Independence Holding Company (NYSE:IHC) today reported 2009
fourth-quarter and annual results. This press release contains both
GAAP and non-GAAP financial information for which reconciliations
can be found at the end of this release.
Financial Results
IHC reported operating income1 per share of $.14 per share,
diluted, or $2,209,000, for the three months ended December 31,
2009, compared to $.07 per share, diluted, or $1,111,000, for the
three months ended December 31, 2008. IHC reported operating income
per share of $.48 per share, diluted, or $7,351,000, for the year
ended December 31, 2009, compared to $.57 per share, diluted, or
$8,706,000, for the year ended December 31, 2008.
Net loss per share from continuing operations attributable to
IHC was $(.95) per share, diluted, or $(14,631,000), for the three
months ended December 31, 2009 compared to $(.74) per share,
diluted, or $(11,407,000), for the three months ended December 31,
2008. Net loss per share from continuing operations
attributable to IHC was $(.48) per share, diluted, or $(7,423,000),
for the year ended December 31, 2009 compared to $(1.59) per share,
diluted, or $(24,484,000), for the year ended December 31,
2008. The loss in 2009 is primarily due to an
other-than-temporary impairment (OTTI) on the Company's investment
in American Independence Corp. As described below, we anticipate
recording a gain in the first quarter of 2010 that will
significantly, if not fully, offset this OTTI loss. The loss
in 2008 is primarily attributable to other-than-temporary
impairments on certain marketable securities.
Revenues decreased 18% to $64,129,000 for the three months ended
December 31, 2009, compared to revenues for the three months ended
December 31, 2008 of $78,017,000 primarily due to the OTTI charge
in 2009. Revenues of $357,181,000 for the year ended December 31,
2009, were flat compared to revenues for the year ended December
31, 2008 of $353,687,000.
Significant Prospective Gain Related to Investment in American
Independence Corp. (Nasdaq:AMIC) in 2010 First Quarter
At December 31, 2009, the Company recorded an OTTI loss of
$16,752,000, net of $12,446,000 of taxes, on its investment in
AMIC. This was based on the length of time and the magnitude
of the amount by which the quoted market price of AMIC had been
below IHC's carrying value. During the first quarter of 2010,
IHC acquired shares of AMIC common stock which brought its total
ownership to over 50% of AMIC's outstanding common stock.
Accordingly, IHC will consolidate the financial results of AMIC and
apply business acquisition accounting. As a result, we anticipate
that the Company will record a gain in the first quarter of 2010
that will significantly, if not fully, offset the OTTI loss
recorded in the fourth quarter of 2009. IHC has engaged
an independent valuation firm to fair value the identifiable assets
of AMIC acquired and liabilities assumed.
Chief Executive Officer's Comments
Roy Thung, Chief Executive Officer, commented, "Our financial
condition is very strong as we enter 2010 even though our 2009
results were adversely impacted by the OTTI loss we were required
to report in the fourth quarter. As discussed above, we are
confident that this loss, which we attribute to an inefficient
market for AMIC shares as opposed to a reflection of AMIC's value,
will be significantly offset, or fully offset, by a gain in the
first quarter of 2010. We now own more than 50%
of its outstanding shares. The acquisition furthers our goal of
creating efficiencies by integrating the back office operations of
our MGUs and marketing companies. We will consider acquiring
additional shares of AMIC stock in the market and/or in private
transactions as opportunities arise."
Mr. Thung continued, "Once we report the AMIC transaction in the
first quarter of 2010, we believe that our insurance companies'
statutory surplus will be at an all-time high. The Company's book
value per share, which increased 25% to $13.16 at December 31, 2009
from $10.56 at December 31, 2008, will significantly increase even
further at March 31, 2010 due to the anticipated gain on AMIC and
first quarter operating results. Our investment portfolio is
rated on average AA. In addition, (i) IHC announced an expansion to
its stock repurchase program, and began repurchasing shares in the
first quarter of 2010; (ii) our stockholders' equity as of March
31, 2010 will be practically the same as that prior to the onset of
the global financial crisis, and (iii) A.M. Best affirmed the A-
(Excellent) rating of our three carriers."
Non-GAAP Financial Measures
The Company provides non-GAAP financial measures to complement
its consolidated financial statements presented in accordance with
GAAP: (i) Operating income is income from continuing operations net
of income or losses attributable to non-controlling interests and
excluding net realized gains or losses, other than temporary
impairment losses and write-off of intangible asset, net of
applicable income taxes, (ii) Operating income per share is
operating income (loss) on a per share basis. These non-GAAP
financial measures are intended to supplement the user's overall
understanding of the Company's current financial performance and
its prospects for the future. Specifically, the Company
believes the non-GAAP results provide useful information to both
management and investors by excluding realized gains or losses, net
of taxes, that, when excluded from the GAAP results, may provide
additional understanding of the Company's core operating results or
business performance. However, these non-GAAP financial
measures are not intended to supersede or replace the Company's
GAAP results. A reconciliation of the non-GAAP results to the
GAAP results is provided in the "Reconciliation of GAAP Income from
Continuing Operations to Non-GAAP Income from Continuing
Operations" schedule below.
