stricter underwriting guidelines and downward pressure on enrollment due to the recession.

Total other income increased $1.8 million in the three months ended June 30, 2009 to $3.2 million from $1.4 million in the six months ended June 30, 2008, primarily due to administrative fees associated with a coinsurance agreement and deferred gain amortization associated with a block of ordinary life and annuities business ceded in second quarter of 2009.

Insurance Benefits, Claims and Reserves

Benefits, claims and reserves decreased $5.8 million. The decrease is primarily due to: (i) a decrease of $10.4 million in the Medical Stop-Loss segment, primarily resulting from a decrease in premiums earned; offset by (ii) an increase of $2.1 million in the Fully Insured Health segment, primarily as a result of the increase in claims and reserves in dental and small group businesses; (iii) an increase of $2.8

million in the group disability, life, annuities and DBL segment primarily as a result of increased LTD retention and new LTD business written; and (iv) a $.3 million decrease in the individual life, annuities and other segment.

Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs decreased $1.0 million primarily due to lower investment income assumptions used in making this calculation in 2009 as a result of a decrease in yields on insurance investments.

Interest Expense on Debt

Interest expense decreased $.4 million, primarily due to a $2.5 million decrease in outstanding debt under a line of credit from $12.5 million to $10.0 million during the third quarter of 2008. In addition, the interest rates on $10.3 million and $12.4 million of floating rate junior subordinated debt averaged 5.3% and 5.2%, respectively, in the first six months of 2009, as compared to 7.1% and 7.5%, respectively, during the first six months of 2008.

Selling, General and Administrative Expenses

Total selling, general and administrative expenses decreased $.1 million in the first six months of 2009 as compared to the first six months of 2008. The decrease is primarily due to: (i) a $2.3 million decrease in commissions and other general expenses in the Medical Stop-Loss segment due to a decrease in volume as a result of reduced production; (ii) a $1.8 million decrease in the Fully Insured Health segment primarily consisting of a decrease in general expenses resulting from a lower volume of business and a reduction in work force; offset by (iii) a $2.9 million increase in compensation, commission and administrative expenses associated with the individual life, annuities and other segment, primarily as a result of the acquisition of a block of life and annuity business in the second quarter of 2008; and (iv) a net $1.1 million increase in all other segments primarily due to an increase in legal and separation expens es.

Income Taxes

Income tax expense increased $4.6 million to $1.5 million for the six months ended June 30, 2009 from a tax benefit of $3.1 million for the first six months of 2008. The effective tax rate was 22.1% for the first six months of 2009 compared to (45.8) % for the first six months of 2008. The difference in the effective tax rates is primarily attributable to a higher level of tax benefits derived from tax exempt interest in 2009. The Company has significantly increased its position in state and political subdivision investments that generate tax exempt interest thus creating a greater benefit in 2009 than in 2008 in proportion to the level of income before taxes recorded.

LIQUIDITY

Insurance Group

The Insurance Group normally provides cash flow from: (i) operations; (ii) the receipt of scheduled principal payments on its portfolio of fixed maturities; and (iii) earnings on investments. Such cash flow is partially used to fund liabilities for insurance policy benefits. These liabilities represent long-term and short-term obligations.

Corporate

Corporate derives its funds principally from: (i) dividends from the Insurance Group; (ii) management fees from its subsidiaries; and (iii) investment income from Corporate liquidity. Regulatory constraints historically have not affected the Company's consolidated liquidity, although state insurance laws have provisions relating to the ability of the parent company to use cash generated by the Insurance Group.

Other assets decreased ~~$6.3~~$24.4 million primarily due to a ~~$4.9~~$19.1 million decrease in net deferred tax assets. Of this amount, ~~$4.1~~$15.7 million represents the deferred taxes on the net unrealized gains on investment securities allocated to stockholders’ equity arising during the ~~three~~six months ended ~~March 31,~~June 30, 2009.

