FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Period Ended: MARCH 31, 1995
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Commission File Number: 0-10306
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INDEPENDENCE HOLDING COMPANY
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(Exact name of Registrant as specified in its charter)
DELAWARE 58-1407235
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(State of Incorporation) (I.R.S. Employer Identification No.)
96 CUMMINGS POINT ROAD, STAMFORD, CONNECTICUT 06902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 358-8000
NOT APPLICABLE
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Former name, former address and fiscal year, if changed since last
report.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days Yes x . No .
--- ---
15,331,730 SHARES OF COMMON STOCK, $1.00 PAR VALUE*
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Common Stock outstanding as of May 10, 1995
* Does not include 4,377,900 shares held by wholly owned
subsidiaries of the Registrant.
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INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
INDEX
PART 1 - FINANCIAL INFORMATION PAGE NO.
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Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994............. 2
Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994....... 3
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994....... 4
Notes to Consolidated Financial Statements........ 5 - 9
Management's Discussion and Analysis of Results of
Operations and Financial Condition............... 10 - 14
PART II - OTHER INFORMATION
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Item 6 - Exhibits and Reports on Form 8-K......... 15
Signatures........................................ 16
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INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS MARCH 31, DECEMBER 31,
1995 1994
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(UNAUDITED)
ASSETS:
Cash and cash equivalents........................$ 10,172,000 $ 21,271,000
Short-term investments........................... 708,000 708,000
Securities purchased under agreements to resell.. 31,077,000 18,660,000
Fixed maturities (Note 2)........................ 131,349,000 129,817,000
Equity securities (Note 2)....................... 10,171,000 6,383,000
Other investments................................ 26,178,000 24,288,000
Trade accounts, notes and other receivables...... 11,000,000 10,590,000
Inventories (Note 3)............................. 10,837,000 10,497,000
Deferred insurance acquisition costs............. 10,286,000 10,979,000
Property, plant and equipment, net............... 4,769,000 4,447,000
Due from reinsurers.............................. 39,988,000 39,336,000
Due from brokers................................. 17,354,000 596,000
Other assets..................................... 4,801,000 4,786,000
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TOTAL ASSETS................................$308,690,000 $282,358,000
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LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Future insurance policy benefits.................$ 95,546,000 $ 95,277,000
Unearned premiums................................ 15,486,000 14,680,000
Future annuity policy benefits................... 34,734,000 34,436,000
Insurance policy claims.......................... 5,052,000 4,434,000
Other policyholders' funds....................... 2,102,000 2,161,000
Financial instruments sold, but not yet
purchased (Note 2).............................. 1,390,000 1,571,000
Due to brokers................................... 43,418,000 22,006,000
Due to reinsurers................................ 3,703,000 4,225,000
Accounts payable, accruals and other liabilities. 19,484,000 20,836,000
Income taxes, principally deferred (Note 5)...... 4,656,000 5,780,000
Long-term debt................................... 22,471,000 21,258,000
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TOTAL LIABILITIES............................ 248,042,000 226,664,000
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STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share (50,000,000
shares authorized; 15,421,730 and 15,528,730
shares issued and outstanding, respectively,
net of 4,377,900 shares in treasury)............ 15,422,000 15,529,000
Paid-in capital.................................. 69,824,000 69,800,000
Unrealized losses on investments, net
of deferred tax benefits of ($796,000)
and ($906,000), respectively.................... (4,868,000) (9,168,000)
Accumulated deficit.............................. (19,730,000) (20,467,000)
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TOTAL STOCKHOLDERS' EQUITY................... 60,648,000 55,694,000
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...$308,690,000 $282,358,000
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 1994
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REVENUES:
Insurance premiums...............................$ 13,205,000 $ 12,571,000
Net investment income............................ 3,275,000 3,484,000
Net realized and unrealized gains (losses)....... (768,000) 885,000
Sales............................................ 10,150,000 8,862,000
Equity income (loss)............................. (233,000) 183,000
