(Telephone Number)

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

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

(Title of Class)

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 _

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

7,180,100 shares of common stock were outstanding as of March 15, 2000.

The aggregate market value of the common stock held by non-affiliates of the Registrant computed by reference to the average bid and asked prices of such stock, as of March 15, 2000 was $39,747,623.

The Exhibit Index is located on page 81 of this filing.

Documents Incorporated by Reference

Portions of the Proxy Statement for the Annual Meeting of Stockholders scheduled for June 22, 2000 are incorporated by reference into Part III of this filing.

PART I

Independence Holding Company, a Delaware corporation ("IHC"), is a holding company engaged principally in the life and health insurance business through its wholly-owned subsidiaries, Standard Security Life Insurance Company of New York ("Standard Life"), Madison National Life Insurance Company, Inc. ("Madison Life") and First Standard Security Insurance Company ("First Standard") and their subsidiaries (collectively, the "Insurance Group"). IHC and its subsidiaries (including the Insurance Group) are collectively referred to as the "Company."

Standard Life, which has an A (Excellent) rating from A.M. Best & Company, Inc. ("Best"), is domiciled in New York and licensed as an insurance company in all 50 states, the District of Columbia, the Virgin Islands and Puerto Rico. Madison Life, which is domiciled in Wisconsin and licensed to sell insurance products in 46 states, the District of Columbia and the Virgin Islands and is an accredited reinsurer in New York, has a B++ (Very Good) rating from Best. First Standard is domiciled in Delaware and licensed to write and reinsure property and casualty insurance in Delaware and New York. Based on information provided by Best, a Best's rating is assigned after an extensive quantitative and qualitative evaluation of a company's financial condition and operating performance. Best ratings are based upon factors relevant to policyholders, agents, and intermediaries, and are not directed toward protection of investors. Best ratings are not recommendations to buy, sell or hold securities of IHC.

On December 31, 1996, IHC consummated the distribution of the common stock of its majority-owned sign manufacturing subsidiary, Zimmerman Sign Company ("Zimmerman"), on a pro rata basis to the holders of record of IHC common stock as of December 20, 1996. Since December 1995, the Consolidated Financial Statements of the Company have presented Zimmerman as discontinued operations (see Note 10 of Notes to Consolidated Financial Statements).

For information pertaining to the Company's business segments, reference is made to Note 18 of Notes to Consolidated Financial Statements.

Standard Life markets, throughout the United States, stop-loss insurance for self-insured group medical plans. Medical stop-loss insurance allows self-insured employers to manage the risk of excessive health insurance exposures by limiting aggregate and specific losses to a predetermined amount. Self-insured plans permit employers flexibility in designing employee health coverages at a cost that may be lower than that available through other health care plans.

Medical stop-loss coverage is available on either a specific or a specific and aggregate basis, although the majority of the policies issued by Standard Life cover both specific and aggregate claims. Standard Life designs plans to fit the identified needs of the self-insured employer by offering a variety of attachment points with respect to aggregate coverage (i.e., the level of claims after which the medical stop-loss benefits become payable) and, with respect to specific coverage, various deductible options.

Standard Life markets its medical stop-loss products through a network of managing general underwriters ("MGUs") who are non-salaried independent contractors that receive administrative fees. During 1999, Standard Life marketed through twelve MGUs. The MGUs are responsible for underwriting accounts in accordance with guidelines formulated and approved by Standard Life, billing and collecting premiums from the employers, paying commissions to third party administrators ("TPAs") and/or brokers, and adjudicating claims. Standard Life is responsible for selecting MGUs, establishing underwriting guidelines and reviewing employers' claims for reimbursement, as well as establishing appropriate accounting procedures and reserves. Standard Life also markets this product through its Health Maintenance Organization ("HMO") relationships, as further described below under "Managed Health Care."

Individuals who obtain health coverage through such self- insured plans cannot currently sue their employer in state court for punitive or compensatory damages, but can seek legal recourse in federal court where an employer can be ordered to cover and deliver a wrongfully-denied benefit. In the continuing debate over health care reform, certain federal and state legislation has been proposed which could have the effect of making plan sponsors, administrators, or certain other parties liable for punitive damages in state court. While the Company cannot predict whether any of these proposals will be adopted or what, if any, impact enactment of any of these (or any similar state legislation) would have on its medical stop-loss business, the number of employers offering health benefits or choosing self-insured plans could be reduced, plans could increase the portion paid by employees (thereby reducing participation), the Company's pricing could be affected, and the Company could be faced with greater liability exposures. As with past initiatives which were not enacted, the Company believes that any such initiatives that could ultimately be implemented should continue to recognize employer's self-insurance of health care benefits as a viable and cost-effective method of financing health care for employees and their families.

The medical stop-loss industry has experienced a down cycle for the past several years. Although Standard Life's underwriting losses have been partially offset by administration fees earned by Standard Life as the issuing carrier, such results are not acceptable to the Company. In order to improve its experience, Standard Life has terminated certain MUGs and producers, increased its underwriting and claims audits, tightened its underwriting guidelines and hired an experienced medical manager at IndependenceCare.