The Company's health reserves by segment are as follows (in thousands):


		Total Health Reserves				Total Health Reserves
		March 31,		December 31,		June 30,		December 31,
		2009		2008		2009		2008

Medical Stop-Loss	$	83,489	$	89,684	$	80,151	$	89,684
Fully Insured Health		36,714		38,168		38,740		38,168
Group Disability		74,346		71,643		78,871		71,643
Individual A&H and Other		12,139		11,823		12,284		11,823

	$	206,688	$	211,318	$	210,046	$	211,318

The Company reviews its investments regularly and monitors its investments continually for impairments. For the ~~three~~six months ended ~~March 31,~~June 30, 2009 and 2008, the Company recorded losses of $.3 million and ~~$.1~~$17.5 million, respectively, for other-than-temporary impairments. The following table summarizes the carrying value of securities with fair values less than 80% of their amortized cost at ~~March 31,~~June 30, 2009 by the length of time the fair values of those securities were below 80% of their amortized cost (in thousands):


					Greater than		Greater than									Greater than		Greater than
					3 months,		6 months,									3 months,		6 months,
			Less than		less than		less than		Greater than					Less than		less than		less than		Greater than
			3 months		6 months		12 months		12 months		Total			3 months		6 months		12 months		12 months		Total

Fixed maturities	Fixed maturities	$	3,622	$	18,731	$	7,406	$	2,913	$	32,672	Fixed maturities	$	4,420	$	1,015	$	7,700	$	2,042	$	15,177
Equity securities	Equity securities		3,325		2,992		14,827		-		21,144	Equity securities		746		1,197		5,436				7,379

	Total	$	6,947	$	21,723	$	22,233	$	2,913	$	53,816	Total	$	5,166	$	2,212	$	13,136	$	2,042	$	22,556

The unrealized losses on all remaining available-for-sale securities have been evaluated in accordance with the Company's impairment policy and were determined to be temporary in nature at ~~March 31,~~June 30, 2009. In 2009, the Company experienced a decrease in net unrealized losses of ~~$14.3~~$51.0 million which, net of deferred taxes of ~~$4.1~~$15.7 million, ~~and~~ net of deferred policy acquisition costs of ~~$2.8~~$7.0 million, and net of the net cumulative effect adjustment of $1.5 million for the adoption of recent investment accounting pronouncements, increased stockholders' equity by ~~$7.4~~$26.7 million (reflecting net unrealized losses of ~~$46.9~~$27.6 million at ~~March 31,~~June 30, 2009 compared to net unrealized losses of $54.3 million at December 31, 2008). From time to time, as warranted, the Company may employ investment strategies to mitigate interest rate and other market exposures. Further deterioration in credit quality of the companies backing the securities, further deterioration in the condition of the financial services industry, a continuation of the current imbalances in liquidity that exist in the marketplace, a continuation or worsening of the current economic recession, or additional declines in real estate values may further affect the fair value of these securities and increase the potential that certain unrealized losses be designated as other-than-temporary in future periods and the Company may incur additional write-downs.

CAPITAL RESOURCES

Due to its strong capital ratios, broad licensing and excellent asset quality and credit-worthiness, the Insurance Group remains well positioned to increase or diversify its current activities. It is anticipated that future acquisitions or other expansion of operations will be funded internally from existing capital and surplus and parent company liquidity. In the event additional funds are required, it is expected that they would be borrowed or raised in the public or private capital markets to the extent determined to be necessary or desirable.

IHC enters into a variety of contractual obligations with third parties in the ordinary course of its operations, including liabilities for insurance reserves, funds on deposit, debt and operating lease obligations. However, IHC does not believe that its cash flow requirements can be fully assessed based solely upon an analysis of these obligations. Future cash outflows, whether they are contractual obligations or not, also will vary based upon IHC’s future needs. Although some outflows are fixed, others depend on future events. The maturity distribution of the Company’s obligations, as of ~~March 31,~~June 30, 2009, is not materially different from that reported in the schedule of such obligations at December 31, 2008 which was included in Item7of the Company’s Annual Report on Form 10-K.

OUTLOOK

For the balance of 2009, , IHC’s business plan is to: (i) ~~continue to maintain~~improve the profitability of our Fully Insured Health business, while selectively pursuing new opportunities that leverage our vertically integrated strategy of generating fee income at multiple levels of marketing and administration, as well as risk profit and profit commission income, (ii) expand the distribution and continue to improve the profitability of our Medical Stop-Loss business, (iii) proactively adjust our mix of business to take advantage of market conditions, and (iv) continue to expand the distribution of our life and disability products. Like many other insurance companies, our gross premiums have been adversely impacted by the current economic downturn.

The following summarizes what IHC has ~~accomplish ed~~accomplished and the outlook for 2009 and beyond by segment.