Other income..................................... 740,000 643,000
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26,369,000 26,628,000
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EXPENSES:
Insurance benefits, claims and reserves....... 9,512,000 9,322,000
Amortization of deferred insurance acquisition
costs........................................... 1,071,000 1,264,000
Cost of sales.................................... 7,789,000 6,968,000
Interest expense................................. 442,000 278,000
Selling, general and administrative expenses..... 6,992,000 6,274,000
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25,806,000 24,106,000
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Operating income before income taxes.............. 563,000 2,522,000
Income tax expense (benefit)...................... (174,000) 750,000
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Net income........................................$ 737,000 $ 1,772,000
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INCOME PER COMMON SHARE:
Net income........................................$ .05 $ .11
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING........ 15,486,000 15,821,000
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................$ 737,000 $ 1,772,000
Adjustment to reconcile net income to net cash
provided by operating activities:
Amortization of deferred insurance acquisition
costs.......................................... 1,071,000 1,264,000
Net realized gains on sales of investment
securities..................................... 981,000 (885,000)
Unrealized gains on trading securities.......... (213,000) -
Equity (income) loss............................ 233,000 (183,000)
Depreciation.................................... 167,000 137,000
Deferred taxes.................................. (835,000) 153,000
Income taxes credited to paid-in capital........ 263,000 360,000
Other........................................... 218,000 (107,000)
Change in assets and liabilities:
Net (purchases) sales of trading securities and
securities held for sale....................... 541,000 2,543,000
Change in future insurance policy benefits,
claims and other policy liabilities............ 6,734,000 3,893,000
Additions to deferred insurance acquisition costs (378,000) (250,000)
Change in income tax liability.................. (398,000) 161,000
Change in net amounts due from and to reinsurers (1,174,000) (1,541,000)
Change in trade accounts, notes and other
receivables.................................... (424,000) (1,415,000)
Other........................................... (1,532,000) (780,000)
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Net cash provided by operating
activities................................ 5,991,000 5,122,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Change in net amount due from and to brokers.... 4,654,000 (8,748,000)
Sales and maturities of short-term investments.. 60,000 2,140,000
Purchases of short-term investments............. (60,000) (5,000)
Net sales (purchases) of resale and repurchase
agreements..................................... (12,417,000) 14,439,000
Sales of fixed maturities....................... 93,392,000 62,251,000
Purchases of fixed maturities................... (91,009,000) (84,856,000)
Sales of equity securities...................... 20,445,000 10,323,000
Purchases of equity securities.................. (24,878,000) (10,854,000)
Distributions from other investments, net of
additional investments......................... (2,541,000) (398,000)
Sales (additions) to property, plant and
equipment...................................... (489,000) (99,000)
Other........................................... - 284,000
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Net cash used by investing
activities................................ (12,843,000) (15,523,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock...................... (346,000) -
Payments of investment type insurance contracts. (4,802,000) (268,000)
Increase in long-term debt...................... 1,750,000 162,000
Repayment of long-term debt..................... (538,000) -
Dividends paid.................................. (311,000) (316,000)
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Net cash used by financing activities...... (4,247,000) (422,000)
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Decrease in cash and cash equivalents............ (11,099,000) (10,823,000)
Cash and cash equivalents, beginning of year..... 21,271,000 19,613,000
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Cash and cash equivalents, end of period.........$ 10,172,000 $ 8,790,000
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
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NOTE 1. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(A) BUSINESS AND ORGANIZATION
Independence Holding Company and subsidiaries (the "Company"
or "IHC") is a diversified financial company primarily engaged in
insurance activities through Madison National Life Insurance
Company, Inc. and its subsidiaries ("Madison Life"), and Standard
Security Life Insurance Company of New York and its subsidiaries
including First Standard Security Insurance Company ("Standard
Life") (collectively, the "Insurance Group"), and in manufacturing
commercial signs through Zimmerman Sign Company ("Zimmerman" or the
"Manufacturing Group").
