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IHC Independence Holding

Filed: 9 Nov 20, 11:54am

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

  

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) November 5, 2020

 

INDEPENDENCE HOLDING COMPANY

(Exact name of registrant as specified in its charter)

 

Delaware

001-32244

58-1407235

(State or other jurisdiction of incorporation or organization)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

 

96 Cummings Point Road, Stamford, Connecticut

06902

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code:  (203) 358-8000

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

IHC

NYSE

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company☐  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) if the Exchange Act.  ¨

 

 

 




Item 2.02 Results of Operations and Financial Condition.

 

The information set forth under this Item 2.02 (Results of Operations and Financial Condition) is intended to be furnished. Such information, including the Exhibit attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities and Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

 

On November 5, 2020, Independence Holding Company issued a news release announcing its 2020 third-quarter results, a copy of which is attached as Exhibit 99.1.

 

Item 9.01 Financial Statements and Exhibits

 

(c)  Exhibits: 

 

 

Exhibit 99.1

News Release of Independence Holding Company dated November 5, 2020: Independence Holding Company Announces 2020 Third-Quarter and Nine-Month Results.

Exhibit 104

Cover Page Interactive Data File ( embedded within the Inline XBRL document)

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

INDEPENDENCE HOLDING COMPANY

(Registrant)

 

 

 

By: Teresa A. Herbert

 

 

 

/s/ Teresa A. Herbert 

Teresa A. Herbert

Senior Vice President and Chief Financial Officer

 

Date:

 

November 9, 2020

 




 

EXHIBIT 99.1

 

INDEPENDENCE HOLDING COMPANY

CONTACT:  Loan Nisser

96 CUMMINGS POINT ROAD

(646) 509-2107

STAMFORD, CONNECTICUT 06902

www.IHCGroup.com

NYSE: IHC

 

 

NEWS RELEASE

 

INDEPENDENCE HOLDING COMPANY ANNOUNCES

2020 THIRD-QUARTER AND NINE-MONTH RESULTS

 

Stamford, Connecticut, November 5, 2020. Independence Holding Company (NYSE: IHC) today reported 2020 third-quarter and nine-month results.      

Financial Results

Net income of $8,688,000, or $.59 per share for the three months ended September 30, 2020 compared to $6,142,000 or $.41 per share, diluted, for the three months ended September 30, 2019.  Net income was $13,387,000 or $.90 per share, diluted, for the nine months ended September 30, 2020 compared to $21,716,000 or $1.45 per share, diluted, for the nine months ended September 30, 2019.  In the third quarter of 2020, the Company recorded an arbitration award of $3,664,000 net of legal expenses and income taxes.

 The Company reported revenues of $113,220,000 for the three months ended September 30, 2020 compared to revenues for the three months ended September 30, 2019 of $95,165,000. The Company reported revenues of $324,522,000 for the nine months ended September 30, 2020 compared to revenues for the nine months ended September 30, 2019 of $284,469,000. The increase in revenues primarily relates to an increase for the Paid Family Leave business and higher premium volume in our pet insurance business.

Chief Executive Officer’s Comments

Roy T. K. Thung, Chief Executive Officer, commented, “We are pleased with the increases in net income and revenues for the quarter, especially in light of the significant expenses we have incurred in ramping up in this quarter and for the nine months in order to be prepared for the majority of our senior sales, which will occur in the fourth quarter as a result of the 2021 Annual Enrollment Period (“AEP”).  For decades, IHC has been known for its disciplined profitable underwriting results in niche health and disability policies produced by its three insurance companies: Madison National Life (“MNL”), Standard Security Life (“SSL”) and Independence American Insurance Company (“IAIC”).  While all three continue to produce exceptional underwriting results in group disability, New York statutory disability (“DBL”) and paid family leave (“PFL”), pet insurance and ancillary health products, over the last several years we have made significant inroads into distribution in two of the fastest growing insurance markets: seniors and pet parents.  With respect to our highly profitable disability division, MNL has delivered consistently exceptional underwriting results which we believe will continue in 2021 and beyond. SSL is one of the leading writers of DBL and PFL insurance with approximately $115 million of premiums on an annual basis.  We will realize another significant increase in premiums next year as the New York Department of Financial Services has raised rates on PFL by 89% for 2021.