Standard Life markets a short-term statutory disability benefit product in New York State ("DBL"). All companies with more than one employee in New York State are required to provide DBL insurance for their employees. DBL coverage provides temporary cash payments to replace wages lost as a result of disability due to non-occupational injury or illness. The DBL policy provides for (i) payment of 50% of salary to a maximum of $170 per week; (ii) a maximum of 26 weeks in a consecutive 52 week period; and (iii) benefit commencement on the eighth consecutive day of disability. Policies covering fewer than 50 employees have fixed rates approved by the New York State Insurance Department. Policies covering 50 or more employees are individually underwritten. The DBL business is marketed primarily through independent general agents who are paid commissions based upon the amount of premiums produced. Standard Life anticipates continuing to expand its DBL business through the addition of general agents, strategic marketing alliances and the acquisition of blocks of business.

Group Long-Term and Short-Term Disability

Madison Life and Standard Life sell group long-term disability ("LTD") products to employers that wish to provide this benefit to their employees. Depending on an employer's requirements, LTD policies (i) cover between 50% and 70% of insurable salary; (ii) have elimination periods (i.e., the period between the commencement of the disability and the start of benefit payments) of between 30 and 730 days; and (iii) terminate after two, five or ten years or extend to age 65. Optional benefits are available to employees, including coverage for partial or residual disabilities, survivor benefits and cost of living adjustments. Madison Life also markets short-term disability ("STD") policies that provide a weekly benefit to disabled employees until they are eligible for long-term disability benefits or they are no longer disabled.

Madison Life's disability products are sold primarily in the Midwest to school districts, municipalities and hospital employer groups through a managing general agent ("MGA") that specializes in these target markets. This MGA has also begun marketing Standard Life's LTD product when a carrier with a higher rating is required. This MGA assists in the billing and administration of the business, and is paid commissions based upon the amount of premiums produced. Madison Life has expanded its marketing to non-governmental businesses through non-salaried independent general agents and agents who are paid commissions based upon the amount of premiums produced. Madison Life also sells group LTD through another insurer in markets in which Madison Life is not currently established. Under the agreement, the other insurer issues policies as to which the underwriting, claims processing and related services are performed by Madison Life for a fee; Madison Life has retained 35% of the risk on this business.

The Company intends to increase sales by targeting non- governmental business, maximizing its traditionally strong sales to school districts, municipalities and hospital employer groups, and marketing Standard Life's LTD product through this distribution system.

Group Term Life; Annuities

Madison Life sells group term life products which are marketed primarily to the same customers that purchase its group short-term and LTD products. These products include group term life, accidental death and dismemberment ("AD&D"), supplemental life and supplemental AD&D and dependent life. In order to enhance its marketing and retention of this line of business, Madison Life also offers a paid-up life benefit for eligible employees of schools and municipalities beginning at age 65, subject to a vesting schedule. Madison Life's group term life products are distributed by the same MGA and independent general agents and agents that distribute its group disability products, with compensation based upon the amount of premiums produced. This MGA has also begun marketing Standard Life's group term life products when a carrier with a higher rating is required. As with its group disability business, the Company intends to expand its sales of these group term life products through this distribution source.

Standard Life distributes group term life insurance products through MGUs (including its medical stop-loss and managed care MGUs), HMOs, general agents, brokers and strategic alliances with other carriers. The independent general agents and agents or brokers who market these products are paid commissions, and the MGUs and HMOs who market these products receive administrative fees.

Standard Life has begun marketing specialized defined benefit and defined contribution service award programs, together with separate group life coverage, to volunteer firefighters in 10 states. These products are distributed through independent general agents who are paid commissions. Standard Life entered this line of business as a result of an acquisition of a block of business in 1999, and, based on its "A" rating and broad licensing, Standard Life intends to increase sales in its core markets and expand into other areas.

Madison Life sells credit life and disability products that insure a debtor for a value and duration not to exceed the amount and repayment term of the indebtedness. Credit insurance is composed of two basic types of coverage: (i) credit life insurance provides for a lump sum benefit paid to the creditor upon the death of the insured debtor to extinguish or reduce the balance of indebtedness; and (ii) credit disability insurance provides a monthly benefit/indemnity (usually a sum equal to the scheduled monthly loan payment) paid to the creditor in the event of the insured debtor's total disability until the debtor recovers, or is able to return to gainful employment or until the scheduled expiration of the insurance coverage, whichever first occurs.

Generally, Madison Life's credit insurance coverage parameters are: (i) at inception of coverage, insureds must be under age 70 for life and under age 66 for disability; (ii) life coverage until the insured attains the age of 71 and disability coverage until the insured attains the age of 66; (iii) maximum life benefit of $110,000 and maximum aggregate disability benefit of $55,000; (iv) maximum monthly disability indemnity/benefit of $1,000; and (v) maximum term of coverage of 120 months.