Geneve Corporation, a diversified financial holding company,
and its affiliated entities ("Geneve") hold approximately 53% of
IHC's outstanding common stock.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared in
accordance with the requirements for quarterly reports on Form 10-
Q. In the opinion of management, all adjustments (consisting only
of normal recurring accruals) that are necessary for a fair
presentation of the consolidated results of operations for the
interim periods have been included. The consolidated results of
operations for the three months ended March 31, 1995 are not
necessarily indicative of the results to be anticipated for the
entire year. The consolidated financial statements should be read
in conjunction with the consolidated financial statements and the
notes included in IHC's Annual Report on Form 10-K for the year
ended December 31, 1994. Certain amounts in prior year's
consolidated financial statements and notes thereto have been
restated to conform to the 1995 presentation.
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INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 2. INVESTMENT SECURITIES
The carrying value, cost (amortized cost with respect to certain fixed
income securities) and market value of IHC's investment securities as of
March 31, 1995 and December 31, 1994 are as follows:
MARCH 31, 1995
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GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
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(DOLLARS IN THOUSANDS)
AVAILABLE-FOR-SALE SECURITIES:
FIXED MATURITIES
Corporate securities.......$ 33,319 $ 29 $(2,917) $ 30,431
U.S. Government and
agencies obligations...... 36,909 - (1,365) 35,544
Government National
Mortgage Association...... 64,842 - (976) 63,866
Obligations of states
and political sub-
divisions................. 1,622 15 (129) 1,508
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$136,692 $ 44 $ (5,387) $131,349
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EQUITY SECURITIES
Common stock................$ 6,649 $ 250 $ (257) $ 6,642
Preferred stock............. 2,449 10 (120) 2,339
Options..................... 441 35 (164) 312
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$ 9,539 $ 295 $ (541) $ 9,293
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FINANCIAL INSTRUMENTS SOLD,
BUT NOT YET PURCHASED
Common stock...............$ (574) $ 4 $ (21) $ (591)
Options.................... (285) 9 (66) (342)
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$ (859) 13 $ (87) $ (933)
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TRADING SECURITIES:
EQUITY SECURITIES
Common stock................$ 757 $ 147 $ (26) $ 878
======= ===== ======= =======
FINANCIAL INSTRUMENTS SOLD,
BUT NOT YET PURCHASED
Common stock................$ (399) $ - $ (42) $ (441)
Options..................... (16) - - (16)
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$ (415) $ - $ (42) $ (457)
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INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 2. INVESTMENT SECURITIES (CONTINUED)
The average market value of trading options sold but not yet purchased
was $38,000 for the period ended March 31, 1995.
DECEMBER 31, 1994
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GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
--------------------------------------------------
(DOLLARS IN THOUSANDS)
AVAILABLE-FOR-SALE SECURITIES:
FIXED MATURITIES
Corporate securities.......$ 34,590 $ 6 $ (4,035) $ 30,561
U.S. Government and
agencies obligations...... 46,885 - (2,781) 44,104
Government National
Mortgage Association...... 54,658 - (1,790) 52,868
Obligations of states
and political sub-
divisions................. 2,422 11 (149) 2,284
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$138,555 $ 17 $ (8,755) $129,817
======= === ======= =======
EQUITY SECURITIES
Common stock................$ 2,711 $ 41 $ (309) $ 2,443
Preferred stock............. 2,241 - (327) 1,914
Options..................... 1,471 - (844) 627
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$ 6,423 $ 41 $ (1,480) $ 4,984
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FINANCIAL INSTRUMENTS SOLD,
BUT NOT YET PURCHASED
Common stock...............$ (563) $ - $ (31) $ (594)
Options.................... (525) 134 - (391)
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$ (1,088) $134 $ (31) $ (985)
======= === ====== =======
TRADING SECURITIES:
EQUITY SECURITIES
Common stock................$ 1,421 $ - $ (40) $ 1,381
Options..................... 80 - (62) 18
------- --- ----- -------
$ 1,501 $ - $ (102) $ 1,399
======= === ===== =======
FINANCIAL INSTRUMENTS SOLD,
BUT NOT YET PURCHASED
Common stock................$ (481) - $ (36) $ (517)
Options..................... (72) 3 - (69)
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$ (553) $ 3 $ (36) $ (586)
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INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 2. INVESTMENT SECURITIES (CONTINUED)
The average market value of trading long options was $36,000
and the average market value of trading options sold but not yet
purchased was $26,000 for the year ended December 31, 1994.