We are very excited by the progress we have made in, and the prospects for, our pet insurance division.  Pet insurance is one of the fastest growing types of coverage, yet there remains tremendous growth potential as less than 2% of pets are insured in the United States, compared to 25% or more in many European countries.  Pet insurance is now one of the most requested employee benefits, and work-site insurers are taking note.  This is demonstrated by the acquisition last year by MetLife, Inc. (“MetLife”) of PetFirst Healthcare, LLC (which uses IAIC




its underwriter) and the recent purchase by Aflac Incorporated of an approximate 9% stake in one of the largest pet insurers in the United States for $200 million.  We believe that IHC is very well-positioned to take advantage of this trend as a result of our product expertise and the TailTrax app.  We currently have agreements in place to partner with well-known insurers to offer PetPartners’ pet insurance through their work-site distribution, and we are in discussions with several more.  In order to prepare for this potentially material growth, we are making significant investments in our pet infrastructure in order to handle the expected volume.

Our pet division will underwrite an aggregate of $117 million of annualized written premium (approximately 200,000 dogs and cats) by the end of this year and we expect continued significant growth in 2021 and beyond.   Our compound annual growth rate in earned premium will be 48% from 2018 to 2020.  Our pet division is comprised of two sub-divisions, both of which use IAIC as their underwriter: (i) PetPartners, our “controlled” distribution and administrator, which has an exclusive relationship with The American Kennel Club (“AKC”) and is rapidly expanding through partnerships to access well-known brands (commonly referred to as “white-labeling”) and (ii) our managing general agency distribution under which IAIC serves as the underwriter for three well-known companies: MetLife, Figo Pet Insurance and Pets Best Insurance Services, LLC.  Our distribution is quite varied; we sell through breeders, employee benefit platforms, affinity partners, white-label partnerships with financial institutions (including well-known insurance companies), direct-to-consumer comparison shopping sites (also known as aggregators), and veterinary offices.  In 2021, our pet division will also accelerate its generation of non-risk revenue through the newest brand asset to the Pet Division, TailTrax, an all-inclusive subscription-based app with Tele-Vet and other high-touch engagement features.  This app will be available without charge to insureds of PetPartners.  In addition, we will begin in 2021 to generate revenues from our site Petplace.com, which is one of the leading sites for veterinarian-curated pet information with one million visitors per month.

Finally, we have invested heavily to ramp up our stand-alone InsureTech agencies by deploying cutting-edge technology systems, marketing and data science initiatives, online portals, and robust agent training platforms that help match consumers with the healthcare policy and carrier that best fits their needs. Collectively, our agencies have approximately 13,000 contracted agents that utilize our platforms to quote and enroll products from both IHC and major third party carriers.  This division is comprised of: (i) our senior sales agents and career advisors who harvest mostly proprietary leads generated by our marketing technology, (ii) our health call center agents who focus on serving the needs of consumers under the age of 65, including USAA and other affinity group members and their families; this unit provides Affordable Care Act (“ACA”) coverage, Short Term Medical, Hospital Indemnity, and many other ancillary health policies, and (iii) our Independence Brokerage Group agency (“IBG”) and web-based entity (WBE) that provide a platform for independent agents to sell ACA and ancillary health plans to individual consumers and small groups.  Our call center has grown from 57 licensed agents at the end of 2019 to 170 agents at the start of open enrollment in 2020, the vast majority of whom currently serve our senior division. Our organic lead development and routing systems have scaled significantly, and continue to grow with the development of fully owned lead generation brands, tools and routes. We’re confident that the rapid advancements in our marketing technology division (“MarTech”) will fuel continued agent growth and consumer engagement during the key enrollment periods of 2021.