Over 90% of Madison's Life's credit insurance premium are derived from financial institutions (banks, thrifts, credit unions and finance companies). Madison Life also markets through entities that arrange for the extension of credit (e.g., automobile, marine and furniture dealerships). Its credit insurance products are marketed and distributed by non-salaried general agents and brokers who receive commissions or service fees as compensation for services rendered.

Madison Life is aggressively expanding its share of the credit insurance market through geographical diversification (with active producers in 25 continental states plus the Virgin Islands and Hawaii), strategic marketing alliances with other insurance companies, and acquisitions of existing general agencies. Madison Life is improving the utilization of its credit insurance resources and reducing unit-operating expenses by performing contract credit insurance third-party administration services for other insurance companies.

Standard Life markets provider-excess products to providers, managed care organizations, including provider hospital organizations, hospital groups, physician groups and individual practice associations (collectively, "MCO's")that have assumed risk (through capitation by an HMO or otherwise) and desire to reduce their risk assumption and/or are required to purchase coverage by contract or regulation. Standard Life writes these products through IndependenceCare and another specialized MGU with management and staff experienced in provider-excess insurance. IndependenceCare and this MGU are responsible for marketing, underwriting, billing and collecting premium, medical management and administering and adjudicating claims.

HMO Reinsurance

Standard Life markets, throughout the United States, reinsurance for HMOs that desire to reduce their risk assumption and/or are required to purchase coverage by regulation. A majority of state regulatory authorities responsible for HMO oversight require such coverage. This coverage allows HMOs to manage the risk of excessive exposures by limiting specific losses to a pre-determined amount. Standard Life markets HMO reinsurance through IndependenceCare Underwriting Services LLC, the Company's Minneapolis- based managed care MGU ("IndependenceCare"). IndependenceCare's experienced staff is responsible for marketing, underwriting, billing and collecting premiums, medical management and administering and adjudicating reinsurance claims. Final authority for all financial decisions remains with Standard Life; financial reviews of each HMO are performed on behalf of Standard Life by both IndependenceCare and an independent firm whose primary business is managed care.

HMO Point-of-Service ("POS")

Standard Life has capitalized on the competitive pressures in the HMO market by marketing POS coverage throughout the United States through its HMO relationships. A POS product allows a member greater freedom of choice of providers and/or the ability to access care without a gatekeeper or primary care physician referral; both mature and start-up HMOs are experiencing difficulty in attracting and retaining members unless they are able to offer such options. Most states require that HMOs desiring to offer a POS product do so by partnering with an indemnity carrier (such as Standard Life). While the marketing of the POS product began in 1995 with its behavioral health carve-out product, Standard Life has accelerated its sales efforts through IndependenceCare. With respect to the POS product, Standard Life retains final responsibility for underwriting, issuing policies, billing and collecting of premiums and servicing claims.

Standard Life markets its employer medical stop-loss products (and certain other products including group term life) through its HMO distribution network and IndependenceCare. Like Standard Life's other medical stop-loss product, these plans allow self-insured employers to manage the risk of excessive health insurance exposures by limiting aggregate and specific losses to a predetermined amount, as well as utilizing the managed care expertise of the HMOs to manage losses. With respect to the HMO employer medical stop-loss product, Standard Life retains final responsibility for underwriting, issuing policies, billing and collecting of premiums, paying commissions and servicing claims.

Madison Life and Standard Life, through partnership investments, participate on an equity basis in two entities that market provider-excess, HMO reinsurance and HMO employer medical stop-loss products through their proprietary market databases and alliances with various partners. In addition, the Company acquired in 1997 a significant interest in an MGU that markets Standard Life products; the Company believes that this acquisition will enable it to control a substantial portion of Standard Life's distribution network for its core products, as well as other products that this MGU may develop and/or market in the future.

The Company is actively increasing its presence in managed health care through IndependenceCare, Standard Life's HMO reinsurance, POS, HMO employer medical stop-loss, provider-excess and related products, and its managed care investments. In addition, Standard Life has agreed in principle to enter into a strategic alliance with an insurance company (rated A+ by Best) to jointly market an integrated benefit package (including LTD, STD, group life, vision, dental and medical stop-loss) through the MCO distribution networks of Standard Life and IndependenceCare.

Standard Life provides disability income, accident medical, accidental death, and AD&D insurance to athletes, executives and entertainers. The coverage is written for a limited term (5 years or less) and is optionally renewable by Standard Life. The principal benefits offered are permanent total disability ("PTD") and temporary total disability ("TTD"). PTD is paid as a lump sum if caused by either an injury or sickness which is career ending. TTD covers the same risks as PTD, but is paid in installments until the maximum limit of insurance is exhausted or the insured no longer has a total disability. For these special risks, Standard Life has delegated marketing and underwriting authority to a specialized MGU which has concentrated its efforts in these markets for more than 15 years. Currently, Standard Life insures no more than half of the value of the individual's contract, thereby sharing the risk with another party (e.g., a team or a corporate sponsor). In addition, Standard Life has minimized its risk on such business by obtaining reinsurance on a quota share or facultative basis.