Historic Core Lines of Business

IHC has historically been a life and health insurance holding company for two insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life") and Madison National Life Insurance Company, Inc. ("Madison National Life"), which relied on independent general agents, managing general underwriters ("MGUs") and administrators to perform the majority of all marketing, underwriting, claims and administrative functions for our two primary product segments (Medical Stop-Loss and group disability, life, annuities and DBL). While it is always our intent to emphasize underwriting profits and not top line growth, , the medical stop-loss industry as a whole succumbed to pricing pressures caused by an unexpectedly long down cycle (or "soft" market) from 2004 through 2008. As a consequence of these market conditions, we made a decision to curtail our ~~growth~~gro wth and our 2008 loss ratios ~~are~~ improved. Due to stricter underwriting guidelines and the termination of several MGUs in 2008, we have experienced a decline in stop-loss premiums in the ~~first~~second quarter of 2009, which we anticipate will continue throughout this year. The Company has experienced an increase in its gross group life and disability premiums in ~~the first quarter of~~ 2009 as a result of taking over an estimated $18 million block from an insurer that exited the market, of which we are retaining approximately 20%.

With respect to distribution, , Standard Security Life is approved to write Medical Stop-Loss in all 50 states and Madison National Life in 49most states. Standard Security Life is currently contracted to write this product through ~~nine~~eight MGUs, and Madison National Life through one. ~~T he~~The Company has a significant ownership interest in five of these MGUs (including those owned by AMIC), which produced ~~$ 99.8~~$99.8 million ~~( 53.9~~(approximately 54 %) of Medical Stop-Loss ~~premium s~~premiums written on IHC paper in ~~2008 ..~~2008.

Fully Insured Health Segment

The Fully Insured Health market (estimated at $500 billion) in the U.S. is a much larger market than the Medical Stop-Loss market (estimated at $4 billion). The Company experienced a decrease in gross premiums during the ~~first~~second quarter of 2009, primarily in its small group line of business. This decrease is due to a general decrease in premiums resulting from stricter underwriting guidelines and the ~~downturn in~~downward pressure on enrollment caused by the ~~economy.~~recession. Net premiums remained constant due to an increase in retention.The Company limited the amount of its growth in this segment in 2008 and expects to continue to do so in 2009. In the event we determine to accelerate our growth, we are optimistic that (as a result of its multiple product filings, distribution sources, and the sheer size of the market) our Fully Insured Health business could grow while maintaining profitable underwriting results.

Investments

Our fixed maturity portfolio continues to be rated on average AA. Approximately 3%4% of our total investment portfolio is Alt-A mortgages. While these mortgages have seen lower market values ~~recently,~~in 2008 they have rebounded slightly in 2009 and we believe that the unrealized losses on these securities are not necessarily indicative of their ultimate performance. The Company also has approximately 3% of its total investment portfolio in preferred stocks of financial institutions which also realized significant losses in 2008. The market for these securities showed significant improvement in 2009 and the Company reduced its exposure from 4% at December 31, 2008, through either ternder offers or sales of such securities at amounts greater than their adjusted cost basis. Our book value per share increased to ~~$11.25~~$12.70 at ~~March 31,~~June 30, 2009 from $10.56 at December 31, 2008 due to net income and positive changes in the fair ~~value~~va lue of our investment portfolio. To the extent that the capital markets remain unsettled, we may continue to see volatility in the market price of our equity and fixed maturity securities, which could have a negative impact on our net income and book value per share.

Summary

In summary, the Company has begun to see improved performance in 2009 from continuing operations primarily as a result of (i) continuing ~~improvement in the~~ profitability of the group disability, life, annuities and DBL ~~line from an increase in production~~ (ii) better performance from investment partnerships (iii) improved ~~loss ratios~~performance on ~~its Medical Stop-Loss business from the year ended 2008;~~our investment portfolio; and (iv) ~~a better balance~~decreases in ~~our fully insured health business.~~overhead due to subsidiary consolidation and cost cutting measures.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company manages interest rate risk by seeking to maintain an investment portfolio with a duration and average life that falls within the band of the duration and average life of the applicable liabilities. Options may be utilized to modify the duration and average life of such assets.

The Company monitors its investment portfolio on a continuous basis and believes that the liquidity of the Insurance Group will not be adversely affected by its current investments. This monitoring includes the maintenance of an asset-liability model that matches current insurance liability cash flows with current investment cash flows. This is accomplished by first creating an insurance model of the Company's in-force policies using current assumptions on mortality, lapses and expenses. Then, current investments are assigned to specific insurance blocks in the model using appropriate prepayment schedules and future reinvestment patterns. The results of the model specify whether the investments and their related cash flows can support the related current insurance cash flows. Additionally, various scenarios are developed changing interest rates and other related assumptions. These scenarios help evaluate the market risk d ue to changing interest rates in relation to the business of the Insurance Group.