The amortized cost and market value of fixed maturities at
March 31, 1995, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
MARCH 31, 1995
----------------------
AMORTIZED MARKET
COST VALUE
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(DOLLARS IN THOUSANDS)
Due in one year or less.................$ 3,023 $ 2,976
Due after one year through
five years............................. 12,844 12,478
Due after five years through
ten years.............................. 32,036 29,982
Due after ten years..................... 23,947 22,047
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71,850 67,483
Government National
Mortgage Association................... 64,842 63,866
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Totals..................................$136,692 $131,349
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Approximately $2,051,000 of gross gains and $2,969,000 of
gross losses were realized on sales of available-for-sale
securities for the three months ended March 31, 1995.
Approximately $1,629,000 of losses were realized on sales of
options held for sale, $74,000 of losses were realized on options
held for trading and $426,000 of losses were realized on sales of
future contracts held for sale for the period ended March 31, 1995.
Approximately $2,655,000 of gross gains and $1,857,000 of
gross losses were realized on sales of available-for-sale
securities for the three months ended March 31, 1994.
Approximately $1,576,000 of gains were realized on sales of
options held for sale and $45,000 of gains were realized on options
held for trading for the period ended March 31, 1994.
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INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 3. INVENTORIES
Inventories at March 31, 1995 and December 31, 1994 are as
follows:
MARCH 31, DECEMBER 31,
1995 1994
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(DOLLARS IN THOUSANDS)
Raw materials..................$ 4,503 $ 4,558
Work in progress............... 4,633 4,078
Finished goods................. 1,701 1,861
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$10,837 $10,497
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NOTE 4. INCOME PER SHARE
The computations of income per share were based upon the
weighted average common shares outstanding of 15,485,543 and
15,820,517 for the three months ended March 31, 1995 and 1994,
respectively. Common stock equivalents represented by warrants and
stock options were not utilized in the calculations as the effect
of their assumed exercise would have been anti-dilutive.
NOTE 5. INCOME TAXES
The Company adopted SFAS No. 109 "Accounting for Income
Taxes" in December 1992. Effective July 1, 1993, IHC and its
subsidiaries including Standard Life, Madison Life and their
respective subsidiaries became eligible to file a life/nonlife
consolidated Federal income tax return. The provision for income
taxes shown in the consolidated statements of operations was
computed based on the Company's estimate of the effective tax rates
expected to be applicable for the current year including the
expected tax impact of the life/nonlife consolidation.
Federal income tax benefits amounting to $263,000 and $360,000
for the three months ended March 31, 1995 and 1994, respectively,
resulting from the utilization of net operating loss carryforwards
existing at December 31, 1980 (the date of quasi-reorganization of
IHC), were credited to paid-in capital.
NOTE 6. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
MARCH 31,
----------------------
1995 1994
----------------------
(DOLLARS IN THOUSANDS)
Cash payments for:
Interest..................$ 438 $ 108
Income taxes..............$ 809 $ 47
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
------------------------------------------------
Independence Holding Company and subsidiaries (the "Company"
or "IHC") has two operating segments: the Insurance Group and the
Manufacturing Group. The Insurance Group consists of the Company's
wholly-owned insurance subsidiaries, Madison National Life
Insurance Company, Inc. ("Madison Life") and its subsidiaries, and
Standard Security Life Insurance Company of New York and its
subsidiaries including First Standard Security Insurance Company
("Standard Life"). The Manufacturing Group consists of the
Company's majority owned sign manufacturing subsidiary, Zimmerman
Sign Company ("Zimmerman"). All remaining income, principally
income from parent company liquidity (cash, cash equivalents,
resale agreements and marketable securities) and expense items
associated with parent company activities, long-term debt, the
Company's remaining real estate operations and certain other
investments of the Company are included in Corporate.