This category includes: (i) insurance products that are in runoff as a result of the Insurance Group's decision to discontinue writing such products; (ii) blocks of business that were acquired from other insurance companies but which are not of the type currently being written by the Insurance Group (acquired blocks of business of the type currently being written are included within the specified product group); (iii) certain miscellaneous insurance products and (iv) individual life and annuities written through Madison Life's military and civilian government employee division.

The following lines of Standard Life's in-force business are in runoff: individual accident and health, individual life, single premium immediate annuities, and miscellaneous insurance business. Madison Life's runoff in this category consists of existing blocks of individual life (including pre- need (i.e., funeral expense coverage) and interest-sensitive life blocks which were acquired in 1997, 1998 and 1999), individual accident and health products, annual and single premium deferred annuity contracts and individual annuity contracts.

Individual Life and Annuities

Madison Life has formed a new division to market an individual life product (with annuity and accumulation fund riders) to military and civilian government employees, primarily through payroll deduction. This strategic initiative arises from Madison Life's acquisition of a block of $78,000,000 of this business in 1999 - - see Acquisitions. This business will be distributed through independent general agents and brokers who will receive commissions.

___________________________

The following table sets forth gross direct and assumed earned premiums and premiums earned of the Insurance Group by principal product for the years indicated (in thousands):

The following table summarizes the aggregate life insurance in-force of the Insurance Group (in thousands):

The Company has assembled a team of senior executives which is responsible for identifying, analyzing, negotiating, acquiring and administering acquisitions of blocks of insurance business. The team members, who have been involved with numerous acquisitions, focus primarily on transactions involving the purchase of blocks of policies, but also evaluate acquisitions of entire companies. The Company's management information systems ("MIS") and policyholder services departments are experienced in converting the acquired policies and assuming the daily servicing requirements related to the acquisition of substantial blocks of policies. We believe that Madison Life's track record of quickly and efficiently converting large numbers of policies (e.g., over 115,000 policies were converted in a two month period at the end of 1999) provides Madison Life with a competitive advantage in many acquisitions. The Company continually upgrades its systems so as to efficiently handle sophisticated policies and contracts.

The Company believes that current trends in the life and health insurance industry provide excellent opportunities for more acquisitions and consolidations. Some companies are reducing administrative costs by divesting of divisions, insurance subsidiaries and blocks of business which do not fit their overall strategies, or are disposing of non-core businesses in order to focus capital on their primary lines. Other companies are experiencing increased difficulty in remaining competitive due to more stringent regulatory requirements, downgrades by rating agencies, the increased cost of sophisticated information processing systems and the inaccessibility to capital markets. Mutual companies and non-profit entities, in particular, may have difficulty accessing sources of capital. Additionally, there are many small to medium sized closely held insurance companies which are exploring divestiture options; the Company believes that it is well positioned to compete for these opportunities.

During 1999, Madison Life acquired seven blocks of business with total reserves of $143,500,000. $135,400,000 of these reserves were acquired from the receivers of four liquidated companies. Madison Life was selected by the National Organization of Life and Health Insurance Guaranty Associations ("NOLHGA") to be the assuming company for these blocks in part because of Madison Life's reputation for quickly converting large numbers of policies with minimal disruption to policyholders. One of these blocks, with reserves of $78,000,000, was comprised of individual life and annuity policies. Two of these blocks, totalling $43,800,000 of reserves, were composed of pre- need and burial policies, and the fourth block, with reserves of $13,600,000, encompassed individual life, annuity and disability income policies. Three other blocks, comprised of individual life, annuities and disability income policies, with reserves totalling $8,100,000, were acquired from three insurance companies exiting these lines of business.

Madison Life acquired four individual life insurance blocks during 1998 with total reserves of $41,500,000. One of the blocks, with reserves of $250,000, was purchased from the receiver of a liquidated company. A second block, with reserves of $250,000, was purchased from a state insurance guaranty fund. A third block, with reserves of $30,000,000, was purchased from another state insurance guarantee fund. The fourth life block, with reserves of $11,000,000 was purchased from an active company exiting the individual life market. In connection with the purchase of the credit insurance agency, Madison Life acquired a block of credit life and disability policies with reserves of $2,000,000.

Madison Life acquired two single premium credit insurance blocks and two individual life insurance blocks during 1997 with aggregate reserves of $58,300,000. The two credit insurance blocks had aggregate reserves of $31,600,000. One of the individual life blocks was purchased from a company under court-ordered liquidation and contained $23,000,000 of life/annuity reserves and $300,000 of annual premiums. The other life block was a single premium book of business with $3,400,000 of reserves and was acquired from a company being merged into its parent company.

Madison Life acquired three blocks of business in 1996, with aggregate reserves of $41,000,000, including a block of pre-need individual ordinary life insurance and annuity policies with reserves of $33,000,000 from a large insurer, and a block of interest-sensitive whole life insurance with reserves of $7,500,000 from NOLHGA.