The expected change in fair value as a percentage of the Company's fixed income portfolio at ~~March 31,~~June 30, 2009 given a 100 to 200 basis point rise or decline in interest rates is not materially different than the expected change at December 31, 2008 included in Item 7A of the Company’s Annual Report on Form 10-K.

In the Company's analysis of the asset-liability model, a 100 to 200 basis point change in interest rates on the Insurance Group's liabilities would not be expected to have a material adverse effect on the Company. With respect to its liabilities, if interest rates were to increase, the risk to the Company is that policies would be surrendered and assets would need to be sold. This is not a material exposure to the Company since a large portion of the Insurance Group's interest sensitive policies are burial policies that are not subject to the typical surrender patterns of other interest sensitive policies, and many of the Insurance Group's universal life and annuity policies were acquired from liquidated companies which tend to exhibit lower surrender rates than such policies of continuing companies. Additionally, there are charges to help offset the benefits being surrendered. If interest rates were to decrease su bstantially, the risk to the Company is that some of its investment assets would be subject to early redemption. This is not a material

exposure because the Company would have additional unrealized gains in its investment portfolio to help

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

~~Not applicable~~At its Annual Meeting of Stockholders held on June 19, 2009, the following seven nominees were re-elected for one-year terms on the Board of Directors:

Larry R. Graber, Allan C. Kirkman, John L. Lahey, Steven B. Lapin, Edward Netter, James G. Tatum, Roy T.K. Thung.

The vote on the election of the above nominees was:

For

At least 12,913,337 shares

Withheld

No more than 1,631,861shares

In addition, at such meeting, the appointment of KPMG LLP as independent auditors for 2009 was ratified by a vote of 14,460,455 shares for, 83,536 shares against, and 1,207 shares abstaining. There were no broker non-votes.

ITEM 5.

OTHER INFORMATION

Not applicable

SIGNATURES

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:

/s/Roy T. K. Thung

Date:

~~May 11,~~August 10, 2009

Roy T.K. Thung

Chief Executive Officer and President

By:

/s/Teresa A. Herbert

Date:

~~May 11,~~August 10, 2009

Teresa A. Herbert

Senior Vice President and

Chief Financial Officer


Delaware		58-1407235
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


Large Accelerated Filer [ ]	Accelerated Filer [ X ]
Non-Accelerated Filer [ ]	Smaller Reporting Company [ ]


Class	Outstanding at ~~May 11,~~August 7, 2009
Common stock, $ 1.00 par value	~~15,418,621~~15,423,175 Shares


PART I – FINANCIAL INFORMATION					PAGE
						NO.

		Item 1. Financial Statements

			Condensed Consolidated Balance Sheets -		4
				~~March 31,~~June 30, 2009 (unaudited) and December 31, 2008	4

			Condensed Consolidated Statements of Operations -
				Three Months and Six Months Ended ~~March 31,~~June 30, 2009 and 2008 (unaudited)	5

			Condensed Consolidated Statement of Changes in Equity -
				~~Three~~Six Months Ended ~~March 31,~~June 30, 2009 (unaudited)	6

			Condensed Consolidated Statements of Cash Flows -
				~~Three~~Six Months Ended ~~March 31,~~June 30, 2009 and 2008 (unaudited)	7

			Notes to Condensed Consolidated Financial Statements (unaudited)		8

		Item 2. Management's Discussion and Analysis of Financial Condition
			and Results of Operations		2530

		Item 3. Quantitative and Qualitative Disclosures about Market Risk			3745

		Item 4. Controls and Procedures			3846

PART II - OTHER INFORMATION

		Item 1. Legal Proceedings			3846

		Item 1A. Risk Factors			3846

		Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3846

		Item 3. Defaults Upon Senior Securities			3846

		Item 4. Submission of Matters to a Vote of Security Holders			3847

		Item 5. Other Information			3847

		Item 6. Exhibits			3947

	Signatures				4048


						March 31, 2009		December 31, 2008						June 30, 2009		December 31, 2008
						(unaudited)								(unaudited)
ASSETS:	ASSETS:								ASSETS:
	Investments:								Investments:
		Short-term investments			$	52	$	52		Short-term investments			$	52	$	52
		Securities purchased under agreements to resell				29,194		60,823		Securities purchased under agreements to resell				23,798		60,823
		Fixed maturities, available for sale				648,931		608,487		Fixed maturities, available for sale				678,775		608,487
		Equity securities, available for sale				44,956		54,007		Equity securities, available for sale				46,588		54,007
		Other investments				37,404		37,724		Other investments				38,070		37,724
				Total investments		760,537		761,093				Total investments		787,283		761,093