RESULTS OF OPERATIONS
---------------------
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1994
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The Company's net income applicable to common shares was $.7
million or $.05 per share for the period ended March 31, 1995 as
compared to $1.8 million or $.11 per share for the comparable
period of 1994. Operating income decreased to $.6 million in the
first quarter of 1995 from $2.5 million in the first quarter of
1994, primarily due to a reduction in net realized and unrealized
gains of $1.7 million of the Insurance Group.
INSURANCE GROUP
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Standard Life underwrites specific and aggregate excess
medical insurance coverage ("stop loss") sold to employers who
self-fund their employees' health benefits, short-term statutory
disability benefits law business ("DBL") and group life insurance.
Standard Life also performs auditing and marketing services in
connection with its stop loss business. Standard Life has existing
business in-force in the following lines of business which are in
runoff status: individual accident and health, individual life,
single premium immediate annuities, and miscellaneous business. In
addition, Standard Life actively seeks opportunities to enter into
cooperative underwriting and reinsurance arrangements with other
life insurers, reinsurers and managed care companies.
Madison Life markets group long-term and short-term disability
and group life products as well as credit life and credit accident
and health products. Its existing blocks of individual ordinary
life, individual accident and health, and annual and single premium
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<PAGE>
deferred annuity business are in runoff status. Madison Life
historically has purchased, on an assumption reinsurance basis,
blocks of group credit life and credit disability insurance and
individual ordinary life insurance business to increase overall
profitability.
The Insurance Group had operating income of $.5 million for
the three months ended March 31, 1995 versus operating income of
$2.2 million for the three months ended March 31, 1994. Operating
income includes net realized and unrealized losses of $.9 million
for the quarter ended March 31, 1995 compared to $.8 million of
gains for the comparable quarter of 1994. Operating income
excluding net securities gains was $1.4 million in both first
quarters of 1995 and 1994. Premium revenues increased $.6 million
from the first quarter of 1994 to the first quarter of 1995.
Premium revenues at Madison Life increased $.4 million representing
an increase in group term life and group long term disability as a
result of additional written premiums. Standard Life had a $.2
million increase in premiums essentially resulting from an increase
in stop loss premiums of $.2 million and a $.2 million increase in
a group accident and health pool assumed, offset by a $.2 million
decrease in DBL premiums due to lapses experienced. Total
investment income remained constant in the two periods. Equity
income decreased $.4 million due to lower returns on certain
limited partnership interests. Other income increased $.1 million
from 1994 to 1995 resulting from an increase in stop loss fees
earned at Standard Life.
Insurance benefits, claims and reserves increased $.2 million,
split evenly between Standard Life and Madison Life. Amortization
of deferred acquisition costs and general and administrative
expenses for the Insurance Group increased $.1 million; Madison
Life's expenses increased $.1 million and Standard Life's expenses
remained constant.
MANUFACTURING GROUP
- -------------------
The first quarter of 1995 continued to reflect excellent
results at Zimmerman. Operating income increased to $1.0 million
for the three months ended March 31, 1995 as compared to income of
$.8 million for the comparable period of 1994. Sales increased $1.3
million to $10.2 million in the first quarter of 1995, while cost
of sales increased $.8 million. This resulted in gross profit
margins of 23.3% for the three months ended March 31, 1995 as
compared to 21.4% for the comparable period of 1994. Interest
expense increased $.1 million due to higher borrowing margins.
Selling, general and administrative expenses increased $.2 million
primarily related to the increase in sales.