About Independence Holding Company
IHC is a holding company principally engaged in the life and
health insurance business and the acquisition of blocks of policies
through its insurance company subsidiaries (Standard Security Life
Insurance Company of New York, Madison National Life Insurance
Company, Inc. and Independence American Insurance Company) and its
managing general underwriters, third-party administrators, and
marketing affiliates. Standard Security Life markets medical
stop-loss, small group major medical, short-term medical, major
medical for individuals and families, limited medical, group long
and short-term disability and life, dental, vision and managed
health care products. Madison Life sells group life and disability,
employer medical stop-loss, small group major medical, major
medical for individuals and families, short-term medical, dental,
vision, and individual life insurance. Independence American offers
medical stop-loss, small group major medical, short-term medical,
and major medical for individuals and families. IHC owns certain
subsidiaries through its majority ownership of American
Independence Corp. (Nasdaq:AMIC), which is a holding company
principally engaged in the insurance and reinsurance business.
Certain statements in this news release may be considered
forward-looking statements, such as statements relating to
management's views with respect to future events and financial
performance. Such forward-looking statements are subject to
risks, uncertainties and other factors which could cause actual
results to differ materially from historical experience or from
future results expressed or implied by such forward-looking
statements. Potential risks and uncertainties include, but are
not limited to, economic conditions in the markets in which IHC
operates, new federal or state governmental regulation, IHC's
ability to effectively operate, integrate and leverage any past or
future strategic acquisition, and other factors which can be found
in IHC's other news releases and filings with the Securities and
Exchange Commission.
1Operating income is a non-GAAP measure representing income from
continuing operations net of (income) losses attributable to
non-controlling interests and excluding net realized investment
gains (losses), other than temporary impairment losses and
write-off of intangible asset, net of applicable income tax. The
Company believes that the presentation of operating income may
offer a better understanding of the core operating results of the
Company. A reconciliation of income from continuing operations
to operating income is included in this press release.
INDEPENDENCE HOLDING COMPANY
FOURTH QUARTER REPORT
December 31, 2009
(In Thousands, Except Per Share Data)
Three Months Ended
Year Ended
December 31,
December 31,
2009
2008
2009
2008
REVENUES
Premiums earned
$69,543
$77,018
$294,799
$317,288
Net investment income
10,070
10,356
43,520
44,044
Fee income
6,960
8,904
31,665
39,672
Net realized investment gains (losses)
5,309
(13,546)
8,789
(12,401)
Total other-than-temporary impairment losses
(29,720)
(4,991)
(29,991)
(38,247)
Equity income from AMIC
285
(607)
1,289
480
Other income
1,682
883
7,110
2,851
64,129
78,017
357,181
353,687
EXPENSES
Insurance benefits, claims and reserves
53,148
58,667
225,234
240,537
Selling, general and administrative expenses
35,232
35,810
141,713
144,006
Amortization of deferred acquisition costs
2,168
1,517
5,519
6,345
Interest expense on debt
585
981
2,817
3,776
91,133
96,975
375,283
394,664
Income (loss) from continuing operations before income taxes
(benefits)
(27,004)
(18,958)
(18,102)
(40,977)
Income taxes (benefits)
(12,378)
(7,507)
(10,669)
(16,399)
Income (loss) from continuing operations
$(14,626)
$(11,451)
$(7,433)
$(24,578)
Discontinued operations:
Income (loss) from discontinued operations
606
(64)
301
644
Net Income (loss)
(14,020)
(11,515)
(7,132)
(23,934)
(Income) loss from noncontrolling interests in Subsidiaries
(5)
44
10
94
NET INCOME (LOSS) ATTRIBUTABLE TO IHC
$(14,025)
$(11,471)
$(7,122)
$(23,840)
Basic income (loss) per common share:
Income (loss) from continuing operations
$(.95)
$(.74)
$(.48)
$(1.59)
Income (loss) from discontinued operations
.04
--
.02
.04
Basic income (loss) per common share
$(.91)
$(.74)
$(.46)
$(1.55)
WEIGHTED AVERAGE SHARES OUTSTANDING
15,424
15,406
15,418
15,387
Diluted income(loss) per common share
Income (loss) from continuing operations
$(.95)
$(.74)
$(.48)
$(1.59)
Income (loss) from discontinued operations
.04
--
.02
.04
Diluted income (loss) per common share
$(.91)
$(.74)
$(.46)
$(1.55)
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING
15,424
15,406
15,418
15,387
As of March 23, 2010, there were 15,285,096 common shares
outstanding, net of treasury shares.
RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS
TO
NON-GAAP INCOME FROM CONTINUING OPERATIONS
(In Thousands, Except Per Share Data)
Three Months Ended
Year Ended
December 31,
December 31,
2009
2008
2009
2008
Income (loss) from continuing operations
$(14,626)
$(11,451)
$(7,433)
$(24,578)
(Income) loss from non-controlling interest in Subsidiaries
(5)
44
10
94
Realized (gains) losses, net of taxes
(3,414)
(807)
(5,701)
8,668
Other-than-temporary impairment losses, net of taxes
17,084
13,325
17,256
24,522
Write-off of intangible asset, net of taxes
3,170
--
3,219
--
Operating income from continuing operations
$2,209
$1,111
$7,351
$8,706
Non - GAAP basic income per common share:
Operating income from continuing operations
$.14
$.07
$.48
$.57
Non - GAAP diluted income per common share:
Operating income from continuing operations
$.14
$.07
$.48
$.57
Included in the realized gains (losses), net of taxes, above are
IHC's proportionate share of AMIC's realized gains (losses) net of
taxes. The other-than-temporary impairment losses are primarily due
to the write down in value of AMIC in 2009 and of preferred stocks
of certain financial institutions, fixed maturities (primarily
Alt-A securities) and common stocks in 2008.
CONTACT: Independence Holding Company
David T. Kettig
(212) 355-4141 Ext. 3047
www.IHCGroup.com
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