Standard Life acquired a block of annuities and group life sold to volunteer firefighters in 1999. This block, with annuity reserves of $32,700,000 and life reserves of $400,000, was acquired from a mutual company exiting this market. Also in 1999, Standard Life acquired the life insurance policies of a non-profit entity with reserves of $4,000,000. This business is administered through Madison Life's systems, and is partially reinsured to Madison Life.

Standard Life actively seeks acquisition opportunities with other insurance companies (i) whose DBL business no longer fits their marketing strategy or (ii) that cannot administer their in-force DBL block profitably. As a result, Standard Life has reduced its administration costs on a per policy basis and gained access to new general agents and brokers. During 1997, Standard Life acquired a DBL block of business with total annualized premiums of $3,500,000. In 1996, Standard Life acquired two DBL blocks from two insurers with total annualized premiums of $3,500,000.

To facilitate its acquisition activity, IHC has contributed $35,000,000 to Madison Life since 1993. These contributions served to further enhance the Insurance Group's already superior capital ratios, broad licensing and excellent asset quality. The Company currently has liquidity of $13,883,000. The Company also has $15,000,000 available under its $30,000,000 credit facility (further described in Note 11 of the Notes to Consolidated Financial Statements). The Company anticipates that it can use its current liquidity, its available line of credit and/or raise additional capital in the public or private markets to the extent determined necessary or desirable in order to pursue acquisitions.

The Company is particularly interested in acquiring the following types of policies: traditional and group life, interest-sensitive life, credit life and health, limited benefit health (e.g., cancer or hospital indemnity), medical stop-loss, DBL, certain other disability and certain annuities. As demonstrated by the magnitude of the transactions the Company has successfully completed with NOLHGA, state guaranty funds and associated receivers the Company believes that it will continue to be a leader in the acquisition of blocks of business from insolvent companies. In addition, the Company expects that additional opportunities may develop with non-profit entities that are having difficulty administering their insurance policies in an economically efficient manner, such as the block acquired by Standard Life in 1999.

Although the Company has more than sufficient capital to retain greater risk, it has maintained a conservative risk profile on its insurance products. The Company's conservative risk profile dictates purchasing reinsurance and excess reinsurance. The Company monitors its retention amounts by product line, and has the ability to adjust its retention as appropriate.

Reinsurance is used to reduce the potentially adverse financial impact of large individual or group risks, and to reduce the strain on statutory income and surplus related to new business. By using reinsurance, the Insurance Group is able to write policies in amounts larger than it could otherwise accept. The amount reinsured is the portion of each policy in excess of the retention limit on a particular policy. Retention limits for Standard Life at December 31, 1999 were: (i) $210,000 per life on individual life and corresponding disability waiver of premium; (ii) no retention on accidental death benefits provided by rider to individual life policies; (iii) $250,000 on any one medical stop-loss claim; (iv) $2,500 of monthly benefits on disability income policies; and (v) $25,000 on its special disability business. Standard Life has purchased excess reinsurance for its medical stop-loss business on the portion of risks which it retains in order to further limit its exposure. Standard Life also maintains stop-loss and catastrophe reinsurance in order to protect against particularly adverse mortality which might occur with respect to its overall life business.

At December 31, 1999, retention limits for Madison Life were: (i) $2,500 per month on group long-term and short-term disability insurance; (ii) $60,000 on group term life, substandard ordinary life, group credit single premium life, group family life and individual ordinary life; (iii) $1,000 per month on individual substandard long-term disability insurance; (iv) $1,000 per month on credit single premium disability insurance; and (v) $1,000 monthly benefit on individual accident and health insurance. There is no retention on accidental death benefits provided by rider to group life policies. In addition, Madison Life has purchased additional reinsurance on the portion of risks which it retains, limiting its exposure on a catastrophic (aggregate) loss.

The following reinsurers represent 56.9% of the total ceded premium for the year ended December 31, 1999:

The Insurance Group remains liable with respect to the insurance in-force which has been reinsured in the unlikely event that the assuming reinsurers are unable to satisfy their obligations. The Insurance Group cedes business (i) to individual reinsurance companies and reinsurance pools comprised of companies that are primarily rated A or better by Best or (ii) upon provision of adequate security. The ceding of reinsurance does not discharge the primary liability of the original insurer to the insured. Since the risks under the Insurance Group's business are primarily short-term, there would be limited exposure as a result of a change in a reinsurer's creditworthiness during the term of the reinsurance. At December 31, 1999 and 1998, the Insurance Group's ceded reinsurance in-force was $3.4 billion and $2.8 billion, respectively.

For further information pertaining to reinsurance, reference is made to Note 17 of Notes to Consolidated Financial Statements.

More than 88% of IHC's securities portfolio is managed by employees of IHC and its affiliates, and ultimate investment authority rests with IHC's in-house investment group. As a result of the nature of IHC's insurance liabilities, IHC endeavors to maintain a significant percentage of its assets in investment grade securities, cash and cash equivalents. At December 31, 1999, approximately 98% of the fixed maturities were investment grade. The internal investment group provides a summary of the investment portfolio and the results thereof at the meetings of the Board of Directors.