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CORPORATE
- ---------
Operating losses for the three months ended March 31, 1995
amounted to $.9 million, compared to an operating loss of $.5
million for the same period of 1994. Investment income decreased
$.2 million from 1994, primarily attributable to less profitable
returns on certain hedged equity positions and a lower base of
invested assets. Realized gains remained constant. Interest expense
increased $.1 million due to higher interest rates on the debt of
a corporate subsidiary. Selling, general and administrative
expenses increased $.1 million.
LIQUIDITY
---------
CASH FLOWS - GENERAL
- --------------------
The net cash used of $11.1 million resulted from cash provided
by operating activities amounting to $6.0 million, cash utilized by
investing activities amounting to $12.8 million and cash utilized
by financing activities of $4.3 million.
INSURANCE GROUP
- ---------------
The Insurance Group normally provides cash flow from
operations, from the receipt of scheduled principal payments on its
portfolio of fixed income securities and from earnings on short-
term investments. Such cash flow is used partially to finance
liabilities for insurance policy benefits. These liabilities
represent long-term obligations which are calculated using certain
assumed interest rates. The nature and quality of insurance company
investments must comply with all applicable statutes and
regulations which have been promulgated primarily for the
protection of policyholders. Of the aggregate carrying value of the
Insurance Group's investment assets, approximately 80.7% was
invested in investment grade fixed income securities, resale
agreements and cash and cash equivalents at March 31, 1995. These
investments carry less risk of default and therefore lower interest
rates than other types of fixed maturity investments. At March 31,
1995, approximately 4.4% of the carrying value of investable assets
was invested in diversified non-investment grade fixed income
securities (investments in such securities have different risks
than investment grade securities, including greater risk of loss
upon default, and thinner trading markets). The Company monitors
its investment portfolio on a continuous basis and believes the
liquidity of the Insurance Group will not be adversely affected by
its current investments.
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MANUFACTURING GROUP
- -------------------
For the first three months of 1995, $1.3 million of cash was
used by Zimmerman's operations reflecting an increase in
receivables due to higher sales volume. This use of cash was
financed by income generated in the first three months and a $1.2
million increase in its bank line of credit. Zimmerman has an $8.0
million bank line of credit as to which $7.5 million was
outstanding at March 31, 1995. The Company believes that Zimmerman
has sufficient funds to meet its obligations.
CORPORATE
- ---------
Corporate derives its funds principally from (i) dividends and
interest income from its Insurance Group and its Manufacturing
Group, (ii) tax payments and management fees from its subsidiaries
and (iii) investment income from Corporate liquidity.
State insurance laws restrict the Insurance Group's ability to
make dividend payments to the parent company. Regulatory
constraints have historically not affected IHC's consolidated
liquidity, although they have limited the ability of the parent
company to use cash generated by the Insurance Group to fund
operating expenses, interest and dividend payments at Corporate.
Through March 31, 1995, 3,703,251 shares of common stock have
been repurchased at a cost of approximately $9.0 million under the
Company's stock repurchase program initiated at the end of 1991.
The Company repurchased 107,000 shares at a cost of $.3 million
during the first quarter of 1995.
Total corporate liquidity (cash, cash equivalents, resale
agreements and marketable securities) amounted to $14.1 million at
March 31, 1995. At the present time, the Company is not in need of
any additional long-term financing.
CAPITAL RESOURCES
-----------------
The Company continues to explore actively new opportunities
which it perceives exist in the health, life, and property and
casualty insurance and reinsurance businesses. With its already
superior capital ratios, together with its broad licensing and
excellent asset quality and credit-worthiness, the Insurance Group
remains well positioned to increase or diversify its current
activities.
At the same time, the Company recognizes that health care
reform initiatives are continuing to be discussed at various levels
of government. Depending upon the scope and timing of any such
legislation that becomes law, the manner in which health insurance
business is conducted in the future could be impacted. The
Insurance Group continuously monitors these initiatives in an
effort to best take advantage of a changing health care
environment.