We are now in the midst of the 2021 AEP, which began on October 15, 2020. Our senior division agents focus on selling Medicare Advantage (“MA”) as well as IAIC’s Medicare Supplement and ancillary senior products.  MA is one of the fastest-growing health insurance products in the country.  We are proud of how far we have come in 2020, and we are well positioned to continue to expand our senior call center for the 2022 AEP.  Our under-age 65 call center will benefit this year from the growth in the number of ACA carriers and an improved financial position arising from a generally higher rate of commission income.  IBG is the primary source of specialty health sales for IAIC.  Agents utilizing our WBE placed over 250,000 members in individual ACA plans (as well as IAIC’s off-exchange ancillary products like dental, critical




illness and accident medical coverage) in 2020, making it one of the leading agent-driven platforms in the market. We are in the process of upgrading the site to provide a more intuitive consumer workflow, allowing our agents to help clients who want to enroll with minimal agent interaction.

Mr. Thung added, “IHC has a very strong balance sheet with no indebtedness and a very substantial amount of free cash at the corporate level and significant excess capital in our insurance companies. Our book value was $31.90 per share at September 30, 2020.  IHC increased its annual dividend to $.44 per share in 2020, which is the sixth increase since December 2014 when the annual dividend paid to the stockholders was $.07 per share. Our overall investment portfolio continues to be very highly rated (on average, AA) and has an effective duration of under three years.  Year–to-date, the Company has repurchased 239,784 shares, for $7,352,000, including 36,377 in connection with a tender offer in May 2020, and is still repurchasing shares on a daily basis as the market permits at these prices up to the maximum allowable, so as to provide liquidity to the market.  In conclusion, we have made, and are continuing to make, material investments in ramping up our pet and senior marketing divisions, which has impacted our earnings.  We believe these investments should drive significant accretion in shareholder value”.  

About The IHC Group

 

Independence Holding Company (NYSE: IHC), formed in 1980, is a holding company that is principally engaged in underwriting, administering and/or distributing group and individual specialty benefit products, including disability, supplemental health, pet, and group life insurance through its subsidiaries (Independence Holding Company and its subsidiaries collectively referred to as “The IHC Group”).  The IHC Group consists of three insurance companies (Standard Security Life Insurance Company of New York, Madison National Life Insurance Company, Inc. and Independence American Insurance Company). We also own the following agencies: (i) PetPartners, Inc., our pet insurance administrator; (ii) IHC Specialty Benefits, Inc., a technology-driven full-service marketing and distribution company that focuses on small employer and individual consumer products through its call center, career agents, and Independence Brokerage Group; and (iii) The INSX Cloud Platform through My1HR, our wholly owned Web Based Entity. Our InsureTech division is comprised of our call centers, field and career agents, in-house MarTech artificial intelligence capabilities and domains, including www.healthedeals.com; www.healthinsurance.org; www.medicareresources.org; www.petplace.com; and www.mypetinsurance.com.

 

 

Forward-looking Statements

Certain statements and information contained in this release may be considered “forward-looking statements,” such as statements relating to management's views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements.  Potential risks and uncertainties include, but are not limited to, economic conditions in the markets in which IHC operates, new federal or state governmental regulation, IHC’s ability to effectively operate, integrate and leverage any past or future strategic acquisition, and other factors which can be found in IHC’s other news releases and filings with the Securities and Exchange Commission. IHC expressly disclaims any duty to update its forward-looking statements unless required by applicable law.