As required by insurance laws and regulations, the Insurance Group establishes reserves to meet obligations on policies in-force. These reserves are amounts which, with additions from premiums expected to be received and with interest on such reserves at certain assumed rates, are calculated to be sufficient to meet anticipated future policy obligations. Premiums and reserves are based upon certain assumptions with respect to mortality, morbidity on health insurance, lapses and interest rates effective at the time the polices are issued. The Insurance Group also establishes appropriate reserves for substandard business, annuities and additional policy benefits, such as waiver of premium and accidental death. Standard Life and Madison Life are also required by law to periodically have a cash flow adequacy analysis, which projects the amount and timing of cash flows to the estimated maturity date of liabilities, prepared by the certifying actuary for each insurance company. Standard Life, Madison Life and First Standard invest their respective assets, which support the reserves and other funds in accordance with applicable insurance law, under the supervision of their respective Boards of Directors. The Company manages interest rate risk seeking to maintain a portfolio with a duration and average life that falls within the band of the duration and average life of the applicable liabilities. The Company utilizes options to modify the duration and average life of the assets. Such investment strategies are further described in Note 1(F)(iv) of the Notes to Consolidated Financial Statements.

Under Wisconsin insurance law, there are restrictions relating to the percentage of an insurer's admitted assets that may be invested in a specific issuer or in the aggregate in a particular type of investment. With respect to the portion of an insurer's assets equal to its liabilities plus a statutorily-determined security surplus amount, a Wisconsin insurer cannot, for example, invest more than a certain percentage of its assets in non- amortizable evidences of indebtedness, securities of any one person (other than its subsidiary and the United States government), or common stock of any corporation and its affiliates (other than its subsidiary).

Under New York insurance law, there are restrictions relating to the amount of an insurer's admitted assets that may be invested in a specific issuer or in the aggregate in a particular type of investment. For example, a New York insurer cannot invest more than a certain percentage of its admitted assets in common or preferred shares of any one institution, obligations secured by any one property (other than those issued, guaranteed or insured by the United States or any state government or agency thereof), or medium and lower grade obligations. In addition, there are certain qualitative investment restrictions.

Under Delaware insurance law, there are restrictions relating to the percentage of an insurer's admitted assets that may be invested in a specific issuer or in the aggregate in a particular type of investment. In addition, there are qualitative investment restrictions.

The following table reflects the asset value in dollars (in thousands) and as a percentage of total investments of the Company as at December 31, 1999:

The Company's total pre-tax investment results for each of the last three years were as follows:

The Company competes with many larger insurance companies, HMOs and other managed care organizations. Although most life insurance companies are stock companies, mutual companies also write life insurance in the United States. Mutual companies may have certain competitive advantages since profits inure directly to the benefit of the policyholders. HMOs may also have certain competitive advantages since they are subject to different regulations than insurance companies. As more companies enter the acquisition field, the Company faces increased competition for future acquisitions.

IHC is an insurance holding company; as such, IHC and the Insurance Group are subject to regulation and supervision by the insurance supervisory agencies of New York in the case of Standard Life, Wisconsin in the case of Madison Life, and Delaware in the case of First Standard. Each of Standard Life, Madison Life and First Standard is also subject to regulation and supervision in all jurisdictions in which it is licensed to transact business. These supervisory agencies have broad administrative powers with respect to the granting and revocation of licenses to transact business, the licensing of agents, the approval of policy forms, the approval of commission rates, the form and content of mandatory financial statements, reserve requirements and the types and maximum amounts of investments which may be made. Such regulation is designed primarily for the benefit of policyholders rather than the stockholders of an insurance company or holding company.

Certain transactions within the holding company system are also subject to regulation and supervision by such regulatory agencies. All such transactions must be fair and equitable. Notice to or prior approval by the insurance department is required with respect to transactions affecting the ownership or control of an insurer and of certain material transactions, including dividend declarations, between an insurer and any person in its holding company system. Under Delaware, New York and Wisconsin insurance laws, "control" is defined as the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person. Under Delaware and New York laws, control is presumed to exist if any person, directly or indirectly, owns, controls or holds with the power to vote ten percent or more of the voting securities of any other person; in Wisconsin, the presumption relates to more than ten percent of the voting securities of another person. Under Delaware and New York laws, an agreement to acquire control of an insurer domiciled in one of those states must be approved by the Commissioner of Insurance of that state. Under Wisconsin law, the Commissioner of Insurance has the right to disapprove an agreement to acquire control of a Wisconsin-domiciled insurer. In addition, periodic disclosure is required concerning the operations, management and financial condition of the insurer within the holding company system. An insurer is also required to file detailed annual statements with each supervisory agency, and its affairs and financial conditions are subject to periodic examination. See Note 19 of Notes to Consolidated Financial Statements for information as to restrictions on the ability of IHC's insurance subsidiaries to pay dividends.