	Cash and cash equivalents					7,906		7,767	Cash and cash equivalents					6,877		7,767
	Due from securities brokers					19,752		2,598	Due from securities brokers					6,308		2,598
	Investment in American Independence Corp. ("AMIC")					41,776		41,217	Investment in American Independence Corp. ("AMIC")					42,892		41,217
	Deferred acquisition costs					59,480		62,401	Deferred acquisition costs					54,516		62,401
	Due and unpaid premiums					53,094		55,663	Due and unpaid premiums					51,036		55,663
	Due from reinsurers					138,138		139,052	Due from reinsurers					186,635		139,052
	Premium and claim funds					46,825		52,171	Premium and claim funds					45,716		52,171
	Notes and other receivables					17,270		16,000	Notes and other receivables					15,107		16,000
	Goodwill					53,081		52,331	Goodwill					53,081		52,331
	Other assets					77,284		83,601	Other assets					59,227		83,601

				TOTAL ASSETS	$	1,275,143	$	1,273,894				TOTAL ASSETS	$	1,308,678	$	1,273,894

LIABILITIES AND EQUITY:	LIABILITIES AND EQUITY:								LIABILITIES AND EQUITY:
LIABILITIES:	LIABILITIES:								LIABILITIES:
	Insurance reserves-health				$	192,111	$	199,160	Insurance reserves-health				$	194,313	$	199,160
	Insurance reserves-life and annuity					279,105		279,731	Insurance reserves-life and annuity					278,582		279,731
	Funds on deposit					407,768		411,188	Funds on deposit					406,221		411,188
	Unearned premiums					16,726		16,727	Unearned premiums					14,388		16,727
	Policy claims-health					14,577		12,158	Policy claims-health					15,733		12,158
	Policy claims-life					12,764		10,738	Policy claims-life					13,251		10,738
	Other policyholders' funds					21,745		21,888	Other policyholders' funds					20,850		21,888
	Due to reinsurers					38,417		38,406	Due to securities brokers					8,500		-
	Accounts payable, accruals and other liabilities					66,537		69,260	Due to reinsurers					38,880		38,406
	Liabilities related to discontinued operations					3,155		3,542	Accounts payable, accruals and other liabilities					70,839		69,260
	Debt					10,000		10,000	Liabilities related to discontinued operations					2,489		3,542
	Junior subordinated debt securities					38,146		38,146	Debt					10,000		10,000
									Junior subordinated debt securities					38,146		38,146
				TOTAL LIABILITIES		1,101,051		1,110,944
												TOTAL LIABILITIES		1,112,192		1,110,944

EQUITY:	EQUITY:								EQUITY:
IHC STOCKHOLDERS' EQUITY:	IHC STOCKHOLDERS' EQUITY:								IHC STOCKHOLDERS' EQUITY:
	Preferred stock (none issued)					-		-	Preferred stock (none issued)					-		-
	Common stock $1.00 par value, 20,000,000 shares authorized;								Common stock $1.00 par value, 20,000,000 shares authorized;
			15,451,292 and 15,434,891 shares issued, respectively;								15,453,186 and 15,434,891 shares issued, respectively;
			15,418,537 and 15,402,136 shares outstanding, respectively			15,451		15,435			15,420,431 and 15,402,136 shares outstanding, respectively			15,453		15,435
	Paid-in capital					101,297		101,086	Paid-in capital					101,315		101,086
	Accumulated other comprehensive loss					(46,888)		(54,291)	Accumulated other comprehensive loss					(27,566)		(54,291)
	Treasury stock, at cost 32,755 shares					(326)		(326)	Treasury stock, at cost 32,755 shares					(326)		(326)
	Retained earnings					103,917		100,798	Retained earnings					106,982		100,798

TOTAL IHC STOCKHOLDERS’ EQUITY	TOTAL IHC STOCKHOLDERS’ EQUITY					173,451		162,702	TOTAL IHC STOCKHOLDERS’ EQUITY					195,858		162,702
NONCONTROLLING INTERESTS IN SUBSIDIARIES	NONCONTROLLING INTERESTS IN SUBSIDIARIES					641		248	NONCONTROLLING INTERESTS IN SUBSIDIARIES					628		248