- 13 -
<PAGE>
In accordance with SFAS No. 115, the Company may carry its
portfolio of fixed income securities either as held to maturity
(carried at amortized cost), as trading securities (carried at fair
market value) or as available-for-sale (carried at fair market
value); the Company has chosen to carry all of its debt securities
as available-for-sale. Primarily as a result of the decline in
interest rates in the first quarter, the Company recorded an
unrealized gain of $4.3 million net of deferred taxes of $.1
million in total stockholders' equity, reflecting a decrease in
unrealized losses net of taxes from $9.2 million at December 31,
1994 to $4.9 million at March 31, 1995. The Company continues to
employ investment strategies to mitigate interest rate and other
market exposures.
- 14 -
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
a) 1) Exhibit 11. Statement re: computation of per
share earnings.
2) Exhibit 27. Financial Data Schedule.
b) No report on Form 8-K was filed during the quarter ended
March 31, 1995.
- 15 -
<PAGE>
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
----------------------------
(THE REGISTRANT)
Dated: May 11, 1995 By: /s/Roy T.K. Thung
-------------------------
Roy T. K. Thung
Executive Vice President,
Chief Financial Officer
and Treasurer
Dated: May 11, 1995 By: /s/Teresa A. Herbert
-------------------------
Teresa A. Herbert
Vice President and
Controller
- 16 -
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
INDEPENDENCE HOLDING COMPANY FORM 10-Q FOR THE QUARTER PERIOD ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000701869
<NAME> INDEPENDENCE HOLDING COMPANY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 131,349,000
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 10,171,000
<MORTGAGE> 508,000
<REAL-ESTATE> 936,000
<TOTAL-INVEST> 198,093,000
<CASH> 10,172,000
<RECOVER-REINSURE> 39,988,000
<DEFERRED-ACQUISITION> 10,286,000
<TOTAL-ASSETS> 308,690,000
<POLICY-LOSSES> 100,598,000
<UNEARNED-PREMIUMS> 15,486,000
<POLICY-OTHER> 34,734,000
<POLICY-HOLDER-FUNDS> 2,102,000
<NOTES-PAYABLE> 0
<COMMON> 15,422,000
0
0
<OTHER-SE> 45,226,000
<TOTAL-LIABILITY-AND-EQUITY> 308,690,000
13,205,000
<INVESTMENT-INCOME> 3,275,000
<INVESTMENT-GAINS> (982,000)
<OTHER-INCOME> 740,000
<BENEFITS> 9,512,000
<UNDERWRITING-AMORTIZATION> 1,071,000
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 563,000
<INCOME-TAX> (174,000)
<INCOME-CONTINUING> 737,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 737,000
<EPS-PRIMARY> .05
<EPS-DILUTED> .07
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
EXHIBIT 11
INDEPENDENCE HOLDING COMPANY
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31,
1995 1994
--------------------
Proceeds from assumed exercise of
stock warrants.........................$ 32,186 $ 42,294
Proceeds from assumed exercise
of stock options....................... 1,521 133
Repurchase of treasury stock
under paragraph 38(a) of APB
No. 15 at the average market
price of $3.09 and $3.29,
respectively........................... (9,570) (10,410)
Assumed payment of debt
outstanding............................ (21,865) (20,107)
------- -------
Balance to be invested per
paragraph 38(b) of APB No. 15..........$ 2,272 $ 11,910
======= =======
Net Income applicable to common and
common equivalent shares...............$ 737 $ 1,772
Add:
Pro-forma interest income.............. 45 268
Pro-forma reduction of interest........ 437 503
------- -------
Adjusted net income.....................$ 1,219 $ 2,543
======= =======
Weighted average shares outstanding..... 15,486 15,821
------- -------
Add:
Shares assumed issued for warrants.... 3,633 4,774
Shares assumed issued for options..... 455 32
Less:
Treasury stock purchased.............. (3,097) (3,164)
------- -------
Incremental shares issued.............. 991 1,642
------- -------
Total common and common
equivalent shares...................... 16,477 17,463
======= =======
Primary net income per common share.....$ .05 $ .11
======= =======
Primary net income per common and
common equivalent shares...............$ .07 $ .15
======= =======