Risk-based capital requirements are imposed on life and property and casualty insurance companies. The risk-based capital ratio is determined by dividing an insurance company's total adjusted capital, as defined, by its authorized control level risk-based capital. Companies that do not meet certain minimum standards require specified corrective action. The risk-based capital ratios for each of Standard Life, Madison Life and First Standard significantly exceed such minimum ratios.

At December 31, 1999, the Company had 160 employees.

IHC

IHC has entered into a renewable short-term arrangement with Geneve Corporation for the use of 6,750 square feet of office space as its corporate headquarters in Stamford, Connecticut.

Standard Life

Standard Life leases 13,500 square feet of office space in New York, New York as its corporate headquarters, and 3,000 square feet of office space in Farmington, New York for its DBL claims processing center.

Madison Life

Madison Life leases 16,800 square feet of office space in Middleton, Wisconsin as its corporate headquarters, 3,900 square feet in Birmingham, Alabama for its military and government individual life and annuity division and 1,300 square feet in Austin, Texas for executive office space.

IndependenceCare

IndependenceCare leases 3,000 square feet of office space in Minneapolis, Minnesota as its corporate headquarters.

The Company knows of no material pending legal proceedings to which it is a party or of which any of its property is the subject.

None.

PART II

IHC's common stock and share purchase warrants expiring June 30, 2001 ("Warrants") are traded over-the-counter. The common stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market under the symbol INHO. Warrant prices are quoted on the OTC Bulletin Board. The following tabulation shows the high and low sales prices for IHC's common stock and the high and low bid prices for the Warrants. The Warrant information was obtained from the National Quotation Bureau.

The foregoing prices for the Warrants do not necessarily represent actual transactions, but rather the quoted prices between dealers, excluding retail markup, markdown or commission.

At March 15, 2000, the number of record holders of IHC's (i) common stock was 2,644 and (ii) Warrants was 1,225.

IHC declared a cash dividend of $.05 per share on its common stock on each of November 16, 1999 and November 16, 1998.

The following is a summary of selected consolidated financial data of the Company for each of the last five years.

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 due to changing interest rates in relation to the business of the Insurance Group.

In the Company's analysis of the asset-liability model, a 100 to 300 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 come 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 substantially, 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 gains in its portfolio to help offset the future reduction of investment income. With respect to its investments, the Company employs (from time to time as warranted) investment strategies to mitigate interest rate and other market exposures.

Balance Sheet

The decrease in short-term investments is offset by a decrease in due to brokers attributable to the settlement of a securities trade that was placed at the end of December 1998. Long-term debt increased $15.0 million as the Company borrowed against its line of credit in connection with the assumption reinsurance transactions in December 1999. Fixed maturities, deferred acquisition costs, due and unpaid premiums, notes receivable, future policy liabilities and funds on deposit experienced significant increases due to nine acquisitions made by Madison Life and Standard Life during 1999. Madison Life acquired: a block of individual life and annuity policies effective June 30, 1999 with reserves of $78.0 million; two blocks of pre-need and burial policies also effective June 30, 1999 with reserves of $43.8 million; a block of individual life, annuity and disability income policies effective November 30, 1999 with reserves of $13.6 million; and the remaining three blocks were also for individual life, annuity and disability income policies and had reserves of $8.1 million (see Note 2 of notes to Consolidated Financial Statements). Standard Life acquired a block of annuities and group life products sold to volunteer firefighters effective April 30, 1999 with reserves of $33.1 million and a block of individual life policies effective January 1, 1999 with reserves of $4.0 million.

The Company had net receivables from reinsurers of $105.7 million at December 31, 1999. Substantially all of the business ceded to such reinsurers is of short duration. All of such receivables are either due from highly rated companies or are adequately secured. Accordingly, no allowance for doubtful accounts was necessary at December 31, 1999.

Corporate derives its funds principally from: (i) dividends and interest income 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.

Total Corporate liquidity (cash, cash equivalents, resale agreements, fixed maturities, equity securities and partnership interests) amounted to $13.9 million at December 31, 1999. During 1999, IHC repurchased 232,500 shares of common stock for $2.7 million under a repurchase program initiated in 1991.

Due to its superior 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, including the remaining $15.0 million availability under its credit facility. 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.

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. The Company experienced a change in unrealized losses of $13.7 million, net of deferred benefits of $1.6 million and net of deferred policy acquisition costs of $2.3 million in total stockholders' equity, reflecting unrealized losses of $11.0 million at December 31, 1999 versus unrealized gains of $2.6 million at December 31, 1998. From time to time, as warranted, the Company employs investment strategies to mitigate interest rate and other market exposures.

The results of 1999 reflect a higher effective tax rate than in 1998 due to the loss of tax benefits associated with the utilization of net operating loss carryforwards which are no longer available and the phase out of the small life insurance company deduction. As previously reported, the Company expects that its future results will continue to reflect higher effective tax rates.