				TOTAL EQUITY		174,092		162,950				TOTAL EQUITY		196,486		162,950

				TOTAL LIABILITIES AND EQUITY	$	1,275,143	$	1,273,894


INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
						Three Months Ended
						March 31,
						2009		2008
REVENUES:
	Premiums earned:
		Health			$	66,638	$	72,654
		Life and annuity				9,795		9,000
	Net investment income					10,719		10,645
	Fee income					9,035		11,199
	Net realized investment gains					1,394		114
	Equity income from AMIC					693		401
	Other income					1,097		405
						99,371		104,418
EXPENSES:
	Insurance benefits, claims and reserves:
		Health				43,796		49,548
		Life and annuity				12,400		11,236
	Selling, general and administrative expenses					37,054		36,837
	Amortization of deferred acquisitions costs					1,050		1,454
	Interest expense on debt					770		986
						95,070		100,061

	Income from continuing operations before income taxes					4,301		4,357
	Income taxes					952		1,353

	Income from continuing operations					3,349		3,004

	Discontinued operations:
	Loss from discontinued operations					(216)		-
	Loss on disposition of discontinued operations					(21)		-

	Net income					3,112		3,004

	Loss from noncontrolling interests in subsidiaries					7		68

				NET INCOME ATTRIBUTABLE TO IHC	$	3,119	$	3,072

Basic income per common share:
	Income from continuing operations attributable to IHC shareholders				$	.22	$	.20
	Loss from discontinued operations attributable to IHC shareholders					(.02)		-
	Loss on disposition of discontinued operations					-		-
			Basic income attributable to IHC shareholders		$	.20	$	.20

WEIGHTED AVERAGE SHARES OUTSTANDING						15,408		15,331

Diluted income per common share:
	Income from continuing operations attributable to IHC shareholders				$	.22	$	.20
	Loss from discontinued operations attributable to IHC shareholders					(.02)		-
	Loss on disposition of discontinued operations					-		-
			Diluted income attributable to IHC shareholders		$	.20	$	.20

WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING						15,411		15,384


INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited)


									ACCUMULATED								NON-
									OTHER		TREASURY				TOTAL IHC		CONTROLLING
					COMMON		PAID-IN		COMPREHENSIVE		STOCK,		RETAINED		STOCKHOLDERS'		INTERESTS IN		TOTAL
					STOCK		CAPITAL		INCOME (LOSS)		AT COST		EARNINGS		EQUITY		SUBSIDIARIES		EQUITY

BALANCE AT
	DECEMBER 31, 2008			$	15,435	$	101,086	$	(54,291)	$	(326)	$	100,798	$	162,702	$	248	$	162,950

Net income (loss)													3,119		3,119		(7)		3,112
Net change in unrealized
	gains (losses)								7,403						7,403		-		7,403
		Total comprehensive
			income												10,522		(7)		10,515

Acquisition of Wisconsin
	Underwriting Associates,
		LLC													-		400		400

Share-based compensation
	expenses and related
		related tax benefits			16		198								214		-		214
Other capital transactions							13								13		-		13

BALANCE AT
	MARCH 31, 2009			$	15,451	$	101,297	$	(46,888)	$	(326)	$	103,917	$	173,451	$	641	$	174,092


				March 2009
						GROSS		GROSS
				AMORTIZED		UNREALIZED		UNREALIZED		FAIR
				COST		GAINS		LOSSES		VALUE
				(In thousands)
FIXED MATURITIES
	AVAILABLE-FOR-SALE:
	Corporate securities		$	201,979	$	17	$	(31,231)	$	170,765
	CMOs⁽¹⁾			116,241		1,199		(14,396)		103,044
	U.S. Government obligations			6,382		135		-		6,517
	Agency MBS⁽²⁾			71,836		357		-		72,193
	GSEs⁽³⁾			6,507		-		(147)		6,360
	States and political subdivisions			305,207		2,069		(17,224)		290,052

		Total fixed maturities	$	708,152	$	3,777	$	(62,998)	$	648,931

EQUITY SECURITIES
	AVAILABLE-FOR-SALE:
	Preferred stocks		$	68,267	$	171	$	(23,482)	$	44,956

		Total equity securities	$	68,267	$	171	$	(23,482)	$	44,956


		Weighted-Average			Weighted-Average
	No. of	Grant-Date		No. of	Grant-Date
	Shares	Fair Value		Shares	Fair Value

December 31, 2008	18,976	$	20.66	18,976	$	20.66
Granted				2,250	$	6.74
Vested	(9,382)	$	22.56	(15,846)	$	21.48
March 31, 2009	9,594	$	18.80
June 30, 2009				5,380	$	12.43