INDEPENDENCE HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

September 30, 2020

 

(In Thousands, Except Shares and Per Share Data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2020

 

2019

 

2020

 

2019

REVENUES:

 

 

 

 

 

 

 

 

Premiums earned

$

100,124  

$

86,453  

$

294,865  

$

254,189  

Net investment income

 

2,793  

 

3,964  

 

9,172  

 

12,094  

Fee income

 

3,872  

 

2,938  

 

12,062  

 

10,833  

Other income

 

6,361  

 

880  

 

7,490  

 

5,443  

Net investment gains

 

70  

 

930  

 

933  

 

2,556  

Net impairment losses recognized in earnings

 

 

 

 

 

 

 

(646) 

 

 

113,220  

 

95,165  

 

324,522  

 

284,469  

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

49,827  

 

41,398  

 

158,474  

 

128,927  

Selling, general and administrative expenses

 

52,684  

 

44,348  

 

149,237  

 

127,083  

 

 

 

 

 

 

 

 

 

 

 

102,511  

 

85,746  

 

307,711  

 

256,010  

 

 

 

 

 

 

 

 

 

Income before income taxes

 

10,709  

 

9,419  

 

16,811  

 

28,459  

Income taxes

 

1,977  

 

3,248  

 

3,219  

 

6,482  

 

 

 

 

 

 

 

 

 

Net income

 

8,732  

 

6,171  

 

13,592  

 

21,977  

(Income) from noncontrolling interests

 

(44) 

 

(29) 

 

(205) 

 

(261) 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO IHC

$

8,688  

$

6,142  

$

13,387 

$

21,716  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per common share

$

.59  

$

.41  

$

.91  

$

1.46  

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

14,670  

 

14,879  

 

14,763  

 

14,919  

 

 

 

 

 

 

 

 

 

Diluted income per common share

$

.59  

$

.41  

$

.90  

$

1.45  

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING

 

14,720  

 

14,941  

 

14,799  

 

14,985  

 

 

 

 

 

 

 

 

 

 

 

As of November 4, 2020, there were 14,637,850 common shares outstanding, net of treasury shares.




INDEPENDENCE HOLDING COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

Short-term investments

 

$

1,133  

 

$

50  

 

Securities purchased under agreements to resell

 

 

78,313  

 

 

107,157  

 

Fixed maturities, available-for-sale

 

 

419,284  

 

 

384,974  

 

Equity securities

 

 

3,760  

 

 

3,747  

 

Other investments

 

 

8,068  

 

 

15,208  

 

Total investments

 

 

510,558  

 

 

511,136  

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

21,677  

 

 

21,094  

 

Due and unpaid premiums

 

 

29,096  

 

 

26,244  

 

Due from reinsurers

 

 

357,635  

 

 

362,969  

 

Goodwill

 

 

75,891  

 

 

60,165  

 

Other assets

 

 

84,730  

 

 

72,695  

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,079,587  

 

$

1,054,303  

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

Policy benefits and claims

 

$

174,114  

 

$

164,802  

 

Future policy benefits

 

 

199,195  

 

 

201,205  

 

Funds on deposit

 

 

141,212  

 

 

140,951  

 

Unearned premiums

 

 

15,865  

 

 

7,282  

 

Other policyholders' funds

 

 

11,693  

 

 

12,049  

 

Due to reinsurers

 

 

3,432  

 

 

5,016  

 

Accounts payable, accruals and other liabilities

 

 

64,403  

 

 

61,049  

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

609,914  

 

 

592,354  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

2,413  

 

 

2,237  

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

Preferred stock (none issued)

 

 

 

 

 

 

 

Common stock

 

 

18,625  

 

 

18,625  

 

Paid-in capital

 

 

124,354  

 

 

122,717  

 

Accumulated other comprehensive income

 

 

3,918  

 

 

1,212  

 

Treasury stock, at cost

 

 

(76,686) 

 

 

(69,724) 

 

Retained earnings

 

 

397,005  

 

 

386,864  

 

 

 

 

 

 

 

TOTAL IHC STOCKHOLDERS’ EQUITY

 

 

467,216  

 

 

459,694  

NONREDEEMABLE NONCONTROLLING INTERESTS

 

 

44  

 

 

18  

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

467,260  

 

 

459,712  

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

$

1,079,587  

 

$

1,054,303