Madison Life closed four assumption reinsurance transactions on December 9, 1999, three of which were effective June 30, 1999 and the fourth of which was effective November 30, 1999. The transactions were structured such that Madison Life received cash and notes equal to the statutory policy reserve liabilities, less policy loans and less ceding commissions credited for the purchase. The notes represent obligations of the Mississippi Guaranty Association ($26.3 million) and of the South Carolina Guaranty Association ($2.0 million), bear interest at 7.25% per annum, and are due on December 9, 2000. In January 2000, the Mississippi Guaranty Association prepaid $9.4 million of such notes. The policy loans represent cash loans, with an average interest rate of 7.0%, made to policyholders on the security of the cash values of their policies, and on the pledge of such policyholders to repay the loan by direct payment of cash or by net retention of proceeds at death or surrender. The Company borrowed $15.0 million under its revolving line of credit and contributed that amount to Madison Life in connection with these transactions.

The insurance liabilities assumed at the settlement represent the undertaking by Madison Life of the present value of future commitments of the policies outstanding at the respective effective dates as determined by generally prescribed actuarial standards. As of the effective dates, approximately $65.3 million of life policy reserves were assumed, most of which were underwritten, and all of which were reserved for, on mortality tables developed by The Society of Actuaries, and range from 2.5% to 5.5%. As of the effective dates, approximately $70.0 million of annuity reserves were assumed, which represent the contract (fund balance) value, with interest crediting rates of 3.5% to 7%.

All of the policies assumed, taken as a whole, represent long-term obligations of Madison Life. The cash received at closing has been, and the proceeds from the notes maturing in 2000 will be, invested in long-term assets so as to approximately match the maturities of the liabilities. Based upon Madison's Life's actuarial model, these blocks are expected to perform similarly to other blocks of Madison Life's acquired life and annuity policies with similar characteristics. Reserve assumptions used in these transactions are consistent with assumptions used in prior transactions (see Note 2 of Notes to Consolidated Financial Statements).

The Company anticipates increasing its premium volume through: (i) acquisitions; (ii) greater geographical diversity; (iii) expansion of its network of MGUs, MGAs, HMOs, general agents and agents; and (iv) investments in affiliated marketing subsidiaries; and strategic marketing alliances. The Company is particularly interested in acquiring the following types of policies: traditional and group life, interest sensitive life, credit life and health, limited benefit health (e.g., cancer or hospital indemnity), medical stop-loss, DBL blocks, and certain other disability. In anticipation of increased acquisition opportunities, the Company has significantly improved its administration systems which has enabled it to more efficiently convert and manage acquired blocks. It is anticipated that future acquisitions will be funded internally from existing capital and surplus and parent company liquidity, including the remaining $15.0 million availability under its credit facility (see Note 11 of Notes to Consolidated Financial Statements) or through additional capital raised in the public or private markets.

Although federal and state legislative and regulatory bodies have proposed various health care and insurance reform initiatives in recent years (see Item 1. Business), the Company anticipates that its insurance products will continue to be viable in any such changed environment.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The requirements for SFAS No. 133 were delayed by SFAS No. 137, "Deferral of the Effective Date of SFAS Statement No. 133," and are now effective for financial statements for periods beginning after June 15, 2000. SFAS No. 133 establishes standards for accounting and reporting for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The Company is currently evaluating the impact of SFAS No. 133, but does not expect it to have a material impact on the Company.

This report and other reports and statements filed by the Company with the Securities and Exchange Commission contain or may contain certain forward looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995) which are subject to certain risks and uncertainties. Among those factors which could cause the actual results to differ materially from those suggested by such statements are the following: catastrophic losses in the Company's insurance lines or a material aggregation of losses; changes in federal or state law affecting the Company's insurance products; availability of adequate retrocessional insurance coverage at appropriate prices; stock and bond market volatility; the effect of changes required by generally accepted accounting practices or statutory accounting practices; and other risks which are described from time to time in the Company's filings with the Securities and Exchange Commission.

See Item 7.

None.

FORM 8-K

(a) (1) and (2) See Index to Consolidated Financial Statements

and Schedules on page 38.

(b) (3) EXHIBITS See Index to Exhibits on page 81.

No reports were filed on Form 8-K during 1999.

Pursuant to the requirements of Section 13 or Section 15(d) 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, on March 22, 2000.

INDEPENDENCE HOLDING COMPANY

By/s/ Roy T.K. Thung

Roy T.K. Thung

Director, President,

and Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of the 22nd day of March, 2000.

Larry R. Graber

Director

Harold E. Johnson

Director

Allan C. Kirkman

Director

Steven B. Lapin

Director and Vice Chairman

Edward Netter

Director and Chairman

Edward J. Scheider

Director

Roy T.K. Thung

Director, President,

and Chief Executive Officer

(Principal Executive Officer)

Teresa A. Herbert

Vice President

and Chief Financial Officer

(Principal Financial and Accounting Officer)

We have audited the consolidated financial statements of Independence Holding Company and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Independence Holding Company and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

KPMG LLP

New York, New York

March 6, 2000

(CONTINUED)